[Congressional Record Volume 149, Number 96 (Thursday, June 26, 2003)]
[House]
[Pages H6007-H6105]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




        MEDICARE PRESCRIPTION DRUG AND MODERNIZATION ACT OF 2003

  Mr. THOMAS. Mr. Speaker, pursuant to House Resolution 299, I call up 
the bill (H.R. 1) to amend title XVIII of the Social Security Act to 
provide for a voluntary program for prescription drug coverage under 
the Medicare Program, to modernize the Medicare Program, and for other 
purposes, and ask for its immediate consideration.
  The Clerk read the title of the bill.
  The SPEAKER pro tempore (Mr. LaHood). Pursuant to House Resolution 
299, the bill is considered read for amendment.
  The text of H.R. 1 is as follows:

                                 H.R. 1

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

     SECTION 1. SHORT TITLE; AMENDMENTS TO SOCIAL SECURITY ACT; 
                   REFERENCES TO BIPA AND SECRETARY; TABLE OF 
                   CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Medicare 
     Prescription Drug and Modernization Act of 2003''.
       (b) Amendments to Social Security Act.--Except as otherwise 
     specifically provided, whenever in this Act an amendment is 
     expressed in terms of an amendment to or repeal of a section 
     or other provision, the reference shall be considered to be 
     made to that section or other provision of the Social 
     Security Act.
       (c) BIPA; Secretary.--In this Act:
       (1) BIPA.--The term ``BIPA'' means the Medicare, Medicaid, 
     and SCHIP Benefits Improvement and Protection Act of 2000, as 
     enacted into law by section 1(a)(6) of Public Law 106-554.
       (2) Secretary.--The term ``Secretary'' means the Secretary 
     of Health and Human Services.
       (d) Table of Contents.--The table of contents of this Act 
     is as follows:

Sec. 1. Short title; amendments to Social Security Act; references to 
              BIPA and Secretary; table of contents.

              TITLE I--MEDICARE PRESCRIPTION DRUG BENEFIT

Sec. 101. Establishment of a medicare prescription drug benefit.

         ``Part D--Voluntary Prescription Drug Benefit Program

``Sec. 1860D-1. Benefits; eligibility; enrollment; and coverage period.
``Sec. 1860D-2. Requirements for qualified prescription drug coverage.
``Sec. 1860D-3. Beneficiary protections for qualified prescription drug 
              coverage.
``Sec. 1860D-4. Requirements for and contracts with prescription drug 
              plan (PDP) sponsors.
``Sec. 1860D-5. Process for beneficiaries to select qualified 
              prescription drug coverage.
``Sec. 1860D-6. Submission of bids and premiums.
``Sec. 1860D-7. Premium and cost-sharing subsidies for low-income 
              individuals.
``Sec. 1860D-8. Subsidies for all medicare beneficiaries for qualified 
              prescription drug coverage.
``Sec. 1860D-9. Medicare Prescription Drug Trust Fund.
``Sec. 1860D-10. Definitions; application to medicare advantage and 
              EFFS programs; treatment of references to provisions in 
              part C.
Sec. 102. Offering of qualified prescription drug coverage under 
              Medicare Advantage and enhanced fee-for-service (EFFS) 
              program.
Sec. 103. Medicaid amendments.
Sec. 104. Medigap transition.
Sec. 105. Medicare prescription drug discount card and assistance 
              program.
Sec. 106. Disclosure of return information for purposes of carrying out 
              medicare catastrophic prescription drug program.
Sec. 107. State Pharmaceutical Assistance Transition Commission.
Sec. 108. Additional requirements for annual financial report and 
              oversight on medicare program, including prescription 
              drug spending.

  TITLE II--MEDICARE ENHANCED FEE-FOR-SERVICE AND MEDICARE ADVANTAGE 
                     PROGRAMS; MEDICARE COMPETITION

Sec. 200. Medicare modernization and revitalization.

         Subtitle A--Medicare Enhanced Fee-for-Service Program

Sec. 201. Establishment of enhanced fee-for-service (EFFS) program 
              under medicare.

               ``Part E--Enhanced Fee-for-Service Program

``Sec. 1860E-1. Offering of enhanced fee-for-service plans throughout 
              the United States.
``Sec. 1860E-2. Offering of enhanced fee-for-service (EFFS) plans.

[[Page H6008]]

``Sec. 1860E-3. Submission of bids; beneficiary savings; payment of 
              plans.
``Sec. 1860E-4. Premiums; organizational and financial requirements; 
              establishment of standards; contracts with EFFS 
              organizations.

                 Subtitle B--Medicare Advantage Program

                  Chapter 1--Implementation Of Program

Sec. 211. Implementation of medicare advantage program.
Sec. 212. Medicare advantage improvements.

            Chapter 2--Implementation Of Competition Program

Sec. 221. Competition program beginning in 2006.

                     Chapter 3--Additional Reforms

Sec. 231. Making permanent change in medicare advantage reporting 
              deadlines and annual, coordinated election period.
Sec. 232. Avoiding duplicative State regulation.
Sec. 233. Specialized medicare advantage plans for special needs 
              beneficiaries.
Sec. 234. Medicare MSAs.
Sec. 235. Extension of reasonable cost contracts.
Sec. 236. Extension of municipal health service demonstration projects.
Sec. 237. Study of performance-based payment systems.

       Subtitle C--Application of FEHBP-Style Competitive Reforms

Sec. 241. Application of FEHBP-style competitive reform beginning in 
              2010.

             TITLE III--COMBATTING WASTE, FRAUD, AND ABUSE

Sec. 301. Medicare secondary payor (MSP) provisions.
Sec. 302. Competitive acquisition of certain items and services.
Sec. 303. Competitive acquisition of covered outpatient drugs and 
              biologicals.
Sec. 304. Demonstration project for use of recovery audit contractors.

                TITLE IV--RURAL HEALTH CARE IMPROVEMENTS

Sec. 401. Enhanced disproportionate share hospital (DSH) treatment for 
              rural hospitals and urban hospitals with fewer than 100 
              beds.
Sec. 402. Immediate establishment of uniform standardized amount in 
              rural and small urban areas.
Sec. 403. Establishment of essential rural hospital classification.
Sec. 404. More frequent update in weights used in hospital market 
              basket.
Sec. 405. Improvements to critical access hospital program.
Sec. 406. Redistribution of unused resident positions.
Sec. 407. Two-year extension of hold harmless provisions for small 
              rural hospitals and sole community hospitals under 
              prospective payment system for hospital outpatient 
              department services.
Sec. 408. Exclusion of certain rural health clinic and federally 
              qualified health center services from the prospective 
              payment system for skilled nursing facilities.
Sec. 409. Recognition of attending nurse practitioners as attending 
              physicians to serve hospice patients.
Sec. 410. Improvement in payments to retain emergency capacity for 
              ambulance services in rural areas.
Sec. 411. Two-year increase for home health services furnished in a 
              rural area.
Sec. 412. Providing safe harbor for certain collaborative efforts that 
              benefit medically underserved populations.
Sec. 413. GAO study of geographic differences in payments for 
              physicians' services.
Sec. 414. Treatment of missing cost reporting periods for sole 
              community hospitals.
Sec. 415. Extension of telemedicine demonstration project.
Sec. 416. Adjustment to the medicare inpatient hospital PPS wage index 
              to revise the labor-related share of such index.
Sec. 417. Medicare incentive payment program improvements for physician 
              scarcity.
Sec. 418. Rural hospice demonstration project.

                 TITLE V--PROVISIONS RELATING TO PART A

                Subtitle A--Inpatient Hospital Services

Sec. 501. Revision of acute care hospital payment updates.
Sec. 502. Recognition of new medical technologies under inpatient 
              hospital PPS.
Sec. 503. Increase in Federal rate for hospitals in Puerto Rico.
Sec. 504. Wage index adjustment reclassification reform .
Sec. 505. MedPAC report on specialty hospitals.

                      Subtitle B--Other Provisions

Sec. 511. Payment for covered skilled nursing facility services.
Sec. 512. Coverage of hospice consultation services.
Sec. 513. Correction of Trust Fund holdings.

                TITLE VI--PROVISIONS RELATING TO PART B

                    Subtitle A--Physicians' Services

Sec. 601. Revision of updates for physicians' services.
Sec. 602. Studies on access to physicians' services.
Sec. 603. MedPAC report on payment for physicians' services.
Sec. 604. Inclusion of podiatrists and dentists under private 
              contracting authority.
Sec. 605. Establishment of floor on work geographic adjustment.

                    Subtitle B--Preventive Services

Sec. 611. Coverage of an initial preventive physical examination.
Sec. 612. Coverage of cholesterol and blood lipid screening.
Sec. 613. Waiver of deductible for colorectal cancer screening tests.
Sec. 614. Improved payment for certain mammography services.

                       Subtitle C--Other Services

Sec. 621. Hospital outpatient department (HOPD) payment reform.
Sec. 622. Payment for ambulance services.
Sec. 623. Renal dialysis services.
Sec. 624. One-year moratorium on therapy caps; provisions relating to 
              reports.
Sec. 625. Adjustment to payments for services furnished in ambulatory 
              surgical centers.
Sec. 626. Payment for certain shoes and inserts under the fee schedule 
              for orthotics and prosthetics.
Sec. 627. Waiver of part B late enrollment penalty for certain military 
              retirees; special enrollment period.
Sec. 628. Part B deductible.
Sec. 629. Extension of coverage of intravenous immune globulin (IVIG) 
              for the treatment of primary immune deficiency diseases 
              in the home.
Sec. 630. Medicare coverage of diabetes laboratory diagnostic tests.
Sec. 631. Demonstration project for coverage of certain prescription 
              drugs and biologics.

            TITLE VII--PROVISIONS RELATING TO PARTS A AND B

                    Subtitle A--Home Health Services

Sec. 701. Update in home health services.
Sec. 702. Establishment of reduced copayment for a home health service 
              episode of care for certain beneficiaries.
Sec. 703. MedPAC study on medicare margins of home health agencies.
Sec. 704. Demonstration project to clarify the definition of homebound.

             Subtitle B--Direct Graduate Medical Education

Sec. 711. Extension of update limitation on high cost programs.

                  Subtitle C--Chronic Care Improvement

Sec. 721. Voluntary chronic care improvement under traditional fee-for-
              service.
Sec. 722. Chronic care improvement under medicare advantage and 
              enhanced fee-for-service programs.
Sec. 723. Institute of Medicine report.
Sec. 724. MedPAC report.

                      Subtitle D--Other Provisions

Sec. 731. Modifications to medicare payment advisory commission 
              (MedPAC).
Sec. 732. Demonstration project for medical adult day care services.
Sec. 733. Improvements in national and local coverage determination 
              process to respond to changes in technology.
Sec. 734. Treatment of certain physician pathology services.
Sec. 735. Clinical investigation of medicare pancreatic islet cell 
              transplants.
Sec. 736. Demonstration project for consumer-directed chronic 
              outpatient services.

              TITLE VIII--MEDICARE BENEFITS ADMINISTRATION

Sec. 801. Establishment of Medicare Benefits Administration.

         TITLE IX--REGULATORY REDUCTION AND CONTRACTING REFORM

                     Subtitle A--Regulatory Reform

Sec. 901. Construction; definition of supplier.
Sec. 902. Issuance of regulations.
Sec. 903. Compliance with changes in regulations and policies.
Sec. 904. Reports and studies relating to regulatory reform.

                     Subtitle B--Contracting Reform

Sec. 911. Increased flexibility in medicare administration.
Sec. 912. Requirements for information security for medicare 
              administrative contractors.

                   Subtitle C--Education and Outreach

Sec. 921. Provider education and technical assistance.
Sec. 922. Small provider technical assistance demonstration program.
Sec. 923. Medicare Provider Ombudsman; Medicare Beneficiary Ombudsman.

[[Page H6009]]

Sec. 924. Beneficiary outreach demonstration program.
Sec. 925. Inclusion of additional information in notices to 
              beneficiaries about skilled nursing facility benefits.
Sec. 926. Information on medicare-certified skilled nursing facilities 
              in hospital discharge plans.

                    Subtitle D--Appeals and Recovery

Sec. 931. Transfer of responsibility for medicare appeals.
Sec. 932. Process for expedited access to review.
Sec. 933. Revisions to medicare appeals process.
Sec. 934. Prepayment review.
Sec. 935. Recovery of overpayments.
Sec. 936. Provider enrollment process; right of appeal.
Sec. 937. Process for correction of minor errors and omissions without 
              pursuing appeals process.
Sec. 938. Prior determination process for certain items and services; 
              advance beneficiary notices.

                  Subtitle V--Miscellaneous Provisions

Sec. 941. Policy development regarding evaluation and management (E & 
              M) documentation guidelines.
Sec. 942. Improvement in oversight of technology and coverage.
Sec. 943. Treatment of hospitals for certain services under medicare 
              secondary payor (MSP) provisions.
Sec. 944. EMTALA improvements.
Sec. 945. Emergency Medical Treatment and Active Labor Act (EMTALA) 
              technical advisory group.
Sec. 946. Authorizing use of arrangements to provide core hospice 
              services in certain circumstances.
Sec. 947. Application of OSHA bloodborne pathogens standard to certain 
              hospitals.
Sec. 948. BIPA-related technical amendments and corrections.
Sec. 949. Conforming authority to waive a program exclusion.
Sec. 950. Treatment of certain dental claims.
Sec. 951. Furnishing hospitals with information to compute dsh formula.
Sec. 952. Revisions to reassignment provisions.
Sec. 953. Other provisions.
Sec. 954. Temporary suspension of OASIS requirement for collection of 
              data on non-medicare and non-medicaid patients.

                           TITLE X--MEDICAID

Sec. 1001. Medicaid disproportionate share hospital (DSH) payments.
Sec. 1002. Clarification of inclusion of inpatient drug prices charged 
              to certain public hospitals in the best price exemptions 
              for the medicaid drug rebate program.

             TITLE XI--ACCESS TO AFFORDABLE PHARMACEUTICALS

            Subtitle A--Access to Affordable Pharmaceuticals

Sec. 1101. 30-month stay-of-effectiveness period.
Sec. 1102. Forfeiture of 180-day exclusivity period.
Sec. 1103. Bioavailability and bioequivalence.
Sec. 1104. Conforming amendments.

 Subtitle B--Ability of Federal Trade Commission to Enforce Antitrust 
                                  Laws

Sec. 1111. Definitions.
Sec. 1112. Notification of agreements.
Sec. 1113. Filing deadlines.
Sec. 1114. Disclosure exemption.
Sec. 1115. Enforcement.
Sec. 1116. Rulemaking.
Sec. 1117. Savings clause.
Sec. 1118. Effective date.

             Subtitle C--Importation of Prescription Drugs

Sec. 1121. Importation of prescription drugs.

              TITLE I--MEDICARE PRESCRIPTION DRUG BENEFIT

     SEC. 101. ESTABLISHMENT OF A MEDICARE PRESCRIPTION DRUG 
                   BENEFIT.

       (a) In General.--Title XVIII is amended--
       (1) by redesignating part D as part F; and
       (2) by inserting after part C the following new part:

         ``Part D--Voluntary Prescription Drug Benefit Program

     ``SEC. 1860D-1. BENEFITS; ELIGIBILITY; ENROLLMENT; AND 
                   COVERAGE PERIOD.

       ``(a) Provision of Qualified Prescription Drug Coverage 
     Through Enrollment in Plans.--Subject to the succeeding 
     provisions of this part, each individual who is entitled to 
     benefits under part A or is enrolled under part B is entitled 
     to obtain qualified prescription drug coverage (described in 
     section 1860D-2(a)) as follows:
       ``(1) Medicare-related plans.--
       ``(A) Medicare advantage.--If the individual is eligible to 
     enroll in a Medicare Advantage plan that provides qualified 
     prescription drug coverage under section 1851(j), the 
     individual may enroll in such plan and obtain coverage 
     through such plan.
       ``(B) EFFS plans.--If the individual is eligible to enroll 
     in an EFFS plan that provides qualified prescription drug 
     coverage under part E under section 1860E-2(d), the 
     individual may enroll in such plan and obtain coverage 
     through such plan.
       ``(C) MA-EFFS plan; MA-EFFS Rx plan.--For purposes of this 
     part, the term `MA-EFFS plan' means a Medicare Advantage plan 
     under part C and an EFFS plan under part E and the term `MA-
     EFFS Rx plan' means a MA-EFFS plan insofar as such plan 
     provides qualified prescription drug coverage.
       ``(2) Prescription drug plan.--If the individual is not 
     enrolled in a MA-EFFS plan, the individual may enroll under 
     this part in a prescription drug plan (as defined in section 
     1860D-10(a)(5)).

     Such individuals shall have a choice of such plans under 
     section 1860D-5(d).
       ``(b) General Election Procedures.--
       ``(1) In general.--An individual eligible to make an 
     election under subsection (a) may elect to enroll in a 
     prescription drug plan under this part, or elect the option 
     of qualified prescription drug coverage under a MA-EFFS Rx 
     plan under part C or part E, and to change such election only 
     in such manner and form as may be prescribed by regulations 
     of the Administrator of the Medicare Benefits Administration 
     (appointed under section 1809(b)) (in this part referred to 
     as the `Medicare Benefits Administrator') and only during an 
     election period prescribed in or under this subsection.
       ``(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 Advantage 
     and EFFS programs 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 an 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 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 October 1, 2005, 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 subsection 
     (c)(2)(C);
       ``(ii) in cases described in section 1837(h) (relating to 
     errors in enrollment), in the same manner as such section 
     applies to part B;
       ``(iii) in the case of an individual who meets such 
     exceptional conditions (including conditions provided under 
     section 1851(e)(4)(D)) as the Administrator may provide; and
       ``(iv) in cases of individuals (as determined by the 
     Administrator) who become eligible for prescription drug 
     assistance under title XIX under section 1935(d).
       ``(3) Information on plans.--Information described in 
     section 1860D-3(b)(1) on prescription drug plans and MA-EFFS 
     Rx plans shall be made available during election periods.
       ``(4) Additional information.--In order to promote the 
     efficient marketing of prescription drug plans and MA-EFFS 
     plans, the Administrator may provide information to the 
     sponsors and organizations offering such plans about 
     individuals eligible to enroll in such plans.
       ``(c) Guaranteed Issue; Community Rating; and 
     Nondiscrimination.--
       ``(1) Guaranteed issue.--
       ``(A) In general.--An eligible individual who is eligible 
     to elect qualified prescription drug coverage under a 
     prescription drug plan or MA-EFFS Rx plan at a time during 
     which elections are accepted under this part with respect to 
     the plan 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.
       ``(B) Medicare advantage 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 PDP sponsors under this subsection.
       ``(2) Community-rated premium.--
       ``(A) In general.--In the case of an individual who enrolls 
     under a prescription drug plan or in a MA-EFFS Rx plan during 
     the individual's initial enrollment period under this part or 
     maintains (as determined under subparagraph (C)) continuous 
     prescription drug coverage since the date the individual 
     first qualifies to elect prescription drug coverage under 
     this part, a PDP sponsor or entity offering a prescription 
     drug plan or MA-EFFS Rx plan and in which the individual is 
     enrolled may not deny, limit, or condition the coverage or 
     provision of covered prescription drug benefits or vary or 
     increase the premium under the plan based on any

[[Page H6010]]

     health status-related factor described in section 2702(a)(1) 
     of the Public Health Service Act or any other factor.
       ``(B) Late enrollment penalty.--In the case of an 
     individual who does not maintain such continuous prescription 
     drug coverage (as described in subparagraph (C)), a PDP 
     sponsor or an entity offering a MA-EFFS Rx plan may 
     (notwithstanding any provision in this title) adjust the 
     premium otherwise applicable with respect to qualified 
     prescription drug coverage in a manner that reflects 
     additional actuarial risk involved. Such a risk shall be 
     established through an appropriate actuarial opinion of the 
     type described in subparagraphs (A) through (C) of section 
     2103(c)(4). The Administrator shall provide a mechanism for 
     assisting such sponsors and entities in identifying eligible 
     individuals who have (or have not) maintained such continuous 
     prescription drug coverage.
       ``(C) 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):
       ``(i) Coverage under prescription drug plan or ma-effs rx 
     plan.--Qualified prescription drug coverage under a 
     prescription drug plan or under a MA-EFFS Rx plan.
       ``(ii) 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, or through a demonstration 
     project under part C that demonstrates the application of 
     capitation payment rates for frail elderly medicare 
     beneficiaries through the use of an interdisciplinary team 
     and through the provision of primary care services to such 
     beneficiaries by means of such a team at the nursing facility 
     involved.
       ``(iii) Prescription drug coverage under group health 
     plan.--Any outpatient 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 in section 1860D-8(f)(1), 
     but only if (subject to subparagraph (E)(ii)) the coverage 
     provides benefits at least equivalent to the benefits under a 
     qualified prescription drug plan.
       ``(iv) 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)), but only 
     if the policy was in effect on January 1, 2006, and if 
     (subject to subparagraph (E)(ii)) the coverage provides 
     benefits at least equivalent to the benefits under a 
     qualified prescription drug plan.
       ``(v) 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 qualified prescription drug plan.
       ``(vi) 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 qualified prescription drug plan.
       ``(D) Certification.--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 shall also 
     include a statement for the period of coverage of whether the 
     individual involved had prescription drug coverage described 
     in subparagraph (C).
       ``(E) Disclosure.--
       ``(i) In general.--Each entity that offers coverage of the 
     type described in clause (iii), (iv), (v), or (vi) of 
     subparagraph (C) shall provide for disclosure, consistent 
     with standards established by the Administrator, of whether 
     such coverage provides benefits at least equivalent to the 
     benefits under a qualified prescription drug plan.
       ``(ii) Waiver of limitations.--An individual may apply to 
     the Administrator to waive the requirement that coverage of 
     such type provide benefits at least equivalent to the 
     benefits under a qualified prescription drug plan, if the 
     individual establishes that the individual was not adequately 
     informed that such coverage did not provide such level of 
     benefits.
       ``(F) Construction.--Nothing in this section shall be 
     construed as preventing the disenrollment of an individual 
     from a prescription drug plan or a MA-EFFS Rx plan based on 
     the termination of an election described in section 
     1851(g)(3), including for non-payment of premiums or for 
     other reasons specified in subsection (d)(3), which takes 
     into account a grace period described in section 
     1851(g)(3)(B)(i).
       ``(3) Nondiscrimination.--A PDP sponsor that offers a 
     prescription drug plan in an area designated under section 
     1860D-4(b)(5) shall make such plan available to all eligible 
     individuals residing in the area without regard to their 
     health or economic status or their place of residence within 
     the area.
       ``(d) Effective Date of Elections.--
       ``(1) In general.--Except as provided in this section, the 
     Administrator shall provide that elections under subsection 
     (b) take effect at the same time as the Administrator 
     provides that similar elections under section 1851(e) take 
     effect under section 1851(f).
       ``(2) No election effective before 2006.--In no case shall 
     any election take effect before January 1, 2006.
       ``(3) Termination.--The Administrator shall provide for the 
     termination of an election in the case of--
       ``(A) termination of coverage under both part A and part B; 
     and
       ``(B) termination of elections described in section 
     1851(g)(3) (including failure to pay required premiums).

     ``SEC. 1860D-2. REQUIREMENTS FOR QUALIFIED PRESCRIPTION DRUG 
                   COVERAGE.

       ``(a) Requirements.--
       ``(1) In general.--For purposes of this part and part C and 
     part E, the term `qualified prescription drug coverage' means 
     either of the following:
       ``(A) Standard coverage with access to negotiated prices.--
     Standard coverage (as defined in subsection (b)) and access 
     to negotiated prices under subsection (d).
       ``(B) Actuarially equivalent coverage with access to 
     negotiated prices.--Coverage of covered outpatient drugs 
     which meets the alternative coverage requirements of 
     subsection (c) and access to negotiated prices under 
     subsection (d), but only if it is approved by the 
     Administrator, as provided under subsection (c).
       ``(2) Permitting additional outpatient prescription drug 
     coverage.--
       ``(A) In general.--Subject to subparagraph (B), nothing in 
     this part shall be construed as preventing qualified 
     prescription drug coverage from including coverage of covered 
     outpatient drugs that exceeds the coverage required under 
     paragraph (1), but any such additional coverage shall be 
     limited to coverage of covered outpatient drugs.
       ``(B) Disapproval authority.--The Administrator shall 
     review the offering of qualified prescription drug coverage 
     under this part or part C or E. If the Administrator finds, 
     in the case of a qualified prescription drug coverage under a 
     prescription drug plan or a MA-EFFS Rx plan, that the 
     organization or sponsor offering the coverage is engaged in 
     activities intended to discourage enrollment of classes of 
     eligible medicare beneficiaries obtaining coverage through 
     the plan on the basis of their higher likelihood of utilizing 
     prescription drug coverage, the Administrator may terminate 
     the contract with the sponsor or organization under this part 
     or part C or E.
       ``(3) Application of secondary payor provisions.--The 
     provisions of section 1852(a)(4) shall apply under this part 
     in the same manner as they apply under part C.
       ``(b) Standard Coverage.--For purposes of this part, the 
     `standard coverage' is coverage of covered outpatient drugs 
     (as defined in subsection (f)) that meets the following 
     requirements:
       ``(1) Deductible.--The coverage has an annual deductible--
       ``(A) for 2006, that is equal to $250; or
       ``(B) for a subsequent year, that is equal to the amount 
     specified under this paragraph for the previous year 
     increased by the percentage specified in paragraph (5) for 
     the year involved.

     Any amount determined under subparagraph (B) that is not a 
     multiple of $10 shall be rounded to the nearest multiple of 
     $10.
       ``(2) 80:20 benefit structure.--
       ``(A) 20 percent coinsurance.--The coverage has cost-
     sharing (for costs above the annual deductible specified in 
     paragraph (1) and up to the initial coverage limit under 
     paragraph (3)) that is--
       ``(i) equal to 20 percent; or
       ``(ii) is actuarially equivalent (using processes 
     established under subsection (e)) to an average expected 
     payment of 20 percent of such costs.
       ``(B) Use of tiers.--Nothing in this part shall be 
     construed as preventing a PDP sponsor from applying tiered 
     copayments, so long as such tiered copayments are consistent 
     with subparagraph (A).
       ``(3) Initial coverage limit.--Subject to paragraph (4), 
     the coverage has an initial coverage limit on the maximum 
     costs that may be recognized for payment purposes--
       ``(A) for 2006, that is equal to $2,000; or
       ``(B) for a subsequent year, that is equal to the amount 
     specified in this paragraph for the previous year, increased 
     by the annual percentage increase described in paragraph (5) 
     for the year involved.

     Any amount determined under subparagraph (B) that is not a 
     multiple of $25 shall be rounded to the nearest multiple of 
     $25.
       ``(4) Catastrophic protection.--
       ``(A) In general.--Notwithstanding paragraph (3), the 
     coverage provides benefits with no cost-sharing after the 
     individual has incurred costs (as described in subparagraph 
     (C)) for covered outpatient drugs in a year equal to the 
     annual out-of-pocket threshold specified in subparagraph (B).
       ``(B) Annual out-of-pocket threshold.--
       ``(i) In general.--For purposes of this part, the `annual 
     out-of-pocket threshold' specified in this subparagraph is 
     equal to $3,500 (subject to adjustment under clause (ii) and 
     subparagraph (D)).
       ``(ii) Inflation increase.--For a year after 2006, the 
     dollar amount specified in clause (i)

[[Page H6011]]

     shall be increased by the annual percentage increase 
     described in paragraph (5) for the year involved. Any amount 
     determined under the previous sentence that is not a multiple 
     of $100 shall be rounded to the nearest multiple of $100.
       ``(C) Application.--In applying subparagraph (A)--
       ``(i) incurred costs shall only include costs incurred for 
     the annual deductible (described in paragraph (1)), cost-
     sharing (described in paragraph (2)), and amounts for which 
     benefits are not provided because of the application of the 
     initial coverage limit described in paragraph (3); and
       ``(ii) such costs shall be treated as incurred only if they 
     are paid by the individual (or by another individual, such as 
     a family member, on behalf of the individual), under section 
     1860D-7, under title XIX, or under a State pharmaceutical 
     assistance program and the individual (or other individual) 
     is not reimbursed through insurance or otherwise, a group 
     health plan, or other third-party payment arrangement (other 
     than under such title or such program) for such costs.
       ``(D) Adjustment of annual out-of-pocket thresholds.--
       ``(i) In general.--Subject to clause (vii), for each 
     enrollee in a prescription drug plan or in a MA-EFFS Rx plan 
     whose adjusted gross income exceeds the income threshold as 
     defined in clause (ii) for a year, the annual out-of-pocket 
     threshold otherwise determined under subparagraph (B) for 
     such year shall be increased by an amount equal to the 
     percentage specified in clause (iii), multiplied by the 
     lesser of--

       ``(I) the amount of such excess; or
       ``(II) the amount by which the income threshold limit 
     exceeds the income threshold.

     Any amount determined under the previous sentence that is not 
     a multiple of $100 shall be rounded to the nearest multiple 
     of $100.
       ``(ii) Income threshold.--For purposes of clause (i)--

       ``(I) In general.--Subject to subclause (II), the term 
     `income threshold' means $60,000 and the term `income 
     threshold limit' means $200,000.
       ``(II) Income inflation adjustment.--In the case of a year 
     beginning after 2006, each of the dollar amounts in subclause 
     (I) shall be increased by an amount equal to such dollar 
     amount multiplied by the cost-of-living adjustment determined 
     under section 1(f)(3) of the Internal Revenue Code of 1986 
     for such year, determined by substituting `calendar year 
     2005' for `calendar year 1992'. If any amount increased under 
     the previous sentence is not a multiple of $100, such amount 
     shall be rounded to the nearest multiple of $100.

       ``(iii) Percentage.--The percentage specified in this 
     clause for a year is a fraction (expressed as a percentage) 
     equal to--

       ``(I) the annual out-of-pocket threshold for a year under 
     subparagraph (B) (determined without regard to this 
     subparagraph), divided by
       ``(II) the income threshold under clause (ii) for that 
     year.

     If any percentage determined under the previous sentence that 
     is not a multiple of \1/10\th of 1 percentage point, such 
     percentage shall be rounded to the nearest multiple of \1/
     10\th of 1 percentage point.
       ``(iv) Use of most recent return information.--For purposes 
     of clause (i) for an enrollee for a year, except as provided 
     in clause (v), the adjusted gross income of an individual 
     shall be based on the most recent information disclosed to 
     the Secretary under section 6109(l)(19) of the Internal 
     Revenue Code of 1986 before the beginning of that year.
       ``(v) Individual election to present most recent 
     information regarding income.--The Secretary shall provide, 
     in coordination with the Secretary of the Treasury, a 
     procedure under which, for purposes of applying this 
     subparagraph for a calendar year, instead of using the 
     information described in clause (iv), an enrollee may elect 
     to use more recent information, including information with 
     respect to a taxable year ending in such calendar year. Such 
     process shall--

       ``(I) require the enrollee to provide the Secretary with a 
     copy of the relevant portion of the more recent return to be 
     used under this clause;
       ``(II) provide for the Medicare Beneficiary Ombudsman 
     (under section 1810) offering assistance to such enrollees in 
     presenting such information and the toll-free number under 
     such section being a point of contact for beneficiaries to 
     inquire as to how to present such information;
       ``(III) provide for the verification of the information in 
     such return by the Secretary of the Treasury under section 
     6103(l)(19) of the Internal Revenue Code of 1986; and
       ``(IV) provide for the payment by the Secretary (in a 
     manner specified by the Secretary) to the enrollee of an 
     amount equal to the excess of the benefit payments that would 
     have been payable under the plan if the more recent return 
     information were used, over the benefit payments that were 
     made under the plan.

     In the case of a payment under subclause (III) for an 
     enrollee under a prescription drug plan, the PDP sponsor of 
     the plan shall pay to the Secretary the amount so paid, less 
     the applicable reinsurance amount that would have applied 
     under section 1860D-8(c)(1)(B) if such payment had been 
     treated as an allowable cost under such section. Such plan 
     payment shall be deposited in the Treasury to the credit of 
     the Medicare Prescription Drug Account in the Federal 
     Supplementary Medical Insurance Trust Fund (under section 
     1841).
       ``(vi) Dissemination of information on process.--The 
     Secretary shall provide, through the annual medicare handbook 
     under section 1804(a), for a general description of the 
     adjustment of annual out-of-pocket thresholds provided under 
     this subparagraph, including the process for adjustment based 
     upon more recent information and the confidentiality 
     provisions of subparagraph (F), and shall provide for 
     dissemination of a table for each year that sets forth the 
     amount of the adjustment that is made under clause (i) based 
     on the amount of an enrollee's adjusted gross income.
       ``(vii) Enrollee opt-out.--The Secretary shall provide a 
     procedure whereby, if an enrollee elects to have the maximum 
     annual out-of-pocket threshold applied under this 
     subparagraph for a year, the Secretary shall not request any 
     information regarding the enrollee under subparagraph (E) for 
     that year.
       ``(E) Requesting information on enrollees.--
       ``(i) In general.--The Secretary shall, periodically as 
     required to carry out subparagraph (D), transmit to the 
     Secretary of the Treasury a list of the names and TINs of 
     enrollees in prescription drug plans (or in MA-EFFS Rx plans) 
     and request that such Secretary disclose to the Secretary 
     information under subparagraph (A) of section 6103(l)(19) of 
     the Internal Revenue Code of 1986 with respect to those 
     enrollees for a specified taxable year for application in a 
     particular calendar year.
       ``(ii) Disclosure to plan sponsors.--In the case of a 
     specified taxpayer (as defined in section 6103(l)(19)(B) of 
     the Internal Revenue Code of 1986) who is enrolled in a 
     prescription drug plan or in an MA-EFFS Rx plan or an 
     individual who makes an election under subparagraph (D)(vii), 
     the Secretary shall disclose to the entity that offers the 
     plan the annual out-of-pocket threshold applicable to such 
     individual under subparagraph (D).
       ``(F) Maintaining confidentiality of information.--
       ``(i) In general.--The amount of any increase in an annual 
     out-of-pocket threshold under subparagraph (D) may not be 
     disclosed by the Secretary except to a PDP sponsor or entity 
     that offers a MA-EFFS Rx plan to the extent necessary to 
     carry out this part.
       ``(ii) Criminal and civil penalties for unauthorized 
     disclosure.--A person who makes an unauthorized disclosure of 
     information disclosed under section 6103(l)(19) of the 
     Internal Revenue Code of 1986 (including disclosure of any 
     increase in an annual out-of-pocket threshold under 
     subparagraph (D)) shall be subject to penalty to the extent 
     provided under--

       ``(I) section 7213 of such Code (relating to criminal 
     penalty for unauthorized disclosure of information);
       ``(II) section 7213A of such Code (relating to criminal 
     penalty for unauthorized inspection of returns or return 
     information);
       ``(III) section 7431 of such Code (relating to civil 
     damages for unauthorized inspection or disclosure of returns 
     and return information);
       ``(IV) any other provision of the Internal Revenue Code of 
     1986; or
       ``(V) any other provision of law.

       ``(iii) Application of additional civil monetary penalty 
     for unauthorized disclosures.--In addition to any penalty 
     otherwise provided under law, any person who makes an 
     unauthorized disclosure of such information shall be subject 
     to a civil monetary penalty of not to exceed $10,000 for each 
     such unauthorized disclosure. The provisions of section 1128A 
     (other than subsections (a) and (b)) shall apply to civil 
     money penalties under this subparagraph in the same manner as 
     they apply to a penalty or proceeding under section 1128A(a).
       ``(G) Information regarding third-party reimbursement.--In 
     order to ensure compliance with the requirements of 
     subparagraph (C)(ii), the Administrator is authorized to 
     establish procedures, in coordination with the Secretary of 
     Treasury and the Secretary of Labor, for determining whether 
     costs for individuals are being reimbursed through insurance 
     or otherwise, a group health plan, or other third-party 
     payment arrangement, and for alerting the sponsors and 
     organization that offer the plans in which such individuals 
     are enrolled about such reimbursement arrangements. A PDP 
     sponsor or Medicare Advantage or EFFS organization may also 
     periodically ask individuals enrolled in a prescription drug 
     plan or MA-EFFS Rx plan offered by the sponsor or 
     organization whether the individuals have or expect to 
     receive such third-party reimbursement. A material 
     misrepresentation of the information described in the 
     preceding sentence by an individual (as defined in standards 
     set by the Administrator and determined through a process 
     established by the Administrator) shall constitute grounds 
     for termination of enrollment under section 1860D-1(d)(3).
       ``(5) Annual percentage increase.--For purposes of this 
     part, the annual percentage increase specified in this 
     paragraph for a year is equal to the annual percentage 
     increase in average per capita aggregate expenditures for 
     covered outpatient drugs in the United States for medicare 
     beneficiaries, as determined by the Administrator for the 12-
     month period ending in July of the previous year.
       ``(c) Alternative Coverage Requirements.--A prescription 
     drug plan or MA-

[[Page H6012]]

     EFFS Rx plan may provide a different prescription drug 
     benefit design from the standard coverage described in 
     subsection (b) so long as the Administrator determines (based 
     on an actuarial analysis approved by the Administrator) that 
     the following requirements are met and the plan applies for, 
     and receives, the approval of the Administrator for such 
     benefit design:
       ``(1) Assuring at least actuarially equivalent coverage.--
       ``(A) Assuring equivalent value of total coverage.--The 
     actuarial value of the total coverage (as determined under 
     subsection (e)) is at least equal to the actuarial value (as 
     so determined) of standard coverage.
       ``(B) Assuring equivalent unsubsidized value of coverage.--
     The unsubsidized value of the coverage is at least equal to 
     the unsubsidized value of standard coverage. For purposes of 
     this subparagraph, the unsubsidized value of coverage is the 
     amount by which the actuarial value of the coverage (as 
     determined under subsection (e)) exceeds the actuarial value 
     of the subsidy payments under section 1860D-8 with respect to 
     such coverage.
       ``(C) Assuring standard payment for costs at initial 
     coverage limit.--The coverage is designed, based upon an 
     actuarially representative pattern of utilization (as 
     determined under subsection (e)), to provide for the payment, 
     with respect to costs incurred that are equal to the initial 
     coverage limit under subsection (b)(3), of an amount equal to 
     at least the product of--
       ``(i) the amount by which the initial coverage limit 
     described in subsection (b)(3) exceeds the deductible 
     described in subsection (b)(1); and
       ``(ii) 100 percent minus the cost-sharing percentage 
     specified in subsection (b)(2)(A)(i).
       ``(2) Catastrophic protection.--The coverage provides for 
     beneficiaries the catastrophic protection described in 
     subsection (b)(4).
       ``(d) Access to Negotiated Prices.--
       ``(1) In general.--Under qualified prescription drug 
     coverage offered by a PDP sponsor or an entity offering a MA-
     EFFS Rx plan, the sponsor or entity shall provide 
     beneficiaries with access to negotiated prices (including 
     applicable discounts) used for payment for covered outpatient 
     drugs, regardless of the fact that no benefits may be payable 
     under the coverage with respect to such drugs because of the 
     application of cost-sharing or an initial coverage limit 
     (described in subsection (b)(3)). Insofar as a State elects 
     to provide medical assistance under title XIX to a 
     beneficiary enrolled under such title and under a 
     prescription drug plan or MA-EFFS Rx plan for a drug based on 
     the prices negotiated by a prescription drug plan or MA-EFFS 
     Rx plan under this part, the requirements of section 1927 
     shall not apply to such drugs. The prices negotiated by a 
     prescription drug plan under this part, by a MA-EFFS Rx plan 
     with respect to covered outpatient drugs, or by a qualified 
     retiree prescription drug plan (as defined in section 1860D-
     8(f)(1)) with respect to such drugs on behalf of individuals 
     entitled to benefits under part A or enrolled under part B, 
     shall (notwithstanding any other provision of law) not be 
     taken into account for the purposes of establishing the best 
     price under section 1927(c)(1)(C).
       ``(2) Disclosure.--The PDP sponsor or entity offering a MA-
     EFFS Rx plan shall disclose to the Administrator (in a manner 
     specified by the Administrator) the extent to which discounts 
     or rebates or other remuneration or price concessions made 
     available to the sponsor or organization by a manufacturer 
     are passed through to enrollees through pharmacies and other 
     dispensers or otherwise. The provisions of section 
     1927(b)(3)(D) shall apply to information disclosed to the 
     Administrator under this paragraph in the same manner as such 
     provisions apply to information disclosed under such section.
       ``(3) Audits and reports.--To protect against fraud and 
     abuse and to ensure proper disclosures and accounting under 
     this part, in addition to any protections against fraud and 
     abuse provided under section 1860D-4(b)(3)(C), the 
     Administrator may periodically audit the financial statements 
     and records of PDP sponsor or entities offering a MA-EFFS Rx 
     plan.
       ``(e) Actuarial Valuation; Determination of Annual 
     Percentage Increases.--
       ``(1) Processes.--For purposes of this section, the 
     Administrator shall establish processes and methods--
       ``(A) for determining the actuarial valuation of 
     prescription drug coverage, including--
       ``(i) an actuarial valuation of standard coverage and of 
     the reinsurance subsidy payments under section 1860D-8;
       ``(ii) the use of generally accepted actuarial principles 
     and methodologies; and
       ``(iii) applying the same methodology for determinations of 
     alternative coverage under subsection (c) as is used with 
     respect to determinations of standard coverage under 
     subsection (b); and
       ``(B) for determining annual percentage increases described 
     in subsection (b)(5).

     Such methods for determining actuarial valuation shall take 
     into account effects of alternative coverage on drug 
     utilization.
       ``(2) Use of outside actuaries.--Under the processes under 
     paragraph (1)(A), PDP sponsors and entities offering MA-EFFS 
     Rx plans may use actuarial opinions certified by independent, 
     qualified actuaries to establish actuarial values, but the 
     Administrator shall determine whether such actuarial values 
     meet the requirements under subsection (c)(1).
       ``(f) Covered Outpatient Drugs Defined.--
       ``(1) In general.--Except as provided in this subsection, 
     for purposes of this part, the term `covered outpatient drug' 
     means--
       ``(A) 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
       ``(B) a biological product described in clauses (i) through 
     (iii) of subparagraph (B) of such section or insulin 
     described in subparagraph (C) of such section and medical 
     supplies associated with the injection of insulin (as defined 
     in regulations of the Secretary)

     ,and such term includes a vaccine licensed under section 351 
     of the Public Health Service Act and any use of a covered 
     outpatient drug for a medically accepted indication (as 
     defined in section 1927(k)(6)).
       ``(2) Exclusions.--
       ``(A) In general.--Such term does not include drugs or 
     classes of drugs, or their medical uses, which may be 
     excluded from coverage or otherwise restricted under section 
     1927(d)(2), other than subparagraph (E) thereof (relating to 
     smoking cessation agents), or under section 1927(d)(3).
       ``(B) Avoidance of duplicate coverage.--A drug prescribed 
     for an individual that would otherwise be a covered 
     outpatient 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.
       ``(3) Application of formulary restrictions.--A drug 
     prescribed for an individual that would otherwise be a 
     covered outpatient 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-3(f)(2).
       ``(4) Application of general exclusion provisions.--A 
     prescription drug plan or MA-EFFS Rx plan may exclude from 
     qualified prescription drug coverage any covered outpatient 
     drug--
       ``(A) for which payment would not be made if section 
     1862(a) applied to part D; or
       ``(B) 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-3(f).

     ``SEC. 1860D-3. BENEFICIARY PROTECTIONS FOR QUALIFIED 
                   PRESCRIPTION DRUG COVERAGE.

       ``(a) Guaranteed Issue, Community-Rated Premiums, Access to 
     Negotiated Prices, and Nondiscrimination.--For provisions 
     requiring guaranteed issue, community-rated premiums, access 
     to negotiated prices, and nondiscrimination, see sections 
     1860D-1(c)(1), 1860D-1(c)(2), 1860D-2(d), and 1860D-6(b), 
     respectively.
       ``(b) Dissemination of Information.--
       ``(1) General information.--A PDP sponsor shall disclose, 
     in a clear, accurate, and standardized form to each enrollee 
     with a prescription drug plan offered by the sponsor under 
     this part at the time of enrollment and at least annually 
     thereafter, the information described in section 1852(c)(1) 
     relating to such plan. Such information includes the 
     following:
       ``(A) Access to specific covered outpatient drugs, 
     including access through pharmacy networks.
       ``(B) How any formulary used by the sponsor functions, 
     including the drugs included in the formulary.
       ``(C) Co-payments and deductible requirements, including 
     the identification of the tiered or other co-payment level 
     applicable to each drug (or class of drugs).
       ``(D) Grievance and appeals procedures.

     Such information shall also be made available upon request to 
     prospective enrollees.
       ``(2) Disclosure upon request of general coverage, 
     utilization, and grievance information.--Upon request of an 
     individual eligible to enroll under a prescription drug plan, 
     the PDP sponsor shall provide the information described in 
     section 1852(c)(2) (other than subparagraph (D)) to such 
     individual.
       ``(3) Response to beneficiary questions.--Each PDP sponsor 
     offering a prescription drug plan shall have a mechanism for 
     providing specific information to enrollees upon request. The 
     sponsor shall make available on a timely basis, through an 
     Internet website and in writing upon request, information on 
     specific changes in its formulary.
       ``(4) Claims information.--Each PDP sponsor offering a 
     prescription drug plan must furnish to each enrollee in a 
     form easily understandable to such enrollees an explanation 
     of benefits (in accordance with section 1806(a) or in a 
     comparable manner) and a notice of the benefits in relation 
     to initial coverage limit and the annual out-of-pocket 
     threshold applicable to such enrollee for the current year, 
     whenever prescription drug benefits are provided under this 
     part (except that such notice need not be provided more often 
     than monthly).
       ``(c) Access to Covered Benefits.--
       ``(1) Assuring pharmacy access.--
       ``(A) Participation of any willing pharmacy.--A PDP sponsor 
     and an entity offering a MA-EFFS Rx plan shall permit the 
     participation of any pharmacy that meets terms and conditions 
     that the plan has established.

[[Page H6013]]

       ``(B) Discounts allowed for network pharmacies.--A 
     prescription drug plan and a MA-EFFS Rx plan may, 
     notwithstanding subparagraph (A), reduce coinsurance or 
     copayments for its enrolled beneficiaries below the level 
     otherwise provided for covered outpatient drugs dispensed 
     through in-network pharmacies, but in no case shall such a 
     reduction result in an increase in payments made by the 
     Administrator under section 1860D-8 to a plan.
       ``(C) Convenient access for network pharmacies.--The PDP 
     sponsor of the prescription drug plan and the entity offering 
     a MA-EFFS Rx plan shall secure the participation in its 
     network of a sufficient number of pharmacies that dispense 
     (other than by mail order) drugs directly to patients to 
     ensure convenient access (consistent with rules of the 
     Administrator). The Administrator shall establish convenient 
     access rules under this subparagraph that are no less 
     favorable to enrollees than the rules for convenient access 
     to pharmacies of the Secretary of Defense established as of 
     June 1, 2003, for purposes of the TRICARE Retail Pharmacy 
     (TRRx) program. Such rules shall include adequate emergency 
     access for enrolled beneficiaries.
       ``(D) Level playing field.--Such a sponsor shall permit 
     enrollees to receive benefits (which may include a 90-day 
     supply of drugs or biologicals) through a community pharmacy, 
     rather than through mail order, with any differential in 
     charge paid by such enrollees.
       ``(E)  Not required to accept insurance risk.--The terms 
     and conditions under subparagraph (A) may not require 
     participating pharmacies to accept insurance risk as a 
     condition of participation.
       ``(2) Use of standardized technology.--
       ``(A) In general.--The PDP sponsor of a prescription drug 
     plan and an entity offering a MA-EFFS Rx plan shall issue 
     (and reissue, as appropriate) such a card (or other 
     technology) that may be used by an enrollee to assure access 
     to negotiated prices under section 1860D-2(d) for the 
     purchase of prescription drugs for which coverage is not 
     otherwise provided under the plan.
       ``(B) Standards.--
       ``(i) Development.--The Administrator shall provide for the 
     development or utilization of uniform standards relating to a 
     standardized format for the card or other technology referred 
     to in subparagraph (A). Such standards shall be compatible 
     with standards established under part C of title XI.
       ``(ii) Application of advisory task force.--The advisory 
     task force established under subsection (d)(3)(B)(ii) shall 
     provide recommendations to the Administrator under such 
     subsection regarding the standards developed under clause 
     (i).
       ``(3) Requirements on development and application of 
     formularies.--If a PDP sponsor of a prescription drug plan or 
     an entity offering a MA-EFFS Rx plan uses a formulary, the 
     following requirements must be met:
       ``(A) Pharmacy and therapeutic (p&t) committee.--The 
     sponsor or entity must establish a pharmacy and therapeutic 
     committee that develops and reviews the formulary. Such 
     committee shall include at least one practicing physician and 
     at least one practicing pharmacist independent and free of 
     conflict with respect to the committee both with expertise in 
     the care of elderly or disabled persons and a majority of its 
     members shall consist of individuals who are practicing 
     physicians or practicing pharmacists (or both).
       ``(B) Formulary development.--In developing and reviewing 
     the formulary, the committee shall--
       ``(i) base clinical decisions on the strength of scientific 
     evidence and standards of practice, including assessing peer-
     reviewed medical literature, such as randomized clinical 
     trials, pharmacoeconomic studies, outcomes research data, and 
     on such other information as the committee determines to be 
     appropriate; and
       ``(ii) shall take into account whether including in the 
     formulary particular covered outpatient drugs has therapeutic 
     advantages in terms of safety and efficacy.
       ``(C) Inclusion of drugs in all therapeutic categories.--
     The formulary must include drugs within each therapeutic 
     category and class of covered outpatient drugs (although not 
     necessarily for all drugs within such categories and 
     classes). In establishing such classes, the committee shall 
     take into account the standards published in the United 
     States Pharmacopeia-Drug Information. The committee shall 
     make available to the enrollees under the plan through the 
     Internet or otherwise the bases for the exclusion of coverage 
     of any drug from the formulary.
       ``(D) Provider and patient education.--The committee shall 
     establish policies and procedures to educate and inform 
     health care providers and enrollees concerning the formulary.
       ``(E) Notice before removing drug from formulary for 
     changing preferred or tier status of drug.--Any removal of a 
     covered outpatient drug from a formulary and any change in 
     the preferred or tier cost-sharing status of such a drug 
     shall take effect only after appropriate notice is made 
     available to beneficiaries and physicians.
       ``(F) Periodic evaluation of protocols.--In connection with 
     the formulary, a prescription drug plan shall provide for the 
     periodic evaluation and analysis of treatment protocols and 
     procedures.
       ``(G) Grievances and appeals relating to application of 
     formularies.--For provisions relating to grievances and 
     appeals of coverage, see subsections (e) and (f).
       ``(d) Cost and Utilization Management; Quality Assurance; 
     Medication Therapy Management Program.--
       ``(1) In general.--The PDP sponsor or entity offering a MA-
     EFFS Rx plan shall have in place, directly or through 
     appropriate arrangements, with respect to covered outpatient 
     drugs--
       ``(A) an effective cost and drug utilization management 
     program, including medically appropriate incentives to use 
     generic drugs and therapeutic interchange, when appropriate;
       ``(B) quality assurance measures and systems to reduce 
     medical errors and adverse drug interactions, including side-
     effects, and improve medication use, including a medication 
     therapy management program described in paragraph (2) and for 
     years beginning with 2007, an electronic prescription program 
     described in paragraph (3); and
       ``(C) a program to control fraud, abuse, and waste.

     Nothing in this section shall be construed as impairing a PDP 
     sponsor or entity from utilizing cost management tools 
     (including differential payments) under all methods of 
     operation.
       ``(2) Medication therapy management program.--
       ``(A) In general.--A medication therapy management program 
     described in this paragraph is a program of drug therapy 
     management and medication administration that may be 
     furnished by a pharmacy provider and that is designed to 
     assure, with respect to beneficiaries at risk for potential 
     medication problems, such as beneficiaries with complex or 
     chronic diseases (such as diabetes, asthma, hypertension, and 
     congestive heart failure) or multiple prescriptions, that 
     covered outpatient drugs under the prescription drug plan are 
     appropriately used to optimize therapeutic outcomes through 
     improved medication use and reduce the risk of adverse 
     events, including adverse drug interactions. Such programs 
     may distinguish between services in ambulatory and 
     institutional settings.
       ``(B) Elements.--Such program may include--
       ``(i) enhanced beneficiary understanding to promote the 
     appropriate use of medications by beneficiaries and to reduce 
     the risk of potential adverse events associated with 
     medications, through beneficiary education, counseling, case 
     management, disease state management programs, and other 
     appropriate means;
       ``(ii) increased beneficiary adherence with prescription 
     medication regimens through medication refill reminders, 
     special packaging, and other compliance programs and other 
     appropriate means; and
       ``(iii) detection of patterns of overuse and underuse of 
     prescription drugs.
       ``(C) Development of program in cooperation with licensed 
     pharmacists.--The program shall be developed in cooperation 
     with licensed and practicing pharmacists and physicians.
       ``(D) Considerations in pharmacy fees.--The PDP sponsor of 
     a prescription drug program and an entity offering a MA-EFFS 
     Rx 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. Each such sponsor or entity 
     shall disclose to the Administrator upon request the amount 
     of any such management or dispensing fees and such fees shall 
     be confidential in the same manner as provided under section 
     1927(b)(3)(D) for information disclosed under section 
     1927(b)(3)(A).
       ``(3) Electronic prescription program.--
       ``(A) In general.--An electronic prescription drug program 
     described in this paragraph is a program that includes at 
     least the following components, consistent with uniform 
     standards established under subparagraph (B):
       ``(i) Electronic transmittal of prescriptions.--
     Prescriptions must be written and transmitted electronically 
     (other than by facsimile), except in emergency cases and 
     other exceptional circumstances recognized by the 
     Administrator.
       ``(ii) Provision of information to prescribing health care 
     professional.--The program provides for the electronic 
     transmittal to the prescribing health care professional of 
     information that includes--

       ``(I) information (to the extent available and feasible) on 
     the drug or drugs being prescribed for that patient and other 
     information relating to the medical history or condition of 
     the patient that may be relevant to the appropriate 
     prescription for that patient;
       ``(II) cost-effective alternatives (if any) for the use of 
     the drug prescribed; and
       ``(III) information on the drugs included in the applicable 
     formulary.

     To the extent feasible, such program shall permit the 
     prescribing health care professional to provide (and be 
     provided) related information on an interactive, real-time 
     basis.
       ``(B) Standards.--
       ``(i) Development.--The Administrator shall provide for the 
     development of uniform standards relating to the electronic 
     prescription drug program described in subparagraph (A). Such 
     standards shall be compatible with standards established 
     under part C of title XI.

[[Page H6014]]

       ``(ii) Advisory task force.--In developing such standards 
     and the standards described in subsection (c)(2)(B)(i) the 
     Administrator shall establish a task force that includes 
     representatives of physicians, hospitals, pharmacies, 
     beneficiaries, pharmacy benefit managers, individuals with 
     expertise in information technology, and pharmacy benefit 
     experts of the Departments of Veterans Affairs and Defense 
     and other appropriate Federal agencies to provide 
     recommendations to the Administrator on such standards, 
     including recommendations relating to the following:

       ``(I) The range of available computerized prescribing 
     software and hardware and their costs to develop and 
     implement.
       ``(II) The extent to which such standards and systems 
     reduce medication errors and can be readily implemented by 
     physicians, pharmacies, and hospitals.
       ``(III) Efforts to develop uniform standards and a common 
     software platform for the secure electronic communication of 
     medication history, eligibility, benefit, and prescription 
     information.
       ``(IV) Efforts to develop and promote universal 
     connectivity and interoperability for the secure electronic 
     exchange of such information.

       ``(V) The cost of implementing such systems in the range of 
     hospital and physician office settings and pharmacies, 
     including hardware, software, and training costs.
       ``(VI) Implementation issues as they relate to part C of 
     title XI, and current Federal and State prescribing laws and 
     regulations and their impact on implementation of 
     computerized prescribing.

       ``(iii) Deadlines.--

       ``(I) The Administrator shall constitute the task force 
     under clause (ii) by not later than April 1, 2004.
       ``(II) Such task force shall submit recommendations to 
     Administrator by not later than January 1, 2005.
       ``(III) The Administrator shall provide for the development 
     and promulgation, by not later than January 1, 2006, of 
     national standards relating to the electronic prescription 
     drug program described in clause (ii). Such standards shall 
     be issued by a standards organization accredited by the 
     American National Standards Institute (ANSI) and shall be 
     compatible with standards established under part C of title 
     XI.

       ``(4) Treatment of accreditation.--Section 1852(e)(4) 
     (relating to treatment of accreditation) shall apply to 
     prescription drug plans under this part with respect to the 
     following requirements, in the same manner as they apply to 
     plans under part C with respect to the requirements described 
     in a clause of section 1852(e)(4)(B):
       ``(A) Paragraph (1) (including quality assurance), 
     including medication therapy management program under 
     paragraph (2).
       ``(B) Subsection (c)(1) (relating to access to covered 
     benefits).
       ``(C) Subsection (g) (relating to confidentiality and 
     accuracy of enrollee records).
       ``(5) Public disclosure of pharmaceutical prices for 
     equivalent drugs.--Each PDP sponsor and each entity offering 
     a MA-EFFS Rx plan shall provide that each pharmacy or other 
     dispenser that arranges for the dispensing of a covered 
     outpatient 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 available generic drug covered under the plan 
     that is therapeutically equivalent and bioequivalent.
       ``(e) Grievance Mechanism, Coverage Determinations, and 
     Reconsiderations.--
       ``(1) In general.--Each PDP sponsor shall provide 
     meaningful procedures for hearing and resolving grievances 
     between the organization (including any entity or individual 
     through which the sponsor provides covered benefits) and 
     enrollees with prescription drug plans of the sponsor under 
     this part in accordance with section 1852(f).
       ``(2) Application of coverage determination and 
     reconsideration provisions.--A PDP sponsor shall meet the 
     requirements of paragraphs (1) through (3) of section 1852(g) 
     with respect to covered benefits under the prescription drug 
     plan it offers under this part in the same manner as such 
     requirements apply to an organization with respect to 
     benefits it offers under a plan under part C.
       ``(3) Request for review of tiered formulary 
     determinations.--In the case of a prescription drug plan 
     offered by a PDP sponsor or a MA-EFFS Rx plan 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 either would not be as effective for the 
     individual or would have adverse effects for the individual 
     or both.
       ``(f) Appeals.--
       ``(1) In general.--Subject to paragraph (2), a PDP sponsor 
     shall meet the requirements of paragraphs (4) and (5) of 
     section 1852(g) with respect to drugs (including a 
     determination related to the application of tiered cost-
     sharing described in subsection (e)(3)) in the same manner as 
     such requirements apply to an organization with respect to 
     benefits it offers under a plan under part C.
       ``(2) Formulary determinations.--An individual who is 
     enrolled in a prescription drug plan offered by a PDP sponsor 
     or in a MA-EFFS Rx plan may appeal to obtain coverage for a 
     covered outpatient drug that is not on a formulary of the 
     sponsor or entity offering the plan if the prescribing 
     physician determines that the formulary drug for treatment of 
     the same condition either would not be as effective for the 
     individual or would have adverse effects for the individual 
     or both.
       ``(g) Confidentiality and Accuracy of Enrollee Records.--A 
     PDP sponsor that offers a prescription drug plan shall meet 
     the requirements of section 1852(h) with respect to enrollees 
     under the plan in the same manner as such requirements apply 
     to an organization with respect to enrollees under part C. A 
     PDP sponsor shall be treated as a business associate for 
     purposes of the provisions of subpart E of part 164 of title 
     45, Code of Federal Regulations, adopted pursuant to the 
     authority of the Secretary under section 264(c) of the Health 
     Insurance Portability and Accountability Act of 1996 (42 U.S. 
     C. 1320d-2 note).

     ``SEC. 1860D-4. REQUIREMENTS FOR AND CONTRACTS WITH 
                   PRESCRIPTION DRUG PLAN (PDP) SPONSORS.

       ``(a) General Requirements.--Each PDP sponsor of a 
     prescription drug plan shall meet the following requirements:
       ``(1) Licensure.--Subject to subsection (c), the sponsor is 
     organized and licensed under State law as a risk-bearing 
     entity eligible to offer health insurance or health benefits 
     coverage in each State in which it offers a prescription drug 
     plan.
       ``(2) Assumption of financial risk for unsubsidized 
     coverage.--
       ``(A) In general.--Subject to subparagraph (B) and section 
     1860D-5(d)(2), the entity assumes full financial risk on a 
     prospective basis for qualified prescription drug coverage 
     that it offers under a prescription drug plan and that is not 
     covered under section 1860D-8.
       ``(B) Reinsurance permitted.--The entity may obtain 
     insurance or make other arrangements for the cost of coverage 
     provided to any enrollee.
       ``(3) Solvency for unlicensed sponsors.--In the case of a 
     sponsor that is not described in paragraph (1), the sponsor 
     shall meet solvency standards established by the 
     Administrator under subsection (d).
       ``(b) Contract Requirements.--
       ``(1) In general.--The Administrator shall not permit the 
     election under section 1860D-1 of a prescription drug plan 
     offered by a PDP sponsor under this part, and the sponsor 
     shall not be eligible for payments under section 1860D-7 or 
     1860D-8, unless the Administrator has entered into a contract 
     under this subsection with the sponsor with respect to the 
     offering of such plan. Such a contract with a sponsor may 
     cover more than one prescription drug plan. Such contract 
     shall provide that the sponsor agrees to comply with the 
     applicable requirements and standards of this part and the 
     terms and conditions of payment as provided for in this part.
       ``(2) Negotiation regarding terms and conditions.--The 
     Administrator shall have the same authority to negotiate the 
     terms and conditions of prescription drug plans under this 
     part as the Director of the Office of Personnel Management 
     has with respect to health benefits plans under chapter 89 of 
     title 5, United States Code. In negotiating the terms and 
     conditions regarding premiums for which information is 
     submitted under section 1860D-6(a)(2), the Administrator 
     shall take into account the subsidy payments under section 
     1860D-8.
       ``(3) Incorporation of certain medicare advantage contract 
     requirements.--The following provisions of section 1857 shall 
     apply, subject to subsection (c)(5), to contracts under this 
     section in the same manner as they apply to contracts under 
     section 1857(a):
       ``(A) Minimum enrollment.--Paragraphs (1) and (3) of 
     section 1857(b), except that the requirement of such 
     paragraph (1) shall be waived during the first contract year 
     with respect to an organization in a region.
       ``(B) Contract period and effectiveness.--Paragraphs (1) 
     through (3) and (5) of section 1857(c).
       ``(C) Protections against fraud and beneficiary 
     protections.--Section 1857(d).
       ``(D) Additional contract terms.--Section 1857(e); except 
     that in applying section 1857(e)(2) under this part--
       ``(i) such section shall be applied separately to costs 
     relating to this part (from costs under part C and part E);
       ``(ii) in no case shall the amount of the fee established 
     under this subparagraph for a plan exceed 20 percent of the 
     maximum amount of the fee that may be established under 
     subparagraph (B) of such section; and
       ``(iii) no fees shall be applied under this subparagraph 
     with respect to MA-EFFS Rx plans.
       ``(E) Intermediate sanctions.--Section 1857(g).
       ``(F) Procedures for termination.--Section 1857(h).
       ``(4) Rules of application for intermediate sanctions.--In 
     applying paragraph (3)(E)--
       ``(A) the reference in section 1857(g)(1)(B) to section 
     1854 is deemed a reference to this part; and
       ``(B) the reference in section 1857(g)(1)(F) to section 
     1852(k)(2)(A)(ii) shall not be applied.
       ``(5) Service area requirement.--For purposes of this part, 
     the Administrator shall designate at least 10 areas covering 
     the entire United States and to the extent practicable shall 
     be consistent with EFFS regions established under section 
     1860E-1(a)(2).

[[Page H6015]]

       ``(c) Waiver of Certain Requirements to Expand Choice.--
       ``(1) In general.--In the case of an entity that seeks to 
     offer a prescription drug plan in a State, the Administrator 
     shall waive the requirement of subsection (a)(1) that the 
     entity be licensed in that State if the Administrator 
     determines, based on the application and other evidence 
     presented to the Administrator, that any of the grounds for 
     approval of the application described in paragraph (2) have 
     been met.
       ``(2) Grounds for approval.--The grounds for approval under 
     this paragraph are the grounds for approval described in 
     subparagraph (B), (C), and (D) of section 1855(a)(2), and 
     also include the application by a State of any grounds other 
     than those required under Federal law.
       ``(3) Application of waiver procedures.--With respect to an 
     application for a waiver (or a waiver granted) under this 
     subsection, the provisions of subparagraphs (E), (F), and (G) 
     of section 1855(a)(2) shall apply.
       ``(4) Licensure does not substitute for or constitute 
     certification.--The fact that an entity is licensed in 
     accordance with subsection (a)(1) does not deem the entity to 
     meet other requirements imposed under this part for a PDP 
     sponsor.
       ``(5) References to certain provisions.--For purposes of 
     this subsection, in applying provisions of section 1855(a)(2) 
     under this subsection to prescription drug plans and PDP 
     sponsors--
       ``(A) any reference to a waiver application under section 
     1855 shall be treated as a reference to a waiver application 
     under paragraph (1); and
       ``(B) any reference to solvency standards shall be treated 
     as a reference to solvency standards established under 
     subsection (d).
       ``(d) Solvency Standards for Non-Licensed Sponsors.--
       ``(1) Establishment.--The Administrator shall establish, by 
     not later than October 1, 2004, financial solvency and 
     capital adequacy standards that an entity that does not meet 
     the requirements of subsection (a)(1) must meet to qualify as 
     a PDP sponsor under this part.
       ``(2) Compliance with standards.--Each PDP sponsor that is 
     not licensed by a State under subsection (a)(1) and for which 
     a waiver application has been approved under subsection (c) 
     shall meet solvency and capital adequacy standards 
     established under paragraph (1). The Administrator shall 
     establish certification procedures for such PDP sponsors with 
     respect to such solvency standards in the manner described in 
     section 1855(c)(2).
       ``(e) Relation to State Laws.--
       ``(1) In general.--The standards established under this 
     part shall supersede any State law or regulation (other than 
     State licensing laws or State laws relating to plan solvency, 
     except as provided in subsection (d)) with respect to 
     prescription drug plans which are offered by PDP sponsors 
     under this part.
       ``(2) Prohibition of state imposition of premium taxes.--No 
     State may impose a premium tax or similar tax with respect to 
     premiums paid to PDP sponsors for prescription drug plans 
     under this part, or with respect to any payments made to such 
     a sponsor by the Administrator under this part.

     ``SEC. 1860D-5. PROCESS FOR BENEFICIARIES TO SELECT QUALIFIED 
                   PRESCRIPTION DRUG COVERAGE.

       ``(a) In General.--The Administrator shall establish a 
     process for the selection of the prescription drug plan or 
     MA-EFFS Rx plan through which eligible individuals elect 
     qualified prescription drug coverage under this part.
       ``(b) Elements.--Such process shall include the following:
       ``(1) Annual, coordinated election periods, in which such 
     individuals can change the qualifying plans through which 
     they obtain coverage, in accordance with section 1860D-
     1(b)(2).
       ``(2) Active dissemination of information to promote an 
     informed selection among qualifying plans based upon price, 
     quality, and other features, in the manner described in (and 
     in coordination with) section 1851(d), including the 
     provision of annual comparative information, maintenance of a 
     toll-free hotline, and the use of non-Federal entities.
       ``(3) Coordination of elections through filing with the 
     entity offering a MA-EFFS Rx plan or a PDP sponsor, in the 
     manner described in (and in coordination with) section 
     1851(c)(2).
       ``(4) Informing each enrollee before the beginning of each 
     year of the annual out-of-pocket threshold applicable to the 
     enrollee for that year under section 1860D-2(b)(4) at such 
     time.
       ``(c) MA-EFFS Rx Enrollee May Only Obtain Benefits Through 
     the Plan.--An individual who is enrolled under a MA-EFFS Rx 
     plan may only elect to receive qualified prescription drug 
     coverage under this part through such plan.
       ``(d) Assuring Access to a Choice of Qualified Prescription 
     Drug Coverage.--
       ``(1) Choice of at least two plans in each area.--
       ``(A) In general.--The Administrator shall assure that each 
     individual who is entitled to benefits under part A or 
     enrolled under part B and who is residing in an area in the 
     United States has available, consistent with subparagraph 
     (B), a choice of enrollment in at least two qualifying plans 
     (as defined in paragraph (5)) in the area in which the 
     individual resides, at least one of which is a prescription 
     drug plan.
       ``(B) Requirement for different plan sponsors.--The 
     requirement in subparagraph (A) is not satisfied with respect 
     to an area if only one PDP sponsor or one entity that offers 
     a MA-EFFS Rx plan offers all the qualifying plans in the 
     area.
       ``(2) Guaranteeing access to coverage.--In order to assure 
     access under paragraph (1) and consistent with paragraph (3), 
     the Administrator may provide partial underwriting of risk 
     for a PDP sponsor to expand the service area under an 
     existing prescription drug plan to adjoining or additional 
     areas or to establish such a plan (including offering such a 
     plan on a regional or nationwide basis), but only so long as 
     (and to the extent) necessary to assure the access guaranteed 
     under paragraph (1).
       ``(3) Limitation on authority.--In exercising authority 
     under this subsection, the Administrator--
       ``(A) shall not provide for the full underwriting of 
     financial risk for any PDP sponsor; and
       ``(B) shall seek to maximize the assumption of financial 
     risk by PDP sponsors or entities offering a MA-EFFS Rx plan.
       ``(4) Reports.--The Administrator shall, in each annual 
     report to Congress under section 1809(f), include information 
     on the exercise of authority under this subsection. The 
     Administrator also shall include such recommendations as may 
     be appropriate to minimize the exercise of such authority, 
     including minimizing the assumption of financial risk.
       ``(5) Qualifying plan defined.--For purposes of this 
     subsection, the term `qualifying plan' means a prescription 
     drug plan or a MA-EFFS Rx plan.

     ``SEC. 1860D-6. SUBMISSION OF BIDS AND PREMIUMS.

       ``(a) Submission of Bids, Premiums, and Related 
     Information.--
       ``(1) In general.--Each PDP sponsor shall submit to the 
     Administrator the information described in paragraph (2) in 
     the same manner as information is submitted by an 
     organization under section 1854(a)(1).
       ``(2) Information submitted.--The information described in 
     this paragraph is the following:
       ``(A) Coverage provided.--Information on the qualified 
     prescription drug coverage to be provided.
       ``(B) Actuarial value.--Information on the actuarial value 
     of the coverage.
       ``(C) Bid and premium.--Information on the bid and the 
     premium for the coverage, including an actuarial 
     certification of--
       ``(i) the actuarial basis for such bid and premium;
       ``(ii) the portion of such bid and premium attributable to 
     benefits in excess of standard coverage;
       ``(iii) the reduction in such bid resulting from the 
     reinsurance subsidy payments provided under section 1860D-
     8(a)(2); and
       ``(iv) the reduction in such premium resulting from the 
     direct and reinsurance subsidy payments provided under 
     section 1860D-8.
       ``(D) Additional information.--Such other information as 
     the Administrator may require to carry out this part.
       ``(3) Review of information; negotiation and approval of 
     premiums.--
       ``(A) In general.--Subject to subparagraph (B), the 
     Administrator shall review the information filed under 
     paragraph (2) for the purpose of conducting negotiations 
     under section 1860D-4(b)(2) (relating to using OPM-like 
     authority under the FEHBP). The Administrator, using the 
     information provided (including the actuarial certification 
     under paragraph (2)(C)) shall approve the premium submitted 
     under this subsection only if the premium accurately reflects 
     both (i) the actuarial value of the benefits provided, and 
     (ii) the 73 percent average subsidy provided under section 
     1860D-8 for the standard benefit. The Administrator shall 
     apply actuarial principles to approval of a premium under 
     this part in a manner similar to the manner in which those 
     principles are applied in establishing the monthly part B 
     premium under section 1839.
       ``(B) Exception.--In the case of a plan described in 
     section 1851(a)(2)(C), the provisions of subparagraph (A) 
     shall not apply and the provisions of paragraph (5)(B) of 
     section 1854(a), prohibiting the review, approval, or 
     disapproval of amounts described in such paragraph, shall 
     apply to the negotiation and rejection of the monthly bid 
     amounts and proportion referred to in subparagraph (A).
       ``(b) Uniform Bid and Premium.--
       ``(1) In general.--The bid and premium for a prescription 
     drug plan under this section may not vary among enrollees in 
     the plan in the same service area.
       ``(2) Construction.--Nothing in paragraph (1) shall be 
     construed as preventing the imposition of a late enrollment 
     penalty under section 1860D-1(c)(2)(B).
       ``(c) Collection.--
       ``(1) Beneficiary's option of payment through withholding 
     from social security payment or use of electronic funds 
     transfer mechanism.--In accordance with regulations, a PDP 
     sponsor shall permit each enrollee, at the enrollee's option, 
     to make payment of premiums under this part to the sponsor 
     through withholding from benefit payments in the manner 
     provided under section 1840 with respect to monthly premiums 
     under section 1839 or through an electronic funds transfer 
     mechanism (such as automatic charges of an account at a 
     financial institution or a credit or debit card account) or 
     otherwise. All premium payments that are withheld under this 
     paragraph shall be

[[Page H6016]]

     credited to the Medicare Prescription Drug Trust Fund and 
     shall be paid to the PDP sponsor involved.
       ``(2) Offsetting.--Reductions in premiums for coverage 
     under parts A and B as a result of a selection of a MA-EFFS 
     Rx plan may be used to reduce the premium otherwise imposed 
     under paragraph (1).
       ``(d) Acceptance of Reference Premium Amount as Full 
     Premium for Subsidized Low-Income Individuals if No Standard 
     (or Equivalent) Coverage in an Area.--
       ``(1) In general.--If there is no standard prescription 
     drug coverage (as defined in paragraph (2)) offered in an 
     area, in the case of an individual who is eligible for a 
     premium subsidy under section 1860D-7 and resides in the 
     area, the PDP sponsor of any prescription drug plan offered 
     in the area (and any entity offering a MA-EFFS Rx plan in the 
     area) shall accept the reference premium amount (under 
     paragraph (3)) as payment in full for the premium charge for 
     qualified prescription drug coverage.
       ``(2) Standard prescription drug coverage defined.--For 
     purposes of this subsection, the term `standard prescription 
     drug coverage' means qualified prescription drug coverage 
     that is standard coverage or that has an actuarial value 
     equivalent to the actuarial value for standard coverage.
       ``(3) Reference premium amount defined.--For purposes of 
     this subsection, the term `reference premium amount' means, 
     with respect to qualified prescription drug coverage offered 
     under--
       ``(A) a prescription drug plan that--
       ``(i) provides standard coverage (or alternative 
     prescription drug coverage the actuarial value is equivalent 
     to that of standard coverage), the plan's PDP premium; or
       ``(ii) provides alternative prescription drug coverage the 
     actuarial value of which is greater than that of standard 
     coverage, the plan's PDP premium multiplied by the ratio of 
     (I) the actuarial value of standard coverage, to (II) the 
     actuarial value of the alternative coverage;
       ``(B) an EFFS plan, the EFFS monthly prescription drug 
     beneficiary premium (as defined in section 1860E-4(a)(3)(B)); 
     or
       ``(C) a Medicare Advantage, the Medicare Advantage monthly 
     prescription drug beneficiary premium (as defined in section 
     1854(b)(2)(B)).

     For purposes of subparagraph (A), the term `PDP premium' 
     means, with respect to a prescription drug plan, the premium 
     amount for enrollment under the plan under this part 
     (determined without regard to any low-income subsidy under 
     section 1860D-7 or any late enrollment penalty under section 
     1860D-1(c)(2)(B)).

     ``SEC. 1860D-7. PREMIUM AND COST-SHARING SUBSIDIES FOR LOW-
                   INCOME INDIVIDUALS.

       ``(a) Income-Related Subsidies for Individuals With Income 
     Below 150 Percent of Federal Poverty Level.--
       ``(1) Full premium subsidy and reduction of cost-sharing 
     for individuals with income below 135 percent of federal 
     poverty level.--In the case of a subsidy eligible individual 
     (as defined in paragraph (4)) who is determined to have 
     income that does not exceed 135 percent of the Federal 
     poverty level, the individual is entitled under this 
     section--
       ``(A) to an income-related premium subsidy equal to 100 
     percent of the amount described in subsection (b)(1); and
       ``(B) subject to subsection (c), to the substitution for 
     the beneficiary cost-sharing described in paragraphs (1) and 
     (2) of section 1860D-2(b) (up to the initial coverage limit 
     specified in paragraph (3) of such section) of amounts that 
     do not exceed $2 for a multiple source or generic drug (as 
     described in section 1927(k)(7)(A)) and $5 for a non-
     preferred drug.
       ``(2) Sliding scale premium subsidy for individuals with 
     income above 135, but below 150 percent, of federal poverty 
     level.--In the case of a subsidy eligible individual who is 
     determined to have income that exceeds 135 percent, but does 
     not exceed 150 percent, of the Federal poverty level, the 
     individual is entitled under this section to an income-
     related premium subsidy determined on a linear sliding scale 
     ranging from 100 percent of the amount described in 
     subsection (b)(1) for individuals with incomes at 135 percent 
     of such level to 0 percent of such amount for individuals 
     with incomes at 150 percent of such level.
       ``(3) Construction.--Nothing in this section shall be 
     construed as preventing a PDP sponsor or entity offering a 
     MA-EFFS Rx plan from reducing to 0 the cost-sharing otherwise 
     applicable to generic drugs.
       ``(4) Determination of eligibility.--
       ``(A) Subsidy eligible individual defined.--For purposes of 
     this section, subject to subparagraph (D), the term `subsidy 
     eligible individual' means an individual who--
       ``(i) is eligible to elect, and has elected, to obtain 
     qualified prescription drug coverage under this part;
       ``(ii) has income below 150 percent of the Federal poverty 
     line; and
       ``(iii) meets the resources requirement described in 
     subparagraph (D).
       ``(B) Determinations.--The determination of whether an 
     individual residing in a State is a subsidy eligible 
     individual and the amount of such individual's income shall 
     be determined under the State medicaid plan for the State 
     under section 1935(a) or by the Social Security 
     Administration. In the case of a State that does not operate 
     such a medicaid plan (either under title XIX or under a 
     statewide waiver granted under section 1115), such 
     determination shall be made under arrangements made by the 
     Administrator. There are authorized to be appropriated to the 
     Social Security Administration such sums as may be necessary 
     for the determination of eligibility under this subparagraph.
       ``(C) Income determinations.--For purposes of applying this 
     section--
       ``(i) income shall be determined in the manner described in 
     section 1905(p)(1)(B); and
       ``(ii) the term `Federal poverty line' means the 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.
       ``(D) Resource standard applied to be based on three times 
     ssi resource standard.--The resource requirement of this 
     subparagraph is that an individual's resources (as determined 
     under section 1613 for purposes of the supplemental security 
     income program) do not exceed--
       ``(i) for 2006 three times the maximum amount of resources 
     that an individual may have and obtain benefits under that 
     program; and
       ``(ii) for a subsequent year the resource limitation 
     established under this clause for the previous year increased 
     by the annual percentage increase in the consumer price index 
     (all items; U.S. city average) as of September of such 
     previous year.

     Any resource limitation established under clause (ii) that is 
     not a multiple of $10 shall be rounded to the nearest 
     multiple of $10.
       ``(E) Treatment of territorial residents.--In the case of 
     an individual who is not a resident of the 50 States or the 
     District of Columbia, the individual is not eligible to be a 
     subsidy eligible individual but may be eligible for financial 
     assistance with prescription drug expenses under section 
     1935(e).
       ``(F) Treatment of conforming medigap policies.--For 
     purposes of this section, the term `qualified prescription 
     drug coverage' includes a medicare supplemental policy 
     described in section 1860D-8(b)(4).
       ``(5) Indexing dollar amounts.--
       ``(A) For 2007.--The dollar amounts applied under 
     paragraphs (1)(B) for 2007 shall be the dollar amounts 
     specified in such paragraph increased by the annual 
     percentage increase described in section 1860D-2(b)(5) for 
     2007.
       ``(B) For subsequent years.--The dollar amounts applied 
     under paragraph (1)(B) for a year after 2007 shall be the 
     amounts (under this paragraph) applied under paragraph (1)(B) 
     for the preceding year increased by the annual percentage 
     increase described in section 1860D-2(b)(5) (relating to 
     growth in medicare prescription drug costs per beneficiary) 
     for the year involved.
       ``(b) Premium Subsidy Amount.--
       ``(1) In general.--The premium subsidy amount described in 
     this subsection for an individual residing in an area is the 
     benchmark premium amount (as defined in paragraph (2)) for 
     qualified prescription drug coverage offered by the 
     prescription drug plan or the MA-EFFS Rx plan in which the 
     individual is enrolled.
       ``(2) Benchmark premium amount defined.--For purposes of 
     this subsection, the term `benchmark premium amount' means, 
     with respect to qualified prescription drug coverage offered 
     under--
       ``(A) a prescription drug plan that--
       ``(i) provides standard coverage (or alternative 
     prescription drug coverage the actuarial value of which is 
     equivalent to that of standard coverage), the premium amount 
     for enrollment under the plan under this part (determined 
     without regard to any subsidy under this section or any late 
     enrollment penalty under section 1860D-1(c)(2)(B)); or
       ``(ii) provides alternative prescription drug coverage the 
     actuarial value of which is greater than that of standard 
     coverage, the premium amount described in clause (i) 
     multiplied by the ratio of (I) the actuarial value of 
     standard coverage, to (II) the actuarial value of the 
     alternative coverage; or
       ``(B) a MA-EFFS Rx plan, the portion of the premium amount 
     that is attributable to statutory drug benefits (described in 
     section 1853(a)(1)(A)(ii)(II)).
       ``(c) Rules in Applying Cost-Sharing Subsidies.--
       ``(1) In general.--In applying subsection (a)(1)(B), 
     nothing in this part shall be construed as preventing a plan 
     or provider from waiving or reducing the amount of cost-
     sharing otherwise applicable.
       ``(2) Limitation on charges.--In the case of an individual 
     receiving cost-sharing subsidies under subsection (a)(1)(B), 
     the PDP sponsor or entity offering a MA-EFFS Rx plan may not 
     charge more than $5 per prescription.
       ``(3) Application of indexing rules.--The provisions of 
     subsection (a)(5) shall apply to the dollar amount specified 
     in paragraph (2) in the same manner as they apply to the 
     dollar amounts specified in subsections (a)(1)(B).
       ``(d) Administration of Subsidy Program.--The Administrator 
     shall provide a process whereby, in the case of an individual 
     who is determined to be a subsidy eligible individual and who 
     is enrolled in prescription drug plan or is enrolled in a MA-
     EFFS Rx plan--
       ``(1) the Administrator provides for a notification of the 
     PDP sponsor or the entity offering the MA-EFFS Rx plan 
     involved that the individual is eligible for a subsidy and 
     the amount of the subsidy under subsection (a);

[[Page H6017]]

       ``(2) the sponsor or entity involved reduces the premiums 
     or cost-sharing otherwise imposed by the amount of the 
     applicable subsidy and submits to the Administrator 
     information on the amount of such reduction; and
       ``(3) the Administrator periodically and on a timely basis 
     reimburses the sponsor or entity for the amount of such 
     reductions.

     The reimbursement under paragraph (3) with respect to cost-
     sharing subsidies may be computed on a capitated basis, 
     taking into account the actuarial value of the subsidies and 
     with appropriate adjustments to reflect differences in the 
     risks actually involved.
       ``(e) Relation to Medicaid Program.--
       ``(1) In general.--For provisions providing for eligibility 
     determinations, and additional financing, under the medicaid 
     program, see section 1935.
       ``(2) Medicaid providing wrap around benefits.--The 
     coverage provided under this part is primary payor to 
     benefits for prescribed drugs provided under the medicaid 
     program under title XIX consistent with section 1935(d)(1).
       ``(3) Coordination.--The Administrator shall develop and 
     implement a plan for the coordination of prescription drug 
     benefits under this part with the benefits provided under the 
     medicaid program under title XIX, with particular attention 
     to insuring coordination of payments and prevention of fraud 
     and abuse. In developing and implementing such plan, the 
     Administrator shall involve the Secretary, the States, the 
     data processing industry, pharmacists, and pharmaceutical 
     manufacturers, and other experts.

     ``SEC. 1860D-8. SUBSIDIES FOR ALL MEDICARE BENEFICIARIES FOR 
                   QUALIFIED PRESCRIPTION DRUG COVERAGE.

       ``(a) Subsidy Payment.--In order to reduce premium levels 
     applicable to qualified prescription drug coverage for all 
     medicare beneficiaries consistent with an overall subsidy 
     level of 73 percent, to reduce adverse selection among 
     prescription drug plans and MA-EFFS Rx plans, and to promote 
     the participation of PDP sponsors under this part, the 
     Administrator shall provide in accordance with this section 
     for payment to a qualifying entity (as defined in subsection 
     (b)) of the following subsidies:
       ``(1) Direct subsidy.--In the case of an enrollee enrolled 
     for a month in a prescription drug plan or a MA-EFFS Rx plan, 
     a direct subsidy equal to 43 percent of the national average 
     monthly bid amount (computed under subsection (g)) for that 
     month.
       ``(2) Subsidy through reinsurance.--In the case of an 
     enrollee enrolled for a month in a prescription drug plan or 
     a MA-EFFS Rx plan, the reinsurance payment amount (as defined 
     in subsection (c)), which in the aggregate is 30 percent of 
     the total payments made by qualifying entities for standard 
     coverage under the respective plan, for excess costs incurred 
     in providing qualified prescription drug coverage--
       ``(A) for enrollees with a prescription drug plan under 
     this part; and
       ``(B) for enrollees with a MA-EFFS Rx plan.
       ``(3) Employer and union flexibility.--In the case of an 
     individual who is a participant or beneficiary in a qualified 
     retiree prescription drug plan (as defined in subsection 
     (f)(1)) and who is not enrolled in a prescription drug plan 
     or in a MA-EFFS Rx plan, the special subsidy payments under 
     subsection (f)(3).

     This section constitutes budget authority in advance of 
     appropriations Acts and represents the obligation of the 
     Administrator to provide for the payment of amounts provided 
     under this section.
       ``(b) Qualifying Entity Defined.--For purposes of this 
     section, the term `qualifying entity' means any of the 
     following that has entered into an agreement with the 
     Administrator to provide the Administrator with such 
     information as may be required to carry out this section:
       ``(1) A PDP sponsor offering a prescription drug plan under 
     this part.
       ``(2) An entity that offers a MA-EFFS Rx plan.
       ``(3) The sponsor of a qualified retiree prescription drug 
     plan (as defined in subsection (f)).
       ``(c) Reinsurance Payment Amount.--
       ``(1) In general.--Subject to subsection (d)(1)(B) and 
     paragraph (4), the reinsurance payment amount under this 
     subsection for a qualifying covered individual (as defined in 
     paragraph (5)) for a coverage year (as defined in subsection 
     (h)(2)) is equal to the sum of the following:
       ``(A) Reinsurance between initial reinsurance threshold and 
     the initial coverage limit.--For the portion of the 
     individual's gross covered prescription drug costs (as 
     defined in paragraph (3)) for the year that exceeds the 
     initial reinsurance threshold specified in paragraph (4), but 
     does not exceed the initial coverage limit specified in 
     section 1860D-2(b)(3), an amount equal to 20 percent of the 
     allowable costs (as defined in paragraph (2)) attributable to 
     such gross covered prescription drug costs.
       ``(B) Reinsurance above annual out-of-pocket threshold.--
     For the portion of the individual's gross covered 
     prescription drug costs for the year that exceeds the annual 
     out-of-pocket threshold specified in 1860D-2(b)(4)(B), an 
     amount equal to 80 percent of the allowable costs 
     attributable to such gross covered prescription drug costs.
       ``(2) Allowable costs.--For purposes of this section, the 
     term `allowable costs' means, with respect to gross covered 
     prescription drug costs under a plan described in subsection 
     (b) offered by a qualifying entity, the part of such costs 
     that are actually paid (net of discounts, chargebacks, and 
     average percentage rebates) under the plan, but in no case 
     more than the part of such costs that would have been paid 
     under the plan if the prescription drug coverage under the 
     plan were standard coverage.
       ``(3) Gross covered prescription drug costs.--For purposes 
     of this section, the term `gross covered prescription drug 
     costs' means, with respect to an enrollee with a qualifying 
     entity under a plan described in subsection (b) during a 
     coverage year, the costs incurred under the plan (including 
     costs attributable to administrative costs) for covered 
     prescription drugs dispensed during the year, including costs 
     relating to the deductible, whether paid by the enrollee or 
     under the plan, regardless of whether the coverage under the 
     plan exceeds standard coverage and regardless of when the 
     payment for such drugs is made.
       ``(4) Initial reinsurance threshold.--The initial 
     reinsurance threshold specified in this paragraph--
       ``(A) for 2006, is equal to $1,000; or
       ``(B) for a subsequent year, is equal to the payment 
     threshold specified in this paragraph for the previous year, 
     increased by the annual percentage increase described in 
     section 1860D-2(b)(5) for the year involved.

     Any amount determined under subparagraph (B) that is not a 
     multiple of $10 shall be rounded to the nearest multiple of 
     $10.
       ``(5) Qualifying covered individual defined.--For purposes 
     of this subsection, the term `qualifying covered individual' 
     means an individual who--
       ``(A) is enrolled with a prescription drug plan under this 
     part; or
       ``(B) is enrolled with a MA-EFFS Rx plan.
       ``(d) Adjustment of Payments.--
       ``(1) Adjustment of reinsurance payments to assure 30 
     percent level of subsidy through reinsurance.--
       ``(A) Estimation of payments.--The Administrator shall 
     estimate--
       ``(i) the total payments to be made (without regard to this 
     subsection) during a year under subsections (a)(2) and (c); 
     and
       ``(ii) the total payments to be made by qualifying entities 
     for standard coverage under plans described in subsection (b) 
     during the year.
       ``(B) Adjustment.--The Administrator shall proportionally 
     adjust the payments made under subsections (a)(2) and (c) for 
     a coverage year in such manner so that the total of the 
     payments made under such subsections for the year is equal to 
     30 percent of the total payments described in subparagraph 
     (A)(ii).
       ``(2) Risk adjustment for direct subsidies.--To the extent 
     the Administrator determines it appropriate to avoid risk 
     selection, the payments made for direct subsidies under 
     subsection (a)(1) are subject to adjustment based upon risk 
     factors specified by the Administrator. Any such risk 
     adjustment shall be designed in a manner as to not result in 
     a change in the aggregate payments made under such 
     subsection.
       ``(e) Payment Methods.--
       ``(1) In general.--Payments under this section shall be 
     based on such a method as the Administrator determines. The 
     Administrator may establish a payment method by which interim 
     payments of amounts under this section are made during a year 
     based on the Administrator's best estimate of amounts that 
     will be payable after obtaining all of the information.
       ``(2) Source of payments.--Payments under this section 
     shall be made from the Medicare Prescription Drug Trust Fund.
       ``(f) Rules Relating to Qualified Retiree Prescription Drug 
     Plan.--
       ``(1) Definition.--For purposes of this section, the term 
     `qualified retiree prescription drug plan' means employment-
     based retiree health coverage (as defined in paragraph 
     (4)(A)) if, with respect to an individual who is a 
     participant or beneficiary under such coverage and is 
     eligible to be enrolled in a prescription drug plan or a MA-
     EFFS Rx plan under this part, the following requirements are 
     met:
       ``(A) Actuarial equivalence to standard coverage.--The 
     Administrator determines (based on an actuarial analysis 
     approved by the Administrator) that coverage provides at 
     least the same actuarial value as standard coverage. Such 
     determination may be made on an annual basis.
       ``(B) Audits.--The sponsor (or the administrator, if 
     designated by the sponsor) and the plan shall maintain, and 
     afford the Administrator access to, such records as the 
     Administrator may require for purposes of audits and other 
     oversight activities necessary to ensure the adequacy of 
     prescription drug coverage and the accuracy of payments made.
       ``(C) Provision of certification of prescription drug 
     coverage.--The sponsor of the plan shall provide for issuance 
     of certifications of the type described in section 1860D-
     1(c)(2)(D).
       ``(2) Limitation on benefit eligibility.--No payment shall 
     be provided under this section with respect to a participant 
     or beneficiary in a qualified retiree prescription drug plan 
     unless the individual is--
       ``(A) is covered under the plan; and
       ``(B) is eligible to obtain qualified prescription drug 
     coverage under section 1860D-1 but did not elect such 
     coverage under this part (either through a prescription drug 
     plan or through a MA-EFFS Rx plan).

[[Page H6018]]

       ``(3) Employer and union special subsidy amounts.--
       ``(A) In general.--For purposes of subsection (a), the 
     special subsidy payment amount under this paragraph for a 
     qualifying covered retiree(as defined in paragraph (6)) for a 
     coverage year (as defined in subsection (h)) enrolled in a 
     qualifying entity described in subsection (b)(3) under a 
     qualified retiree prescription drug plan is, for the portion 
     of the individual's gross covered prescription drug costs for 
     the year that exceeds the deductible amount specified in 
     subparagraph (B), an amount equal to, subject to subparagraph 
     (D), 28 percent of the allowable costs attributable to such 
     gross covered prescription drug costs, but only to the extent 
     such costs exceed the deductible under subparagraph (B) and 
     do not exceed the cost limit under such subparagraph in the 
     case of any such individual for the plan year.
       ``(B) Deductible and cost limit applicable.--Subject to 
     subparagraph (C)--
       ``(i) the deductible under this subparagraph is equal to 
     $250 for plan years that end in 2006; and
       ``(ii) the cost limit under this subparagraph is equal to 
     $5,000 for plan years that end in 2006.
       ``(C) Indexing.--The deductible and cost limit amounts 
     specified in subparagraphs (B) for a plan year that ends 
     after 2006 shall be adjusted in the same manner as the annual 
     deductible under section 1860D-2(b)(1) is annually adjusted 
     under such section.
       ``(4) Related definitions.--As used in this section:
       ``(A) Employment-based retiree health coverage.--The term 
     `employment-based retiree health coverage' means health 
     insurance or other coverage of health care costs for 
     individuals eligible to enroll in a prescription drug plan or 
     MA-EFFS Rx plan under this part (or for such individuals and 
     their spouses and dependents) under a group health plan 
     (including such a plan that is established or maintained 
     under or pursuant to one or more collective bargaining 
     agreements or that is offered under chapter 89 of title 5, 
     United States Code) based on their status as retired 
     participants in such plan.
       ``(B) Qualifying covered retiree.--The term `qualifying 
     covered retiree' means an individual who is eligible to 
     obtain qualified prescription drug coverage under section 
     1860D-1 but did not elect such coverage under this part 
     (either through a prescription drug plan or through a MA-EFFS 
     Rx plan) but is covered under a qualified retiree 
     prescription drug plan.
       ``(C) Sponsor.--The term `sponsor' means a plan sponsor, as 
     defined in section 3(16)(B) of the Employee Retirement Income 
     Security Act of 1974.
       ``(5) Construction.--Nothing in this subsection shall be 
     construed as--
       ``(A) precluding an individual who is covered under 
     employment-based retiree health coverage from enrolling in a 
     prescription drug plan or in a MA-EFFS plan;
       ``(B) precluding such employment-based retiree health 
     coverage or an employer or other person from paying all or 
     any portion of any premium required for coverage under such a 
     prescription drug plan or MA-EFFS plan on behalf of such an 
     individual; or
       ``(C) preventing such employment-based retiree health 
     coverage from providing coverage for retirees--
       ``(i) who are covered under a qualified retiree 
     prescription plan that is better than standard coverage; or
       ``(ii) who are not covered under a qualified retiree 
     prescription plan but who are enrolled in a prescription drug 
     plan or a MA-EFFS Rx plan, that is supplemental to the 
     benefits provided under such prescription drug plan or MA-
     EFFS Rx plan, except that any such supplemental coverage (not 
     including payment of any premium referred to in subparagraph 
     (B)) shall be treated as primary coverage to which section 
     1862(b)(2)(A)(i) is deemed to apply.
       ``(g) Computation of National Average Monthly Bid Amount.--
       ``(1) In general.--For each year (beginning with 2006) the 
     Administrator shall compute a national average monthly bid 
     amount equal to the average of the benchmark bid amounts for 
     each prescription drug plan and for each MA-EFFS Rx plan (as 
     computed under paragraph (2), but excluding plans described 
     in section 1851(a)(2)(C))) adjusted under paragraph (4) to 
     take into account reinsurance payments.
       ``(2) Benchmark bid amount defined.--For purposes of this 
     subsection, the term `benchmark bid amount' means, with 
     respect to qualified prescription drug coverage offered 
     under--
       ``(A) a prescription drug plan that--
       ``(i) provides standard coverage (or alternative 
     prescription drug coverage the actuarial value of which is 
     equivalent to that of standard coverage), the PDP bid; or
       ``(ii) provides alternative prescription drug coverage the 
     actuarial value of which is greater than that of standard 
     coverage, the PDP bid multiplied by the ratio of (I) the 
     actuarial value of standard coverage, to (II) the actuarial 
     value of the alternative coverage; or
       ``(B) a MA-EFFS Rx plan, the portion of the bid amount that 
     is attributable to statutory drug benefits (described in 
     section 1853(a)(1)(A)(ii)(II)).

     For purposes of subparagraph (A), the term `PDP bid' means, 
     with respect to a prescription drug plan, the bid amount for 
     enrollment under the plan under this part (determined without 
     regard to any low-income subsidy under section 1860D-7 or any 
     late enrollment penalty under section 1860D-1(c)(2)(B)).
       ``(3) Weighted average.--
       ``(A) In general.--The monthly national average monthly bid 
     amount computed under paragraph (1) shall be a weighted 
     average, with the weight for each plan being equal to the 
     average number of beneficiaries enrolled under such plan in 
     the previous year.
       ``(B) Special rule for 2006.--For purposes of applying this 
     subsection for 2006, the Administrator shall establish 
     procedures for determining the weighted average under 
     subparagraph (A) for 2005.
       ``(4) Adjustment to add back in value of reinsurance 
     subsidies.--The adjustment under this paragraph, to take into 
     account reinsurance payments under subsection (c) making up 
     30 percent of total payments, is such an adjustment as will 
     make the national average monthly bid amount represent 
     represent 100 percent, instead of representing 70 percent, of 
     average payments under this part.
       ``(h) Coverage Year Defined.--For purposes of this section, 
     the term `coverage year' means a calendar year in which 
     covered outpatient drugs are dispensed if a claim for payment 
     is made under the plan for such drugs, regardless of when the 
     claim is paid.

     ``SEC. 1860D-9. MEDICARE PRESCRIPTION DRUG TRUST FUND.

       ``(a) In General.--There is created on the books of the 
     Treasury of the United States a trust fund to be known as the 
     `Medicare Prescription Drug Trust Fund' (in this section 
     referred to as the `Trust Fund'). The Trust Fund shall 
     consist of such gifts and bequests as may be made as provided 
     in section 201(i)(1), and such amounts as may be deposited 
     in, or appropriated to, such fund as provided in this part. 
     Except as otherwise provided in this section, the provisions 
     of subsections (b) through (i) of section 1841 shall apply to 
     the Trust Fund in the same manner as they apply to the 
     Federal Supplementary Medical Insurance Trust Fund under such 
     section.
       ``(b) Payments From Trust Fund.--
       ``(1) In general.--The Managing Trustee shall pay from time 
     to time from the Trust Fund such amounts as the Administrator 
     certifies are necessary to make--
       ``(A) payments under section 1860D-7 (relating to low-
     income subsidy payments);
       ``(B) payments under section 1860D-8 (relating to subsidy 
     payments); and
       ``(C) payments with respect to administrative expenses 
     under this part in accordance with section 201(g).
       ``(2) Transfers to medicaid account for increased 
     administrative costs.--The Managing Trustee shall transfer 
     from time to time from the Trust Fund to the Grants to States 
     for Medicaid account amounts the Administrator certifies are 
     attributable to increases in payment resulting from the 
     application of a higher Federal matching percentage under 
     section 1935(b).
       ``(c) Deposits Into Trust Fund.--
       ``(1) Low-income transfer.--There is hereby transferred to 
     the Trust Fund, from amounts appropriated for Grants to 
     States for Medicaid, amounts equivalent to the aggregate 
     amount of the reductions in payments under section 1903(a)(1) 
     attributable to the application of section 1935(c).
       ``(2) Appropriations to cover government contributions.--
     There are authorized to be appropriated from time to time, 
     out of any moneys in the Treasury not otherwise appropriated, 
     to the Trust Fund, an amount equivalent to the amount of 
     payments made from the Trust Fund under subsection (b), 
     reduced by the amount transferred to the Trust Fund under 
     paragraph (1).
       ``(d) Relation to Solvency Requirements.--Any provision of 
     law that relates to the solvency of the Trust Fund under this 
     part shall take into account the Trust Fund and amounts 
     receivable by, or payable from, the Trust Fund.

     ``SEC. 1860D-10. DEFINITIONS; APPLICATION TO MEDICARE 
                   ADVANTAGE AND EFFS PROGRAMS; TREATMENT OF 
                   REFERENCES TO PROVISIONS IN PART C.

       ``(a) Definitions.--For purposes of this part:
       ``(1) Covered outpatient drugs.--The term `covered 
     outpatient drugs' is defined in section 1860D-2(f).
       ``(2) Initial coverage limit.--The term `initial coverage 
     limit' means such limit as established under section 1860D-
     2(b)(3), or, in the case of coverage that is not standard 
     coverage, the comparable limit (if any) established under the 
     coverage.
       ``(3) Medicare prescription drug trust fund.--The term 
     `Medicare Prescription Drug Trust Fund' means the Trust Fund 
     created under section 1860D-9(a).
       ``(4) PDP sponsor.--The term `PDP sponsor' means an entity 
     that is certified under this part as meeting the requirements 
     and standards of this part for such a sponsor.
       ``(5) Prescription drug plan.--The term `prescription drug 
     plan' means health benefits coverage that--
       ``(A) is offered under a policy, contract, or plan by a PDP 
     sponsor pursuant to, and in accordance with, a contract 
     between the Administrator and the sponsor under section 
     1860D-4(b);
       ``(B) provides qualified prescription drug coverage; and
       ``(C) meets the applicable requirements of the section 
     1860D-3 for a prescription drug plan.

[[Page H6019]]

       ``(6) Qualified prescription drug coverage.--The term 
     `qualified prescription drug coverage' is defined in section 
     1860D-2(a).
       ``(7) Standard coverage.--The term `standard coverage' is 
     defined in section 1860D-2(b).
       ``(8) Insurance risk.--The term `insurance risk' means, 
     with respect to a participating pharmacy, risk of the type 
     commonly assumed only by insurers licensed by a State and 
     does not include payment variations designed to reflect 
     performance-based measures of activities within the control 
     of the pharmacy, such as formulary compliance and generic 
     drug substitution.
       ``(b) Offer of Qualified Prescription Drug Coverage Under 
     Medicare Advantage and EFFS Programs.--
       ``(1) As part of medicare advantage plan.--Medicare 
     Advantage organizations are required to offer Medicare 
     Advantage plans that include qualified prescription drug 
     coverage under part C pursuant to section 1851(j).
       ``(2) As part of effs plan.--EFFS organizations are 
     required to offer EFFS plans that include qualified 
     prescription drug coverage under part E pursuant to section 
     1860E-2(d).
       ``(c) Application of Part C Provisions Under this Part.--
     For purposes of applying provisions of part C under this part 
     with respect to a prescription drug plan and a PDP sponsor, 
     unless otherwise provided in this part such provisions shall 
     be applied as if--
       ``(1) any reference to a Medicare Advantage or other plan 
     included a reference to a prescription drug plan;
       ``(2) any reference to a provider-sponsored organization 
     included a reference to a PDP sponsor;
       ``(3) any reference to a contract under section 1857 
     included a reference to a contract under section 1860D-4(b); 
     and
       ``(4) any reference to part C included a reference to this 
     part.
       ``(d) Report on Pharmacy Services Provided to Long-Term 
     Care Facility Patients.--
       ``(1) Review.--Within 6 months after the date of the 
     enactment of this section, the Secretary shall review the 
     current standards of practice for pharmacy services provided 
     to patients in nursing facilities and other long-term care 
     facilities.
       ``(2) Evaluations and recommendations.--Specifically in the 
     review under paragraph (1), the Secretary shall--
       ``(A) assess the current standards of practice, clinical 
     services, and other service requirements generally utilized 
     for pharmacy services in the long-term care setting;
       ``(B) evaluate the impact of those standards with respect 
     to patient safety, reduction of medication errors and quality 
     of care; and
       ``(C) recommend (in the Secretary's report under paragraph 
     (3)) necessary actions and appropriate reimbursement to 
     ensure the provision of prescription drugs to medicare 
     beneficiaries residing in nursing facilities and other long-
     term care facilities in a manner consistent with existing 
     patient safety and quality of care standards under applicable 
     State and Federal laws.
       ``(3) Report.--The Secretary shall submit a report to the 
     Congress on the Secretary's findings and recommendations 
     under this subsection, including a detailed description of 
     the Secretary's plans to implement this part in a manner 
     consistent with applicable State and Federal laws designed to 
     protect the safety and quality of care of patients of nursing 
     facilities and other long-term care facilities.''.
       (b) Additional Conforming Changes.--
       (1) Conforming references to previous part d.--Any 
     reference in law (in effect before the date of the enactment 
     of this Act) to part D of title XVIII of the Social Security 
     Act is deemed a reference to part F of such title (as in 
     effect after such date).
       (2) Conforming amendment permitting waiver of cost-
     sharing.--Section 1128B(b)(3) (42 U.S.C. 1320a-7b(b)(3)) is 
     amended--
       (A) by striking ``and'' at the end of subparagraph (E);
       (B) by striking the period at the end of subparagraph (F) 
     and inserting ``; and''; and
       (C) by adding at the end the following new subparagraph:
       ``(G) the waiver or reduction of any cost-sharing imposed 
     under part D of title XVIII.''.
       (3) Submission of legislative proposal.--Not later than 6 
     months after the date of the enactment of this Act, 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 subtitle.
       (c) Study on Transitioning Part B Prescription Drug 
     Coverage.--Not later than January 1, 2005, the Medicare 
     Benefits Administrator shall submit a report to Congress that 
     makes recommendations regarding methods for providing 
     benefits under part D of title XVIII of the Social Security 
     Act for outpatient prescription drugs for which benefits are 
     provided under part B of such title.

     SEC. 102. OFFERING OF QUALIFIED PRESCRIPTION DRUG COVERAGE 
                   UNDER MEDICARE ADVANTAGE AND ENHANCED FEE-FOR-
                   SERVICE (EFFS) PROGRAM.

       (a) Medicare Advantage.--Section 1851 (42 U.S.C. 1395w-21) 
     is amended by adding at the end the following new subsection:
       ``(j) Availability of Prescription Drug Benefits and 
     Subsidies.--
       ``(1) Offering of qualified prescription drug coverage.--A 
     Medicare Advantage organization on and after January 1, 
     2006--
       ``(A) may not offer a Medicare Advantage plan described in 
     section 1851(a)(2)(A) in an area unless either that plan (or 
     another Medicare Advantage plan offered by the organization 
     in that area) includes qualified prescription drug coverage; 
     and
       ``(B) may not offer the prescription drug coverage (other 
     than that required under parts A and B) to an enrollee under 
     a Medicare Advantage plan, unless such drug coverage is at 
     least qualified prescription drug coverage and unless the 
     requirements of this subsection with respect to such coverage 
     are met.
       ``(2) Requirement for election of part d coverage to obtain 
     qualified prescription drug coverage.--For purposes of this 
     part, an individual who has not elected qualified 
     prescription drug coverage under section 1860D-1(b) shall be 
     treated as being ineligible to enroll in a Medicare Advantage 
     plan under this part that offers such coverage.
       ``(3) Compliance with certain additional beneficiary 
     protections for prescription drug coverage.--With respect to 
     the offering of qualified prescription drug coverage by a 
     Medicare Advantage organization under this part on and after 
     January 1, 2006, the organization and plan shall meet the 
     requirements of subsections (a) through (d) of section 1860D-
     3 in the same manner as they apply to a PDP sponsor and a 
     prescription drug plan under part D and shall submit to the 
     Administrator the information described in section 1860D-
     6(a)(2). The Administrator shall waive such requirements to 
     the extent the Administrator determines that such 
     requirements duplicate requirements otherwise applicable to 
     the organization or plan under this part.
       ``(4) Availability of premium and cost-sharing subsidies.--
     In the case of low-income individuals who are enrolled in a 
     Medicare Advantage plan that provides qualified prescription 
     drug coverage, premium and cost-sharing subsidies are 
     provided for such coverage under section 1860D-7.
       ``(5) Availability of direct and reinsurance subsidies to 
     reduce bids and premiums.--Medicare Advantage organizations 
     are provided direct and reinsurance subsidy payments for 
     providing qualified prescription drug coverage under this 
     part under section 1860D-8.
       ``(6) Consolidation of drug and non-drug premiums.--In the 
     case of a Medicare Advantage plan that includes qualified 
     prescription drug coverage, with respect to an enrollee in 
     such plan there shall be a single premium for both drug and 
     non-drug coverage provided under the plan.
       ``(7) Transition in initial enrollment period.--
     Notwithstanding any other provision of this part, the annual, 
     coordinated election period under subsection (e)(3)(B) for 
     2006 shall be the 6-month period beginning with November 
     2005.
       ``(8) Qualified prescription drug coverage; standard 
     coverage.--For purposes of this part, the terms `qualified 
     prescription drug coverage' and `standard coverage' have the 
     meanings given such terms in section 1860D-2.
       ``(9) Special rules for private fee-for-service plans.-- 
     With respect to a Medicare Advantage plan described in 
     section 1851(a)(2)(C) that offers qualified prescription drug 
     coverage--
       ``(A) Requirements regarding negotiated prices.--
     Subsections (a)(1) and (d)(1) of section 1860D-2 shall not be 
     construed to require the plan to negotiate prices or 
     discounts but shall apply to the extent the plan does so.
       ``(B) Modification of pharmacy participation requirement.--
     If the plan provides access, without charging additional 
     copayments, to all pharmacies without regard to whether they 
     are participating pharmacies in a network, section 1860D-
     3(c)(1)(A)(iii) shall not apply to the plan.
       ``(C) Drug utilization management program not required.--
     The requirements of section 1860D-3(d)(1)(A) shall not apply 
     to the plan.
       ``(D) Non-participating pharmacy disclosure exception.--If 
     the plan provides coverage for drugs purchased from all 
     pharmacies, without entering into contracts or agreements 
     with pharmacies to provide drugs to enrollees covered by the 
     plan, section 1860D-3(d)(5) shall not apply to the plan.''.
       (b) Application to EFFS Plans.--Subsection (d) of section 
     1860E-2, as added by section 201(a), is amended to read as 
     follows:
       ``(d) Availability of Prescription Drug Benefits and 
     Subsidies.--
       ``(1) Offering of qualified prescription drug coverage.--An 
     EFFS organization--
       ``(A) may not offer an EFFS plan in an area unless either 
     that plan (or another EFFS plan offered by the organization 
     in that area) includes qualified prescription drug coverage; 
     and
       ``(B) may not offer the prescription drug coverage (other 
     than that required under parts A and B) to an enrollee under 
     an EFFS plan, unless such drug coverage is at least qualified 
     prescription drug coverage and unless the requirements of 
     this subsection with respect to such coverage are met.
       ``(2) Requirement for election of part d coverage to obtain 
     qualified prescription drug coverage.--For purposes of this 
     part, an individual who has not elected qualified 
     prescription drug coverage under section 1860D-1(b) shall be 
     treated as being ineligible

[[Page H6020]]

     to enroll in an EFFS plan under this part that offers such 
     coverage.
       ``(3) Compliance with certain additional beneficiary 
     protections for prescription drug coverage.--With respect to 
     the offering of qualified prescription drug coverage by an 
     EFFS organization under this part, the organization and plan 
     shall meet the requirements of subsections (a) through (d) of 
     section 1860D-3 in the same manner as they apply to a PDP 
     sponsor and a prescription drug plan under part D and shall 
     submit to the Administrator the information described in 
     section 1860D-6(a)(2). The Administrator shall waive such 
     requirements to the extent the Administrator determines that 
     such requirements duplicate requirements otherwise applicable 
     to the organization or plan under this part.
       ``(4) Availability of premium and cost-sharing subsidies.--
     In the case of low-income individuals who are enrolled in an 
     EFFS plan that provides qualified prescription drug coverage, 
     premium and cost-sharing subsidies are provided for such 
     coverage under section 1860D-7.
       ``(5) Availability of direct and reinsurance subsidies to 
     reduce bids and premiums.--EFFS organizations are provided 
     direct and reinsurance subsidy payments for providing 
     qualified prescription drug coverage under this part under 
     section 1860D-8.
       ``(6) Consolidation of drug and non-drug premiums.--In the 
     case of an EFFS plan that includes qualified prescription 
     drug coverage, with respect to an enrollee in such plan there 
     shall be a single premium for both drug and non-drug coverage 
     provided under the plan.
       ``(7) Qualified prescription drug coverage; standard 
     coverage.--For purposes of this part, the terms `qualified 
     prescription drug coverage' and `standard coverage' have the 
     meanings given such terms in section 1860D-2.''.
       (c) Conforming Amendments.--Section 1851 (42 U.S.C. 1395w-
     21) is amended--
       (1) in subsection (a)(1)--
       (A) by inserting ``(other than qualified prescription drug 
     benefits)'' after ``benefits'';
       (B) by striking the period at the end of subparagraph (B) 
     and inserting a comma; and
       (C) by adding after and below subparagraph (B) the 
     following:
     ``and may elect qualified prescription drug coverage in 
     accordance with section 1860D-1.''; and
       (2) in subsection (g)(1), by inserting ``and section 1860D-
     1(c)(2)(B)'' after ``in this subsection''.
       (d) Effective Date.--The amendments made by this section 
     apply to coverage provided on or after January 1, 2006.

     SEC. 103. MEDICAID AMENDMENTS.

       (a) Determinations of Eligibility for Low-Income 
     Subsidies.--
       (1) Requirement.--Section 1902(a) (42 U.S.C. 1396a(a)) is 
     amended--
       (A) by striking ``and'' at the end of paragraph (64);
       (B) by striking the period at the end of paragraph (65) and 
     inserting ``; and''; and
       (C) by inserting after paragraph (65) the following new 
     paragraph:
       ``(66) provide for making eligibility determinations under 
     section 1935(a).''.
       (2) New section.--Title XIX is further amended--
       (A) by redesignating section 1935 as section 1936; and
       (B) by inserting after section 1934 the following new 
     section:


  ``special provisions relating to medicare prescription drug benefit

       ``Sec. 1935. (a) Requirement for Making Eligibility 
     Determinations for Low-Income Subsidies.--As a condition of 
     its State plan under this title under section 1902(a)(66) and 
     receipt of any Federal financial assistance under section 
     1903(a), a State shall--
       ``(1) make determinations of eligibility for premium and 
     cost-sharing subsidies under (and in accordance with) section 
     1860D-7;
       ``(2) inform the Administrator of the Medicare Benefits 
     Administration of such determinations in cases in which such 
     eligibility is established; and
       ``(3) otherwise provide such Administrator with such 
     information as may be required to carry out part D of title 
     XVIII (including section 1860D-7).
       ``(b) Payments for Additional Administrative Costs.--
       ``(1) In general.--The amounts expended by a State in 
     carrying out subsection (a) are, subject to paragraph (2), 
     expenditures reimbursable under the appropriate paragraph of 
     section 1903(a); except that, notwithstanding any other 
     provision of such section, the applicable Federal matching 
     rates with respect to such expenditures under such section 
     shall be increased as follows (but in no case shall the rate 
     as so increased exceed 100 percent):
       ``(A) For expenditures attributable to costs incurred 
     during 2005, the otherwise applicable Federal matching rate 
     shall be increased by 6-\2/3\ percent of the percentage 
     otherwise payable (but for this subsection) by the State.
       ``(B)(i) For expenditures attributable to costs incurred 
     during 2006 and each subsequent year through 2018, the 
     otherwise applicable Federal matching rate shall be increased 
     by the applicable percent (as defined in clause (ii)) of the 
     percentage otherwise payable (but for this subsection) by the 
     State.
       ``(ii) For purposes of clause (i), the `applicable percent' 
     for--
       ``(I) 2006 is 13-\1/3\ percent; or
       ``(II) a subsequent year is the applicable percent under 
     this clause for the previous year increased by 6-\2/3\ 
     percentage points.
       ``(C) For expenditures attributable to costs incurred after 
     2018, the otherwise applicable Federal matching rate shall be 
     increased to 100 percent.
       ``(2) Coordination.--The State shall provide the 
     Administrator with such information as may be necessary to 
     properly allocate administrative expenditures described in 
     paragraph (1) that may otherwise be made for similar 
     eligibility determinations.''.
       (b) Phased-In Federal Assumption of Medicaid Responsibility 
     for Premium and Cost-Sharing Subsidies for Dually Eligible 
     Individuals.--
       (1) In general.--Section 1903(a)(1) (42 U.S.C. 1396b(a)(1)) 
     is amended by inserting before the semicolon the following: 
     ``, reduced by the amount computed under section 1935(c)(1) 
     for the State and the quarter''.
       (2) Amount described.--Section 1935, as inserted by 
     subsection (a)(2), is amended by adding at the end the 
     following new subsection:
       ``(c) Federal Assumption of Medicaid Prescription Drug 
     Costs for Dually-Eligible Beneficiaries.--
       ``(1) In general.--For purposes of section 1903(a)(1), for 
     a State that is one of the 50 States or the District of 
     Columbia for a calendar quarter in a year (beginning with 
     2005) the amount computed under this subsection is equal to 
     the product of the following:
       ``(A) Medicare subsidies.--The total amount of payments 
     made in the quarter under section 1860D-7 (relating to 
     premium and cost-sharing prescription drug subsidies for low-
     income medicare beneficiaries) that are attributable to 
     individuals who are residents of the State and are entitled 
     to benefits with respect to prescribed drugs under the State 
     plan under this title (including such a plan operating under 
     a waiver under section 1115).
       ``(B) State matching rate.--A proportion computed by 
     subtracting from 100 percent the Federal medical assistance 
     percentage (as defined in section 1905(b)) applicable to the 
     State and the quarter.
       ``(C) Phase-out proportion.--The phase-out proportion (as 
     defined in paragraph (2)) for the quarter.
       ``(2) Phase-out proportion.--For purposes of paragraph 
     (1)(C), the `phase-out proportion' for a calendar quarter 
     in--
       ``(A) 2006 is 93\1/3\ percent;
       ``(B) a subsequent year before 2021, is the phase-out 
     proportion for calendar quarters in the previous year 
     decreased by 6-\2/3\ percentage points; or
       ``(C) a year after 2020 is 0 percent.''.
       (c) Medicaid Providing Wrap-Around Benefits.--Section 1935, 
     as so inserted and amended, is further amended by adding at 
     the end the following new subsection:
       ``(d) Additional Provisions.--
       ``(1) Medicaid as secondary payor.--In the case of an 
     individual who is entitled to qualified prescription drug 
     coverage under a prescription drug plan under part D of title 
     XVIII (or under a MA-EFFS Rx plan under part C or E of such 
     title) and medical assistance for prescribed drugs under this 
     title, medical assistance shall continue to be provided under 
     this title (other than for copayment amounts specified in 
     section 1860D-7(a)(1)(B), notwithstanding section 1916) for 
     prescribed drugs to the extent payment is not made under the 
     prescription drug plan or MA-EFFS Rx plan selected by the 
     individual.
       ``(2) Condition.--A State may require, as a condition for 
     the receipt of medical assistance under this title with 
     respect to prescription drug benefits for an individual 
     eligible to obtain qualified prescription drug coverage 
     described in paragraph (1), that the individual elect 
     qualified prescription drug coverage under section 1860D-
     1.''.
       (d) Treatment of Territories.--
       (1) In general.--Section 1935, as so inserted and amended, 
     is further amended--
       (A) in subsection (a) in the matter preceding paragraph 
     (1), by inserting ``subject to subsection (e)'' after 
     ``section 1903(a)'';
       (B) in subsection (c)(1), by inserting ``subject to 
     subsection (e)'' after ``1903(a)(1)''; and
       (C) by adding at the end the following new subsection:
       ``(e) Treatment of Territories.--
       ``(1) In general.--In the case of a State, other than the 
     50 States and the District of Columbia--
       ``(A) the previous provisions of this section shall not 
     apply to residents of such State; and
       ``(B) if the State establishes a plan described in 
     paragraph (2) (for providing medical assistance with respect 
     to the provision of prescription drugs to medicare 
     beneficiaries), the amount otherwise determined under section 
     1108(f) (as increased under section 1108(g)) for the State 
     shall be increased by the amount specified in paragraph (3).
       ``(2) Plan.--The plan described in this paragraph is a plan 
     that--
       ``(A) provides medical assistance with respect to the 
     provision of covered outpatient drugs (as defined in section 
     1860D-2(f)) to low-income medicare beneficiaries; and
       ``(B) assures that additional amounts received by the State 
     that are attributable to the operation of this subsection are 
     used only for such assistance.
       ``(3) Increased amount.--
       ``(A) In general.--The amount specified in this paragraph 
     for a State for a year is equal to the product of--
       ``(i) the aggregate amount specified in subparagraph (B); 
     and

[[Page H6021]]

       ``(ii) the amount specified in section 1108(g)(1) for that 
     State, divided by the sum of the amounts specified in such 
     section for all such States.
       ``(B) Aggregate amount.--The aggregate amount specified in 
     this subparagraph for--
       ``(i) 2006, is equal to $25,000,000; or
       ``(ii) a subsequent year, is equal to the aggregate amount 
     specified in this subparagraph for the previous year 
     increased by annual percentage increase specified in section 
     1860D-2(b)(5) for the year involved.
       ``(4) Report.--The Administrator shall submit to Congress a 
     report on the application of this subsection and may include 
     in the report such recommendations as the Administrator deems 
     appropriate.''.
       (2) Conforming amendment.--Section 1108(f) (42 U.S.C. 
     1308(f)) is amended by inserting ``and section 
     1935(e)(1)(B)'' after ``Subject to subsection (g)''.
       (e) Amendment to Best Price.--Section 1927(c)(1)(C)(i) (42 
     U.S.C. 1396r-8(c)(1)(C)(i)) is amended--
       (1) by striking ``and'' at the end of subclause (III);
       (2) by striking the period at the end of subclause (IV) and 
     inserting ``; and''; and
       (3) by adding at the end the following new subclause:

       ``(V) any prices charged which are negotiated by a 
     prescription drug plan under part D of title XVIII, by a MA-
     EFFS Rx plan under part C or E of such title with respect to 
     covered outpatient drugs, or by a qualified retiree 
     prescription drug plan (as defined in section 1860D-8(f)(1)) 
     with respect to such drugs on behalf of individuals entitled 
     to benefits under part A or enrolled under part B of such 
     title.''.

     SEC. 104. MEDIGAP TRANSITION.

       (a) In General.--Section 1882 (42 U.S.C. 1395ss) is amended 
     by adding at the end the following new subsection:
       ``(v) Coverage of Prescription Drugs.--
       ``(1) In general.--Notwithstanding any other provision of 
     law, except as provided in paragraph (3) no new medicare 
     supplemental policy that provides coverage of expenses for 
     prescription drugs may be issued under this section on or 
     after January 1, 2006, to an individual unless it replaces a 
     medicare supplemental policy that was issued to that 
     individual and that provided some coverage of expenses for 
     prescription drugs. Nothing in this subsection shall be 
     construed as preventing the policy holder of a medicare 
     supplemental policy issued before January 1, 2006, from 
     continuing to receive benefits under such policy on and after 
     such date.
       ``(2) Issuance of substitute policies for beneficiaries 
     enrolled with a plan under part d.--
       ``(A) In general.--The issuer of a medicare supplemental 
     policy--
       ``(i) may not deny or condition the issuance or 
     effectiveness of a medicare supplemental policy that has a 
     benefit package classified as `A', `B', `C', `D', `E', `F', 
     or `G' (under the standards established under subsection 
     (p)(2)) and that is offered and is available for issuance to 
     new enrollees by such issuer;
       ``(ii) may not discriminate in the pricing of such policy, 
     because of health status, claims experience, receipt of 
     health care, or medical condition; and
       ``(iii) may not impose an exclusion of benefits based on a 
     pre-existing condition under such policy,

     in the case of an individual described in subparagraph (B) 
     who seeks to enroll under the policy not later than 63 days 
     after the date of the termination of enrollment described in 
     such paragraph and who submits evidence of the date of 
     termination or disenrollment along with the application for 
     such medicare supplemental policy.
       ``(B) Individual covered.--An individual described in this 
     subparagraph is an individual who--
       ``(i) enrolls in a prescription drug plan under part D; and
       ``(ii) at the time of such enrollment was enrolled and 
     terminates enrollment in a medicare supplemental policy which 
     has a benefit package classified as `H', `I', or `J' under 
     the standards referred to in subparagraph (A)(i) or 
     terminates enrollment in a policy to which such standards do 
     not apply but which provides benefits for prescription drugs.
       ``(C) Enforcement.--The provisions of paragraph (4) of 
     subsection (s) shall apply with respect to the requirements 
     of this paragraph in the same manner as they apply to the 
     requirements of such subsection.
       ``(3) New standards.--In applying subsection (p)(1)(E) 
     (including permitting the NAIC to revise its model 
     regulations in response to changes in law) with respect to 
     the change in benefits resulting from title I of the Medicare 
     Prescription Drug and Modernization Act of 2003, with respect 
     to policies issued to individuals who are enrolled in a plan 
     under part D, the changes in standards shall only provide for 
     substituting (for the benefit packages described in paragraph 
     (2)(B)(ii) that included coverage for prescription drugs) two 
     benefit packages that may provide for coverage of cost-
     sharing (other than the prescription drug deductible) with 
     respect to qualified prescription drug coverage under such 
     part. The two benefit packages shall be consistent with the 
     following:
       ``(A) First new policy.--The policy described in this 
     subparagraph has the following benefits, notwithstanding any 
     other provision of this section relating to a core benefit 
     package:
       ``(i) Coverage of 50 percent of the cost-sharing otherwise 
     applicable under parts A and B, except coverage of 100 
     percent of any cost-sharing otherwise applicable for 
     preventive benefits.
       ``(ii) No coverage of the part B deductible.
       ``(iii) Coverage for all hospital coinsurance for long 
     stays (as in the current core benefit package).
       ``(iv) A limitation on annual out-of-pocket expenditures 
     under parts A and B to $4,000 in 2005 (or, in a subsequent 
     year, to such limitation for the previous year increased by 
     an appropriate inflation adjustment specified by the 
     Secretary).
       ``(B) Second new policy.--The policy described in this 
     subparagraph has the same benefits as the policy described in 
     subparagraph (A), except as follows:
       ``(i) Substitute `75 percent' for `50 percent' in clause 
     (i) of such subparagraph.
       ``(ii) Substitute `$2,000' for `$4,000' in clause (iv) of 
     such subparagraph.
       ``(4) Construction.--Any provision in this section or in a 
     medicare supplemental policy relating to guaranteed 
     renewability of coverage shall be deemed to have been met 
     through the offering of other coverage under this 
     subsection.''.
       (b) NAIC Report to Congress on Medigap Modernization.--The 
     Secretary shall request the National Association of Insurance 
     Commissioners to submit to Congress, not later than 18 months 
     after the date of the enactment of this Act, a report that 
     includes recommendations on the modernization of coverage 
     under the medigap program under section 1882 of the Social 
     Security Act (42 U.S.C. 1395ss).

     SEC. 105. MEDICARE PRESCRIPTION DRUG DISCOUNT CARD AND 
                   ASSISTANCE PROGRAM.

       (a) In General.--Title XVIII is amended by inserting after 
     section 1806 the following new sections:


 ``medicare prescription drug discount card endorsement and assistance 
                                program

       ``Sec. 1807. (a) Establishment of Program.--
       ``(1) In general.--The Secretary shall establish a 
     program--
       ``(A) to endorse prescription drug discount card programs 
     (each such program referred to as an `endorsed program') that 
     meet the requirements of this section in order to provide 
     access to prescription drug discounts through eligible 
     entities for medicare beneficiaries throughout the United 
     States; and
       ``(B) to provide for prescription drug accounts and public 
     contributions into such accounts.

     The Secretary shall make available to medicare beneficiaries 
     information regarding endorsed programs and accounts under 
     this section.
       ``(2) Limited period of operation.--The Secretary shall 
     begin--
       ``(A) the card endorsement part of the program under 
     paragraph (1)(A) as soon as possible, but in no case later 
     than 90 days after the date of the enactment of this section; 
     and
       ``(B) the prescription drug account part of the program 
     under paragraph (1)(B) as soon as possible, but in no case 
     later than September 2004.
       ``(3) Transition.--The program under this section shall 
     continue through 2005 throughout the United States. The 
     Secretary shall provide for an appropriate transition and 
     termination of such program on January 1, 2006.
       ``(4) Voluntary nature of program.--Nothing in this section 
     shall be construed as requiring an eligible beneficiary to 
     enroll in the program under this section.
       ``(b) Eligible Beneficiary; Eligible Entity; Prescription 
     Drug Account.--For purposes of this section:
       ``(1) Eligible beneficiary.--The term `eligible 
     beneficiary' means an individual who is eligible for benefits 
     under part A or enrolled under part B and who is not enrolled 
     in a Medicare Advantage plan that offers qualified 
     prescription drug coverage.
       ``(2) Eligible entity.--The term `eligible entity' means 
     any entity that the Secretary determines to be appropriate to 
     provide the benefits under this section, including--
       ``(A) pharmaceutical benefit management companies;
       ``(B) wholesale and retail pharmacy delivery systems;
       ``(C) insurers;
       ``(D) Medicare Advantage organizations;
       ``(E) other entities; or
       ``(F) any combination of the entities described in 
     subparagraphs (A) through (E).
       ``(3) Prescription drug account.--The term `prescription 
     drug account' means, with respect to an eligible beneficiary, 
     an account established for the benefit of that beneficiary 
     under section 1807A.
       ``(c) Enrollment in Endorsed Plan.--
       ``(1) Establishment of process.--
       ``(A) In general.--The Secretary shall establish a process 
     through which an eligible beneficiary may make an election to 
     enroll under this section with an endorsed program.
       ``(B) Requirement of enrollment.--An eligible beneficiary 
     must enroll under this section for a year in order to be 
     eligible to receive the benefits under this section for that 
     year.
       ``(C) Limitation on enrollment.--
       ``(i) In general.--Except as provided under this 
     subparagraph and under such exceptional circumstances as the 
     Secretary may provide, an eligible individual shall have the 
     opportunity to enroll under this section during an initial, 
     general enrollment period as soon as possible after the date 
     of the enactment of this section and annually thereafter.

[[Page H6022]]

     The Secretary shall specify the form, manner, and timing of 
     such election but shall permit the exercise of such election 
     at the time the individual is eligible to enroll. The annual 
     open enrollment periods shall be coordinated with those 
     provided under the Medicare Advantage program under part C.
       ``(ii) Reelection after termination of enrollment in a 
     medicare advantage plan.--In the case of an individual who is 
     enrolled under this section and who subsequently enrolls in a 
     Medicare Advantage plan that provides qualified prescription 
     drug coverage under part C, the individual shall be given the 
     opportunity to reenroll under this section at the time the 
     individual discontinues the enrollment under such part.
       ``(iii) Late enrollment.--The Secretary shall permit 
     individuals to elect to enroll under this section at times 
     other than as permitted under the previous provisions of this 
     paragraph.
       ``(D) Termination of enrollment.--An enrollee under this 
     section shall be disenrolled--
       ``(i) upon enrollment in a Medicare Advantage plan under 
     part C that provides qualified prescription drug coverage;
       ``(ii) upon failure to pay the applicable enrollment fee 
     under subsection (f);
       ``(iii) upon termination of coverage under part A or part 
     B; or
       ``(iv) upon notice submitted to the Secretary in such form, 
     manner, and time as the Secretary shall provide.

     Terminations of enrollment under this subparagraph shall be 
     effective as specified by the Secretary in regulations.
       ``(2) Enrollment periods.--
       ``(A) In general.--Except as provided under 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) Open enrollment period 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 section and shall end not 
     earlier than 3 months later, during which any eligible 
     beneficiary may enroll under this section.
       ``(C) Special enrollment period in case of termination of 
     coverage under a group health plan.--The Secretary shall 
     provide for a special enrollment period under this section in 
     the same manner as is provided under section 1837(i) with 
     respect to part B, except that for purposes of this 
     subparagraph any reference to `by reason of the individual's 
     (or the individual's spouse's) current employment status' 
     shall be treated as being deleted.
       ``(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 section shall be 
     effective for the period provided under section 1838, as if 
     that section applied to the program under this section.
       ``(B) Enrollment during open and special enrollment.--
     Subject to subparagraph (C), an eligible beneficiary who 
     enrolls under the program under this section under 
     subparagraph (B) or (C) of paragraph (2) shall be entitled to 
     the benefits under this section beginning on the first day of 
     the month following the month in which such enrollment 
     occurs.
       ``(d) Selection of an Eligible Entity for Access to 
     Negotiated Prices.--
       ``(1) Process.--
       ``(A) In general.--The Secretary shall establish a process 
     through which an eligible beneficiary who is enrolled under 
     this section shall select any eligible entity, that has been 
     awarded a contract under this section and serves the State in 
     which the beneficiary resides, to provide access to 
     negotiated prices under subsection (i).
       ``(B) Rules.--In establishing the process under 
     subparagraph (A), the Secretary shall use rules similar to 
     the rules for enrollment and disenrollment with a Medicare 
     Advantage plan under section 1851 (including the special 
     election periods under subsection (e)(4) of such section), 
     including that--
       ``(i) an individual may not select more than one eligible 
     entity at any time; and
       ``(ii) an individual shall only be permitted (except for 
     unusual circumstances) to change the selection of the entity 
     once a year.

     In carrying out clause (ii), the Secretary may consider a 
     change in residential setting (such as placement in a nursing 
     facility) to be an unusual circumstance.
       ``(C) Default selection.--In establishing such process, the 
     Secretary shall provide an equitable method for selecting an 
     eligible entity for individuals who enroll under this section 
     and fail to make such a selection.
       ``(2) Competition.--Eligible entities with a contract under 
     this section shall compete for beneficiaries on the basis of 
     discounts, formularies, pharmacy networks, and other services 
     provided for under the contract.
       ``(e) Providing Enrollment, Selection, and Coverage 
     Information to Beneficiaries.--
       ``(1) Activities.--The Secretary shall provide for 
     activities under this section to broadly disseminate 
     information to eligible beneficiaries (and prospective 
     eligible beneficiaries) regarding enrollment under this 
     section, the selection of eligible entities, and the 
     prescription drug coverage made available by eligible 
     entities with a contract under this section.
       ``(2) Special rule for first enrollment under the 
     program.--To the extent practicable, the activities described 
     in paragraph (1) shall ensure that eligible beneficiaries are 
     provided with such information at least 60 days prior to the 
     first enrollment period described in subsection (c).
       ``(f) Enrollment Fee.--
       ``(1) Amount.--Except as provided in paragraph (3), 
     enrollment under the program under this section is 
     conditioned upon payment of an annual enrollment fee of $30. 
     Such fee for 2004 shall include any portion of 2003 in which 
     the program is implemented under this section.
       ``(2) Collection of enrollment fee.--The annual enrollment 
     fee 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, 
     except that it shall be collected only 1 time per year.
       ``(3) Payment of enrollment fee by state for certain 
     beneficiaries.--
       ``(A) In general.--The Secretary shall establish an 
     arrangement under which a State may provide for payment of 
     some or all of the enrollment fee for some or all low income 
     enrollees in the State, as specified by the State under the 
     arrangement. Insofar as such a payment arrangement is made 
     with respect to an enrollee, the amount of the enrollment fee 
     shall be paid directly by the State and shall not be 
     collected under paragraph (2). In carrying out this 
     paragraph, the Secretary may apply procedures similar to that 
     applied under state agreements under section 1843.
       ``(B) No federal matching available under medicaid or 
     schip.--Expenditures made by a State described in 
     subparagraph (A) shall not be treated as State expenditures 
     for purposes of Federal matching payments under titles XIX 
     and XXI insofar as such expenditures are for an enrollment 
     fee under this subsection.
       ``(4) Distribution of portion of enrollment fee.--Of the 
     enrollment fee collected by the Secretary under this 
     subsection with respect to a beneficiary, \2/3\ of that fee 
     shall be made available to the eligible entity selected by 
     the eligible beneficiary.
       ``(g) Issuance of Card and Coordination.--Each eligible 
     entity shall--
       ``(1) issue, in a uniform standard format specified by the 
     Secretary, to each enrolled beneficiary a card and an 
     enrollment number that establishes proof of enrollment and 
     that can be used in a coordinated manner--
       ``(A) to identify the eligible entity selected to provide 
     access to negotiated prices under subsection (i); and
       ``(B) to make deposits to and withdrawals from a 
     prescription drug account under section 1807A; and
       ``(2) provide for electronic methods to coordinate with the 
     accounts established under section 1807A.
       ``(h) Enrollee Protections.--
       ``(1) Guaranteed issue and nondiscrimination.--
       ``(A) Guaranteed issue.--
       ``(i) In general.--An eligible beneficiary who is eligible 
     to select an eligible entity under subsection (b) for 
     prescription drug coverage under this section at a time 
     during which selections are accepted under this section with 
     respect to the coverage shall not be denied selection based 
     on any health status-related factor (described in section 
     2702(a)(1) of the Public Health Service Act) or any other 
     factor and may not be charged any selection or other fee as a 
     condition of such acceptance.
       ``(ii) Medicare advantage 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 selection of eligible entities under 
     this paragraph.
       ``(B) Nondiscrimination.--An eligible entity offering 
     prescription drug coverage under this section shall not 
     establish a service area in a manner that would discriminate 
     based on health or economic status of potential enrollees.
       ``(C) Coverage of all portions of a state.--If an eligible 
     entity with a contract under this section serves any part of 
     a State it shall serve the entire State.
       ``(2) Dissemination of information.--
       ``(A) General information.--An eligible entity with a 
     contract under this section shall disclose, in a clear, 
     accurate, and standardized form to each eligible beneficiary 
     who has selected the entity to provide access to negotiated 
     prices under this section at the time of selection and at 
     least annually thereafter, the information described in 
     section 1852(c)(1) relating to such prescription drug 
     coverage. Such information includes the following (in a 
     manner designed to permit and promote competition among 
     eligible entities):
       ``(i) Summary information regarding negotiated prices 
     (including discounts) for covered outpatient drugs.
       ``(ii) Access to such prices through pharmacy networks.
       ``(iii) How any formulary used by the eligible entity 
     functions.
       ``(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 section 1852(c)(2) (other than 
     subparagraph (D)) to such beneficiary.

[[Page H6023]]

       ``(C) Response to beneficiary questions.--Each eligible 
     entity offering prescription drug coverage under this section 
     shall have a mechanism (including a toll-free telephone 
     number) for providing upon request specific information (such 
     as negotiated prices, including discounts) to individuals who 
     have selected the entity. The entity shall make available, 
     through an Internet website and in writing upon request, 
     information on specific changes in its formulary.
       ``(D) Coordination with prescription drug account 
     benefits.--Each such eligible entity shall provide for 
     coordination of such information as the Secretary may specify 
     to carry out section 1807A.
       ``(3) Access to covered benefits.--
       ``(A) Ensuring pharmacy access.--The provisions of 
     subsection (c)(1) of section 1860D-3 (other than payment 
     provisions under section 1860D-8 with respect to sponsors 
     under such subsection) shall apply to an eligible entity 
     under this section in the same manner as they apply to a PDP 
     sponsor under such section.
       ``(B) Access to negotiated prices for prescription drugs.--
     For requirements relating to the access of an eligible 
     beneficiary to negotiated prices (including applicable 
     discounts), see subsection (i).
       ``(C) Requirements on development and application of 
     formularies.--Insofar as an eligible entity with a contract 
     under this part uses a formulary, the entity shall comply 
     with the requirements of section 1860D-3(c)(3), insofar as 
     the Secretary determines that such requirements can be 
     implemented on a timely basis.
       ``(4) Cost and utilization management; quality assurance; 
     medication therapy management program.--
       ``(A) In general.--For purposes of providing access to 
     negotiated benefits under subsection (i), the eligible entity 
     shall have in place the programs and measure described in 
     section 1860D-3(d), including an effective cost and drug 
     utilization management program, quality assurance measures 
     and systems, and a program to control fraud, abuse, and 
     waste, insofar as the Secretary determines that such 
     provisions can be implemented on a timely basis.
       ``(B) Treatment of accreditation.--Section 1852(e)(4) 
     (relating to treatment of accreditation) shall apply to the 
     requirements for an endorsed program under this section with 
     respect to the following requirements, in the same manner as 
     they apply to Medicare Advantage plans under part C with 
     respect to the requirements described in a clause of section 
     1852(e)(4)(B):
       ``(i) Paragraph (3)(A) (relating to access to covered 
     benefits).
       ``(ii) Paragraph (7) (relating to confidentiality and 
     accuracy of enrollee records).
       ``(5) Grievance mechanism.--Each eligible entity shall 
     provide meaningful procedures for hearing and resolving 
     grievances between the organization consistent with the 
     requirements of section 1860D-3(e) insofar as they relate to 
     PDP sponsors of prescription drug plans.
       ``(6) Beneficiary services.--An eligible entity shall 
     provide for its enrollees pharmaceutical support services, 
     such as education and counseling, and services to prevent 
     adverse drug interactions.
       ``(7) Coverage determinations and reconsiderations.--An 
     eligible entity shall meet the requirements of paragraphs (1) 
     through (3) of section 1852(g) with respect to covered 
     benefits under the prescription drug coverage it offers under 
     this section in the same manner as such requirements apply to 
     a Medicare Advantage organization with respect to benefits it 
     offers under a Medicare Advantage plan under part C.
       ``(8) Confidentiality and accuracy of enrollee records.--An 
     eligible entity shall meet the requirements of section 
     1852(h) with respect to enrollees under this section in the 
     same manner as such requirements apply to a Medicare 
     Advantage organization with respect to enrollees under part 
     C. The eligible entity shall implement policies and 
     procedures to safeguard the use and disclosure of enrollees' 
     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. The eligible 
     entity shall be treated as a covered entity for purposes of 
     the provisions of subpart E of part 164 of title 45, Code of 
     Federal Regulations, adopted pursuant to the authority of the 
     Secretary under section 264(c) of the Health Insurance 
     Portability and Accountability Act of 1996 (42 U.S. C. 1320d-
     2 note).
       ``(9) Periodic reports and oversight.--The eligible entity 
     shall submit to the Secretary periodic reports on 
     performance, utilization, finances, and such other matters as 
     the Secretary may specify. The Secretary shall provide 
     appropriate oversight to ensure compliance of eligible 
     entities with the requirements of this subsection, including 
     verification of the discounts and services provided.
       ``(10) Additional beneficiary protections.--The eligible 
     entity meets such additional requirements as the Secretary 
     identifies to protect and promote the interest of enrollees, 
     including requirements that ensure that enrollees are not 
     charged more than the lower of the negotiated retail price or 
     the usual and customary price.
       ``(i) Benefits Under the Program Through Savings to 
     Enrollees Through Negotiated Prices.--
       ``(1) In general.--Subject to paragraph (2), each eligible 
     entity with a contract under this section shall provide each 
     eligible beneficiary enrolled with the entity with access to 
     negotiated prices (including applicable discounts). For 
     purposes of this paragraph, the term `prescription drugs' is 
     not limited to covered outpatient drugs, but does not include 
     any over-the-counter drug that is not a covered outpatient 
     drug. The prices negotiated by an eligible entity under this 
     paragraph shall (notwithstanding any other provision of law) 
     not be taken into account for the purposes of establishing 
     the best price under section 1927(c)(1)(C).
       ``(2) Formulary restrictions.--Insofar as an eligible 
     entity with a contract under this part uses a formulary, the 
     negotiated prices (including applicable discounts) for 
     prescription drugs shall only be available for drugs included 
     in such formulary.
       ``(3) Prohibition on application only to mail order.--The 
     negotiated prices under this subsection shall apply to 
     prescription drugs that are available other than solely 
     through mail order.
       ``(4) Prohibition on charges for required services.--An 
     eligible entity (and any pharmacy contracting with such 
     entity for the provision of a discount under this section) 
     may not charge a beneficiary any amount for any services 
     required to be provided by the entity under this section.
       ``(5) Disclosure.--The eligible entity offering the 
     endorsed program shall disclose to the Secretary (in a manner 
     specified by the Secretary) the extent to which discounts or 
     rebates or other remuneration or price concessions made 
     available to the entity by a manufacturer are passed through 
     to enrollees through pharmacies and other dispensers or 
     otherwise. The provisions of section 1927(b)(3)(D) shall 
     apply to information disclosed to the Secretary under this 
     paragraph in the same manner as such provisions apply to 
     information disclosed under such section.
       ``(6) Public disclosure of pharmaceutical prices for 
     equivalent drugs.--Each eligible entity shall provide that 
     each pharmacy or other dispenser that arranges for the 
     dispensing of a covered outpatient drug in connection with 
     its endorsed program shall inform the enrollee in that 
     program 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 available generic 
     drug covered under the program that is therapeutically 
     equivalent and bioequivalent.
       ``(j) Contribution Into Prescription Drug Account.--
       ``(1) In general.--In the case of an individual enrolled 
     under this section, the Secretary shall--
       ``(A) establish a prescription drug account for the 
     individual under section 1807A; and
       ``(B) subject to paragraph (5), deposit into such account 
     on a monthly or other periodic basis an amount that, on an 
     annual basis, is equivalent to the annual Federal 
     contribution amount specified in paragraph (2) for the 
     enrollee involved.
       ``(2) Annual federal contribution amount.--Subject to 
     paragraph (3), in the case of an accountholder whose income 
     is--
       ``(A) not more than 135 percent of the poverty line, the 
     annual Federal contribution amount for a year is $800;
       ``(B) more than 135 percent, but not more than 150 percent, 
     of the poverty line, the annual Federal contribution amount 
     for a year is $500; or
       ``(C) more than 150 percent of the poverty line, the annual 
     Federal contribution amount for a year is $100.
       ``(3) Income eligibility determinations.--The determination 
     of whether an individual residing in a State is a eligible 
     for a contribution under paragraph (1) shall be determined 
     under the State medicaid plan for the State under section 
     1935(a) or by the Social Security Administration. In the case 
     of a State that does not operate such a medicaid plan (either 
     under title XIX or under a statewide waiver granted under 
     section 1115), such determination shall be made under 
     arrangements made by the Secretary. There are authorized to 
     be appropriated to the Social Security Administration such 
     sums as may be necessary for the determination of eligibility 
     under this paragraph.
       ``(4) Partial year.--Insofar as the provisions of this 
     subsection and section 1807A are not implemented for all 
     months in 2004, the annual contribution amount under this 
     subsection for 2004 shall be prorated to reflect the portion 
     of that year in which such provisions are in effect.
       ``(5) Restriction on contributions.--There shall only be an 
     annual Federal contribution under paragraph (1) for an 
     individual if the individual is not eligible for coverage of, 
     or assistance for, outpatient prescription drugs under any of 
     the following:
       ``(A) A medicaid plan under title XIX (including under any 
     waiver approved under section 1115).
       ``(B) Enrollment under a group health plan or health 
     insurance coverage.
       ``(C) Enrollment under a medicare supplemental insurance 
     policy.
       ``(D) Chapter 55 of title 10, United States Code (relating 
     to medical and dental care for members of the uniformed 
     services).
       ``(E) Chapter 17 of title 38, United States Code (relating 
     to Veterans' medical care).
       ``(F) Enrollment under a plan under chapter 89 of title 5, 
     United States Code (relating to the Federal employees' health 
     benefits program).
       ``(G) The Indian Health Care Improvement Act (25 U.S.C. 
     1601 et seq.).

[[Page H6024]]

       ``(6) Appropriation to cover net program expenditures.--
     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 section exceed the sum of the portion 
     of the enrollment fees retained by the Secretary.
       ``(k) Definitions.--In this part and section 1807A:
       ``(1) Covered outpatient drug.--
       ``(A) In general.--Except as provided in this paragraph, 
     for purposes of this section, the term `covered outpatient 
     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 medical 
     supplies associated with the injection of insulin (as defined 
     in regulations of the Secretary),

     and such term includes a vaccine licensed under section 351 
     of the Public Health Service Act and any use of a covered 
     outpatient 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 
     outpatient drug under this section 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 outpatient drug under this section shall not be so 
     considered under an endorsed program if the eligible entity 
     offering the program excludes the drug under a formulary and 
     a review of such exclusion is not successfully resolved under 
     subsection (h)(5).
       ``(D) Application of general exclusion provisions.--An 
     eligible entity offering an endorsed program may exclude from 
     qualified prescription drug coverage any covered outpatient 
     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 
     program or this section.

     Such exclusions are determinations subject to review pursuant 
     to subsection (h)(5).
       ``(2) 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.
       ``(l) Authorization of Appropriations.--There are 
     authorized to be appropriated such sums as may be necessary 
     to carry out this section and section 1807A.
       ``(e) Interim, Final Regulatory Authority.--In order to 
     carry out this section and section 1807A in a timely manner, 
     the Secretary may promulgate regulations that take effect on 
     an interim basis, after notice and pending opportunity for 
     public comment.


                      ``prescription drug accounts

       ``Sec. 1807A. ``(a) Establishment of Accounts.--
       ``(1) In general.--The Secretary shall establish and 
     maintain for each eligible beneficiary who is enrolled under 
     section 1807 at the time of enrollment a prescription drug 
     account (in this section and section 1807 referred to as an 
     `account').
       ``(2) Reserve accounts.--In cases described in subsections 
     (b)(3)(A), (b)(3)(B)(i), and (b)(3)(B)(ii)(I), the Secretary 
     shall establish and maintain for each surviving spouse who is 
     not enrolled under section 1807 a reserve prescription drug 
     account (in this section referred to as an `reserve 
     account').
       ``(3) Accountholder defined.--In this section and section 
     1807A, the term `accountholder' means an individual for whom 
     an account or reserve account has been established under this 
     section.
       ``(4) Expenditures from account.--Nothing in this section 
     shall be construed as requiring the Federal Government to 
     obligate funds for amounts in any account until such time as 
     a withdrawal from such account is authorized under this 
     section.
       ``(b) Use of Accounts.--
       ``(1) Application of account.--Except as provided in this 
     subsection, amounts credited to an account shall only be used 
     for the purchase of covered outpatient drugs for the 
     accountholder. Any amounts remaining at the end of a year 
     remain available for expenditures in succeeding years.
       ``(2) Account rules for public and private contributions.--
     The Secretary shall establish a ongoing process for the 
     determination of the amount in each account that is 
     attributable to public and private contributions (including 
     spousal rollover contributions) based on the following rules:
       ``(A) Treatment of expenditures.--Expenditures from the 
     account shall--
       ``(i) first be counted against any public contribution; and
       ``(ii) next be counted against private contributions.
       ``(B) Treatment of spousal rollover contributions.--With 
     respect to any spousal rollover contribution, the portions of 
     such contribution that were attributable to public and 
     private contributions at the time of its distribution under 
     subsection (b)(3) shall be treated under this paragraph as if 
     it were a direct public or private contribution, 
     respectively, into the account of the spouse.
       ``(3) Death of accountholder.--In the case of the death of 
     an accountholder, the balance in any account (taking into 
     account liabilities accrued before the time of death) shall 
     be distributed as follows:
       ``(A) Treatment of public contributions.--If the 
     accountholder is married at the time of death, the amount in 
     the account that is attributable to public contributions 
     shall be credited to the account (if any) of the surviving 
     spouse of the accountholder (or, if the surviving spouse is 
     not an eligible beneficiary, into a reserve account to be 
     held for when that spouse becomes an eligible beneficiary).
       ``(B) Treatment of private contributions.--The amount in 
     the account that is attributable to private contributions 
     shall be distributed as follows:
       ``(i) Designation of distributee.--If the accountholder has 
     made a designation, in a form and manner specified by the 
     Secretary, for the distribution of some or all of such 
     amount, such amount shall be distributed in accordance with 
     the designation. Such designation may provide for the 
     distribution into an account (including a reserve account) of 
     a surviving spouse.
       ``(ii) Absence of designation.--Insofar as the 
     accountholder has not made such a designation--

       ``(I) Surviving spouse.--If the accountholder was married 
     at the time of death, the remainder shall be credited to an 
     account (including a reserve account) of the accountholder's 
     surviving spouse.
       ``(II) No surviving spouse.--If the accountholder was not 
     so married, the remainder shall be distributed to the estate 
     of the accountholder and distributed as provided by law.

       ``(4) Use of account for premiums for enrollment in a 
     medicare advantage plan.--During any period in which an 
     accountholder is enrolled in a Medicare Advantage plan under 
     part C, the balance in the account may be used and applied 
     only to reimburse the amount of the premium (if any) 
     established for enrollment under the plan.
       ``(5) Application to medicaid expenses in certain cases.--
       ``(A) In general.--Except as provided in this paragraph, an 
     account shall be treated as an asset for purposes of 
     establishing eligibility for medical assistance under title 
     XIX.
       ``(B) Application towards spenddown.--In the case of an 
     accountholder who is applying for such medical assistance and 
     who would, but for the application of subparagraph (A), be 
     eligible for such assistance--
       ``(i) subparagraph (A) shall not apply; and
       ``(ii) the account shall be available (in accordance with a 
     procedure established by the Secretary) to the State to 
     reimburse the State for any expenditures made under the plan 
     for such medical assistance.
       ``(c) Amounts Credited in Account.--The Secretary shall 
     credit to a prescription drug account of an eligible 
     beneficiary the following amounts:
       ``(1) Public contributions.--The following contributions 
     (each referred to in this section as a `public 
     contribution'):
       ``(A) Federal contributions.--Federal contributions 
     provided under subsection (d).
       ``(B) State contributions.--Contributions made by a State 
     under subsection (f).
       ``(2) Spousal rollover contribution.--A distribution from a 
     deceased spouse under subsection (b)(3) (referred to in this 
     section as a `spousal rollover contribution').
       ``(3) Private contributions.--The following contributions 
     (each referred to in this section as a `private 
     contribution'):
       ``(A) Employer and individual contributions.--Contributions 
     made under subsection (e).
       ``(B) Other individual contributions.--Contributions made 
     by accountholder other than under subsection (e).
       ``(C) Contributions by nonprofit organizations.--
     Contributions made by a charitable, not-for-profit 
     organization (that may be a religious organization).

     Except as provided in this subsection, no amounts may be 
     contributed to, or credited to, a prescription drug account.
       ``(d) Federal Contribution.--For Federal contributions in 
     the case of accountholders, see section 1807(j).
       ``(e) Employer and Individual Contributions.--
       ``(1) Employment-related contribution.--
       ``(A) In general.--In the case of any accountholder who is 
     a beneficiary or participant in a group health plan 
     (including a multi-employer plan), whether as an employee, 
     former employee or otherwise, including as a dependent of an 
     employee or former employee, the plan may make a contribution 
     into the accountholder's account (but not into a reserve 
     account of the accountholder).
       ``(B) Limitation.--The total amount that may be contributed 
     under subparagraph (A) under a plan to an account during any 
     year may not exceed $5,000.
       ``(C) Condition.--A group health plan may condition a 
     contribution with respect to an

[[Page H6025]]

     accountholder under this paragraph on the accountholder's 
     enrollment under section 1807 with an eligible entity that is 
     recognized or approved by that plan.
       ``(2) Other individuals.--
       ``(A) In general.--Any individual may also contribute to 
     the account of that individual or the account of any other 
     individual under this subsection.
       ``(B) Limitation.--The total amount that may be contributed 
     to an account under subparagraph (A) during any year may not 
     exceed $5,000, regardless of who makes such contribution.
       ``(3) No contribution permitted to reserve account.--No 
     contribution may be made under this subsection to a reserve 
     account.
       ``(4) Form and manner of contribution.--The Secretary shall 
     specify the form and manner of contributions under this 
     subsection.
       ``(f) State Contributions.--
       ``(1) In general.--A State may enter into arrangements with 
     the Secretary for the crediting of amounts for 
     accountholders.
       ``(2) Form and manner of contribution.--The Secretary shall 
     specify the form and manner of contributions under this 
     subsection.
       ``(3) Medicaid treatment.--Amounts credited under this 
     subsection shall not be treated as medical assistance for 
     purposes of title XIX or child health assistance for purposes 
     of title XXI for individuals who are not qualifying low 
     income enrollees.''.
       (b) Exclusion of Costs from Determination of Part B Monthly 
     Premium.--Section 1839(g) (42 U.S.C. 1395r(g)) is amended--
       (1) by striking ``attributable to the application of 
     section'' and inserting ``attributable to--
       ``(1) the application of section'';
       (2) by striking the period and inserting ``; and''; and
       (3) by adding at the end the following new paragraph:
       ``(2) the Voluntary Medicare Outpatient Prescription Drug 
     Discount and Security Program under sections 1807 and 
     1807A.''.
       (c) State Eligibility Determinations.--Section 1935, as 
     added by section 103(a)(2), is amended--
       (1) in subsection (a)(1), by inserting ``and of eligibility 
     for an annual Federal contribution amount under section 
     1807A(j)(2)'' before the semicolon; and
       (2) in subsection (a)(3), by inserting ``and sections 1807 
     and 1807A'' after ``1860D-7)''.
       (d) Report on Progress in Implementation of Prescription 
     Drug Benefit.--Not later than March 1, 2005, the 
     Administrator shall submit a report to Congress on the 
     progress that has been made in implementing the prescription 
     drug benefit under this title. The Administrator shall 
     include in the report specific steps that have been taken, 
     and that need to be taken, to ensure a timely start of the 
     program on January 1, 2006.

     SEC. 106. DISCLOSURE OF RETURN INFORMATION FOR PURPOSES OF 
                   CARRYING OUT MEDICARE CATASTROPHIC PRESCRIPTION 
                   DRUG PROGRAM.

       (a) Disclosure.--
       (1) In general.--Subsection (l) of section 6103 of the 
     Internal Revenue Code of 1986 (relating to disclosure of 
     returns and return information for purposes other than tax 
     administration) is amended by adding at the end the following 
     new paragraph:
       ``(19) Disclosure of return information for purposes of 
     carrying out medicare catastrophic prescription drug 
     program.--
       ``(A) In general.--The Secretary may, upon written request 
     from the Secretary of Health and Human Services under section 
     1860D-2(b)(4)(E)(i) of the Social Security Act, disclose to 
     officers and employees of the Department of Health and Human 
     Services with respect to a specified taxpayer for the taxable 
     year specified by the Secretary of Health and Human Services 
     in such request--
       ``(i) the taxpayer identity information with respect to 
     such taxpayer, and
       ``(ii) the adjusted gross income of such taxpayer for the 
     taxable year (or, if less, the income threshold limit 
     specified in section 1860D-2(b)(4)(D)(ii) for the calendar 
     year specified by such Secretary in such request).
       ``(B) Specified taxpayer.--For purposes of this paragraph, 
     the term `specified taxpayer' means any taxpayer who--
       ``(i) is identified by the Secretary of Health and Human 
     Services in the request referred to in subparagraph (A), and
       ``(ii) either--

       ``(I) has an adjusted gross income for the taxable year 
     referred to in subparagraph (A) in excess of the income 
     threshold specified in section 1860D-2(b)(4)(D)(ii) of such 
     Act for the calendar year referred to in such subparagraph, 
     or
       ``(II) is identified by such Secretary under subparagraph 
     (A) as being an individual who elected to use more recent 
     information under section 1860D-2(b)(4)(D)(v) of such Act.

       ``(C) Joint returns.--In the case of a joint return, the 
     Secretary shall, for purposes of applying this paragraph, 
     treat each spouse as a separate taxpayer having an adjusted 
     gross income equal to one-half of the adjusted gross income 
     determined with respect to such return.
       ``(D) Restriction on use of disclosed information.--Return 
     information disclosed under subparagraph (A) may be used by 
     officers and employees of the Department of Health and Human 
     Services only for the purpose of administering the 
     prescription drug benefit under title XVIII of the Social 
     Security Act. Such officers and employees may disclose the 
     annual out-of-pocket threshold which applies to an individual 
     under such part to the entity that offers the plan referred 
     to in section 1860D-2(b)(4)(E)(ii) of such Act in which such 
     individual is enrolled. Such sponsor may use such information 
     only for purposes of administering such benefit.''.
       (2) Joint return permitted in case of surviving spouses.--
     Under section 6103(a)(3) of the Internal Revenue Code of 
     1986, a surviving spouse may file a joint return for the 
     taxable year in which one spouse dies.
       (b) Confidentiality.--Paragraph (3) of section 6103(a) of 
     such Code is amended by striking ``or (16)'' and inserting 
     ``(16), or (19)''.
       (c) Procedures and Recordkeeping Related to Disclosures.--
     Subsection (p)(4) of section 6103 of such Code is amended by 
     striking ``any other person described in subsection (l)(16) 
     or (17)'' each place it appears and inserting ``any other 
     person described in subsection (l)(16), (17), or (19)''.
       (d) Unauthorized Disclosure.--Paragraph (2) of section 
     7213(a) of such Code is amended by striking ``or (16)'' and 
     inserting ``(16), or (19)''.
       (e) Unauthorized Inspection.--Subparagraph (B) of section 
     7213A(a)(1) of such Code is amended by inserting ``or (19)'' 
     after ``subsection (l)(18)''.

     SEC. 107. STATE PHARMACEUTICAL ASSISTANCE TRANSITION 
                   COMMISSION.

       (a) Establishment.--
       (1) In general.--There is established, as of the first day 
     of the third month beginning after the date of the enactment 
     of this Act, a State Pharmaceutical Assistance Transition 
     Commission (in this section referred to as the 
     ``Commission'') to develop a proposal for addressing the 
     unique transitional issues facing State pharmaceutical 
     assistance programs, and program participants, due to the 
     implementation of the medicare prescription drug program 
     under part D of title XVIII of the Social Security Act.
       (2) Definitions.--For purposes of this section:
       (A) State pharmaceutical assistance program defined.--The 
     term ``State pharmaceutical assistance program'' means a 
     program (other than the medicaid program) operated by a State 
     (or under contract with a State) that provides as of the date 
     of the enactment of this Act assistance to low-income 
     medicare beneficiaries for the purchase of prescription 
     drugs.
       (B) Program participant.--The term ``program participant'' 
     means a low-income medicare beneficiary who is a participant 
     in a State pharmaceutical assistance program.
       (b) Composition.--The Commission shall include the 
     following:
       (1) A representative of each governor of each State that 
     the Secretary identifies as operating on a statewide basis a 
     State pharmaceutical assistance program that provides for 
     eligibility and benefits that are comparable or more generous 
     than the low-income assistance eligibility and benefits 
     offered under part D of title XVIII of the Social Security 
     Act.
       (2) Representatives from other States that the Secretary 
     identifies have in operation other State pharmaceutical 
     assistance programs, as appointed by the Secretary.
       (3) Representatives of organizations that have an inherent 
     interest in program participants or the program itself, as 
     appointed by the Secretary but not to exceed the number of 
     representatives under paragraphs (1) and (2).
       (4) Representatives of Medicare Advantage organizations and 
     other private health insurance plans, as appointed by the 
     Secretary.
       (5) The Secretary (or the Secretary's designee) and such 
     other members as the Secretary may specify

     The Secretary shall designate a member to serve as chair of 
     the Commission and the Commission shall meet at the call of 
     the chair.
       (c) Development of Proposal.--The Commission shall develop 
     the proposal described in subsection (a) in a manner 
     consistent with the following principles:
       (1) Protection of the interests of program participants in 
     a manner that is the least disruptive to such participants 
     and that includes a single point of contact for enrollment 
     and processing of benefits.
       (2) Protection of the financial and flexibility interests 
     of States so that States are not financially worse off as a 
     result of the enactment of this title.
       (3) Principles of medicare modernization provided under 
     title II of this Act.
       (d) Report.--By not later than January 1, 2005, the 
     Commission shall submit to the President and the Congress a 
     report that contains a detailed proposal (including specific 
     legislative or administrative recommendations, if any) and 
     such other recommendations as the Commission deems 
     appropriate.
       (e) Support.--The Secretary shall provide the Commission 
     with the administrative support services necessary for the 
     Commission to carry out its responsibilities under this 
     section.
       (f) Termination.--The Commission shall terminate 30 days 
     after the date of submission of the report under subsection 
     (d).

     SEC. 108. ADDITIONAL REQUIREMENTS FOR ANNUAL FINANCIAL REPORT 
                   AND OVERSIGHT ON MEDICARE PROGRAM, INCLUDING 
                   PRESCRIPTION DRUG SPENDING.

       (a) In General.--Section 1817 (42 U.S.C. 1395i) is amended 
     by adding at the end the following new subsection:

[[Page H6026]]

       ``(l) Combined Report on Operation and Status of the Trust 
     Fund, the Federal Supplementary Medical Insurance Trust Fund, 
     and Medicare Prescription Drug Trust Fund.--
       ``(1) In general.--In addition to the duty of the Board of 
     Trustees to report to Congress under subsection (b), on the 
     date the Board submits the report required under subsection 
     (b)(2), the Board shall submit to Congress a report on the 
     operation and status of the Trust Fund, the Federal 
     Supplementary Medical Insurance Trust Fund established under 
     section 1841, and the Medicare Prescription Drug Trust Fund 
     under section 1860D-9(a) (in this subsection collectively 
     referred to as the `Trust Funds'). Such report shall included 
     the following information:
       ``(A) Overall spending from the general fund of the 
     treasury.--A statement of total amounts obligated during the 
     preceding fiscal year from the General Revenues of the 
     Treasury to the Trust Funds for payment for benefits covered 
     under this title, stated in terms of the total amount and in 
     terms of the percentage such amount bears to all other 
     amounts obligated from such General Revenues during such 
     fiscal year.
       ``(B) Historical overview of spending.--From the date of 
     the inception of the program of insurance under this title 
     through the fiscal year involved, a statement of the total 
     amounts referred to in subparagraph (A).
       ``(C) 10-year and 75-year projections.--An estimate of 
     total amounts referred to in subparagraph (A) required to be 
     obligated for payment for benefits covered under this title 
     for each of the 10 fiscal years succeeding the fiscal year 
     involved and for the 75-year period beginning with the 
     succeeding fiscal year.
       ``(D) Relation to gdp growth.--A comparison of the rate of 
     growth of the total amounts referred to in subparagraph (A) 
     to the rate of growth in the gross domestic product for the 
     same period.
       ``(2) Publication.--Each report submitted under paragraph 
     (1) shall be published jointly by the Committee on Ways and 
     Means and the Committee on Energy and Commerce as a public 
     document and shall be made available by such Committees on 
     the Internet.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply with respect to fiscal years beginning on or 
     after the date of the enactment of this Act.

  TITLE II--MEDICARE ENHANCED FEE-FOR-SERVICE AND MEDICARE ADVANTAGE 
                     PROGRAMS; MEDICARE COMPETITION

     SEC. 200. MEDICARE MODERNIZATION AND REVITALIZATION.

       This title provides for--
       (1) establishment of the medicare enhanced fee-for-service 
     (EFFS) program under which medicare beneficiaries are 
     provided access to a range of enhanced fee-for-service (EFFS) 
     plans that may use preferred provider networks to offer an 
     enhanced range of benefits;
       (2) establishment of a Medicare Advantage program that 
     offers improved managed care plans with coordinated care; and
       (3) competitive bidding, in the style of the Federal 
     Employees Health Benefits program (FEHBP), among enhanced 
     fee-for-service plans and Medicare Advantage plans in order 
     to promote greater efficiency and responsiveness to medicare 
     beneficiaries.

         Subtitle A--Medicare Enhanced Fee-for-Service Program

     SEC. 201. ESTABLISHMENT OF ENHANCED FEE-FOR-SERVICE (EFFS) 
                   PROGRAM UNDER MEDICARE.

       (a) In General.--Title XVIII, as amended by section 101(a), 
     is amended--
       (1) by redesignating part E as part F; and
       (2) by inserting after part D the following new part:

               ``Part E--Enhanced Fee-for-Service Program


  ``offering of enhanced fee-for-service plans throughout the united 
                                 states

       ``Sec. 1860E-1. (a) Establishment of Program.--
       ``(1) In general.--The Administrator shall establish under 
     this part beginning January 1, 2006, an enhanced fee-for-
     service program under which enhanced fee-for-service plans 
     (as defined in subsection (b)) are offered to EFFS-eligible 
     individuals (as so defined) in EFFS regions throughout the 
     United States.
       ``(2) EFFS regions.--For purposes of this part the 
     Administrator shall establish EFFS regions throughout the 
     United States by dividing the entire United States into at 
     least 10 such regions. Before establishing such regions, the 
     Administrator shall conduct a market survey and analysis, 
     including an examination of current insurance markets, to 
     determine how the regions should be established. The regions 
     shall be established in a manner to take into consideration 
     maximizing full access for all EFFS-eligible individuals, 
     especially those residing in rural areas.
       ``(b) Definitions.--For purposes of this part:
       ``(1) EFFS organization.--The `EFFS organization' means an 
     entity that the Administrator certifies as meeting the 
     requirements and standards applicable to such organization 
     under this part.
       ``(2) Enhanced fee-for-service plan; effs plan.--The terms 
     `enhanced fee-for-service plan' and `EFFS plan' mean health 
     benefits coverage offered under a policy, contract, or plan 
     by an EFFS organization pursuant to and in accordance with a 
     contract pursuant to section 1860E-4(c), but only if the plan 
     provides either fee-for-service coverage described in the 
     following subparagraph (A) or preferred provider coverage 
     described in the following subparagraph (B):
       ``(A) Fee-for-service coverage.--The plan--
       ``(i) reimburses hospitals, physicians, and other providers 
     at a rate determined by the plan on a fee-for-service basis 
     without placing the provider at financial risk;
       ``(ii) does not vary such rates for such a provider based 
     on utilization relating to such provider; and
       ``(iii) does not restrict the selection of providers among 
     those who are lawfully authorized to provide the covered 
     services and agree to accept the terms and conditions of 
     payment established by the plan.
       ``(B) Preferred provider coverage.--The plan--
       ``(i) has a network of providers that have agreed to a 
     contractually specified reimbursement for covered benefits 
     with the organization offering the plan; and
       ``(ii) provides for reimbursement for all covered benefits 
     regardless of whether such benefits are provided within such 
     network of providers.
       ``(3) EFFS eligible individual.--The term `EFFS eligible 
     individual' means an eligible individual described in section 
     1851(a)(3).
       ``(4) EFFS region.--The term `EFFS region' means a region 
     established under subsection (a)(2).
       ``(c) Application of Certain Eligibility, Enrollment, etc. 
     Requirements.--The provisions of section 1851 (other than 
     subsection (h)(4)(A)) shall apply to EFFS plans offered by an 
     EFFS organization in an EFFS region, including subsection (g) 
     (relating to guaranteed issue and renewal).


          ``offering of enhanced fee-for-service (effs) plans

       ``Sec. 1860E-2. (a) Plan Requirements.--No EFFS plan may be 
     offered under this part in an EFFS region unless the 
     requirements of this part are met with respect to the plan 
     and EFFS organization offering the plan.
       ``(b) Available to All EFFS Beneficiaries in the Entire 
     Region.--With respect to an EFFS plan offered in an EFFS 
     region--
       ``(1) In general.--The plan must be offered to all EFFS-
     eligible individuals residing in the region.
       ``(2) Assuring access to services.--The plan shall comply 
     with the requirements of section 1852(d)(4).
       ``(c) Benefits.--
       ``(1) In general.--Each EFFS plan shall provide to members 
     enrolled in the plan under this part benefits, through 
     providers and other persons that meet the applicable 
     requirements of this title and part A of title XI--
       ``(A) for the items and services described in section 
     1852(a)(1);
       ``(B) that are uniform for the plan for all EFFS eligible 
     individuals residing in the same EFFS region;
       ``(C) that include a single deductible applicable to 
     benefits under parts A and B and include a catastrophic limit 
     on out-of-pocket expenditures for such covered benefits; and
       ``(D) that include benefits for prescription drug coverage 
     for each enrollee who elects under part D to be provided 
     qualified prescription drug coverage through the plan.
       ``(2) Disapproval authority.--The Administrator shall not 
     approve a plan of an EFFS organization if the Administrator 
     determines (pursuant to the last sentence of section 
     1852(b)(1)(A)) that the benefits are designed to 
     substantially discourage enrollment by certain EFFS eligible 
     individuals with the organization.
       ``(d) Outpatient Prescription Drug Coverage.--For rules 
     concerning the offering of prescription drug coverage under 
     EFFS plans, see the amendment made by section 102(b) of the 
     Medicare Prescription Drug and Modernization Act of 2003.
       ``(e) Other Additional Provisions.--The provisions of 
     section 1852 (other than subsection (a)(1)) shall apply under 
     this part to EFFS plans. For the application of chronic care 
     improvement provisions, see the amendment made by section 
     722(b).


      ``submission of bids; beneficiary savings; payment of plans

       ``Sec. 1860E-3. (a) Submission of Bids.--
       ``(1) Requirement.--
       ``(A) EFFS monthly bid amount.--For each year (beginning 
     with 2006), an EFFS organization shall submit to the 
     Administrator an EFFS monthly bid amount for each EFFS plan 
     offered in each region. Each such bid is referred to in this 
     section as the `EFFS monthly bid amount'.
       ``(B) Form.--Such bid amounts shall be submitted for each 
     such plan and region in a form and manner and time specified 
     by the Administrator, and shall include information described 
     in paragraph (3)(A).
       ``(2) Uniform bid amounts.--Each EFFS monthly bid amount 
     submitted under paragraph (1) by an EFFS organization under 
     this part for an EFFS plan in an EFFS region may not vary 
     among EFFS eligible individuals residing in the EFFS region 
     involved.
       ``(3) Submission of bid amount information by effs 
     organizations.--
       ``(A) Information to be submitted.--The information 
     described in this subparagraph is as follows:
       ``(i) The EFFS monthly bid amount for provision of all 
     items and services under this

[[Page H6027]]

     part, which amount shall be based on average costs for a 
     typical beneficiary residing in the region, and the actuarial 
     basis for determining such amount.
       ``(ii) The proportions of such bid amount that are 
     attributable to--

       ``(I) the provision of statutory non-drug benefits (such 
     portion referred to in this part as the `unadjusted EFFS 
     statutory non-drug monthly bid amount');
       ``(II) the provision of statutory prescription drug 
     benefits; and
       ``(III) the provision of non-statutory benefits;

     and the actuarial basis for determining such proportions.
       ``(iii) Such additional information as the Administrator 
     may require to verify the actuarial bases described in 
     clauses (i) and (ii).
       ``(B) Statutory benefits defined.--For purposes of this 
     part:
       ``(i) The term `statutory non-drug benefits' means benefits 
     under section 1852(a)(1).
       ``(ii) The term `statutory prescription drug benefits' 
     means benefits under part D.
       ``(iii) The term `statutory benefits' means statutory 
     prescription drug benefits and statutory non-drug benefits.
       ``(C) Acceptance and negotiation of bid amounts.--The 
     Administrator has the authority to negotiate regarding 
     monthly bid amounts submitted under subparagraph (A) (and the 
     proportion described in subparagraph (A)(ii)), and for such 
     purpose, the Administrator has negotiation authority that the 
     Director of the Office of Personnel Management has with 
     respect to health benefits plans under chapter 89 of title 5, 
     United States Code. The Administrator may reject such a bid 
     amount or proportion if the Administrator determines that 
     such amount or proportion is not supported by the actuarial 
     bases provided under subparagraph (A).
       ``(D) Contract authority.--The Administrator may, taking 
     into account the unadjusted EFFS statutory non-drug monthly 
     bid amounts accepted under subparagraph (C), enter into 
     contracts for the offering of EFFS plans by up to 3 EFFS 
     organizations in any region.
       ``(b) Provision of Beneficiary Savings for Certain Plans.--
       ``(1) Beneficiary rebate rule.--
       ``(A) Requirement.--The EFFS plan shall provide to the 
     enrollee a monthly rebate equal to 75 percent of the average 
     per capita savings (if any) described in paragraph (2) 
     applicable to the plan and year involved.
       ``(B) Form of rebate.--A rebate required under this 
     paragraph shall be provided--
       ``(i) through the crediting of the amount of the rebate 
     towards the EFFS monthly prescription drug beneficiary 
     premium (as defined in section 1860E-4(a)(3)(B)) and the EFFS 
     monthly supplemental beneficiary premium (as defined in 
     section 1860E-4(a)(3)(C));
       ``(ii) through a direct monthly payment (through electronic 
     funds transfer or otherwise); or
       ``(iii) through other means approved by the Medicare 
     Benefits Administrator,
     or any combination thereof.
       ``(2) Computation of average per capita monthly savings.--
     For purposes of paragraph (1)(A), the average per capita 
     monthly savings referred to in such paragraph for an EFFS 
     plan and year is computed as follows:
       ``(A) Determination of region-wide average risk 
     adjustment.--
       ``(i) In general.--The Medicare Benefits Administrator 
     shall determine, at the same time rates are promulgated under 
     section 1853(b)(1) (beginning with 2006), for each EFFS 
     region the average of the risk adjustment factors described 
     in subsection (c)(3) to be applied to enrollees under this 
     part in that region. In the case of an EFFS region in which 
     an EFFS plan was offered in the previous year, the 
     Administrator may compute such average based upon risk 
     adjustment factors applied under subsection (c)(3) in that 
     region in a previous year.
       ``(ii) Treatment of new regions.--In the case of a region 
     in which no EFFS plan was offered in the previous year, the 
     Administrator shall estimate such average. In making such 
     estimate, the Administrator may use average risk adjustment 
     factors applied to comparable EFFS regions or applied on a 
     national basis.
       ``(B) Determination of risk adjusted benchmark and risk-
     adjusted bid.--For each EFFS plan offered in an EFFS region, 
     the Administrator shall--
       ``(i) adjust the EFFS region-specific non-drug monthly 
     benchmark amount (as defined in paragraph (3)) by the 
     applicable average risk adjustment factor computed under 
     subparagraph (A); and
       ``(ii) adjust the unadjusted EFFS statutory non-drug 
     monthly bid amount by such applicable average risk adjustment 
     factor.
       ``(C) Determination of average per capita monthly 
     savings.--The average per capita monthly savings described in 
     this subparagraph is equal to the amount (if any) by which--
       ``(i) the risk-adjusted benchmark amount computed under 
     subparagraph (B)(i), exceeds
       ``(ii) the risk-adjusted bid computed under subparagraph 
     (B)(ii).
       ``(3) Computation of effs region-specific non-drug monthly 
     benchmark amount.--For purposes of this part, the term `EFFS 
     region-specific non-drug monthly benchmark amount' means, 
     with respect to an EFFS region for a month in a year, an 
     amount equal to \1/12\ of the average (weighted by number of 
     EFFS eligible individuals in each payment area described in 
     section 1853(d)) of the annual capitation rate as calculated 
     under section 1853(c)(1) for that area.
       ``(c) Payment of Plans Based on Bid Amounts.--
       ``(1) Non-drug benefits.--Under a contract under section 
     1860E-4(c) and subject to section 1853(g) (as made applicable 
     under subsection (d)), the Administrator shall make monthly 
     payments under this subsection in advance to each EFFS 
     organization, with respect to coverage of an individual under 
     this part in an EFFS region for a month, in an amount 
     determined as follows:
       ``(A) Plans with bids below benchmark.--In the case of a 
     plan for which there are average per capita monthly savings 
     described in subsection (b)(2)(C), the payment under this 
     subsection is equal to the unadjusted EFFS statutory non-drug 
     monthly bid amount, adjusted under paragraphs (3) and (4), 
     plus the amount of the monthly rebate computed under 
     subsection (b)(1)(A) for that plan and year.
       ``(B) Plans with bids at or above benchmark.--In the case 
     of a plan for which there are no average per capita monthly 
     savings described in subsection (b)(2)(C), the payment amount 
     under this subsection is equal to the EFFS region-specific 
     non-drug monthly benchmark amount, adjusted under paragraphs 
     (3) and (4).
       ``(2) For federal drug subsidies.--In the case in which an 
     enrollee who elects under part D to be provided qualified 
     prescription drug coverage through the plan, the EFFS 
     organization offering such plan also is entitled--
       ``(A) to direct subsidy payment under section 1860D-
     8(a)(1);
       ``(B) to reinsurance subsidy payments under section 1860D-
     8(a)(2); and
       ``(C) to reimbursement for premium and cost-sharing 
     reductions for low-income individuals under section 1860D-
     7(c)(3).
       ``(3) Demographic risk adjustment, including adjustment for 
     health status.--The Administrator shall adjust under 
     paragraph (1)(A) the unadjusted EFFS statutory non-drug 
     monthly bid amount and under paragraph (1)(B) the EFFS 
     region-specific non-drug monthly benchmark amount for such 
     risk factors as age, disability status, gender, institutional 
     status, and such other factors as the Administrator 
     determines to be appropriate, including adjustment for health 
     status under section 1853(a)(3) (as applied under subsection 
     (d)), so as to ensure actuarial equivalence. The 
     Administrator may add to, modify, or substitute for such 
     adjustment factors if such changes will improve the 
     determination of actuarial equivalence.
       ``(4) Adjustment for intra-regional geographic 
     variations.--The Administrator shall also adjust such amounts 
     in a manner to take into account variations in payments rates 
     under part C among the different payment areas under such 
     part included in each EFFS region.
       ``(d) Application of Additional Payment Rules.--The 
     provisions of section 1853 (other than subsections (a)(1)(A), 
     (d), and (e)) shall apply to an EFFS plan under this part, 
     except as otherwise provided in this section.


``premiums; organizational and financial requirements; establishment of 
              standards; contracts with effs organizations

       ``Sec. 1860E-4. (a) Premiums.--
       ``(1) In general.--The provisions of section 1854 (other 
     than subsections (a)(6)(C) and (h)), including subsection 
     (b)(5) relating to the consolidation of drug and non-drug 
     beneficiary premiums and subsection (c) relating to uniform 
     bids and premiums, shall apply to an EFFS plan under this 
     part, subject to paragraph (2).
       ``(2) Cross-walk.--In applying paragraph (1), any reference 
     in section 1854(b)(1)(A) or 1854(d) to--
       ``(A) a Medicare Advantage monthly basic beneficiary 
     premium is deemed a reference to the EFFS monthly basic 
     beneficiary premium (as defined in paragraph (3)(A));
       ``(B) a Medicare Advantage monthly prescription drug 
     beneficiary premium is deemed a reference to the EFFS monthly 
     prescription drug beneficiary premium (as defined in 
     paragraph (3)(B)); and
       ``(C) a Medicare Advantage monthly supplemental beneficiary 
     premium is deemed a reference to the EFFS monthly 
     supplemental beneficiary premium (as defined in paragraph 
     (3)(C)).
       ``(3) Definitions.--For purposes of this part:
       ``(A) EFFS monthly basic beneficiary premium.--The term 
     `EFFS monthly basic beneficiary premium' means, with respect 
     to an EFFS plan--
       ``(i) described in section 1860E-3(c)(1)(A) (relating to 
     plans providing rebates), zero; or
       ``(ii) described in section 1860E-3(c)(1)(B), the amount 
     (if any) by which the unadjusted EFFS statutory non-drug 
     monthly bid amount exceeds the EFFS region-specific non-drug 
     monthly benchmark amount (as defined in section 1860E-
     3(b)(3)).
       ``(B) EFFS monthly prescription drug beneficiary premium.--
     The term `EFFS monthly prescription drug beneficiary premium' 
     means, with respect to an EFFS plan, the portion of the 
     aggregate monthly bid amount submitted under clause (i) of 
     section 1860E-3(a)(3)(A) for the year that is attributable 
     under such section to the provision of statutory prescription 
     drug benefits.
       ``(C) EFFS monthly supplemental beneficiary premium.--The 
     term `EFFS monthly supplemental beneficiary premium' means, 
     with respect to an EFFS plan, the portion of the aggregate 
     monthly bid amount submitted under clause (i) of section 
     1860E-

[[Page H6028]]

     3(a)(3)(A) for the year that is attributable under such 
     section to the provision of nonstatutory benefits.
       ``(b) Organizational and Financial Requirements.--The 
     provisions of section 1855 shall apply to an EFFS plan 
     offered by an EFFS organization under this part.
       ``(c) Standards.--The provisions of paragraphs (1), (3), 
     and (4) of section 1856(b) shall apply to an EFFS plan 
     offered by an EFFS organization under this part.
       ``(d) Contracts with EFFS Organizations.--The provisions of 
     section 1857 shall apply to an EFFS plan offered by an EFFS 
     organization under this part, except that any reference in 
     such section to part C is deemed a reference to this part.''.
       (b) Application of Medigap Provisions to EFFS Plans.--
     Section 1882 of the Social Security Act (42 U.S.C. 1395ss) 
     shall be administered as if any reference to a 
     Medicare+Choice organization offering a Medicare+Choice plan 
     under part C of title XVIII of such Act were a reference both 
     to a Medicare Advantage organization offering a Medicare 
     Advantage plan under such part and an EFFS organization 
     offering an EFFS plan under part E of such title.

                 Subtitle B--Medicare Advantage Program

                  CHAPTER 1--IMPLEMENTATION OF PROGRAM

     SEC. 211. IMPLEMENTATION OF MEDICARE ADVANTAGE PROGRAM.

       (a) In General.--There is hereby established the Medicare 
     Advantage program. The Medicare Advantage program shall 
     consist of the program under part C of title XVIII of the 
     Social Security Act, as amended by this title.
       (b) References.--Any reference to the program under part C 
     of title XVIII of the Social Security Act shall be deemed a 
     reference to the Medicare Advantage program and, with respect 
     to such part, any reference to ``Medicare+Choice'' is deemed 
     a reference to ``Medicare Advantage''.

     SEC. 212. MEDICARE ADVANTAGE IMPROVEMENTS.

       (a) Equalizing Payments With Fee-For-Service.--
       (1) In general.--Section 1853(c)(1) (42 U.S.C. 1395w-
     23(c)(1)) is amended by adding at the end the following:
       ``(D) Based on 100 percent of fee-for-service costs.--
       ``(i) In general.--For 2004, the adjusted average per 
     capita cost for the year involved, determined under section 
     1876(a)(4) for the Medicare Advantage payment area for 
     services covered under parts A and B for individuals entitled 
     to benefits under part A and enrolled under part B who are 
     not enrolled in a Medicare Advantage under this part for the 
     year, but adjusted to exclude costs attributable to payments 
     under section 1886(h).
       ``(ii) Inclusion of costs of va and dod military facility 
     services to medicare-eligible beneficiaries.--In determining 
     the adjusted average per capita cost under clause (i) for a 
     year, such cost shall be adjusted to include the Secretary's 
     estimate, on a per capita basis, of the amount of additional 
     payments that would have been made in the area involved under 
     this title if individuals entitled to benefits under this 
     title had not received services from facilities of the 
     Department of Veterans Affairs or the Department of 
     Defense.''.
       (2) Conforming amendment.--Such section is further amended, 
     in the matter before subparagraph (A), by striking ``or (C)'' 
     and inserting ``(C), or (D)''.
       (b) Change in Budget Neutrality for Blend.--Section 1853(c) 
     (42 U.S.C. 1395w-23(c)) is amended--
       (1) in paragraph (1)(A), by inserting ``(for a year other 
     than 2004)'' after ``multiplied''; and
       (2) in paragraph (5), by inserting ``(other than 2004)'' 
     after ``for each year''.
       (c) Increasing Minimum Percentage Increase to National 
     Growth Rate.--
       (1) In general.--Section 1853(c)(1) (42 U.S.C. 1395w-
     23(c)(1)) is amended--
       (A) in subparagraph (A), by striking ``The sum'' and 
     inserting ``For a year before 2005, the sum'';
       (B) in subparagraph (B)(iv), by striking ``and each 
     succeeding year'' and inserting ``, 2003, and 2004'';
       (C) in subparagraph (C)(iv), by striking ``and each 
     succeeding year'' and inserting ``and 2003''; and
       (D) by adding at the end of subparagraph (C) the following 
     new clause:
       ``(v) For 2004 and each succeeding year, the greater of--

       ``(I) 102 percent of the annual Medicare Advantage 
     capitation rate under this paragraph for the area for the 
     previous year; or
       ``(II) the annual Medicare Advantage capitation rate under 
     this paragraph for the area for the previous year increased 
     by the national per capita Medicare Advantage growth 
     percentage, described in paragraph (6) for that succeeding 
     year, but not taking into account any adjustment under 
     paragraph (6)(C) for a year before 2004.''.

       (2) Conforming amendment.--Section 1853(c)(6)(C) (42 U.S.C. 
     1395w-23(c)(6)(C)) is amended by inserting before the period 
     at the end the following: ``, except that for purposes of 
     paragraph (1)(C)(v)(II), no such adjustment shall be made for 
     a year before 2004''.
       (d) Inclusion of Costs of DOD and VA Military Facility 
     Services to Medicare-Eligible Beneficiaries in Calculation of 
     Medicare+Choice Payment Rates.--Section 1853(c)(3) (42 U.S.C. 
     1395w-23(c)(3)) is amended--
       (1) in subparagraph (A), by striking ``subparagraph (B)'' 
     and inserting ``subparagraphs (B) and (E)'', and
       (2) by adding at the end the following new subparagraph:
       ``(E) Inclusion of costs of dod and va military facility 
     services to medicare-eligible beneficiaries.--In determining 
     the area-specific Medicare+Choice capitation rate under 
     subparagraph (A) for a year (beginning with 2004), the annual 
     per capita rate of payment for 1997 determined under section 
     1876(a)(1)(C) shall be adjusted to include in the rate the 
     Secretary's estimate, on a per capita basis, of the amount of 
     additional payments that would have been made in the area 
     involved under this title if individuals entitled to benefits 
     under this title had not received services from facilities of 
     the Department of Defense or the Department of Veterans 
     Affairs.''.
       (e) Extending Special Rule for Certain Inpatient Hospital 
     Stays to Rehabilitation Hospitals.--
       (1) In general.--Section 1853(g) (42 U.S.C. 1395w-23(g)) is 
     amended--
       (A) by inserting ``or from a rehabilitation facility (as 
     defined in section 1886(j)(1)(A))'' after ``1886(d)(1)(B))''; 
     and
       (B) in paragraph (2)(B), by inserting ``or section 1886(j), 
     as the case may be,'' after ``1886(d)''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply to contract years beginning on or after January 
     1, 2004.
       (f) MedPAC Study of AAPCC.--
       (1) Study.--The Medicare Payment Advisory Commission shall 
     conduct a study that assesses the method used for determining 
     the adjusted average per capita cost (AAPCC) under section 
     1876(a)(4) of the Social Security Act (42 U.S.C. 
     1395mm(a)(4)) as applied under section 1853(c)(1)(A) of such 
     Act (as amended by subsection (a)). Such study shall include 
     an examination of--
       (A) the bases for variation in such costs between different 
     areas, including differences in input prices, utilization, 
     and practice patterns;
       (B) the appropriate geographic area for payment under the 
     Medicare Advantage program under part C of title XVIII of 
     such Act; and
       (C) the accuracy of risk adjustment methods in reflecting 
     differences in costs of providing care to different groups of 
     beneficiaries served under such program.
       (2) Report.--Not later than 18 months after the date of the 
     enactment of this Act, the Commission shall submit to 
     Congress a report on the study conducted under paragraph (1).
       (g) Report on Impact of Increased Financial Assistance to 
     Medicare Advantage Plans.--Not later than July 1, 2006, the 
     Medicare Benefits Administrator shall submit to Congress a 
     report that describes the impact of additional financing 
     provided under this Act and other Acts (including the 
     Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act 
     of 1999 and BIPA) on the availability of Medicare Advantage 
     plans in different areas and its impact on lowering premiums 
     and increasing benefits under such plans.
       (h) Announcement of Revised Medicare Advantage Payment 
     Rates.--Within 6 weeks after the date of the enactment of 
     this Act, the Secretary shall determine, and shall announce 
     (in a manner intended to provide notice to interested 
     parties) Medicare Advantage capitation rates under section 
     1853 of the Social Security Act (42 U.S.C. 1395w-23) for 
     2004, revised in accordance with the provisions of this 
     section.

            CHAPTER 2--IMPLEMENTATION OF COMPETITION PROGRAM

     SEC. 221. COMPETITION PROGRAM BEGINNING IN 2006.

       (a) Submission of EFFS-Like Bidding Information Beginning 
     in 2006.--Section 1854 (42 U.S.C. 1395w-24) is amended--
       (1) by amending the section heading to read as follows:


                      ``premiums and bid amount'';

       (2) in subsection (a)(1)(A)--
       (A) by striking ``(A)'' and inserting ``(A)(i) if the 
     following year is before 2006,''; and
       (B) by inserting before the semicolon at the end the 
     following: ``or (ii) if the following year is 2006 or later, 
     the information described in paragraph (3) or (6)(A) for the 
     type of plan involved''; and
       (3) by adding at the end of subsection (a) the following:
       ``(6) Submission of bid amounts by medicare advantage 
     organizations.--
       ``(A) Information to be submitted.--The information 
     described in this subparagraph is as follows:
       ``(i) The monthly aggregate bid amount for provision of all 
     items and services under this part, which amount shall be 
     based on average costs for a typical beneficiary residing in 
     the area, and the actuarial basis for determining such 
     amount.
       ``(ii) The proportions of such bid amount that are 
     attributable to--

       ``(I) the provision of statutory non-drug benefits (such 
     portion referred to in this part as the `unadjusted Medicare 
     Advantage statutory non-drug monthly bid amount');
       ``(II) the provision of statutory prescription drug 
     benefits; and
       ``(III) the provision of non-statutory benefits;

     and the actuarial basis for determining such proportions.

[[Page H6029]]

       ``(iii) Such additional information as the Administrator 
     may require to verify the actuarial bases described in 
     clauses (i) and (ii).
       ``(B) Statutory benefits defined.--For purposes of this 
     part:
       ``(i) The term `statutory non-drug benefits' means benefits 
     under section 1852(a)(1).
       ``(ii) The term `statutory prescription drug benefits' 
     means benefits under part D.
       ``(iii) The term `statutory benefits' means statutory 
     prescription drug benefits and statutory non-drug benefits.
       ``(C) Acceptance and negotiation of bid amounts.--
       ``(i) In general.--Subject to clause (ii)--

       ``(I) the Administrator has the authority to negotiate 
     regarding monthly bid amounts submitted under subparagraph 
     (A) (and the proportion described in subparagraph (A)(ii)), 
     and for such purpose and subject to such clause, the 
     Administrator has negotiation authority that the Director of 
     the Office of Personnel Management has with respect to health 
     benefits plans under chapter 89 of title 5, United States 
     Code; and
       ``(II) the Administrator may reject such a bid amount or 
     proportion if the Administrator determines that such amount 
     or proportion is not supported by the actuarial bases 
     provided under subparagraph (A).

       ``(ii) Exception.--In the case of a plan described in 
     section 1851(a)(2)(C), the provisions of clause (i) shall not 
     apply and the provisions of paragraph (5)(B), prohibiting the 
     review, approval, or disapproval of amounts described in such 
     paragraph, shall apply to the negotiation and rejection of 
     the monthly bid amounts and proportion referred to in 
     subparagraph (A).''.
       (b) Providing for Beneficiary Savings for Certain Plans.--
       (1) In general.--Section 1854(b) (42 U.S.C. 1395w-24(b)) is 
     amended--
       (A) by adding at the end of paragraph (1) the following new 
     subparagraph:
       ``(C) Beneficiary rebate rule.--
       ``(i) Requirement.--The Medicare Advantage plan shall 
     provide to the enrollee a monthly rebate equal to 75 percent 
     of the average per capita savings (if any) described in 
     paragraph (3) applicable to the plan and year involved.
       ``(iii) Form of rebate.--A rebate required under this 
     subparagraph shall be provided--

       ``(I) through the crediting of the amount of the rebate 
     towards the Medicare Advantage monthly supplementary 
     beneficiary premium or the premium imposed for prescription 
     drug coverage under part D;
       ``(II) through a direct monthly payment (through electronic 
     funds transfer or otherwise); or
       ``(III) through other means approved by the Medicare 
     Benefits Administrator,

     or any combination thereof.''; and
       (B) by adding at the end the following new paragraphs:
       ``(3) Computation of average per capita monthly savings.--
     For purposes of paragraph (1)(C)(i), the average per capita 
     monthly savings referred to in such paragraph for a Medicare 
     Advantage plan and year is computed as follows:
       ``(A) Determination of state-wide average risk 
     adjustment.--
       ``(i) In general.--The Medicare Benefits Administrator 
     shall determine, at the same time rates are promulgated under 
     section 1853(b)(1) (beginning with 2006), for each State the 
     average of the risk adjustment factors to be applied under 
     section 1853(a)(1)(A) to payment for enrollees in that State. 
     In the case of a State in which a Medicare Advantage plan was 
     offered in the previous year, the Administrator may compute 
     such average based upon risk adjustment factors applied in 
     that State in a previous year.
       ``(ii) Treatment of new states.--In the case of a State in 
     which no Medicare Advantage plan was offered in the previous 
     year, the Administrator shall estimate such average. In 
     making such estimate, the Administrator may use average risk 
     adjustment factors applied to comparable States or applied on 
     a national basis.
       ``(B) Determination of risk adjusted benchmark and risk-
     adjusted bid.--For each Medicare Advantage plan offered in a 
     State, the Administrator shall--
       ``(i) adjust the Medicare Advantage area-specific non-drug 
     monthly benchmark amount (as defined in subsection (j)) by 
     the applicable average risk adjustment factor computed under 
     subparagraph (A); and
       ``(ii) adjust the unadjusted Medicare Advantage statutory 
     non-drug monthly bid amount by such applicable average risk 
     adjustment factor.
       ``(C) Determination of average per capita monthly 
     savings.--The average per capita monthly savings described in 
     this subparagraph is equal to the amount (if any) by which--
       ``(i) the risk-adjusted benchmark amount computed under 
     subparagraph (B)(i), exceeds
       ``(ii) the risk-adjusted bid computed under subparagraph 
     (B)(ii).
       ``(D) Authority to determine risk adjustment for areas 
     other than states.--The Administrator may provide for the 
     determination and application of risk adjustment factors 
     under this paragraph on the basis of areas other than States.
       ``(4) Beneficiary's option of payment through withholding 
     from social security payment or use of electronic funds 
     transfer mechanism.--In accordance with regulations, a 
     Medicare Advantage organization shall permit each enrollee, 
     at the enrollee's option, to make payment of premiums under 
     this part to the organization indirectly through withholding 
     from benefit payments in the manner provided under section 
     1840 with respect to monthly premiums under section 1839 or 
     through an electronic funds transfer mechanism (such as 
     automatic charges of an account at a financial institution or 
     a credit or debit card account) or otherwise. All premium 
     payments that are withheld under this paragraph that are 
     credited to the Federal Supplementary Medical Insurance Drug 
     Trust Fund shall be paid to the Medicare Advantage 
     organization involved.''.
       (2) Provision of single consolidated premium.--Section 
     1854(b) (42 U.S.C. 1395w-24(b)), as amended by paragraph (1), 
     is further amended by adding at the end the following new 
     paragraph:
       ``(5) Single consolidated premium.--In the case of an 
     enrollee in a Medicare Advantage plan who elects under part D 
     to be provided qualified prescription drug coverage through 
     the plan, the Administrator shall provide a mechanism for the 
     consolidation of the beneficiary premium amount for non-drug 
     benefits under this part with the premium amount for 
     prescription drug coverage under part D provided through the 
     plan.''.
       (3) Computation of medicare advantage area-specific non-
     drug benchmark.--Section 1853 (42 U.S.C. 1395w-23) is amended 
     by adding at the end the following new subsection:
       ``(j) Computation of Medicare Advantage Area-Specific Non-
     Drug Monthly Benchmark Amount.--For purposes of this part, 
     the term `Medicare Advantage area-specific non-drug monthly 
     benchmark amount' means, with respect to a Medicare Advantage 
     payment area for a month in a year, an amount equal to \1/12\ 
     of the annual Medicare Advantage capitation rate under 
     section 1853(c)(1) for the area for the year.''.
       (c) Payment of Plans Based on Bid Amounts.--
       (1) In general.--Section 1853(a)(1)(A) (42 U.S.C. 1395w-23) 
     is amended by striking ``in an amount'' and all that follows 
     and inserting the following: ``in an amount determined as 
     follows:
       ``(i) Payment before 2006.--For years before 2006, the 
     payment amount shall be equal to \1/12\ of the annual 
     Medicare Advantage capitation rate (as calculated under 
     subsection (c)(1)) with respect to that individual for that 
     area, reduced by the amount of any reduction elected under 
     section 1854(f )(1)(E) and adjusted under clause (iv).
       ``(ii) Payment for statutory non-drug benefits beginning 
     with 2006.--For years beginning with 2006--

       ``(I) Plans with bids below benchmark.--In the case of a 
     plan for which there are average per capita monthly savings 
     described in section 1854(b)(3)(C), the payment under this 
     subsection is equal to the unadjusted Medicare Advantage 
     statutory non-drug monthly bid amount, adjusted under clause 
     (iv), plus the amount of the monthly rebate computed under 
     section 1854(b)(1)(C)(i) for that plan and year.
       ``(II) Plans with bids at or above benchmark.--In the case 
     of a plan for which there are no average per capita monthly 
     savings described in section 1854(b)(3)(C), the payment 
     amount under this subsection is equal to the Medicare 
     Advantage area-specific non-drug monthly benchmark amount, 
     adjusted under clause (iv).

       ``(iii) For federal drug subsidies.--In the case in which 
     an enrollee who elects under part D to be provided qualified 
     prescription drug coverage through the plan, the Medicare 
     Advantage organization offering such plan also is entitled--

       ``(I) to direct subsidy payment under section 1860D-
     8(a)(1);
       ``(II) to reinsurance subsidy payments under section 1860D-
     8(a)(2); and
       ``(III) to reimbursement for premium and cost-sharing 
     reductions for low-income individuals under section 1860D-
     7(c)(3).

       ``(iv) Demographic adjustment, including adjustment for 
     health status.--The Administrator shall adjust the payment 
     amount under clause (i), the unadjusted Medicare Advantage 
     statutory non-drug monthly bid amount under clause (ii)(I), 
     and the Medicare Advantage area-specific non-drug monthly 
     benchmark amount under clause (ii)(II) for such risk factors 
     as age, disability status, gender, institutional status, and 
     such other factors as the Administrator determines to be 
     appropriate, including adjustment for health status under 
     paragraph (3), so as to ensure actuarial equivalence. The 
     Administrator may add to, modify, or substitute for such 
     adjustment factors if such changes will improve the 
     determination of actuarial equivalence.''.
       (d) Conforming Amendments.--
       (1) Protection against beneficiary selection.--Section 
     1852(b)(1)(A) (42 U.S.C. 1395w-22(b)(1)(A)) is amended by 
     adding at the end the following: ``The Administrator shall 
     not approve a plan of an organization if the Administrator 
     determines that the benefits are designed to substantially 
     discourage enrollment by certain Medicare Advantage eligible 
     individuals with the organization.''.
       (2) Conforming amendment to premium terminology.--Section 
     1854(b)(2) (42 U.S.C. 1395w-24(b)(2)) is amended by 
     redesignating subparagraph (C) as subparagraph (D) and by 
     striking subparagraphs (A) and (B) and inserting the 
     following:
       ``(A) Medicare advantage monthly basic beneficiary 
     premium.--The term `Medicare Advantage monthly basic 
     beneficiary premium' means, with respect to a Medicare 
     Advantage plan--
       ``(i) described in section 1853(a)(1)(A)(ii)(I) (relating 
     to plans providing rebates), zero; or

[[Page H6030]]

       ``(ii) described in section 1853(a)(1)(A)(ii)(II), the 
     amount (if any) by which the unadjusted Medicare Advantage 
     statutory non-drug monthly bid amount exceeds the Medicare 
     Advantage area-specific non-drug monthly benchmark amount.
       ``(B) Medicare advantage monthly prescription drug 
     beneficiary premium.--The term `Medicare Advantage monthly 
     prescription drug beneficiary premium' means, with respect to 
     a Medicare Advantage plan, that portion of the bid amount 
     submitted under clause (i) of subsection (a)(6)(A) for the 
     year that is attributable under such section to the provision 
     of statutory prescription drug benefits.
       ``(C) Medicare advantage monthly supplemental beneficiary 
     premium.--The term `Medicare Advantage monthly supplemental 
     beneficiary premium' means, with respect to a Medicare 
     Advantage plan, the portion of the aggregate monthly bid 
     amount submitted under clause (i) of subsection (a)(6)(A) for 
     the year that is attributable under such section to the 
     provision of nonstatutory benefits.''.
       (3) Requirement for uniform premium and bid amounts.--
     Section 1854(c) (42 U.S.C. 1395w-24(c)) is amended to read as 
     follows:
       ``(c) Uniform Premium and Bid Amounts.--The Medicare 
     Advantage monthly bid amount submitted under subsection 
     (a)(6), the Medicare Advantage monthly basic, prescription 
     drug, and supplemental beneficiary premiums, and the Medicare 
     Advantage monthly MSA premium charged under subsection (b) of 
     a Medicare Advantage organization under this part may not 
     vary among individuals enrolled in the plan.''.
       (4) Permitting beneficiary rebates.--
       (A) Section 1851(h)(4)(A) (42 U.S.C. 1395w-21(h)(4)(A)) is 
     amended by inserting ``except as provided under section 
     1854(b)(1)(C)'' after ``or otherwise''.
       (B) Section 1854(d) (42 U.S.C. 1395w-24(d)) is amended by 
     inserting ``, except as provided under subsection 
     (b)(1)(C),'' after ``and may not provide''.
       (5) Other conforming amendments relating to bids.--Section 
     1854 (42 U.S.C. 1395w-24) is amended--
       (A) in the heading of subsection (a), by inserting ``and 
     Bid Amounts'' after ``Premiums''; and
       (B) in subsection (a)(5)(A), by inserting ``paragraphs (2), 
     (3), and (4) of'' after ``filed under''.
       (e) Additional Conforming Amendments.--
       (1) Annual determination and announcement of certain 
     factors.--Section 1853(b)(1) (42 U.S.C. 1395w-23(b)(1)) is 
     amended by striking ``the respective calendar year'' and all 
     that follows and inserting the following: ``the calendar year 
     concerned with respect to each Medicare Advantage payment 
     area, the following:
       ``(A) Pre-competition information.--For years before 2006, 
     the following:
       ``(i) Medicare advantage capitation rates.--The annual 
     Medicare Advantage capitation rate for each Medicare 
     Advantage payment area for the year.
       ``(ii) Adjustment factors.--The risk and other factors to 
     be used in adjusting such rates under subsection (a)(1)(A) 
     for payments for months in that year.
       ``(B) Competition information.--For years beginning with 
     2006, the following:
       ``(i) Benchmark.--The Medicare Advantage area-specific non-
     drug benchmark under section 1853(j).
       ``(ii) Adjustment factors.--The adjustment factors applied 
     under section 1853(a)(1)(A)(iv) (relating to demographic 
     adjustment), section 1853(a)(1)(B) (relating to adjustment 
     for end-stage renal disease), and section 1853(a)(3) 
     (relating to health status adjustment).''.
       (2) Repeal of provisions relating to adjusted community 
     rate (acr).--
       (A) In general.--Subsections (e) and (f) of section 1854 
     (42 U.S.C. 1395w-24) are repealed.
       (B) Conforming amendments.--(i) Section 1839(a)(2) (42 
     U.S.C. 1395r(a)(2)) is amended by striking ``, and to 
     reflect'' and all that follows and inserting a period.
       (ii) Section 1852(a)(1) (42 U.S.C. 1395w-22(a)(1)) is 
     amended by striking ``title XI'' and all that follows and 
     inserting the following: ``title XI those items and services 
     (other than hospice care) for which benefits are available 
     under parts A and B to individuals residing in the area 
     served by the plan.''.
       (iii) Section 1857(d)(1) (42 U.S.C. 1395w-27(d)(1)) is 
     amended by striking ``, costs, and computation of the 
     adjusted community rate'' and inserting ``and costs''.
       (f) References under Part E.--Section 1859 (42 U.S.C. 
     1395w-29) is amended by adding at the end the following new 
     subsection:
       ``(f) Application under Part E.--In the case of any 
     reference under part E to a requirement or provision of this 
     part in the relation to an EFFS plan or organization under 
     such part, except as otherwise specified any such requirement 
     or provision shall be applied to such organization or plan in 
     the same manner as such requirement or provision applies to a 
     Medicare Advantage private fee-for-service plan (and the 
     Medicare Advantage organization that offers such plan) under 
     this part.''.
       (g) Effective Date.--The amendments made by this section 
     shall apply to payments and premiums for months beginning 
     with January 2006.

                     CHAPTER 3--ADDITIONAL REFORMS

     SEC. 231. MAKING PERMANENT CHANGE IN MEDICARE ADVANTAGE 
                   REPORTING DEADLINES AND ANNUAL, COORDINATED 
                   ELECTION PERIOD.

       (a) Change in Reporting Deadline.--Section 1854(a)(1) (42 
     U.S.C. 1395w-24(a)(1)), as amended by section 532(b)(1) of 
     the Public Health Security and Bioterrorism Preparedness and 
     Response Act of 2002, is amended by striking ``2002, 2003, 
     and 2004 (or July 1 of each other year)'' and inserting 
     ``2002 and each subsequent year''.
       (b) Delay in Annual, Coordinated Election Period.--Section 
     1851(e)(3)(B) (42 U.S.C. 1395w-21(e)(3)(B)), as amended by 
     section 532(c)(1)(A) of the Public Health Security and 
     Bioterrorism Preparedness and Response Act of 2002, is 
     amended--
       (1) by striking ``and after 2005''; and
       (2) by striking ``, 2004, and 2005'' and inserting ``and 
     any subsequent year''.
       (c) Annual Announcement of Payment Rates.--Section 
     1853(b)(1) (42 U.S.C. 1395w-23(b)(1)), as amended by section 
     532(d)(1) of the Public Health Security and Bioterrorism 
     Preparedness and Response Act of 2002, is amended--
       (1) by striking ``and after 2005''; and
       (2) by striking ``and 2005'' and inserting ``and each 
     subsequent year''.
       (d) Requiring Provision of Available Information Comparing 
     Plan Options.--The first sentence of section 
     1851(d)(2)(A)(ii) (42 U.S.C. 1395w-21(d)(2)(A)(ii)) is 
     amended by inserting before the period the following: ``to 
     the extent such information is available at the time of 
     preparation of materials for the mailing''.

     SEC. 232. AVOIDING DUPLICATIVE STATE REGULATION.

       (a) In General.--Section 1856(b)(3) (42 U.S.C. 1395w-
     26(b)(3)) is amended to read as follows:
       ``(3) Relation to state laws.--The standards established 
     under this subsection shall supersede any State law or 
     regulation (other than State licensing laws or State laws 
     relating to plan solvency) with respect to Medicare Advantage 
     plans which are offered by Medicare Advantage organizations 
     under this part.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect on the date of the enactment of this Act.

     SEC. 233. SPECIALIZED MEDICARE ADVANTAGE PLANS FOR SPECIAL 
                   NEEDS BENEFICIARIES.

       (a) Treatment as Coordinated Care Plan.--Section 
     1851(a)(2)(A) (42 U.S.C. 1395w-21(a)(2)(A)) is amended by 
     adding at the end the following new sentence: ``Specialized 
     Medicare Advantage plans for special needs beneficiaries (as 
     defined in section 1859(b)(4)) may be any type of coordinated 
     care plan.''.
       (b) Specialized Medicare Advantage Plan for Special Needs 
     Beneficiaries Defined.--Section 1859(b) (42 U.S.C. 1395w-
     29(b)) is amended by adding at the end the following new 
     paragraph:
       ``(4) Specialized medicare advantage plans for special 
     needs beneficiaries.--
       ``(A) In general.--The term `specialized Medicare Advantage 
     plan for special needs beneficiaries' means a Medicare 
     Advantage plan that exclusively serves special needs 
     beneficiaries (as defined in subparagraph (B)).
       ``(B) Special needs beneficiary.--The term `special needs 
     beneficiary' means a Medicare Advantage eligible individual 
     who--
       ``(i) is institutionalized (as defined by the Secretary);
       ``(ii) is entitled to medical assistance under a State plan 
     under title XIX; or
       ``(iii) meets such requirements as the Secretary may 
     determine would benefit from enrollment in such a specialized 
     Medicare Advantage plan described in subparagraph (A) for 
     individuals with severe or disabling chronic conditions.''.
       (c) Restriction on Enrollment Permitted.--Section 1859 (42 
     U.S.C. 1395w-29) is amended by adding at the end the 
     following new subsection:
       ``(f) Restriction on Enrollment for Specialized Medicare 
     Advantage Plans for Special Needs Beneficiaries.--In the case 
     of a specialized Medicare Advantage plan (as defined in 
     subsection (b)(4)), notwithstanding any other provision of 
     this part and in accordance with regulations of the Secretary 
     and for periods before January 1, 2007, the plan may restrict 
     the enrollment of individuals under the plan to individuals 
     who are within one or more classes of special needs 
     beneficiaries.''.
       (d) Authority To Designate Other Plans as Specialized 
     Medicare Advantage Plans.--In promulgating regulations to 
     carry out the last sentence of section 1851(a)(2)(A) of the 
     Social Security Act (as added by subsection (a)) and section 
     1859(b)(4) of such Act (as added by subsection (b)), the 
     Secretary may provide (notwithstanding section 1859(b)(4)(A) 
     of such Act) for the offering of specialized Medicare 
     Advantage plans by Medicare Advantage plans that 
     disproportionately serve special needs beneficiaries who are 
     frail, elderly medicare beneficiaries.
       (e) Report to Congress.--Not later than December 31, 2005, 
     the Medicare Benefits Administrator shall submit to Congress 
     a report that assesses the impact of specialized Medicare 
     Advantage plans for special needs beneficiaries on the cost 
     and quality of services provided to enrollees. Such report 
     shall include an assessment of the costs and savings to the 
     medicare program as a result of amendments made by 
     subsections (a), (b), and (c).
       (f) Effective Dates.--

[[Page H6031]]

       (1) In general.--The amendments made by subsections (a), 
     (b), and (c) shall take effect upon the date of the enactment 
     of this Act.
       (2) Deadline for issuance of requirements for special needs 
     beneficiaries; transition.--No later than 6 months after the 
     date of the enactment of this Act, the Secretary shall issue 
     interim final regulations to establish requirements for 
     special needs beneficiaries under section 1859(b)(4)(B)(iii) 
     of the Social Security Act, as added by subsection (b).

     SEC. 234. MEDICARE MSAS.

       (a) Exemption from Reporting Enrollee Encounter Data.--
       (1) In general.--Section 1852(e)(1) (42 U.S.C. 1395w-
     22(e)(1)) is amended by inserting ``(other than MSA plans)'' 
     after ``plans''.
       (2) Conforming amendments.--Section 1852 (42 U.S.C. 1395w-
     22) is amended--
       (A) in subsection (c)(1)(I), by inserting before the period 
     at the end the following: ``if required under such section''; 
     and
       (B) in subparagraphs (A) and (B) of subsection (e)(2), by 
     striking ``, a non-network MSA plan,'' and ``, non-network 
     msa plans,'' each place it appears.
       (b) Making Program Permanent and Eliminating Cap.--Section 
     1851(b)(4) (42 U.S.C. 1395w-21(b)(4)) is amended--
       (1) in the heading, by striking ``on a demonstration 
     basis'';
       (2) by striking the first sentence of subparagraph (A); and
       (3) by striking the second sentence of subparagraph (C).
       (c) Applying Limitations on Balance Billing.--Section 
     1852(k)(1) (42 U.S.C. 1395w-22(k)(1)) is amended by inserting 
     ``or with an organization offering a MSA plan'' after 
     ``section 1851(a)(2)(A)''.
       (d) Additional Amendment.--Section 1851(e)(5)(A) (42 U.S.C. 
     1395w-21(e)(5)(A)) is amended--
       (1) by adding ``or'' at the end of clause (i);
       (2) by striking ``, or'' at the end of clause (ii) and 
     inserting a semicolon; and
       (3) by striking clause (iii).

     SEC. 235. EXTENSION OF REASONABLE COST CONTRACTS.

       Subparagraph (C) of section 1876(h)(5) (42 U.S.C. 
     1395mm(h)(5)) is amended to read as follows:
       ``(C)(i) Subject to clause (ii), may be extended or renewed 
     under this subsection indefinitely.
       ``(ii) For any period beginning on or after January 1, 
     2008, a reasonable cost reimbursement contract under this 
     subsection may not be extended or renewed for a service area 
     insofar as such area, during the entire previous year, was 
     within the service area of 2 or more plans which were 
     coordinated care Medicare Advantage plans under part C or 2 
     or more enhanced fee-for-service plans under part E and each 
     of which plan for that previous year for the area involved 
     meets the following minimum enrollment requirements:
       ``(I) With respect to any portion of the area involved that 
     is within a Metropolitan Statistical Area with a population 
     of more than 250,000 and counties contiguous to such 
     Metropolitan Statistical Area, 5,000 individuals.
       ``(II) With respect to any other portion of such area, 
     1,500 individuals.''.

     SEC. 236. EXTENSION OF MUNICIPAL HEALTH SERVICE DEMONSTRATION 
                   PROJECTS.

       Section 9215(a) of the Consolidated Omnibus Budget 
     Reconciliation Act of 1985 (42 U.S.C. 1395b-1 note), as 
     amended by section 6135 of the Omnibus Budget Reconciliation 
     Act of 1989, section 13557 of the Omnibus Budget 
     Reconciliation Act of 1993, section 4017 of BBA, section 534 
     of BBRA (113 Stat. 1501A-390), and section 633 of BIPA, is 
     amended by striking ``December 31, 2004'' and inserting 
     ``December 31, 2009''.

     SEC. 237. STUDY OF PERFORMANCE-BASED PAYMENT SYSTEMS.

       (a) In General.--The Secretary shall request the Institute 
     of Medicine of the National Academy of Sciences to--
       (1) conduct a study that reviews and evaluates public and 
     private sector experiences in establishing performance 
     measures and payment incentives under the medicare program 
     and linking performance to payment; and
       (2) submit a report to the Secretary and Congress, not 
     later than 18 months after the date of the enactment of this 
     Act, regarding such study.
       (b) Study.--The study under subsection (a)(1) shall--
       (1) include a review and evaluation of incentives that have 
     been or could be used to encourage quality performance, 
     including those aimed at health plans and their enrollees, 
     providers and their patients, and other incentives that 
     encourage quality-based health care purchasing and 
     collaborative efforts to improve performance; and
       (2) examine how these measures and incentives might be 
     applied in the Medicare Advantage program, the Enhanced Fee-
     For-Service (EFFS) program, and traditional fee-for-service 
     programs.
       (c) Report Recommendations.--The report under subsection 
     (a)(2) shall--
       (1) include recommendations regarding appropriate 
     performance measures for use in assessing and paying for 
     quality; and
       (2) identify options for updating performance measures.

       Subtitle C--Application of FEHBP-Style Competitive Reforms

     SEC. 241. APPLICATION OF FEHBP-STYLE COMPETITIVE REFORM 
                   BEGINNING IN 2010.

       (a) Identification of Competitive EFFS Regions; Computation 
     of Competitive EFFS Non-Drug Benchmarks Under EFFS Program.--
       (1) In general.--Section 1860E-3, as added by section 
     201(a), is amended by adding at the end the following new 
     subsection:
       ``(e) Application of Competition.--
       ``(1) Determination of competitive effs regions.--
       ``(A) In general.--For purposes of this part, the term 
     `competitive EFFS region' means, for a year beginning with 
     2010, an EFFS region that the Administrator finds--
       ``(i) there will be offered in the region during the 
     annual, coordinated election period under section 
     1851(e)(3)(B) (as applied under section 1860E-1(c)) before 
     the beginning of the year at least 2 EFFS plans (in addition 
     to the fee-for-service program under parts A and B), each 
     offered by a different EFFS organization and each of which 
     met the minimum enrollment requirements of paragraph (1) of 
     section 1857(b) (as applied without regard to paragraph (3) 
     thereof) as of March of the previous year; and
       ``(ii) during March of the previous year at least the 
     percentage specified in subparagraph (C) of the number of 
     EFFS eligible individuals who reside in the region were 
     enrolled in an EFFS plan.
       ``(B) Percentage specified.--
       ``(i) In general.--For purposes of subparagraph (A), 
     subject to clause (ii), the percentage specified in this 
     subparagraph for a year is equal the lesser of 20 percent or 
     to the sum of--

       ``(I) the percentage, as estimated by the Administrator, of 
     EFFS eligible individuals in the United States who are 
     enrolled in EFFS plans during March of the previous year; and
       ``(II) the percentage, as estimated by the Administrator, 
     of Medicare Advantage eligible individuals in the United 
     States who are enrolled in Medicare Advantage plans during 
     March of the previous year.

       ``(ii) Exception.--In the case of an EFFS region that was a 
     competitive EFFS region for the previous year, the Medicare 
     Benefits Administrator may continue to treat the region as 
     meeting the requirement of subparagraph (A)(ii) if the region 
     would meet such requirement but for a de minimis reduction 
     below the percentage specified in clause (i).
       ``(2) Competitive effs non-drug monthly benchmark amount.--
     For purposes of this part, the term `competitive EFFS non-
     drug monthly benchmark amount' means, with respect to an EFFS 
     region for a month in a year and subject to paragraph (8), 
     the sum of the 2 components described in paragraph (3) for 
     the region and year. The Administrator shall compute such 
     benchmark amount for each competitive EFFS region before the 
     beginning of each annual, coordinated election period under 
     section 1851(e)(3)(B) for each year (beginning with 2010) in 
     which it is designated as such a region.
       ``(3) 2 components.--For purposes of paragraph (2), the 2 
     components described in this paragraph for an EFFS region and 
     a year are the following:
       ``(A) EFFS component.--The product of the following:
       ``(i) Weighted average of plan bids in region.--The 
     weighted average of the EFFS plan bids for the region and 
     year (as determined under paragraph (4)(A)).
       ``(ii) Non-ffs market share.--1 minus the fee-for-service 
     market share percentage determined under paragraph (5) for 
     the region and the year.
       ``(B) Fee-for-service component.--The product of the 
     following:
       ``(i) Fee-for-service region-specific non-drug amount.--The 
     fee-for-service region-specific non-drug amount (as defined 
     in paragraph (6)) for the region and year.
       ``(ii) Fee-for-service market share.--The fee-for-service 
     market share percentage (determined under paragraph (5)) for 
     the region and the year.
       ``(4) Determination of weighted average effs plan bids for 
     a region.--
       ``(A) In general.--For purposes of paragraph (3)(A)(i), the 
     weighted average of EFFS plan bids for an EFFS region and a 
     year is the sum of the following products for EFFS plans 
     described in subparagraph (C) in the region and year:
       ``(i) Unadjusted effs statutory non-drug monthly bid 
     amount.--The unadjusted EFFS statutory non-drug monthly bid 
     amount (as defined in subsection (a)(3)(A)(ii)(I)) for the 
     region and year.
       ``(ii) Plan's share of effs enrollment in region.--The 
     number of individuals described in subparagraph (B), divided 
     by the total number of such individuals for all EFFS plans 
     described in subparagraph (C) for that region and year.
       ``(B) Counting of individuals.--The Administrator shall 
     count, for each EFFS plan described in subparagraph (C) for 
     an EFFS region and year, the number of individuals who reside 
     in the region and who were enrolled under such plan under 
     this part during March of the previous year.
       ``(C) Exclusion of plans not offered in previous year.--For 
     an EFFS region and year, the EFFS plans described in this 
     subparagraph are plans that are offered in the region and 
     year and were offered in the region in March of the previous 
     year.
       ``(5) Computation of fee-for-service market share 
     percentage.--The Administrator shall determine, for a year 
     and an EFFS region, the proportion (in this subsection 
     referred to as the `fee-for-service market share percentage') 
     of the EFFS eligible individuals who are residents of the 
     region during March

[[Page H6032]]

     of the previous year, of such individuals who were not 
     enrolled in an EFFS plan or in a Medicare Advantage plan (or, 
     if greater, such proportion determined for individuals 
     nationally).
       ``(6) Fee-for-service region-specific non-drug amount.--
       ``(A) In general.--For purposes of paragraph (3)(B)(i) and 
     section 1839(h)(2)(A), subject to subparagraph (C), the term 
     `fee-for-service region-specific non-drug amount' means, for 
     a competitive EFFS region and a year, the adjusted average 
     per capita cost for the year involved, determined under 
     section 1876(a)(4) for such region for services covered under 
     parts A and B for individuals entitled to benefits under part 
     A and enrolled under this part who are not enrolled in an 
     EFFS plan under part E or a Medicare Advantage plan under 
     part C for the year, but adjusted to exclude costs 
     attributable to payments under section 1886(h).
       ``(B) Use of full risk adjustment to standardize fee-for-
     service costs to typical beneficiary.--In determining the 
     adjusted average per capita cost for a region and year under 
     subparagraph (A), such costs shall be adjusted to fully take 
     into account the demographic and health status risk factors 
     established under subsection (c)(3) so that such per capita 
     costs reflect the average costs for a typical beneficiary 
     residing in the region.
       ``(C) Inclusion of costs of va and dod military facility 
     services to medicare-eligible beneficiaries.--In determining 
     the adjusted average per capita cost under subparagraph (A) 
     for a year, such cost shall be adjusted to include the 
     Administrator's estimate, on a per capita basis, of the 
     amount of additional payments that would have been made in 
     the region involved under this title if individuals entitled 
     to benefits under this title had not received services from 
     facilities of the Department of Veterans Affairs or the 
     Department of Defense.
       ``(7) Application of competition.--In the case of an EFFS 
     region that is a competitive EFFS region for a year, for 
     purposes of applying subsections (b) and (c)(1) and section 
     1860E-4(a), any reference to an EFFS region-specific non-drug 
     monthly benchmark amount shall be treated as a reference to 
     the competitive EFFS non-drug monthly benchmark amount under 
     paragraph (2) for the region and year.
       ``(8) Phase-in of benchmark for each region.--
       ``(A) Use of blended benchmark.--In the case of a region 
     that has not been a competitive EFFS region for each of the 
     previous 4 years, the competitive EFFS non-drug monthly 
     benchmark amount shall be equal to the sum of the following:
       ``(i) New competitive component.--The product of--

       ``(I) the weighted average phase-in proportion for that 
     area and year, as specified in subparagraph (B); and
       ``(II) the competitive EFFS non-drug monthly benchmark 
     amount for the region and year, determined under paragraph 
     (2) without regard to this paragraph.

       ``(ii) Old competitive component.--The product of--

       ``(I) 1 minus the weighted average phase-in proportion for 
     that region and year; and
       ``(II) the EFFS region-specific non-drug benchmark amount 
     for the region and the year.

       ``(B) Computation of weighted average phase-in 
     proportion.--For purposes of this paragraph, the `weighted 
     average phase-in proportion' for an EFFS region for a year 
     shall be determined as follows:
       ``(i) First year (and region not competitive region in 
     previous year).--If the area was not a competitive EFFS 
     region in the previous year, the weighted average phase-in 
     proportion for the region for the year is equal to \1/5\.
       ``(ii) Competitive region in previous year.--If the region 
     was a competitive EFFS region in the previous year, the 
     weighted average phase-in proportion for the region for the 
     year is equal to the weighted average phase-in proportion 
     determined under this subparagraph for the region for the 
     previous year plus \1/5\, but in no case more than 1.''.
       (2) Conforming amendments.--
       (A) Such section 1860E-3 is further amended--
       (i) in subsection (b), by adding at the end the following 
     new paragraph:
       ``(4) Application in competitive regions.--For special 
     rules applying this subsection in competitive EFFS regions, 
     see subsection (e)(7).'';
       (ii) in subsection (c)(1), by inserting ``and subsection 
     (e)(7)'' after ``(as made applicable under subsection (d))''; 
     and
       (iii) in subsection (d) , by striking ``and (e)'' and 
     inserting ``(e), and (k) ''.
       (B) Section 1860E-4(a)(1), as inserted by section 
     201(a)(2), is amended by inserting ``, except as provided in 
     section 1860E-3(e)(7)'' after ``paragraph (2)''.
       (b) Identification of Competitive Medicare Advantage Areas; 
     Application of Competitive Medicare Advantage Non-Drug 
     Benchmarks Under Medicare Advantage Program.--
       (1) In general.--Section 1853, as amended by section 
     221(b)(3), is amended by adding at the end the following new 
     subsection:
       ``(k) Application of Competition.--
       ``(1) Determination of competitive medicare advantage 
     areas.--
       ``(A) In general.--For purposes of this part, the terms 
     `competitive Medicare Advantage area' and `CMA area' mean, 
     for a year beginning with 2010, an area (which is a 
     metropolitan statistical area or other area with a 
     substantial number of Medicare Advantage enrollees) that the 
     Administrator finds--
       ``(i) there will be offered during the annual, coordinated 
     election period under section 1851(e)(3)(B) under this part 
     before the beginning of the year at least 2 Medicare 
     Advantage plans (in addition to the fee-for-service program 
     under parts A and B), each offered by a different Medicare 
     Advantage organization and each of which met the minimum 
     enrollment requirements of paragraph (1) of section 1857(b) 
     (as applied without regard to paragraph (3) thereof) as of 
     March of the previous year with respect to the area; and
       ``(ii) during March of the previous year at least the 
     percentage specified in subparagraph (B) of the number of 
     Medicare Advantage eligible individuals who reside in the 
     area were enrolled in a Medicare Advantage plan.
       ``(B) Percentage specified.--
       ``(i) In general.--For purposes of subparagraph (A), 
     subject to clause (ii), the percentage specified in this 
     subparagraph for a year is equal the lesser of 20 percent or 
     to the sum of--

       ``(I) the percentage, as estimated by the Administrator, of 
     EFFS eligible individuals in the United States who are 
     enrolled in EFFS plans during March of the previous year; and
       ``(II) the percentage, as estimated by the Administrator, 
     of Medicare Advantage eligible individuals in the United 
     States who are enrolled in Medicare Advantage plans during 
     March of the previous year.

       ``(ii) Exception.--In the case of an area that was a 
     competitive area for the previous year, the Medicare Benefits 
     Administrator may continue to treat the area as meeting the 
     requirement of subparagraph (A)(ii) if the area would meet 
     such requirement but for a de minimis reduction below the 
     percentage specified in clause (i).
       ``(2) Competitive medicare advantage non-drug monthly 
     benchmark amount.--For purposes of this part, the term 
     `competitive Medicare Advantage non-drug monthly benchmark 
     amount' means, with respect to a competitive Medicare 
     Advantage area for a month in a year subject to paragraph 
     (8), the sum of the 2 components described in paragraph (3) 
     for the area and year. The Administrator shall compute such 
     benchmark amount for each competitive Medicare Advantage area 
     before the beginning of each annual, coordinated election 
     period under section 1851(e)(3)(B) for each year (beginning 
     with 2010) in which it is designated as such an area.
       ``(3) 2 components.--For purposes of paragraph (2), the 2 
     components described in this paragraph for a competitive 
     Medicare Advantage area and a year are the following:
       ``(A) Medicare advantage component.--The product of the 
     following:
       ``(i) Weighted average of medicare advantage plan bids in 
     area.--The weighted average of the plan bids for the area and 
     year (as determined under paragraph (4)(A)).
       ``(ii) Non-ffs market share.--1 minus the fee-for-service 
     market share percentage, determined under paragraph (5) for 
     the area and year.
       ``(B) Fee-for-service component.--The product of the 
     following:
       ``(i) Fee-for-service area-specific non-drug amount.--The 
     fee-for-service area-specific non-drug amount (as defined in 
     paragraph (6)) for the area and year.
       ``(ii) Fee-for-service market share.--The fee-for-service 
     market share percentage, determined under paragraph (5) for 
     the area and year.
       ``(4) Determination of weighted average medicare advantage 
     bids for an area.--
       ``(A) In general.--For purposes of paragraph (3)(A)(i), the 
     weighted average of plan bids for an area and a year is the 
     sum of the following products for Medicare Advantage plans 
     described in subparagraph (C) in the area and year:
       ``(i) Monthly medicare advantage statutory non-drug bid 
     amount.--The unadjusted Medicare Advantage statutory non-drug 
     monthly bid amount.
       ``(ii) Plan's share of medicare advantage enrollment in 
     area.--The number of individuals described in subparagraph 
     (B), divided by the total number of such individuals for all 
     Medicare Advantage plans described in subparagraph (C) for 
     that area and year.
       ``(B) Counting of individuals.--The Administrator shall 
     count, for each Medicare Advantage plan described in 
     subparagraph (C) for an area and year, the number of 
     individuals who reside in the area and who were enrolled 
     under such plan under this part during March of the previous 
     year.
       ``(C) Exclusion of plans not offered in previous year.--For 
     an area and year, the Medicare Advantage plans described in 
     this subparagraph are plans described in the first sentence 
     of section 1851(a)(2)(A) that are offered in the area and 
     year and were offered in the area in March of the previous 
     year.
       ``(5) Computation of fee-for-service market share 
     percentage.--The Administrator shall determine, for a year 
     and a competitive Medicare Advantage area, the proportion (in 
     this subsection referred to as the `fee-for-service market 
     share percentage') of Medicare Advantage eligible individuals 
     residing in the area who during March of the previous year 
     were not enrolled in a Medicare Advantage plan or in an EFFS 
     plan (or, if greater, such proportion determined for 
     individuals nationally).

[[Page H6033]]

       ``(6) Fee-for-service area-specific non-drug amount.--
       ``(A) In general.--For purposes of paragraph (3)(B)(i) and 
     section 1839(h)(1)(A), subject to subparagraph (C), the term 
     `fee-for-service area-specific non-drug amount' means, for a 
     competitive Medicare Advantage area and a year, the adjusted 
     average per capita cost for the year involved, determined 
     under section 1876(a)(4) for such area for services covered 
     under parts A and B for individuals entitled to benefits 
     under part A and enrolled under this part who are not 
     enrolled in a Medicare Advantage plan under part C or an EFFS 
     plan under part E for the year, but adjusted to exclude costs 
     attributable to payments under section 1886(h).
       ``(B) Use of full risk adjustment to standardize fee-for-
     service costs to typical beneficiary.--In determining the 
     adjusted average per capita cost for an area and year under 
     subparagraph (A), such costs shall be adjusted to fully take 
     into account the demographic and health status risk factors 
     established under subsection (a)(1)(A)(iv) so that such per 
     capita costs reflect the average costs for a typical 
     beneficiary residing in the area.
       ``(C) Inclusion of costs of va and dod military facility 
     services to medicare-eligible beneficiaries.--In determining 
     the adjusted average per capita cost under subparagraph (A) 
     for a year, such cost shall be adjusted to include the 
     Administrator's estimate, on a per capita basis, of the 
     amount of additional payments that would have been made in 
     the area involved under this title if individuals entitled to 
     benefits under this title had not received services from 
     facilities of the Department of Veterans Affairs or the 
     Department of Defense.
       ``(7) Application of competition.--In the case of an area 
     that is a competitive Medicare Advantage area for a year, for 
     purposes of applying subsection (a)(1)(A)(ii) and sections 
     1854(b)(2)(A)(ii) and 1854(b)(3)(B)(i), any reference to a 
     Medicare Advantage area-specific non-drug monthly benchmark 
     amount shall be treated as a reference to the competitive 
     Medicare Advantage non-drug monthly benchmark amount under 
     paragraph (2) for the area and year.
       ``(8) Phase-in of benchmark for each area.--
       ``(A) Use of blended benchmark.--In the case of an area 
     that has not been a competitive Medicare Advantage area for 
     each of the previous 4 years, the competitive Medicare 
     Advantage non-drug monthly benchmark amount shall be equal to 
     the sum of the following:
       ``(i) New competitive component.--The product of--

       ``(I) the weighted average phase-in proportion for that 
     area and year, as specified in subparagraph (B); and
       ``(II) the competitive Medicare Advantage non-drug monthly 
     benchmark amount for the area and year, determined under 
     paragraph (2) without regard to this paragraph.

       ``(ii) Old competitive component.--The product of--

       ``(I) 1 minus the weighted average phase-in proportion for 
     that area and year; and
       ``(II) the Medicare Advantage area-wide non-drug benchmark 
     amount for the area and the year.

       ``(B) Computation of weighted average phase-in 
     proportion.--For purposes of this paragraph, the `weighted 
     average phase-in proportion' for a Medicare Advantage payment 
     area for a year shall be determined as follows:
       ``(i) First year (and area not competitive area in previous 
     year).--If the area was not a Medicare Advantage competitive 
     area in the previous year, the weighted average phase-in 
     proportion for the area for the year is equal to \1/5\.
       ``(ii) Competitive area in previous year.--If the area was 
     a competitive Medicare Advantage area in the previous year, 
     the weighted average phase-in proportion for the area for the 
     year is equal to the weighted average phase-in proportion 
     determined under this subparagraph for the area for the 
     previous year plus \1/5\, but in no case more than 1.
       ``(C) Medicare advantage area-wide non-drug benchmark 
     amount.--For purposes of subparagraph (A)(ii)(II), the term 
     `Medicare Advantage area-wide non-drug benchmark amount' 
     means, for an area and year, the weighted average of the 
     amounts described in section 1853(j) for Medicare Advantage 
     payment area or areas included in the area (based on the 
     number of traditional fee-for-service enrollees in such 
     payment area or areas) and year.''.
       (2) Application.--Section 1854 (42 U.S.C. 1395w-24) is 
     amended--
       (A) in subsection (b)(1)(C)(i), as added by section 
     221(b)(1)(A), by striking ``(i) Requirement.--The'' and 
     inserting ``(i) Requirement for non-competitive areas.--In 
     the case of a Medicare Advantage payment area that is not a 
     competitive Medicare Advantage area designated under section 
     1853(k)(1), the'';
       (B) in subsection (b)(1)(C), as so added, by inserting 
     after clause (i) the following new clause:
       ``(ii) Requirement for competitive medicare advantage 
     areas.--In the case of a Medicare Advantage payment area that 
     is designated as a competitive Medicare Advantage area under 
     section 1853(k)(1), if there are average per capita monthly 
     savings described in paragraph (6) for a Medicare Advantage 
     plan and year, the Medicare Advantage plan shall provide to 
     the enrollee a monthly rebate equal to 75 percent of such 
     savings.''; and
       (C) by adding at the end of subsection (b), as amended by 
     sections 221(b)(1)(B) and 221(b)(2), the following new 
     paragraph:
       ``(6) Computation of average per capita monthly savings for 
     competitive medicare advantage areas.--For purposes of 
     paragraph (1)(C)(ii), the average per capita monthly savings 
     referred to in such paragraph for a Medicare Advantage plan 
     and year shall be computed in the same manner as the average 
     per capita monthly savings is computed under paragraph (3) 
     except that the reference to the Medicare Advantage area-
     specific non-drug monthly benchmark amount in paragraph 
     (3)(B)(i) (or to the benchmark amount as adjusted under 
     paragraph (3)(C)(i)) is deemed to be a reference to the 
     competitive Medicare Advantage non-drug monthly benchmark 
     amount (or such amount as adjusted in the manner described in 
     paragraph (3)(B)(i)).''.
       (3) Additional conforming amendments.--
       (A) Payment of plans.--Section 1853(a)(1)(A)(ii), as 
     amended by section 221(c)(1), is amended--
       (i) in subclauses (I) and (II), by inserting ``(or, insofar 
     as such payment area is a competitive Medicare Advantage 
     area, described in section 1854(b)(6))'' after ``section 
     1854(b)(3)(C)''; and
       (ii) in subclause (II), by inserting ``(or, insofar as such 
     payment area is a competitive Medicare Advantage area, the 
     competitive Medicare Advantage non-drug monthly benchmark 
     amount)'' after ``Medicare Advantage area-specific non-drug 
     monthly benchmark amount''; and
       (B) Disclosure of information.--Section 1853(b)(1)(B), as 
     amended by section 221(e)(1), is amended to read as follows:
       ``(B) Competition information.--For years beginning with 
     2006, the following:
       ``(i) Benchmarks.--The Medicare Advantage area-specific 
     non-drug benchmark under section 1853(j) and, if applicable, 
     the competitive Medicare Advantage non-drug benchmark under 
     section 1853(k)(2), for the year and competitive Medicare 
     Advantage area involved and the national fee-for-service 
     market share percentage for the area and year.
       ``(ii) Adjustment factors.--The adjustment factors applied 
     under section 1853(a)(1)(A)(iv) (relating to demographic 
     adjustment), section 1853(a)(1)(B) (relating to adjustment 
     for end-stage renal disease), and section 1853(a)(3) 
     (relating to health status adjustment).
       ``(iii) Certain benchmarks and amounts.--In the case of a 
     competitive Medicare Advantage area, the Medicare Advantage 
     area-wide non-drug benchmark amount (as defined in subsection 
     (k)(8)(C)) and the fee-for-service area-specific non-drug 
     amount (as defined in section 1853(k)(6)) for the area.
       ``(iv) Individuals.--The number of individuals counted 
     under subsection (k)(4)(B) and enrolled in each Medicare 
     Advantage plan in the area.''.
       (C) Definition of monthly basic premium.--Section 
     1854(b)(2)(A)(ii), as amended by section 221(d)(2), is 
     amended by inserting ``(or, in the case of a competitive 
     Medicare Advantage area, the competitive Medicare Advantage 
     non-drug monthly benchmark amount or, in applying this 
     paragraph under part E in the case of a competitive EFFS 
     region, the competitive EFFS non-drug monthly benchmark 
     amount)'' after ``benchmark amount''.
       (c) Premium Adjustment.--
       (1) In general.--Section 1839 (42 U.S.C. 1395r) is amended 
     by adding at the end the following new subsection:
       ``(h)(1)(A) In the case of an individual who resides in a 
     competitive Medicare Advantage area under section 1853(k)(1) 
     (regardless of whether such area is in a competitive EFFS 
     region under section 1860E-3(e)) and who is not enrolled in a 
     Medicare Advantage plan under part C or in an EFFS plan under 
     part E, the monthly premium otherwise applied under this part 
     (determined without regard to subsections (b) and (f) or any 
     adjustment under this subsection) shall be adjusted as 
     follows: If the fee-for-service area-specific non-drug amount 
     (as defined in section 1853(k)(6)) for the competitive 
     Medicare Advantage area in which the individual resides for a 
     month--
       ``(i) does not exceed the competitive Medicare Advantage 
     non-drug benchmark (as determined under paragraph (2) of 
     section 1853(k), without regard to paragraph (8) thereof) for 
     such area, the amount of the premium for the individual for 
     the month shall be reduced by an amount equal to the product 
     of the adjustment factor under subparagraph (C) and 75 
     percent of the amount by which such competitive benchmark 
     exceeds such fee-for-service area-specific non-drug amount; 
     or
       ``(ii) exceeds such competitive Medicare Advantage non-drug 
     benchmark, the amount of the premium for the individual for 
     the month shall be adjusted to ensure, subject to 
     subparagraph (B), that--
       ``(I) the sum of the amount of the adjusted premium and the 
     competitive Medicare Advantage non-drug benchmark for the 
     area, is equal to
       ``(II) the sum of the unadjusted premium plus amount of the 
     fee-for-service area-specific non-drug amount for the area.
       ``(B) In no case shall the actual amount of an adjustment 
     under subparagraph (A)(ii) exceed the product of the 
     adjustment factor under subparagraph (C) and the amount of 
     the adjustment otherwise computed under

[[Page H6034]]

     subparagraph (A)(ii) without regard to this subparagraph.
       ``(C) The adjustment factor under this subparagraph for an 
     area for a year is equal to--
       ``(i) the number of consecutive years (in the 5-year period 
     ending with the year involved) in which such area was a 
     competitive Medicare Advantage area; divided by
       ``(ii) 5.
       ``(2)(A) In the case of an individual who resides in an 
     area that is within a competitive EFFS region under section 
     1860E-3(e) but is not within a competitive Medicare Advantage 
     area under section 1853(k)(1) and who is not enrolled in a 
     Medicare Advantage plan under part C or in an EFFS plan under 
     part E, the monthly premium otherwise applied under this part 
     (determined without regard to subsections (b) and (f) or any 
     adjustment under this subsection) shall be adjusted as 
     follows: If the fee-for-service region-specific non-drug 
     amount (as defined in section 1860E-3(e)(6)) for a region for 
     a month--
       ``(i) does not exceed the competitive EFFS non-drug monthly 
     benchmark amount (as determined under paragraph (2) of 
     section 1860E-3(e), without regard to paragraph (8) thereof) 
     for such region, the amount of the premium for the individual 
     for the month shall be reduced by an amount equal to the 
     product of the adjustment factor under subparagraph (C) and 
     75 percent of the amount by which such competitive benchmark 
     amount exceeds such fee-for-service region-specific non-drug 
     benchmark amount; or
       ``(ii) exceeds such competitive EFFS non-drug monthly 
     benchmark amount, the amount of the premium for the 
     individual for the month shall be adjusted to ensure, subject 
     to subparagraph (B), that--
       ``(I) the sum of the amount of the adjusted premium and the 
     competitive EFFS non-drug monthly benchmark amount for the 
     region, is equal to
       ``(II) the sum of the unadjusted premium plus the amount of 
     the EFFS region-specific non-drug monthly bidfor the region.
       ``(B) In no case shall the actual amount of an adjustment 
     under subparagraph (A)(ii) exceed the product of the 
     adjustment factor under subparagraph (C) and the amount of 
     the adjustment otherwise computed under subparagraph (A)(ii) 
     without regard to this subparagraph.
       ``(C) The adjustment factor under this subparagraph for an 
     EFFS region for a year is equal to--
       ``(i) the number of consecutive years (in the 5-year period 
     ending with the year involved) in which such region was a 
     competitive EFFS region; divided by
       ``(ii) 5.
       ``(3) Nothing in this subsection shall be construed as 
     preventing a reduction under paragraph (1)(A) or paragraph 
     (2)(A) in the premium otherwise applicable under this part to 
     zero or from requiring the provision of a rebate to the 
     extent such premium would otherwise be required to be less 
     than zero.
       ``(4) The adjustment in the premium under this subsection 
     shall be effected in such manner as the Medicare Benefits 
     Administrator determines appropriate.
       ``(5) In order to carry out this subsection (insofar as it 
     is effected through the manner of collection of premiums 
     under 1840(a)), the Medicare Benefits Administrator shall 
     transmit to the Commissioner of Social Security--
       ``(A) at the beginning of each year, the name, social 
     security account number, and the amount of the adjustment (if 
     any) under this subsection for each individual enrolled under 
     this part for each month during the year; and
       ``(B) periodically throughout the year, information to 
     update the information previously transmitted under this 
     paragraph for the year.''.
       (2) No change in medicare's defined benefit package.--
     Nothing in this part (or the amendments made by this part) 
     shall be construed as changing the entitlement to defined 
     benefits under parts A and B of title XVIII of the Social 
     Security Act.
       (3) Conforming amendment.--Section 1844(c) (42 U.S.C. 
     1395w(c)) is amended by inserting ``and without regard to any 
     premium adjustment effected under section 1839(h)'' before 
     the period at the end.
       (d) Effective Date.--The amendments made by this section 
     shall take effect on January 1, 2010.

             TITLE III--COMBATTING WASTE, FRAUD, AND ABUSE

     SEC. 301. MEDICARE SECONDARY PAYOR (MSP) PROVISIONS.

       (a) Technical Amendment Concerning Secretary's Authority to 
     Make Conditional Payment When Certain Primary Plans Do Not 
     Pay Promptly.--
       (1) In general.--Section 1862(b)(2) (42 U.S.C. 1395y(b)(2)) 
     is amended--
       (A) in subparagraph (A)(ii), by striking ``promptly (as 
     determined in accordance with regulations)'';
       (B) in subparagraph (B)--
       (i) by redesignating clauses (i) through (iii) as clauses 
     (ii) through (iv), respectively; and
       (ii) by inserting before clause (ii), as so redesignated, 
     the following new clause:
       ``(i) Authority to make conditional payment.--The Secretary 
     may make payment under this title with respect to an item or 
     service if a primary plan described in subparagraph (A)(ii) 
     has not made or cannot reasonably be expected to make payment 
     with respect to such item or service promptly (as determined 
     in accordance with regulations). Any such payment by the 
     Secretary shall be conditioned on reimbursement to the 
     appropriate Trust Fund in accordance with the succeeding 
     provisions of this subsection.''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall be effective as if included in the enactment of title 
     III of the Medicare and Medicaid Budget Reconciliation 
     Amendments of 1984 (Public Law 98-369).
       (b) Clarifying Amendments to Conditional Payment 
     Provisions.--Section 1862(b)(2) (42 U.S.C. 1395y(b)(2)) is 
     further amended--
       (1) in subparagraph (A), in the matter following clause 
     (ii), by inserting the following sentence at the end: ``An 
     entity that engages in a business, trade, or profession shall 
     be deemed to have a self-insured plan if it carries its own 
     risk (whether by a failure to obtain insurance, or otherwise) 
     in whole or in part.'';
       (2) in subparagraph (B)(ii), as redesignated by subsection 
     (a)(2)(B)--
       (A) by striking the first sentence and inserting the 
     following: ``A primary plan, and an entity that receives 
     payment from a primary plan, shall reimburse the appropriate 
     Trust Fund for any payment made by the Secretary under this 
     title with respect to an item or service if it is 
     demonstrated that such primary plan has or had a 
     responsibility to make payment with respect to such item or 
     service. A primary plan's responsibility for such payment may 
     be demonstrated by a judgment, a payment conditioned upon the 
     recipient's compromise, waiver, or release (whether or not 
     there is a determination or admission of liability) of 
     payment for items or services included in a claim against the 
     primary plan or the primary plan's insured, or by other 
     means.''; and
       (B) in the final sentence, by striking ``on the date such 
     notice or other information is received'' and inserting ``on 
     the date notice of, or information related to, a primary 
     plan's responsibility for such payment or other information 
     is received''; and
       (3) in subparagraph (B)(iii), , as redesignated by 
     subsection (a)(2)(B), by striking the first sentence and 
     inserting the following: ``In order to recover payment made 
     under this title for an item or service, the United States 
     may bring an action against any or all entities that are or 
     were required or responsible (directly, as an insurer or 
     self-insurer, as a third-party administrator, as an employer 
     that sponsors or contributes to a group health plan, or large 
     group health plan, or otherwise) to make payment with respect 
     to the same item or service (or any portion thereof) under a 
     primary plan. The United States may, in accordance with 
     paragraph (3)(A) collect double damages against any such 
     entity. In addition, the United States may recover under this 
     clause from any entity that has received payment from a 
     primary plan or from the proceeds of a primary plan's payment 
     to any entity.''.
       (c) Clerical Amendments.--Section 1862(b) (42 U.S.C. 
     1395y(b)) is amended--
       (1) in paragraph (1)(A), by moving the indentation of 
     clauses (ii) through (v) 2 ems to the left; and
       (2) in paragraph (3)(A), by striking ``such'' before 
     ``paragraphs''.

     SEC. 302. COMPETITIVE ACQUISITION OF CERTAIN ITEMS AND 
                   SERVICES.

       (a) In General.--Section 1847 (42 U.S.C. 1395w-3) is 
     amended to read as follows:


        ``competitive acquisition of certain items and services

       ``Sec. 1847. (a) Establishment of Competitive Acquisition 
     Programs.--
       ``(1) Implementation of programs.--
       ``(A) In general.--The Secretary shall establish and 
     implement programs under which competitive acquisition areas 
     are established throughout the United States for contract 
     award purposes for the furnishing under this part of 
     competitively priced items and services (described in 
     paragraph (2)) for which payment is made under this part. 
     Such areas may differ for different items and services.
       ``(B) Phased-in implementation.--The programs shall be 
     phased-in--
       ``(i) among competitive acquisition areas over a period of 
     not longer than 3 years in a manner so that the competition 
     under the programs occurs in--

       ``(I) at least \1/3\ of such areas in 2005; and
       ``(II) at least \2/3\ of such areas in 2006; and

       ``(ii) among items and services in a manner such that the 
     programs apply to the highest cost and highest volume items 
     and services first.
       ``(C) Waiver of certain provisions.--In carrying out the 
     programs, the Secretary may waive such provisions of the 
     Federal Acquisition Regulation as are necessary for the 
     efficient implementation of this section, other than 
     provisions relating to confidentiality of information and 
     such other provisions as the Secretary determines 
     appropriate.
       ``(2) Items and services described.--The items and services 
     referred to in paragraph (1) are the following:
       ``(A) Durable medical equipment and medical supplies.--
     Covered items (as defined in section 1834(a)(13)) for which 
     payment is otherwise made under section 1834(a), including 
     items used in infusion and drugs and supplies used in 
     conjunction with durable medical equipment, but excluding 
     class III devices under the Federal Food, Drug, and Cosmetic 
     Act.
       ``(B) Other equipment and supplies.--Items, equipment, and 
     supplies (as described in section 1842(s)(2)(D) other than 
     enteral nutrients).

[[Page H6035]]

       ``(C) Off-the-shelf orthotics.--Orthotics (described in 
     section 1861(s)(9)) for which payment is otherwise made under 
     section 1834(h) which require minimal self-adjustment for 
     appropriate use and does not require expertise in trimming, 
     bending, molding, assembling, or customizing to fit to the 
     patient.
       ``(3) Exception authority.--In carrying out the programs 
     under this section, the Secretary may exempt--
       ``(A) rural areas and areas with low population density 
     within urban areas that are not competitive, unless there is 
     a significant national market through mail order for a 
     particular item or service; and
       ``(B) items and services for which the application of 
     competitive acquisition is not likely to result in 
     significant savings.
       ``(4) Special rule for certain rented items of durable 
     medical equipment.--In the case of a covered item for which 
     payment is made on a rental basis under section 1834(a), the 
     Secretary shall establish a process by which rental 
     agreements for the covered items entered into before the 
     application of the competitive acquisition program under this 
     section for the item may be continued notwithstanding this 
     section. In the case of any such continuation, the supplier 
     involved shall provide for appropriate servicing and 
     replacement, as required under section 1834(a).
       ``(5) Physician authorization.--The Secretary may establish 
     a process under which a physician may prescribe a particular 
     brand or mode of delivery of an item or service if the item 
     or service involved is clinically more appropriate than other 
     similar items or services.
       ``(6) Application.--For each competitive acquisition area 
     in which the program is implemented under this subsection 
     with respect to items and services, the payment basis 
     determined under the competition conducted under subsection 
     (b) shall be substituted for the payment basis otherwise 
     applied under section 1834(a).
       ``(b) Program Requirements.--
       ``(1) In general.--The Secretary shall conduct a 
     competition among entities supplying items and services 
     described in subsection (a)(2) for each competitive 
     acquisition area in which the program is implemented under 
     subsection (a) with respect to such items and services.
       ``(2) Conditions for awarding contract.--
       ``(A) In general.--The Secretary may not award a contract 
     to any entity under the competition conducted in an 
     competitive acquisition area pursuant to paragraph (1) to 
     furnish such items or services unless the Secretary finds all 
     of the following:
       ``(i) The entity meets quality and financial standards 
     specified by the Secretary or developed by the Program 
     Advisory and Oversight Committee established under subsection 
     (c).
       ``(ii) The total amounts to be paid under the contract 
     (including costs associated with the administration of the 
     contract) are expected to be less than the total amounts that 
     would otherwise be paid.
       ``(iii) Beneficiary access to a choice of multiple 
     suppliers in the area is maintained.
       ``(iv) Beneficiary liability is limited to 20 percent of 
     the applicable contract award price, except in such cases 
     where a supplier has furnished an upgraded item and has 
     executed an advanced beneficiary notice.
       ``(B) Development of quality standards for dme products.--
       ``(i) In general.--The quality standards specified under 
     subparagraph (A)(i) shall not be less than the quality 
     standards that would otherwise apply if this section did not 
     apply and shall include consumer services standards. Not 
     later than July 1, 2004, the Secretary shall establish new 
     quality standards for products subject to competitive 
     acquisition under this section. Such standards shall be 
     applied prospectively and shall be published on the website 
     of the Department of Health and Human Services.
       ``(ii) Consultation with program advisory and oversight 
     committee.--The Secretary shall consult with the Program 
     Advisory and Oversight Committee (established under 
     subsection (c)) to review (and advise the Secretary 
     concerning) the quality standards referred to in clause (i).
       ``(iii) Construction.--Nothing in this subparagraph shall 
     be construed as delaying the effective date of the 
     implementation of the competitive acquisition program under 
     this section.
       ``(3) Contents of contract.--
       ``(A) In general.--A contract entered into with an entity 
     under the competition conducted pursuant to paragraph (1) is 
     subject to terms and conditions that the Secretary may 
     specify.
       ``(B) Term of contracts.--The Secretary shall recompete 
     contracts under this section not less often than once every 3 
     years.
       ``(4) Limit on number of contractors.--
       ``(A) In general.--The Secretary may limit the number of 
     contractors in a competitive acquisition area to the number 
     needed to meet projected demand for items and services 
     covered under the contracts. In awarding contracts, the 
     Secretary shall take into account the ability of bidding 
     entities to furnish items or services in sufficient 
     quantities to meet the anticipated needs of beneficiaries for 
     such items or services in the geographic area covered under 
     the contract on a timely basis.
       ``(B) Multiple winners.--The Secretary shall award 
     contracts to multiple entities submitting bids in each area 
     for an item or service.
       ``(5) Payment.--Payment under this part for competitively 
     priced items and services described in subsection (a)(2) 
     shall be based on the bids submitted and accepted under this 
     section for such items and services.
       ``(6) Participating contractors.--Payment shall not be made 
     for items and services described in subsection (a)(2) 
     furnished by a contractor and for which competition is 
     conducted under this section unless--
       ``(A) the contractor has submitted a bid for such items and 
     services under this section; and
       ``(B) the Secretary has awarded a contract to the 
     contractor for such items and services under this section.

     In this section, the term `bid' means a request for a 
     proposal for an item or service that includes the cost of the 
     item or service, and where appropriate, any services that are 
     attendant to the provision of the item or service.
       ``(7) Consideration in determining categories for bids.--
     The Secretary shall consider the similarity of the clinical 
     efficiency and value of specific codes and products, 
     including products that may provide a therapeutic advantage 
     to beneficiaries, before delineating the categories and 
     products that will be subject to bidding.
       ``(8) Authority to contract for education, monitoring, 
     outreach and complaint services.--The Secretary may enter 
     into a contract with an appropriate entity to address 
     complaints from beneficiaries who receive items and services 
     from an entity with a contract under this section and to 
     conduct appropriate education of and outreach to such 
     beneficiaries and monitoring quality of services with respect 
     to the program.
       ``(c) Program Advisory and Oversight Committee.--
       ``(1) Establishment.--There is established a Program 
     Advisory and Oversight Committee (hereinafter in this section 
     referred to as the `Committee').
       ``(2) Membership; terms.--The Committee shall consist of 
     such members as the Secretary may appoint who shall serve for 
     such term as the Secretary may specify.
       ``(3) Duties.--
       ``(A) Technical assistance.--The Committee shall provide 
     advice and technical assistance to the Secretary with respect 
     to the following functions:
       ``(i) The implementation of the program under this section.
       ``(ii) The establishment of requirements for collection of 
     data.
       ``(iii) The development of proposals for efficient 
     interaction among manufacturers and distributors of the items 
     and services and providers and beneficiaries.
       ``(B) Additional duties.--The Committee shall perform such 
     additional functions to assist the Secretary in carrying out 
     this section as the Secretary may specify.
       ``(4) Inapplicability of faca.--The provisions of the 
     Federal Advisory Committee Act (5 U.S.C. App.) shall not 
     apply.
       ``(d) Annual Reports.--The Secretary shall submit to 
     Congress an annual management report on the programs under 
     this section. Each such report shall include information on 
     savings, reductions in beneficiary cost-sharing, access to 
     and quality of items and services, and beneficiary 
     satisfaction.
       ``(e) Demonstration Project for Clinical Laboratory 
     Services.--
       ``(1) In general.--The Secretary shall conduct a 
     demonstration project on the application of competitive 
     acquisition under this section to clinical diagnostic 
     laboratory tests--
       ``(A) for which payment is otherwise made under section 
     1833(h) or 1834(d)(1) (relating to colorectal cancer 
     screening tests); and
       ``(B) which are furnished by entities that did not have a 
     face-to-face encounter with the individual.
       ``(2) Terms and conditions.--Such project shall be under 
     the same conditions as are applicable to items and services 
     described in subsection (a)(2).
       ``(3) Report.--The Secretary shall submit to Congress--
       ``(A) an initial report on the project not later than 
     December 31, 2005; and
       ``(B) such progress and final reports on the project after 
     such date as the Secretary determines appropriate.''.
       (b) Conforming Amendments.--
       (1) Durable medical equipment; elimination of inherent 
     reasonableness authority.--Section 1834(a) (42 U.S.C. 
     1395m(a)) is amended--
       (A) in paragraph (1)(B), by striking ``The payment basis'' 
     and inserting ``Subject to subparagraph (E)(i), the payment 
     basis'';
       (B) in paragraph (1)(C), by striking ``This subsection'' 
     and inserting ``Subject to subparagraph (E)(ii), this 
     subsection'';
       (C) by adding at the end of paragraph (1) the following new 
     subparagraph:
       ``(E) Application of competitive acquisition; elimination 
     of inherent reasonableness authority.--In the case of covered 
     items and services that are included in a competitive 
     acquisition program in a competitive acquisition area under 
     section 1847(a)--
       ``(i) the payment basis under this subsection for such 
     items and services furnished in such area shall be the 
     payment basis determined under such competitive acquisition 
     program; and
       ``(ii) the Secretary may use information on the payment 
     determined under such competitive acquisition programs to 
     adjust the payment amount otherwise recognized under

[[Page H6036]]

     subparagraph (B)(ii) for an area that is not a competitive 
     acquisition area under section 1847 and in the case of such 
     adjustment, paragraph (10)(B) shall not be applied.''; and
       (D) in paragraph (10)(B), by inserting ``in an area and 
     with respect to covered items and services for which the 
     Secretary does not make a payment amount adjustment under 
     paragraph (1)(E)'' after ``under this subsection''.
       (2) Off-the-shelf orthotics; elimination of inherent 
     reasonableness authority.--Section 1834(h) (42 U.S.C. 
     1395m(h)) is amended--
       (A) in paragraph (1)(B), by striking ``and (E)'' and 
     inserting ``, (E) , and (H)(i)'';
       (B) in paragraph (1)(D), by striking ``This subsection'' 
     and inserting ``Subject to subparagraph (H)(ii), this 
     subsection'';
       (C) by adding at the end of paragraph (1) the following new 
     subparagraph:
       ``(H) Application of competitive acquisition to orthotics; 
     elimination of inherent reasonableness authority.--In the 
     case of orthotics described in paragraph (2)(B) of section 
     1847(a) that are included in a competitive acquisition 
     program in a competitive acquisition area under such 
     section--
       ``(i) the payment basis under this subsection for such 
     orthotics furnished in such area shall be the payment basis 
     determined under such competitive acquisition program; and
       ``(ii) the Secretary may use information on the payment 
     determined under such competitive acquisition programs to 
     adjust the payment amount otherwise recognized under 
     subparagraph (B)(ii) for an area that is not a competitive 
     acquisition area under section 1847, and in the case of such 
     adjustment, paragraphs (8) and (9) of section 1842(b) shall 
     not be applied.''.
       (c) Report on Activities of Suppliers.--The Secretary shall 
     conduct a study to determine the extent to which (if any) 
     suppliers of covered items of durable medical equipment that 
     are subject to the competitive acquisition program under 
     section 1847 of the Social Security Act, as amended by 
     subsection (a), are soliciting physicians to prescribe 
     certain brands or modes of delivery of covered items based on 
     profitability.
       (d) GAO Study on Safe and Effective Home Infusion and 
     Inhalation Therapy; Standards.--
       (1) Study.--The Comptroller General of the United States 
     shall conduct a study of the standards, professional 
     services, and related functions necessary for the provision 
     of safe and effective home infusion therapy and home 
     inhalation therapy.
       (2) Report.--Not later than May 1, 2004, the Comptroller 
     General shall submit to Congress a report on the study 
     conducted under paragraph (1).
       (3) Use of findings in developing standards.--In 
     promulgating regulations to carry out section 1847 of the 
     Social Security Act, as amended by subsection (a), the 
     Secretary shall ensure that quality standards developed under 
     subsection (b)(2)(B) of such section reflect the findings of 
     the Comptroller General set forth in the report under 
     paragraph (2).

     SEC. 303. COMPETITIVE ACQUISITION OF COVERED OUTPATIENT DRUGS 
                   AND BIOLOGICALS.

       (a) Adjustment to Physician Fee Schedule.--
       (1) Adjustment in practice expense relative value units.--
     Section 1848(c)(2) (42 U.S.C. 1395w-4(c)(2)) is amended--
       (A) in subparagraph (B)--
       (i) in clause (ii)(II), by striking ``The adjustments'' and 
     inserting ``Subject to clause (iv), the adjustments''; and
       (ii) by adding at the end of subparagraph (B), the 
     following new clause:
       ``(iv) Exception to budget neutrality.--The additional 
     expenditures attributable to clauses (ii) and (iii) of 
     subparagraph (H) shall not be taken into account in applying 
     clause (ii)(II) for 2005.''; and
       (B) by adding at the end the following new subparagraph:
       ``(H) Adjustments in practice expense relative value units 
     for 2005.--
       ``(i) In general.--As part of the annual process of 
     establishing the physician fee schedule under subsection (b) 
     for 2005, the Secretary shall increase the practice expense 
     relative value units for 2005 consistent with clauses (ii) 
     and (iii).
       ``(ii) Use of supplemental survey data.--For 2005 for any 
     specialty that submitted survey data that included expenses 
     for the administration of drugs and biologicals for which 
     payment is made under section 1842(o) (or section 1847A), the 
     Secretary shall use such supplemental survey data in carrying 
     out this subparagraph insofar as they are collected and 
     provided by entities and organizations consistent with the 
     criteria established by the Secretary pursuant to section 
     212(a) of the Medicare, Medicaid, and SCHIP Balanced Budget 
     Refinement Act of 1999 and insofar as such data are submitted 
     to the Secretary by December 31, 2004.
       ``(iii) Provisions for appropriate reporting and billing 
     for physicians' services associated with the administration 
     of covered outpatient drugs and biologicals.--

       ``(I) Evaluation of codes.--The Secretary shall promptly 
     evaluate existing codes for physicians' services associated 
     with the administration of covered outpatient drugs and 
     biologicals (as defined in section 1847A(a)(2)(A)) to ensure 
     accurate reporting and billing for such services.
       ``(II) Use of existing processes.--In carrying out 
     subclause (I), the Secretary shall use existing processes for 
     the consideration of coding changes and, to the extent coding 
     changes are made, shall use such processes in establishing 
     relative values for such services.
       ``(III) Implementation.--In carrying out subclause (I), the 
     Secretary shall consult with representatives of physician 
     specialties affected by the implementation of section 1847A 
     or section 1847B, and shall take such steps within the 
     Secretary's authority to expedite such considerations under 
     subclause (II).

       ``(iv) Subsequent, budget neutral adjustments permitted.--
     Nothing in this subparagraph shall be construed as preventing 
     the Secretary from providing for adjustments in practice 
     expense relative value units under (and consistent with) 
     subparagraph (B) for years after 2005.
       ``(v) Consultation.--Before publishing the notice of 
     proposed rulemaking to carry out this subparagraph, the 
     Secretary shall consult with the Comptroller General of the 
     United States and with groups representing the physician 
     specialties involved.
       ``(vi) Treatment as change in law and regulation in 
     sustainable growth rate determination.--The enactment of 
     subparagraph (B)(iv) and this subparagraph shall be treated 
     as a change in law for purposes of applying subsection 
     (f)(2)(D).''.
       (2) Prohibition of administrative and judicial review.--
     Section 1848(i)(1) (42 U.S.C. 1395w-4(i)(1)) is amended--
       (A) by striking ``and'' at the end of subparagraph (D);
       (B) by striking the period at the end of subparagraph (E) 
     and inserting ``, and''; and
       (C) by adding at the end the following new subparagraph:
       ``(F) adjustments in practice expense relative value units 
     for 2005 under subsection (c)(2)(H).''.
       (3) Treatment of other services currently in the non-
     physician work pool.--The Secretary shall make adjustments to 
     the non-physician work pool methodology (as such term is used 
     in the regulations promulgated by the Secretary in the 
     Federal Register as of December 31, 2002) for determination 
     of practice expense relative value units under the physician 
     fee schedule described in section 1848(c)(2)(C)(ii) of the 
     Social Security Act so that the practice expense relative 
     value units for services determined under such methodology 
     are not affected relative to the practice expense relative 
     value units of other services not determined under such non-
     physician work pool methodology, as the result of amendments 
     made by paragraph (1).
       (b) Payment Based on Competition.--Title XVIII is amended 
     by inserting after section 1847 (42 U.S.C. 1395w-3), as 
     amended by section 302, the following new sections:


 ``competitive acquisition of covered outpatient drugs and biologicals

       ``Sec. 1847A. (a) Implementation of Competitive 
     Acquisition.--
       ``(1) Implementation of program.--
       ``(A) In general.--The Secretary shall establish and 
     implement a competitive acquisition program under which--
       ``(i) competitive acquisition areas are established 
     throughout the United States for contract award purposes for 
     acquisition of and payment for categories of covered 
     outpatient drugs and biologicals (as defined in paragraph 
     (2)) under this part;
       ``(ii) each physician is given the opportunity annually to 
     elect to obtain drugs and biologicals under the program or 
     under section 1847B; and
       ``(iii) each physician who elects to obtain drugs and 
     biologicals under the program makes an annual selection under 
     paragraph (5) of the contractor through which drugs and 
     biologicals within a category of drugs and biologicals will 
     be acquired and delivered to the physician under this part.
       ``(B) Implementation.--The Secretary shall implement the 
     program so that the program applies to--
       ``(i) the oncology category beginning in 2005; and
       ``(ii) the non-oncology category beginning in 2006.

     This section shall not apply in the case of a physician who 
     elects section 1847B to apply.
       ``(C) Waiver of certain provisions.--In order to promote 
     competition, efficient service, and product quality, in 
     carrying out the program the Secretary may waive such 
     provisions of the Federal Acquisition Regulation as are 
     necessary for the efficient implementation of this section, 
     other than provisions relating to confidentiality of 
     information and such other provisions as the Secretary 
     determines appropriate.
       ``(D) Exclusion authority.--The Secretary may exclude 
     covered outpatient drugs and biologicals (including a class 
     of such drugs and biologicals) from the competitive bidding 
     system under this section if the drugs or biologicals (or 
     class) are not appropriate for competitive bidding due to low 
     volume of utilization by beneficiaries under this part or a 
     unique mode or method of delivery or similar reasons.
       ``(2) Covered outpatient drugs and biologicals, categories, 
     program defined.--For purposes of this section--
       ``(A) Covered outpatient drugs and biologicals defined.--
     The term `covered outpatient drugs and biologicals' means 
     drugs and biologicals to which section 1842(o) applies and 
     which are not covered under section 1847 (relating to 
     competitive acquisition for items of durable medical 
     equipment). Such term does not include the following:

[[Page H6037]]

       ``(i) Blood clotting factors.
       ``(ii) Drugs and biologicals furnished to individuals in 
     connection with the treatment of end stage renal disease.
       ``(iii) Radiopharmaceuticals.
       ``(iv) Vaccines.
       ``(B) 2 categories.--Each of the following shall be a 
     separate category of covered outpatient drugs and 
     biologicals, as identified by the Secretary:
       ``(i) Oncology category.--A category (in this section 
     referred to as the `oncology category') consisting of those 
     covered outpatient drugs and biologicals that, as determined 
     by the Secretary, are typically primarily billed by 
     oncologists or are otherwise used to treat cancer.
       ``(ii) Non-oncology categories.--Such numbers of categories 
     (in this section referred to as the `non-oncology 
     categories') consisting of covered outpatient drugs and 
     biologicals not described in clause (i), and appropriate 
     subcategories of such drugs and biologicals as the Secretary 
     may specify.
       ``(C) Program.--The term `program' means the competitive 
     acquisition program under this section.
       ``(D) Competitive acquisition area; area.--The terms 
     `competitive acquisition area' and `area' mean an appropriate 
     geographic region established by the Secretary under the 
     program.
       ``(E) Contractor.--The term `contractor' means an entity 
     that has entered into a contract with the Secretary under 
     this section.
       ``(3) Application of program payment methodology.--With 
     respect to covered outpatient drugs and biologicals which are 
     supplied under the program in an area and which are 
     prescribed by a physician who has not elected section 1847B 
     to apply--
       ``(A) the claim for such drugs and biologicals shall be 
     submitted by the contractor that supplied the drugs and 
     biologicals;
       ``(B) collection of amounts of any deductible and 
     coinsurance applicable with respect to such drugs and 
     biologicals shall be the responsibility of such contractor 
     and shall not be collected unless the drug or biological is 
     administered to the beneficiary involved; and
       ``(C) the payment under this section (and related 
     coinsurance amounts) for such drugs and biologicals--
       ``(i) shall be made only to such contractor;
       ``(ii) shall be conditioned upon the administration of such 
     drugs and biologicals; and
       ``(iii) shall be based on the average of the bid prices for 
     such drugs and biologicals in the area, as computed under 
     subsection (d).

     The Secretary shall provide a process for recoupment in the 
     case in which payment is made for drugs and biologicals which 
     were billed at the time of dispensing but which were not 
     actually administered.
       ``(4) Contract required.--
       ``(A) In general.--Payment may not be made under this part 
     for covered outpatient drugs and biologicals prescribed by a 
     physician who has not elected section 1847B to apply within a 
     category and a competitive acquisition area with respect to 
     which the program applies unless--
       ``(i) the drugs or biologicals are supplied by a contractor 
     with a contract under this section for such category of drugs 
     and biologicals and area; and
       ``(ii) the physician has elected such contractor under 
     paragraph (5) for such category and area.
       ``(B) Physician choice.--Subparagraph (A) shall not apply 
     for a category of drugs for an area if the physician 
     prescribing the covered outpatient drug in such category and 
     area has elected to apply section 1847B instead of this 
     section.
       ``(5) Contractor selection process.--
       ``(A) In general.--The Secretary shall provide a process 
     for the selection of a contractor, on an annual basis and in 
     such exigent circumstances as the Secretary may provide and 
     with respect to each category of covered outpatient drugs and 
     biologicals for an area, by physicians prescribing such drugs 
     and biologicals in the area of the contractor under this 
     section that will supply the drugs and biologicals within 
     that category and area. Such selection shall also include the 
     election described in section 1847B(a).
       ``(B) Information on contractors.--The Secretary shall make 
     available to physicians on an ongoing basis, through a 
     directory posted on the Department's Internet website or 
     otherwise and upon request, a list of the contractors under 
     this section in the different competitive acquisition areas.
       ``(C) Selecting physician defined.--For purposes of this 
     section, the term `selecting physician' means, with respect 
     to a contractor and category and competitive acquisition 
     area, a physician who has not elected section 1847B to apply 
     and has selected to apply under this section such contractor 
     for such category and area.
       ``(b) Program Requirements.--
       ``(1) Contract for covered outpatient drugs and 
     biologicals.--The Secretary shall conduct a competition among 
     entities for the acquisition of a covered outpatient drug or 
     biological within each HCPCS code within each category for 
     each competitive acquisition area.
       ``(2) Conditions for awarding contract.--
       ``(A) In general.--The Secretary may not award a contract 
     to any entity under the competition conducted in a 
     competitive acquisition area pursuant to paragraph (1) with 
     respect to the acquisition of covered outpatient drugs and 
     biologicals within a category unless the Secretary finds that 
     the entity meets all of the following with respect to the 
     contract period involved:
       ``(i) Capacity to supply covered outpatient drug or 
     biological within category.--

       ``(I) In general.--The entity has sufficient arrangements 
     to acquire and to deliver covered outpatient drugs and 
     biologicals within such category in the area specified in the 
     contract at the bid price specified in the contract for all 
     physicians that may elect such entity.
       ``(II) Shipment methodology.--The entity has arrangements 
     in effect for the shipment at least 5 days each week of 
     covered outpatient drugs and biologicals under the contract 
     and for the timely delivery (including for emergency 
     situations) of such drugs and biologicals in the area under 
     the contract.

       ``(ii) Quality, service, financial performance and solvency 
     standards.--The entity meets quality, service, financial 
     performance, and solvency standards specified by the 
     Secretary, including--

       ``(I) the establishment of procedures for the prompt 
     response and resolution of physician and beneficiary 
     complaints and inquiries regarding the shipment of covered 
     outpatient drugs and biologicals; and
       ``(II) a grievance process for the resolution of disputes.

       ``(B) Additional considerations.--The Secretary may refuse 
     to award a contract under this section, and may terminate 
     such a contract, with an entity based upon--
       ``(i) the suspension or revocation, by the Federal 
     Government or a State government, of the entity's license for 
     the distribution of drugs or biologicals (including 
     controlled substances); or
       ``(ii) the exclusion of the entity under section 1128 from 
     participation under this title.
       ``(C) Application of medicare provider ombudsman.--For 
     provision providing for a program-wide Medicare Provider 
     Ombudsman to review complaints, see section 1868(b), as added 
     by section 923 of the Medicare Prescription Drug and 
     Modernization Act of 2003.
       ``(3) Awarding multiple contracts for a category and 
     area.--In order to provide a choice of at least 2 contractors 
     in each competitive acquisition area for a category of drugs 
     and biologicals, the Secretary may limit (but not below 2) 
     the number of qualified entities that are awarded such 
     contracts for any category and area. The Secretary shall 
     select among qualified entities based on the following:
       ``(A) The bid prices for covered outpatient drugs and 
     biologicals within the category and area.
       ``(B) Bid price for distribution of such drugs and 
     biologicals.
       ``(C) Ability to ensure product integrity.
       ``(D) Customer service.
       ``(E) Past experience in the distribution of drugs and 
     biologicals, including controlled substances.
       ``(F) Such other factors as the Secretary may specify.
       ``(4) Terms of contracts.--
       ``(A) In general.--A contract entered into with an entity 
     under the competition conducted pursuant to paragraph (1) is 
     subject to terms and conditions that the Secretary may 
     specify consistent with this section.
       ``(B) Period of contracts.--A contract under this section 
     shall be for a term of 2 years, but may be terminated by the 
     Secretary or the entity with appropriate, advance notice.
       ``(C) Integrity of drug and biological distribution 
     system.--The Secretary--
       ``(i) shall require that for all drug and biological 
     products distributed by a contractor under this section be 
     acquired directly from the manufacturer or from a distributor 
     that has acquired the products directly from the 
     manufacturer; and
       ``(ii) may require, in the case of such products that are 
     particularly susceptible to counterfeit or diversion, that 
     the contractor comply with such additional product integrity 
     safeguards as may be determined to be necessary.
       ``(D) Implementation of anti-counterfeiting, quality, 
     safety, and record keeping requirements.--The Secretary shall 
     require each contractor to implement (through its officers, 
     agents, representatives, and employees) requirements relating 
     to the storage and handling of covered outpatient drugs and 
     biologicals and for the establishment and maintenance of 
     distribution records for such drugs and biologicals. A 
     contract under this section may include requirements relating 
     to the following:
       ``(i) Secure facilities.
       ``(ii) Safe and appropriate storage of drugs and 
     biologicals.
       ``(iii) Examination of drugs and biologicals received and 
     dispensed.
       ``(iv) Disposition of damaged and outdated drugs and 
     biologicals.
       ``(v) Record keeping and written policies and procedures.
       ``(vi) Compliance personnel.
       ``(E) Compliance with code of conduct and fraud and abuse 
     rules.--Under the contract--
       ``(i) the contractor shall comply with a code of conduct, 
     specified or recognized by the Secretary, that includes 
     standards relating to conflicts of interest; and
       ``(ii) the contractor shall comply with all applicable 
     provisions relating to prevention of fraud and abuse, 
     including compliance with applicable guidelines of the 
     Department of Justice and the Inspector General of the 
     Department of Health and Human Services.

[[Page H6038]]

       ``(F) Direct delivery of drugs and biologicals to 
     physicians.--Under the contract the contractor shall only 
     supply covered outpatient drugs and biologicals directly to 
     the selecting physicians and not directly to beneficiaries, 
     except under circumstances and settings where a beneficiary 
     currently receives a drug or biological in the beneficiary's 
     home or other non-physician office setting as the Secretary 
     may provide. The contractor shall not deliver drugs and 
     biologicals to a selecting physician except upon receipt of a 
     prescription for such drugs and biologicals, and such 
     necessary data as may be required by the Secretary to carry 
     out this section. This section does not--
       ``(i) require a physician to submit a prescription for each 
     individual treatment; or
       ``(ii) change a physician's flexibility in terms of writing 
     a prescription for drugs for a single treatment or a course 
     of treatment.
       ``(5) Permitting access to drugs and biologicals.--The 
     Secretary shall establish rules under this section under 
     which drugs and biologicals which are acquired through a 
     contractor under this section may be used to resupply 
     inventories of such drugs and biologicals which are 
     administered consistent with safe drug practices and with 
     adequate safeguards against fraud and abuse. The previous 
     sentence shall apply if the physicians can demonstrate to the 
     Secretary all of the following:
       ``(A) The drugs or biologicals are required immediately.
       ``(B) The physician could not have reasonably anticipated 
     the immediate requirement for the drugs or biologicals.
       ``(C) The contractor could not deliver to the physician the 
     drugs or biologicals in a timely manner.
       ``(D) The drugs or biologicals were administered in an 
     emergency situation.
       ``(6) Construction.--Nothing in this section shall be 
     construed as waiving applicable State requirements relating 
     to licensing of pharmacies.
       ``(c) Bidding Process.--
       ``(1) In general.--In awarding a contract for a category of 
     drugs and biologicals in an area under the program, the 
     Secretary shall consider with respect to each entity seeking 
     to be awarded a contract the prices bid to acquire and supply 
     the covered outpatient drugs and biologicals for that 
     category and area and the other factors referred to in 
     subsection (b)(3).
       ``(2) Prices bid.--The prices bid by an entity under 
     paragraph (1) shall be the prices in effect and available for 
     the supply of contracted drugs and biologicals in the area 
     through the entity for the contract period.
       ``(3) Rejection of contract offer.--The Secretary shall 
     reject the contract offer of an entity with respect to a 
     category of drugs and biologicals for an area if the 
     Secretary estimates that the prices bid, in the aggregate on 
     average, would exceed 100 percent of the average sales price 
     (as determined under section 1847B).
       ``(4) Bidding on a national or regional basis.--Nothing in 
     this section shall be construed as precluding a bidder from 
     bidding for contracts in all areas of the United States or as 
     requiring a bidder to submit a bid for all areas of the 
     United States.
       ``(5) Uniformity of bids within area.--The amount of the 
     bid submitted under a contract offer for any covered 
     outpatient drug or biological for an area shall be the same 
     for that drug or biological for all portions of that area.
       ``(6) Confidentiality of bids.--The provisions of 
     subparagraph (D) of section 1927(b)(3) shall apply to a bid 
     submitted in a contract offer for a covered outpatient drug 
     or biological under this section in the same manner as it 
     applies to information disclosed under such section, except 
     that any reference--
       ``(A) in that subparagraph to a `manufacturer or 
     wholesaler' is deemed a reference to a `bidder' under this 
     section;
       ``(B) in that section to `prices charged for drugs' is 
     deemed a reference to a `bid' submitted under this section; 
     and
       ``(C) in clause (i) of that section to `this section', is 
     deemed a reference to `part B of title XVIII'.
       ``(7) Inclusion of costs.--The bid price submitted in a 
     contract offer for a covered outpatient drug or biological 
     shall--
       ``(A) include all costs related to the delivery of the drug 
     or biological to the selecting physician (or other point of 
     delivery); and
       ``(B) include the costs of dispensing (including shipping) 
     of such drug or biological and management fees, but shall not 
     include any costs related to the administration of the drug 
     or biological, or wastage, spillage, or spoilage.
       ``(8) Price adjustments during contract period; disclosure 
     of costs.--Each contract awarded shall provide for--
       ``(A) disclosure to the Secretary the contractor's 
     reasonable, net acquisition costs for periods specified by 
     the Secretary, not more often than quarterly, of the 
     contract; and
       ``(B) appropriate price adjustments over the period of the 
     contract to reflect significant increases or decreases in a 
     contractor's reasonable, net acquisition costs, as so 
     disclosed.
       ``(d) Computation of Average Bid Prices for a Category and 
     Area.--
       ``(1) In general.--For each year or other contract period 
     for each covered outpatient drug or biological and area with 
     respect to which a competition is conducted under the 
     program, the Secretary shall compute an area average of the 
     bid prices submitted, in contract offers accepted for the 
     category and area, for that year or other contract period.
       ``(2) Special rules.--The Secretary shall establish rules 
     regarding the use under this section of the alternative 
     payment amount provided under section 1847B to the use of a 
     price for specific covered outpatient drugs and biologicals 
     in the following cases:
       ``(A) New drugs and biologicals.--A covered outpatient drug 
     or biological for which an average bid price has not been 
     previously determined.
       ``(B) Other cases.--Such other exceptional cases as the 
     Secretary may specify in regulations, such as oral drugs 
     under section 1861(s)(2)(Q) and immmunosuppressives under 
     section 1861(s)(2)(J).
       ``(e) Coinsurance.--
       ``(1) In general.--Coinsurance under this part with respect 
     to a covered outpatient drug or biological for which payment 
     is payable under this section shall be based on 20 percent of 
     the payment basis under this section.
       ``(2) Collection.--Such coinsurance shall be collected by 
     the contractor that supplies the drug or biological involved 
     and, subject to subsection (a)(3)(B), in the same manner as 
     coinsurance is collected for durable medical equipment under 
     this part.
       ``(f) Special Payment Rules.--
       ``(1) In general.--The Secretary may not provide for an 
     adjustment to reimbursement for covered outpatient drugs and 
     biologicals unless adjustments to the practice expense 
     payment adjustment are made on the basis of supplemental 
     surveys under section 1848(c)(2)(H)(ii) of the Social 
     Security Act, as added by subsection (a)(1)(B).
       ``(2) Use in exclusion cases.--If the Secretary excludes a 
     drug or biological (or class of drugs or biologicals) under 
     subsection (a)(1)(D), the Secretary may provide for 
     reimbursement to be made under this part for such drugs and 
     biologicals (or class) using the payment methodology under 
     section 1847B.
       ``(3) Coordination rules.--The provisions of section 
     1842(h)(3) shall apply to a contractor with respect to 
     covered outpatients drugs and biologicals supplied by that 
     contractor in the same manner as they apply to a 
     participating supplier. In order to administer this section, 
     the Secretary may condition payment under this part to a 
     person for the administration of a drug or biological 
     supplied under this section upon person's provision of 
     information on such administration.
       ``(4) Application of requirement for assignment.--For 
     provision requiring assignment of claims for covered 
     outpatient drugs and biologicals, see section 1842(o)(3).
       ``(5) Protection for beneficiary in case of medical 
     necessity denial.--For protection of beneficiaries against 
     liability in the case of medical necessity determinations, 
     see section 1842(b)(3)(B)(ii)(III).
       ``(6) Physician role in appeals process.--The Secretary 
     shall establish a procedure under which a physician who 
     prescribes a drug or biological for which payment is made 
     under this section has appeal rights that are similar to 
     those provided to a physician who prescribes durable medical 
     equipment or a laboratory test.
       ``(g) Advisory Committee.--The Secretary shall establish an 
     advisory committee that includes representatives of parties 
     affected by the program under this section, including 
     physicians, specialty pharmacies, distributors, 
     manufacturers, and beneficiaries. The committee shall advise 
     the Secretary on issues relating to the effective 
     implementation of this section.
       ``(h) Annual Reports.--The Secretary shall submit to 
     Congress an annual report in each of 2005, 2006, and 2007, on 
     the program. Each such report shall include information on 
     savings, reductions in cost-sharing, access to covered 
     outpatient drugs and biologicals, the range of choices of 
     contractors available to providers, and beneficiary and 
     provider satisfaction.


       ``optional use of average sales price payment methodology

       ``Sec. 1847B. (a) In General.--
       ``(1) Election.--In connection with the annual election 
     made by a physician under section 1847A(a)(5), the physician 
     may elect to apply this section to the payment for covered 
     outpatient drugs and biologicals instead of the payment 
     methodology under section 1847A.
       ``(2) Implementation.--This section shall be implemented 
     with respect to categories of covered outpatient drugs and 
     biologicals described in section 1847A(a)(2)(B).
       ``(3) Covered outpatient drugs and biologicals defined.--
     For purposes of this section, the term `covered outpatient 
     drugs and biologicals' has the meaning given such term in 
     section 1847A(a)(2)(A).
       ``(b) Computation of Payment Amount.--
       ``(1) In general.--If this section applies with respect to 
     a covered outpatient drug or biological, the amount payable 
     for the drug or biological (based on a minimum dosage unit) 
     is, subject to applicable deductible and coinsurance--
       ``(A) in the case of a multiple source drug (as defined in 
     subsection (c)(6)(C)), 100 percent (or in the case of covered 
     outpatient drugs and biologicals furnished during 2005 and 
     2006, 112 percent) of the amount determined under paragraph 
     (3); or
       ``(B) in the case of a single source drug (as defined in 
     subsection (c)(6)(D)), 100 percent (or in the case of covered 
     outpatient drugs and biologicals furnished during 2005 and 
     2006, 112 percent) of the amount determined under paragraph 
     (4).

[[Page H6039]]

       ``(2) Specification of unit.--
       ``(A) Specification by manufacturer.--The manufacturer of a 
     covered outpatient drug shall specify the unit associated 
     with each National Drug Code as part of the submission of 
     data under section 1927(b)(3)(A)(iii).
       ``(B) Unit defined.--In this section, the term `unit' 
     means, with respect to a covered outpatient drug, the lowest 
     identifiable quantity (such as a capsule or tablet, milligram 
     of molecules, or grams) of the drug that is dispensed, 
     exclusive of any diluent without reference to volume measures 
     pertaining to liquids.
       ``(3) Multiple source drug.--For all drug products included 
     within the same multiple source drug, the amount specified in 
     this paragraph is the volume-weighted average of the average 
     sales prices reported under section 1927(b)(3)(A)(iii) 
     computed as follows:
       ``(A) Compute the sum of the products (for each national 
     drug code assigned to such drug products) of--
       ``(i) the manufacturer's average sales price (as defined in 
     subsection (c)); and
       ``(ii) the total number of units specified under paragraph 
     (2) sold, as reported under section 1927(b)(3)(A)(iii).
       ``(B) Divide the sum computed under subparagraph (A) by the 
     sum of the total number of units under subparagraph (A)(ii) 
     for all national drug codes assigned to such drug products.
       ``(4) Single source drug.--The amount specified in this 
     paragraph for a single source drug is the lesser of the 
     following:
       ``(A) Manufacturer's average sales price.--The 
     manufacturer's average sales price for a national drug code, 
     as computed using the methodology applied under paragraph 
     (3).
       ``(B) Wholesale acquisition cost (wac).--The wholesale 
     acquisition cost (as defined in subsection (c)(6)(B)) 
     reported for the single source drug.
       ``(5) Basis for determination.--The payment amount shall be 
     determined under this subsection based on information 
     reported under subsection (e) and without regard to any 
     special packaging, labeling, or identifiers on the dosage 
     form or product or package.
       ``(c) Manufacturer's Average Sales Price.--
       ``(1) In general.--For purposes of this subsection, subject 
     to paragraphs (2) and (3), the manufacturer's `average sales 
     price' means, of a covered outpatient drug for a NDC code for 
     a calendar quarter for a manufacturer for a unit--
       ``(A) the manufacturer's total sales (as defined by the 
     Secretary in regulations for purposes of section 1927(c)(1)) 
     in the United States for such drug in the calendar quarter; 
     divided by
       ``(B) the total number of such units of such drug sold by 
     the manufacturer in such quarter.
       ``(2) Certain sales exempted from computation.--In 
     calculating the manufacturer's average sales price under this 
     subsection, the following sales shall be excluded:
       ``(A) Sales exempt from best price.--Sales exempt from the 
     inclusion in the determination of `best price' under section 
     1927(c)(1)(C)(i).
       ``(B) Sales at nominal charge.--Such other sales as the 
     Secretary identifies by regulation as sales to an entity that 
     are nominal in price or do not reflect a market price paid by 
     an entity to which payment is made under this section.
       ``(3) Sale price net of discounts.--In calculating the 
     manufacturer's average sales price under this subsection, 
     such price shall be determined taking into account volume 
     discounts, prompt pay discounts, cash discounts, the free 
     goods that are contingent on any purchase requirement, 
     chargebacks, and rebates (other than rebates under section 
     1927), that result in a reduction of the cost to the 
     purchaser. A rebate to a payor or other entity that does not 
     take title to a covered outpatient drug shall not be taken 
     into account in determining such price unless the 
     manufacturer has an agreement with the payor or other entity 
     under which the purchaser's price for the drug is reduced as 
     a consequence of such rebate.
       ``(4) Authority to disregard average sales price during 
     first quarter of sales.--In the case of a covered outpatient 
     drug during an initial period (not to exceed a full calendar 
     quarter) in which data on the prices for sales for the drug 
     is not sufficiently available from the manufacturer to 
     compute an average sales price for the drug, the Secretary 
     may determine the amount payable under this section for the 
     drug without considering the manufacturer's average sales 
     price of that manufacturer for that drug.
       ``(5) Frequency of determinations.--
       ``(A) In general on a quarterly basis.--The manufacturer's 
     average sales price, for a covered outpatient drug of a 
     manufacturer, shall be determined by such manufacturer under 
     this subsection on a quarterly basis. In making such 
     determination insofar as there is a lag in the reporting of 
     the information on rebates and chargebacks under paragraph 
     (3) so that adequate data are not available on a timely 
     basis, the manufacturer shall apply a methodology established 
     by the Secretary based on a 12-month rolling average for the 
     manufacturer to estimate costs attributable to rebates and 
     chargebacks.
       ``(B) Updates in rates.--The payment rates under subsection 
     (b)(1) and (b)(2)(A) shall be updated by the Secretary on a 
     quarterly basis and shall be applied based upon the 
     manufacturer's average sales price determined for the most 
     recent calendar quarter.
       ``(C) Use of contractors; implementation.--The Secretary 
     may use a carrier, fiscal intermediary, or other contractor 
     to determine the payment amount under subsection (b). 
     Notwithstanding any other provision of law, the Secretary may 
     implement, by program memorandum or otherwise, any of the 
     provisions of this section.
       ``(6) Definitions and other rules.--In this section:
       ``(A) Manufacturer.--The term `manufacturer' means, with 
     respect to a covered outpatient drug, the manufacturer (as 
     defined in section 1927(k)(5)) whose national drug code 
     appears on such drug.
       ``(B) Wholesale acquisition cost.--The term `wholesale 
     acquisition cost' means, with respect to a covered outpatient 
     drug, the manufacturer's list price for the drug to 
     wholesalers or direct purchasers in the United States, not 
     including prompt pay or other discounts, rebates or 
     reductions in price, for the most recent month for which the 
     information is available, as reported in wholesale price 
     guides or other publications of drug pricing data.
       ``(C) Multiple source drug.--The term `multiple source 
     drug' means, for a calendar quarter, a covered outpatient 
     drug for which there are 2 or more drug products which--
       ``(i) are rated as therapeutically equivalent (under the 
     Food and Drug Administration's most recent publication of 
     `Approved Drug Products with Therapeutic Equivalence 
     Evaluations'),
       ``(ii) except as provided in subparagraph (E), are 
     pharmaceutically equivalent and bioequivalent, as determined 
     under subparagraph (F) and as determined by the Food and Drug 
     Administration, and
       ``(iii) are sold or marketed in the United States during 
     the quarter.
       ``(D) Single source drug.--The term `single source drug' 
     means a covered outpatient drug which is not a multiple 
     source drug and which is produced or distributed under an 
     original new drug application approved by the Food and Drug 
     Administration, including a drug product marketed by any 
     cross-licensed producers or distributors operating under the 
     new drug application, or which is a biological.
       ``(E) Exception from pharmaceutical equivalence and 
     bioequivalence requirement.--Subparagraph (C)(ii) shall not 
     apply if the Food and Drug Administration changes by 
     regulation the requirement that, for purposes of the 
     publication described in subparagraph (C)(i), in order for 
     drug products to be rated as therapeutically equivalent, they 
     must be pharmaceutically equivalent and bioequivalent, as 
     defined in subparagraph (F).
       ``(F) Determination of pharmaceutical equivalence and 
     bioequivalence.--For purposes of this paragraph--
       ``(i) drug products are pharmaceutically equivalent if the 
     products contain identical amounts of the same active drug 
     ingredient in the same dosage form and meet compendial or 
     other applicable standards of strength, quality, purity, and 
     identity; and
       ``(ii) drugs are bioequivalent if they do not present a 
     known or potential bioequivalence problem, or, if they do 
     present such a problem, they are shown to meet an appropriate 
     standard of bioequivalence.
       ``(G) Inclusion of vaccines.--In applying provisions of 
     section 1927 under this section, `other than a vaccine' is 
     deemed deleted from section 1927(k)(2)(B).
       ``(d) Authority To Use Alternative Payment in Response to 
     Public Health Emergency.--In the case of a public health 
     emergency under section 319 of the Public Health Service Act 
     in which there is a documented inability to access covered 
     outpatient drugs and biologicals, and a concomitant increase 
     in the price, of a drug or biological which is not reflected 
     in the manufacturer's average sales price for one or more 
     quarters, the Secretary may use the wholesale acquisition 
     cost (or other reasonable measure of drug price) instead of 
     the manufacturer's average sales price for such quarters and 
     for subsequent quarters until the price and availability of 
     the drug or biological has stabilized and is substantially 
     reflected in the applicable manufacturer's average sales 
     price.
       ``(e) Reports.--
       ``(1) Quarterly report on average sales price.--For 
     requirements for reporting the manufacturer's average sales 
     price (and, if required to make payment, the manufacturer's 
     wholesale acquisition cost) for the covered outpatient drug 
     or biological, see section 1927(b)(3).
       ``(2) Annual report to congress.--The Secretary shall 
     submit to the Committees on Energy and Commerce and Ways and 
     Means of the House of Representatives and the Committee on 
     Finance of the Senate an annual report on the operation of 
     this section. Such report shall include information on the 
     following:
       ``(A) Trends in average sales price under subsection (b).
       ``(B) Administrative costs associated with compliance with 
     this section.
       ``(C) Total value of payments made under this section.
       ``(D) Comparison of the average manufacturer price as 
     applied under section 1927 for a covered outpatient drug or 
     biological with the manufacturer's average sales price for 
     the drug or biological under this section.

[[Page H6040]]

       ``(f) Restriction on administrative and judicial review.--
     There shall be no administrative or judicial review under 
     section 1869, section 1878, or otherwise, of determinations 
     of manufacturer's average sales price under subsection 
     (c).''.
       (c) Continuation of Payment Methodology for 
     Radiopharmaceuticals.--Nothing in the amendments made by this 
     section shall be construed as changing the payment 
     methodology under part B of title XVIII of the Social 
     Security Act for radiopharmaceuticals, including the use by 
     carriers of invoice pricing methodology.
       (d) Conforming Amendments.--
       (1) In general.--Section 1842(o) (42 U.S.C. 1395u(o)) is 
     amended--
       (A) in paragraph (1), by inserting ``, subject to section 
     1847A and 1847B,'' before ``the amount payable for the drug 
     or biological''; and
       (B) by adding at the end of paragraph (2) the following: 
     ``This paragraph shall not apply in the case of payment under 
     section 1847A or 1847B.''.
       (2) No change in coverage basis.--Section 1861(s)(2)(A) (42 
     U.S.C. 1395x(s)(2)(A)) is amended by inserting ``(or would 
     have been so included but for the application of section 
     1847A or 1847B)'' after ``included in the physicians' 
     bills''.
       (3) Payment.--Section 1833(a)(1)(S) (42 U.S.C. 
     1395l(a)(1)(S)) is amended by inserting ``(or, if applicable, 
     under section 1847A or 1847B)'' after ``1842(o)''.
       (4) Consolidated reporting of pricing information.--Section 
     1927 (42 U.S.C. 1396r-8) is amended--
       (A) in subsection (a)(1), by inserting ``or under part B of 
     title XVIII'' after ``section 1903(a)'';
       (B) in subsection (b)(3)(A)--
       (i) in clause (i), by striking ``and'' at the end;
       (ii) in clause (ii), by striking the period and inserting 
     ``; and''; and
       (iii) by adding at the end the following new clause:
       ``(iii) for calendar quarters beginning on or after April 
     1, 2004, in conjunction with reporting required under clause 
     (i) and by national drug code (NDC)--

       ``(I) the manufacturer's average sales price (as defined in 
     section 1847B(c)) and the total number of units specified 
     under section 1847B(b)(2)(A);
       ``(II) if required to make payment under section 1847B, the 
     manufacturer's wholesale acquisition cost, as defined in 
     subsection (c)(6) of such section; and
       ``(III) information on those sales that were made at a 
     nominal price or otherwise described in section 
     1847B(c)(2)(B), which information is subject to audit by the 
     Inspector General of the Department of Health and Human 
     Services;

     for a covered outpatient drug or biological for which payment 
     is made under section 1847B.'';
       (C) in subsection (b)(3)(B)--
       (i) in the heading, by inserting ``and manufacturer's 
     average sales price'' after ``price''; and
       (ii) by inserting ``and manufacturer's average sales prices 
     (including wholesale acquisition cost) if required to make 
     payment'' after ``manufacturer prices''; and
       (D) in subsection (b)(3)(D)(i), by inserting ``and section 
     1847B'' after ``this section''.
       (e) GAO Study.--
       (1) Study.--The Comptroller General of the United States 
     shall conduct a study to assess the impact of the amendments 
     made by this section on the delivery of services, including 
     their impact on--
       (A) beneficiary access to drugs and biologicals for which 
     payment is made under part B of title XVIII of the Social 
     Security Act; and
       (B) the site of delivery of such services.
       (2) Report.--Not later than 2 years after the year in which 
     the amendment made by subsection (a)(1) first takes effect, 
     the Comptroller General shall submit to Congress a report on 
     the study conducted under paragraph (1).
       (f) MedPAC Recommendations on Blood Clotting Factors.--The 
     Medicare Payment Advisory Commission shall submit to 
     Congress, in its annual report in 2004, specific 
     recommendations regarding a payment amount (or amounts) for 
     blood clotting factors and its administration under the 
     medicare program.
       (g) Establishment of Pharmaceutical Management Fee Where 
     Drugs Provided Through a Contractor.--Section 1848(a) (42 
     U.S.C. 1395w-4(a)) is amended by adding at the end the 
     following new paragraph:
       ``(5) Recognition of pharmaceutical management fee in 
     certain cases.--In establishing the fee schedule under this 
     section, the Secretary shall provide for a separate payment 
     with respect to physicians' services consisting of the unique 
     administrative and management costs associated with covered 
     drugs and biologicals which are furnished to physicians 
     through a contractor under section 1847A (compared with such 
     costs if such drugs and biologicals were acquired directly by 
     such physicians).''.
       (h) Study on Codes for Non-oncology Codes.--
       (1) Study.--The Secretary shall conduct a study to 
     determine the appropriateness of establishing and 
     implementing separate codes for non-oncology infusions that 
     are based on the level of complexity of the administration 
     and resource consumption.
       (2) Report.--Not later than 1 year after the date of the 
     enactment of this Act, the Secretary shall submit a report to 
     Congress on the study. To the extent the Secretary determines 
     it to be appropriate, the Secretary may implement appropriate 
     changes in the payment methodology for such codes.

     SEC. 304. DEMONSTRATION PROJECT FOR USE OF RECOVERY AUDIT 
                   CONTRACTORS.

       (a) In General.--The Secretary of Health and Human Services 
     shall conduct a demonstration project under this section (in 
     this section referred to as the ``project'') to demonstrate 
     the use of recovery audit contractors under the Medicare 
     Integrity Program in identifying underpayments and 
     overpayments and recouping overpayments under the medicare 
     program for services for which payment is made under part A 
     or part B of title XVIII of the Social Security Act. Under 
     the project--
       (1) payment may be made to such a contractor on a 
     contingent basis;
       (2) a percentage of the amount recovered may be retained by 
     the Secretary and shall be available to the program 
     management account of the Centers for Medicare & Medicaid 
     Services; and
       (3) the Secretary shall examine the efficacy of such use 
     with respect to duplicative payments, accuracy of coding, and 
     other payment policies in which inaccurate payments arise.
       (b) Scope and Duration.--
       (1) Scope.--The project shall cover at least 2 States that 
     are among the States with--
       (A) the highest per capita utilization rates of medicare 
     services, and
       (B) at least 3 contractors.
       (2) Duration.--The project shall last for not longer than 3 
     years.
       (c) Waiver.--The Secretary of Health and Human Services 
     shall waive such provisions of title XVIII of the Social 
     Security Act as may be necessary to provide for payment for 
     services under the project in accordance with subsection (a).
       (d) Qualifications of Contractors.--
       (1) In general.--The Secretary shall enter into a recovery 
     audit contract under this section with an entity only if the 
     entity has staff that has the appropriate clinical knowledge 
     of and experience with the payment rules and regulations 
     under the medicare program or the entity has or will contract 
     with another entity that has such knowledgeable and 
     experienced staff.
       (2) Ineligibility of certain contractors.--The Secretary 
     may not enter into a recovery audit contract under this 
     section with an entity to the extent that the entity is a 
     fiscal intermediary under section 1816 of the Social Security 
     Act (42 U.S.C. 1395h), a carrier under section 1842 of such 
     Act (42 U.S.C. 1395u), or a Medicare Administrative 
     Contractor under section 1874A of such Act.
       (3) Preference for entities with demonstrated 
     proficiency.--In awarding contracts to recovery audit 
     contractors under this section, the Secretary shall give 
     preference to those risk entities that the Secretary 
     determines have demonstrated more than 3 years direct 
     management experience and a proficiency for cost control or 
     recovery audits with private insurers, health care providers, 
     health plans, or under the medicaid program under title XIX 
     of the Social Security Act.
       (e) Construction Relating to Conduct of Investigation of 
     Fraud.--A recovery of an overpayment to a provider by a 
     recovery audit contractor shall not be construed to prohibit 
     the Secretary or the Attorney General from investigating and 
     prosecuting, if appropriate, allegations of fraud or abuse 
     arising from such overpayment.
       (f) Report.--The Secretary of Health and Human Services 
     shall submit to Congress a report on the project not later 
     than 6 months after the date of its completion. Such reports 
     shall include information on the impact of the project on 
     savings to the medicare program and recommendations on the 
     cost-effectiveness of extending or expanding the project.

                TITLE IV--RURAL HEALTH CARE IMPROVEMENTS

     SEC. 401. ENHANCED DISPROPORTIONATE SHARE HOSPITAL (DSH) 
                   TREATMENT FOR RURAL HOSPITALS AND URBAN 
                   HOSPITALS WITH FEWER THAN 100 BEDS.

       (a) Doubling the Cap.--
       (1) In general.--Section 1886(d)(5)(F) (42 U.S.C. 
     1395ww(d)(5)(F)) is amended by adding at the end the 
     following new clause:
       ``(xiv)(I) In the case of discharges in a fiscal year 
     beginning on or after October 1, 2003, subject to subclause 
     (II), there shall be substituted for the disproportionate 
     share adjustment percentage otherwise determined under clause 
     (iv) (other than subclause (I)) or under clause (viii), (x), 
     (xi), (xii), or (xiii), the disproportionate share adjustment 
     percentage determined under clause (vii) (relating to large, 
     urban hospitals).
       ``(II) Under subclause (I), the disproportionate share 
     adjustment percentage shall not exceed 10 percent for a 
     hospital that is not classified as a rural referral center 
     under subparagraph (C).''.
       (2) Conforming amendments.--Section 1886(d)(5)(F) (42 
     U.S.C. 1395ww(d)(5)(F)) is amended--
       (A) in each of subclauses (II), (III), (IV), (V), and (VI) 
     of clause (iv), by inserting ``subject to clause (xiv) and'' 
     before ``for discharges occurring'';
       (B) in clause (viii), by striking ``The formula'' and 
     inserting ``Subject to clause (xiv), the formula''; and
       (C) in each of clauses (x), (xi), (xii), and (xiii), by 
     striking ``For purposes'' and inserting ``Subject to clause 
     (xiv), for purposes''.
       (b) Effective Date.--The amendments made by this section 
     shall apply with respect

[[Page H6041]]

     to discharges occurring on or after October 1, 2003.

     SEC. 402. IMMEDIATE ESTABLISHMENT OF UNIFORM STANDARDIZED 
                   AMOUNT IN RURAL AND SMALL URBAN AREAS.

       (a) In General.--Section 1886(d)(3)(A) (42 U.S.C. 
     1395ww(d)(3)(A)) is amended--
       (1) in clause (iv), by inserting ``and ending on or before 
     September 30, 2003,'' after ``October 1, 1995,''; and
       (2) by redesignating clauses (v) and (vi) as clauses (vii) 
     and (viii), respectively, and inserting after clause (iv) the 
     following new clauses:
       ``(v) For discharges occurring in the fiscal year beginning 
     on October 1, 2003, the average standardized amount for 
     hospitals located in areas other than a large urban area 
     shall be equal to the average standardized amount for 
     hospitals located in a large urban area.''.
       (b) Conforming Amendments.--
       (1) Computing drg-specific rates.--Section 1886(d)(3)(D) 
     (42 U.S.C. 1395ww(d)(3)(D)) is amended--
       (A) in the heading, by striking ``in different areas'';
       (B) in the matter preceding clause (i), by striking ``, 
     each of'';
       (C) in clause (i)--
       (i) in the matter preceding subclause (I), by inserting 
     ``for fiscal years before fiscal year 2004,'' before ``for 
     hospitals''; and
       (ii) in subclause (II), by striking ``and'' after the 
     semicolon at the end;
       (D) in clause (ii)--
       (i) in the matter preceding subclause (I), by inserting 
     ``for fiscal years before fiscal year 2004,'' before ``for 
     hospitals''; and
       (ii) in subclause (II), by striking the period at the end 
     and inserting ``; and''; and
       (E) by adding at the end the following new clause:
       ``(iii) for a fiscal year beginning after fiscal year 2003, 
     for hospitals located in all areas, to the product of--
       ``(I) the applicable standardized amount (computed under 
     subparagraph (A)), reduced under subparagraph (B), and 
     adjusted or reduced under subparagraph (C) for the fiscal 
     year; and
       ``(II) the weighting factor (determined under paragraph 
     (4)(B)) for that diagnosis-related group.''.
       (2) Technical conforming sunset.--Section 1886(d)(3) (42 
     U.S.C. 1395ww(d)(3)) is amended--
       (A) in the matter preceding subparagraph (A), by inserting 
     ``, for fiscal years before fiscal year 1997,'' before ``a 
     regional adjusted DRG prospective payment rate''; and
       (B) in subparagraph (D), in the matter preceding clause 
     (i), by inserting ``, for fiscal years before fiscal year 
     1997,'' before ``a regional DRG prospective payment rate for 
     each region,''.

     SEC. 403. ESTABLISHMENT OF ESSENTIAL RURAL HOSPITAL 
                   CLASSIFICATION.

       (a) Classification.--Section 1861(mm) (42 U.S.C. 1395x(mm)) 
     is amended--
       (1) in the heading by adding ``Essential Rural Hospitals'' 
     at the end; and
       (2) by adding at the end the following new paragraphs:
       ``(4)(A) The term `essential rural hospital' means a 
     subsection (d) hospital (as defined in section 1886(d)(1)(B)) 
     that is located in a rural area (as defined for purposes of 
     section 1886(d)), has more than 25 licensed acute care 
     inpatient beds, has applied to the Secretary for 
     classification as such a hospital, and with respect to which 
     the Secretary has determined that the closure of the hospital 
     would significantly diminish the ability of medicare 
     beneficiaries to obtain essential health care services.
       ``(B) The determination under subparagraph (A) shall be 
     based on the following criteria:
       ``(i) High proportion of medicare beneficiaries receiving 
     care from hospital.--(I) A high percentage of such 
     beneficiaries residing in the area of the hospital who are 
     hospitalized (during the most recent year for which complete 
     data are available) receive basic inpatient medical care at 
     the hospital.
       ``(II) For a hospital with more than 200 licensed beds, a 
     high percentage of such beneficiaries residing in such area 
     who are hospitalized (during such recent year) receive 
     specialized surgical inpatient care at the hospital.
       ``(III) Almost all physicians described in section 
     1861(r)(1) in such area have privileges at the hospital and 
     provide their inpatient services primarily at the hospital.
       ``(IV) The hospital inpatient score for quality of care is 
     not less than the median hospital score for qualify of care 
     for hospitals in the State, as established under standards of 
     the utilization and quality control peer review organization 
     under part B of title XI or other quality standards 
     recognized by the Secretary.
       ``(ii) Significant adverse impact in absence of hospital.--
     If the hospital were to close--
       ``(I) there would be a significant amount of time needed 
     for residents to reach emergency treatment, resulting in a 
     potential significant harm to beneficiaries with critical 
     illnesses or injuries;
       ``(II) there would be an inability in the community to 
     stablize emergency cases for transfers to another acute care 
     setting, resulting in a potential for significant harm to 
     medicare beneficiaries; and
       ``(III) any other nearby hospital lacks the physical and 
     clinical capacity to take over the hospital's typical 
     admissions.
       ``(C) In making such determination, the Secretary may also 
     consider the following:
       ``(i) Free-standing ambulatory surgery centers, office-
     based oncology care, and imaging center services are 
     insufficient in the hospital's area to handle the outpatient 
     care of the hospital.
       ``(ii) Beneficiaries in nearby areas would be adversely 
     affected if the hospital were to close as the hospital 
     provides specialized knowledge and services to a network of 
     smaller hospitals and critical access hospitals.
       ``(iii) Medicare beneficiaries would have difficulty in 
     accessing care if the hospital were to close as the hospital 
     provides significant subsidies to support ambulatory care in 
     local clinics, including mental health clinics and to support 
     post acute care.
       ``(iv) The hospital has a committment to provide graduate 
     medical education in a rural area.

     A hospital classified as an essential rural hospital may not 
     change such classification and a hospital so classified shall 
     not be treated as a sole community hospital, medicare 
     dependent hospital, or rural referral center for purposes of 
     section 1886.''.
       (b) Payment Based on 102 Percent of Allowed Costs.--
       (1) Inpatient hospital services.--Section 1886(d) (42 
     U.S.C. 1395ww(d)) is amended by adding at the end the 
     following:
       ``(11) In the case of a hospital classified as an essential 
     rural hospital under section 1861(mm)(4) for a cost reporting 
     period, the payment under this subsection for inpatient 
     hospital services for discharges occurring during the period 
     shall be based on 102 percent of the reasonable costs for 
     such services. Nothing in this paragraph shall be construed 
     as affecting the application or amount of deductibles or 
     copayments otherwise applicable to such services under part A 
     or as waiving any requirement for billing for such 
     services.''.
       (2) Hospital outpatient services.--Section 1833(t)(13) (42 
     U.S.C. 1395l(t)(13)) is amended by adding at the end the 
     following new subparagraph:
       ``(B) Special rule for essential rural hospitals.--In the 
     case of a hospital classified as an essential rural hospital 
     under section 1861(mm)(4) for a cost reporting period, the 
     payment under this subsection for covered OPD services during 
     the period shall be based on 102 percent of the reasonable 
     costs for such services. Nothing in this subparagraph shall 
     be construed as affecting the application or amount of 
     deductibles or copayments otherwise applicable to such 
     services under this part or as waiving any requirement for 
     billing for such services.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to cost reporting periods beginning on or after 
     October 1, 2004.

     SEC. 404. MORE FREQUENT UPDATE IN WEIGHTS USED IN HOSPITAL 
                   MARKET BASKET.

       (a) More Frequent Updates in Weights.--After revising the 
     weights used in the hospital market basket under section 
     1886(b)(3)(B)(iii) of the Social Security Act (42 U.S.C. 
     1395ww(b)(3)(B)(iii)) to reflect the most current data 
     available, the Secretary shall establish a frequency for 
     revising such weights, including the labor share, in such 
     market basket to reflect the most current data available more 
     frequently than once every 5 years.
       (b) Report.--Not later than October 1, 2004, the Secretary 
     shall submit a report to Congress on the frequency 
     established under subsection (a), including an explanation of 
     the reasons for, and options considered, in determining such 
     frequency.

     SEC. 405. IMPROVEMENTS TO CRITICAL ACCESS HOSPITAL PROGRAM.

       (a) Increase in Payment Amounts.--
       (1) In general.--Sections 1814(l), 1834(g)(1), and 
     1883(a)(3) (42 U.S.C. 1395f(l); 1395m(g)(1); 42 U.S.C. 
     1395tt(a)(3)) are each amended by inserting ``equal to 102 
     percent of'' before ``the reasonable costs''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply to payments for services furnished during cost 
     reporting periods beginning on or after October 1, 2003.
       (b) Coverage of Costs for Certain Emergency Room On-Call 
     Providers.--
       (1) In general.--Section 1834(g)(5) (42 U.S.C. 1395m(g)(5)) 
     is amended--
       (A) in the heading--
       (i) by inserting ``certain'' before ``emergency''; and
       (ii) by striking ``physicians'' and inserting 
     ``providers'';
       (B) by striking ``emergency room physicians who are on-call 
     (as defined by the Secretary)'' and inserting ``physicians, 
     physician assistants, nurse practitioners, and clinical nurse 
     specialists who are on-call (as defined by the Secretary) to 
     provide emergency services''; and
       (C) by striking ``physicians' services'' and inserting 
     ``services covered under this title''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply with respect to costs incurred for services 
     provided on or after January 1, 2004.
       (c) Modification of the Isolation Test for Cost-Based CAH 
     Ambulance Services.--
       (1) In general.--Section 1834(l)(8) (42 U.S.C. 1395m(l)), 
     as added by section 205(a) of BIPA (114 Stat. 2763A-482), is 
     amended by adding at the end the following: ``The limitation 
     described in the matter following subparagraph (B) in the 
     previous sentence shall not apply if the ambulance services 
     are furnished by such a provider or supplier of ambulance 
     services who is a first responder to

[[Page H6042]]

     emergencies in accordance with local protocols (as determined 
     by the Secretary).''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to ambulances services furnished on or after the 
     first cost reporting period that begins after the date of the 
     enactment of this Act.
       (d) Reinstatement of Periodic Interim Payment (PIP).--
       (1) In general.--Section 1815(e)(2) (42 U.S.C. 1395g(e)(2)) 
     is amended--
       (A) in the matter before subparagraph (A), by inserting ``, 
     in the cases described in subparagraphs (A) through (D)'' 
     after ``1986''; and
       (B) by striking ``and'' at the end of subparagraph (C);
       (C) by adding ``and'' at the end of subparagraph (D); and
       (D) by inserting after subparagraph (D) the following new 
     subparagraph:
       ``(E) inpatient critical access hospital services;''.
       (2) Development of alternative methods of periodic interim 
     payments.--With respect to periodic interim payments to 
     critical access hospitals for inpatient critical access 
     hospital services under section 1815(e)(2)(E) of the Social 
     Security Act, as added by paragraph (1), the Secretary shall 
     develop alternative methods for such payments that are based 
     on expenditures of the hospital.
       (3) Reinstatement of pip.--The amendments made by paragraph 
     (1) shall apply to payments made on or after January 1, 2004.
       (e) Condition for Application of Special Physician Payment 
     Adjustment.--
       (1) In general.--Section 1834(g)(2) (42 U.S.C. 1395m(g)(2)) 
     is amended by adding after and below subparagraph (B) the 
     following:
     ``The Secretary may not require, as a condition for applying 
     subparagraph (B) with respect to a critical access hospital, 
     that each physician providing professional services in the 
     hospital must assign billing rights with respect to such 
     services, except that such subparagraph shall not apply to 
     those physicians who have not assigned such billing 
     rights.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall be effective as if included in the enactment of section 
     403(d) of the Medicare, Medicaid, and SCHIP Balanced Budget 
     Refinement Act of 1999 (113 Stat. 1501A-371).
       (f) Flexibility in Bed Limitation for Hospitals.--Section 
     1820 (42 U.S.C. 1395i-4) is amended--
       (1) in subsection (c)(2)(B)(iii), by inserting ``subject to 
     paragraph (3)'' after ``(iii) provides'';
       (2) by adding at the end of subsection (c) the following 
     new paragraph:
       ``(3) Increase in maximum number of beds for hospitals with 
     strong seasonal census fluctuations.--
       ``(A) In general.--Subject to subparagraph (C), in the case 
     of a hospital that demonstrates that it meets the standards 
     established under subparagraph (B) and has not made the 
     election described in subsection (f)(2)(A), the bed 
     limitations otherwise applicable under paragraph (2)(B)(iii) 
     and subsection (f) shall be increased by 5 beds.
       ``(B) Standards.--The Secretary shall specify standards for 
     determining whether a critical access hospital has 
     sufficiently strong seasonal variations in patient admissions 
     to justify the increase in bed limitation provided under 
     subparagraph (A).''; and
       (3) in subsection (f)--
       (A) by inserting ``(1)'' after ``(f)''; and
       (B) by adding at the end the following new paragraph:
       ``(2)(A) A hospital may elect to treat the reference in 
     paragraph (1) to `15 beds' as a reference to `25 beds', but 
     only if no more than 10 beds in the hospital are at any time 
     used for non-acute care services. A hospital that makes such 
     an election is not eligible for the increase provided under 
     subsection (c)(3)(A).
       ``(B) The limitations in numbers of beds under the first 
     sentence of paragraph (1) are subject to adjustment under 
     subsection (c)(3).''.
       (4) Effective date.--The amendments made by this subsection 
     shall apply to designations made before, on, or after January 
     1, 2004.
       (g) Additional 5-Year Period of Funding for Grant 
     Program.--
       (1) In general.--Section 1820(g) (42 U.S.C. 1395i-4(g)) is 
     amended by adding at the end the following new paragraph:
       ``(4) Funding.--
       ``(A) In general.--Subject to subparagraph (B), payment for 
     grants made under this subsection during fiscal years 2004 
     through 2008 shall be made from the Federal Hospital 
     Insurance Trust Fund.
       ``(B) Annual aggregate limitation.--In no case may the 
     amount of payment provided for under subparagraph (A) for a 
     fiscal year exceed $25,000,000.''.
       (2) Conforming amendment.--Section 1820 (42 U.S.C. 1395i-4) 
     is amended by striking subsection (j).

     SEC. 406. REDISTRIBUTION OF UNUSED RESIDENT POSITIONS.

       (a) In General.--Section 1886(h)(4) (42 U.S.C. 
     1395ww(h)(4)) is amended--
       (1) in subparagraph (F)(i), by inserting ``subject to 
     subparagraph (I),'' after ``October 1, 1997,'';
       (2) in subparagraph (H)(i), by inserting ``subject to 
     subparagraph (I),'' after ``subparagraphs (F) and (G),''; and
       (3) by adding at the end the following new subparagraph:
       ``(I) Redistribution of unused resident positions.--
       ``(i) Reduction in limit based on unused positions.--

       ``(I) In general.--If a hospital's resident level (as 
     defined in clause (iii)(I)) is less than the otherwise 
     applicable resident limit (as defined in clause (iii)(II)) 
     for each of the reference periods (as defined in subclause 
     (II)), effective for cost reporting periods beginning on or 
     after January 1, 2004, the otherwise applicable resident 
     limit shall be reduced by 75 percent of the difference 
     between such limit and the reference resident level specified 
     in subclause (III) (or subclause (IV) if applicable).
       ``(II) Reference periods defined.--In this clause, the term 
     `reference periods' means, for a hospital, the 3 most recent 
     consecutive cost reporting periods of the hospital for which 
     cost reports have been settled (or, if not, submitted) on or 
     before September 30, 2002.
       ``(III) Reference resident level.--Subject to subclause 
     (IV), the reference resident level specified in this 
     subclause for a hospital is the highest resident level for 
     the hospital during any of the reference periods.
       ``(IV) Adjustment process.--Upon the timely request of a 
     hospital, the Secretary shall adjust (subject to audit) the 
     reference resident level for a hospital to be the resident 
     level for the hospital for the cost reporting period that 
     includes July 1, 2003.
       ``(V) Affiliation.--With respect to hospitals which are 
     members of the same affiliated group (as defined by the 
     Secretary under subparagraph (H)(ii)), the provisions of this 
     section shall be applied with respect to such an affiliated 
     group by deeming the affiliated group to be a single 
     hospital.

       ``(ii) Redistribution.--

       ``(I) In general.--The Secretary is authorized to increase 
     the otherwise applicable resident limits for hospitals by an 
     aggregate number estimated by the Secretary that does not 
     exceed the aggregate reduction in such limits attributable to 
     clause (i) (without taking into account any adjustment under 
     subclause (IV) of such clause).
       ``(II) Effective date.--No increase under subclause (I) 
     shall be permitted or taken into account for a hospital for 
     any portion of a cost reporting period that occurs before 
     July 1, 2004, or before the date of the hospital's 
     application for an increase under this clause. No such 
     increase shall be permitted for a hospital unless the 
     hospital has applied to the Secretary for such increase by 
     December 31, 2005.
       ``(III) Considerations in redistribution.--In determining 
     for which hospitals the increase in the otherwise applicable 
     resident limit is provided under subclause (I), the Secretary 
     shall take into account the need for such an increase by 
     specialty and location involved, consistent with subclause 
     (IV).
       ``(IV) Priority for rural and small urban areas.--In 
     determining for which hospitals and residency training 
     programs an increase in the otherwise applicable resident 
     limit is provided under subclause (I), the Secretary shall 
     first distribute the increase to programs of hospitals 
     located in rural areas or in urban areas that are not large 
     urban areas (as defined for purposes of subsection (d)) on a 
     first-come-first-served basis (as determined by the 
     Secretary) based on a demonstration that the hospital will 
     fill the positions made available under this clause and not 
     to exceed an increase of 25 full-time equivalent positions 
     with respect to any hospital.
       ``(V) Application of locality adjusted national average per 
     resident amount.--With respect to additional residency 
     positions in a hospital attributable to the increase provided 
     under this clause, notwithstanding any other provision of 
     this subsection, the approved FTE resident amount is deemed 
     to be equal to the locality adjusted national average per 
     resident amount computed under subparagraph (E) for that 
     hospital.
       ``(VI) Construction.--Nothing in this clause shall be 
     construed as permitting the redistribution of reductions in 
     residency positions attributable to voluntary reduction 
     programs under paragraph (6) or as affecting the ability of a 
     hospital to establish new medical residency training programs 
     under subparagraph (H).

       ``(iii) Resident level and limit defined.--In this 
     subparagraph:

       ``(I) Resident level.--The term `resident level' means, 
     with respect to a hospital, the total number of full-time 
     equivalent residents, before the application of weighting 
     factors (as determined under this paragraph), in the fields 
     of allopathic and osteopathic medicine for the hospital.
       ``(II) Otherwise applicable resident limit.--The term 
     `otherwise applicable resident limit' means, with respect to 
     a hospital, the limit otherwise applicable under 
     subparagraphs (F)(i) and (H) on the resident level for the 
     hospital determined without regard to this subparagraph.''.

       (b) Conforming Amendment to IME.--Section 1886(d)(5)(B)(v) 
     (42 U.S.C. 1395ww(d)(5)(B)(v)) is amended by adding at the 
     end the following: ``The provisions of subparagraph (I) of 
     subsection (h)(4) shall apply with respect to the first 
     sentece of this clause in the same manner as it applies with 
     respect to subparagraph (F) of such subsection.''.
       (c) Report on Extension of Applications Under 
     Redistribution Program.--Not later than July 1, 2005, the 
     Secretary shall submit to Congress a report containing 
     recommendations regarding whether to extend

[[Page H6043]]

     the deadline for applications for an increase in resident 
     limits under section 1886(h)(4)(I)(ii)(II) of the Social 
     Security Act (as added by subsection (a)).

     SEC. 407. TWO-YEAR EXTENSION OF HOLD HARMLESS PROVISIONS FOR 
                   SMALL RURAL HOSPITALS AND SOLE COMMUNITY 
                   HOSPITALS UNDER PROSPECTIVE PAYMENT SYSTEM FOR 
                   HOSPITAL OUTPATIENT DEPARTMENT SERVICES.

       (a) Hold Harmless Provisions.--
       (1) In general.--Section 1833(t)(7)(D)(i) (42 U.S.C. 
     1395l(t)(7)(D)(i)) is amended--
       (A) in the heading, by striking ``small'' and inserting 
     ``certain'';
       (B) by inserting ``or a sole community hospital (as defined 
     in section 1886(d)(5)(D)(iii)) located in a rural area'' 
     after ``100 beds''; and
       (C) by striking ``2004'' and inserting ``2006''.
       (2) Effective date.--The amendment made by subsection 
     (a)(2) shall apply with respect to payment for OPD services 
     furnished on and after January 1, 2004.
       (b) Study; Adjustment.--
       (1) Study.--The Secretary shall conduct a study to 
     determine if, under the prospective payment system for 
     hospital outpatient department services under section 1833(t) 
     of the Social Security Act (42 U.S.C. 1395l(t)), costs 
     incurred by rural providers of services by ambulatory payment 
     classification groups (APCs) exceed those costs incurred by 
     urban providers of services.
       (2) Adjustment.--Insofar as the Secretary determines under 
     paragraph (1) that costs incurred by rural providers exceed 
     those costs incurred by urban providers of services, the 
     Secretary shall provide for an appropriate adjustment under 
     such section 1833(t) to reflect those higher costs by January 
     1, 2005.

     SEC. 408. EXCLUSION OF CERTAIN RURAL HEALTH CLINIC AND 
                   FEDERALLY QUALIFIED HEALTH CENTER SERVICES FROM 
                   THE PROSPECTIVE PAYMENT SYSTEM FOR SKILLED 
                   NURSING FACILITIES.

       (a) In General.--Section 1888(e)(2)(A) (42 U.S.C. 
     1395yy(e)(2)(A)) is amended--
       (1) in clause (i)(II), by striking ``clauses (ii) and 
     (iii)'' and inserting ``clauses (ii), (iii), and (iv)''; and
       (2) by adding at the end the following new clause:
       ``(iv) Exclusion of certain rural health clinic and 
     federally qualified health center services.--Services 
     described in this clause are--

       ``(I) rural health clinic services (as defined in paragraph 
     (1) of section 1861(aa)); and
       ``(II) Federally qualified health center services (as 
     defined in paragraph (3) of such section);

     that would be described in clause (ii) if such services were 
     not furnished by an individual affiliated with a rural health 
     clinic or a Federally qualified health center.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall apply to services furnished on or after January 1, 
     2004.

     SEC. 409. RECOGNITION OF ATTENDING NURSE PRACTITIONERS AS 
                   ATTENDING PHYSICIANS TO SERVE HOSPICE PATIENTS.

       (a) In General.--Section 1861(dd)(3)(B) (42 U.S.C. 
     1395x(dd)(3)(B)) is amended by inserting ``or nurse 
     practitioner (as defined in subsection (aa)(5))'' after ``the 
     physician (as defined in subsection (r)(1))''.
       (b) Clarification of Hospice Role of Nurse Practitioners.--
     Section 1814(a)(7)(A)(i)(I) (42 U.S.C. 1395f(a)(7)(A)(i)(I)) 
     is amended by inserting ``(which for purposes of this 
     subparagraph does not include a nurse practitioner)'' after 
     ``attending physician (as defined in section 
     1861(dd)(3)(B))''.

     SEC. 410. IMPROVEMENT IN PAYMENTS TO RETAIN EMERGENCY 
                   CAPACITY FOR AMBULANCE SERVICES IN RURAL AREAS.

       Section 1834(l) (42 U.S.C. 1395m(l)) is amended--
       (1) by redesignating paragraph (8), as added by section 
     221(a) of BIPA (114 Stat. 2763A-486), as paragraph (9); and
       (2) by adding at the end the following new paragraph:
       ``(10) Assistance for rural providers furnishing services 
     in low medicare population density areas.--
       ``(A) In general.--In the case of ground ambulance services 
     furnished on or after January 1, 2004, for which the 
     transportation originates in a qualified rural area (as 
     defined in subparagraph (B)), the Secretary shall provide for 
     a percent increase in the base rate of the fee schedule for a 
     trip established under this subsection. In establishing such 
     percent increase, the Secretary shall estimate the average 
     cost per trip for the base rate in the lowest quartile as 
     compared to the average cost for the base rate for such 
     services that is in the highest quartile of all rural county 
     populations.
       ``(B) Qualified rural area defined.--For purposes of 
     subparagraph (A), the term `qualified rural area' is a rural 
     area (as defined in section 1886(d)(2)(D)) with a population 
     density of medicare beneficiaries residing in the area that 
     is in the lowest quartile of all rural county populations.''.

     SEC. 411. TWO-YEAR INCREASE FOR HOME HEALTH SERVICES 
                   FURNISHED IN A RURAL AREA.

       (a) In General.--In the case of home health services 
     furnished in a rural area (as defined in section 
     1886(d)(2)(D) of the Social Security Act (42 U.S.C. 
     1395ww(d)(2)(D))) during 2004 and 2005, the Secretary shall 
     increase the payment amount otherwise made under section 1895 
     of such Act (42 U.S.C. 1395fff ) for such services by 5 
     percent.
       (b) Waiving Budget Neutrality.--The Secretary shall not 
     reduce the standard prospective payment amount (or amounts) 
     under section 1895 of the Social Security Act (42 U.S.C. 
     1395fff ) applicable to home health services furnished during 
     a period to offset the increase in payments resulting from 
     the application of subsection (a).

     SEC. 412. PROVIDING SAFE HARBOR FOR CERTAIN COLLABORATIVE 
                   EFFORTS THAT BENEFIT MEDICALLY UNDERSERVED 
                   POPULATIONS.

       (a) In General.--Section 1128B(b)(3) (42 U.S.C. 1320a-
     7(b)(3)), as amended by section 101(b)(2), is amended--
       (1) in subparagraph (F), by striking ``and'' after the 
     semicolon at the end;
       (2) in subparagraph (G), by striking the period at the end 
     and inserting ``; and''; and
       (3) by adding at the end the following new subparagraph:
       ``(H) any remuneration between a public or nonprofit 
     private health center entity described under clause (i) or 
     (ii) of section 1905(l)(2)(B) and any individual or entity 
     providing goods, items, services, donations or loans, or a 
     combination thereof, to such health center entity pursuant to 
     a contract, lease, grant, loan, or other agreement, if such 
     agreement contributes to the ability of the health center 
     entity to maintain or increase the availability, or enhance 
     the quality, of services provided to a medically underserved 
     population served by the health center entity.''.
       (b) Rulemaking for Exception for Health Center Entity 
     Arrangements.--
       (1) Establishment.--
       (A) In general.--The Secretary of Health and Human Services 
     (in this subsection referred to as the ``Secretary'') shall 
     establish, on an expedited basis, standards relating to the 
     exception described in section 1128B(b)(3)(H) of the Social 
     Security Act, as added by subsection (a), for health center 
     entity arrangements to the antikickback penalties.
       (B) Factors to consider.--The Secretary shall consider the 
     following factors, among others, in establishing standards 
     relating to the exception for health center entity 
     arrangements under subparagraph (A):
       (i) Whether the arrangement between the health center 
     entity and the other party results in savings of Federal 
     grant funds or increased revenues to the health center 
     entity.
       (ii) Whether the arrangement between the health center 
     entity and the other party restricts or limits a patient's 
     freedom of choice.
       (iii) Whether the arrangement between the health center 
     entity and the other party protects a health care 
     professional's independent medical judgment regarding 
     medically appropriate treatment.

     The Secretary may also include other standards and criteria 
     that are consistent with the intent of Congress in enacting 
     the exception established under this section.
       (2) Interim final effect.--No later than 180 days after the 
     date of enactment of this Act, the Secretary shall publish a 
     rule in the Federal Register consistent with the factors 
     under paragraph (1)(B). Such rule shall be effective and 
     final immediately on an interim basis, subject to such change 
     and revision, after public notice and opportunity (for a 
     period of not more than 60 days) for public comment, as is 
     consistent with this subsection.

     SEC. 413. GAO STUDY OF GEOGRAPHIC DIFFERENCES IN PAYMENTS FOR 
                   PHYSICIANS' SERVICES.

       (a) Study.--The Comptroller General of the United States 
     shall conduct a study of differences in payment amounts under 
     the physician fee schedule under section 1848 of the Social 
     Security Act (42 U.S.C. 1395w-4) for physicians' services in 
     different geographic areas. Such study shall include--
       (1) an assessment of the validity of the geographic 
     adjustment factors used for each component of the fee 
     schedule;
       (2) an evaluation of the measures used for such adjustment, 
     including the frequency of revisions; and
       (3) an evaluation of the methods used to determine 
     professional liability insurance costs used in computing the 
     malpractice component, including a review of increases in 
     professional liability insurance premiums and variation in 
     such increases by State and physician specialty and methods 
     used to update the geographic cost of practice index and 
     relative weights for the malpractice component.
       (b) Report.--Not later than 1 year after the date of the 
     enactment of this Act, the Comptroller General shall submit 
     to Congress a report on the study conducted under subsection 
     (a). The report shall include recommendations regarding the 
     use of more current data in computing geographic cost of 
     practice indices as well as the use of data directly 
     representative of physicians' costs (rather than proxy 
     measures of such costs).

     SEC. 414. TREATMENT OF MISSING COST REPORTING PERIODS FOR 
                   SOLE COMMUNITY HOSPITALS.

       (a) In General.--Section 1886(b)(3)(I) (42 U.S.C. 
     1395ww(b)(3)(I)) is amended by adding at the end the 
     following new clause:
       ``(iii) In no case shall a hospital be denied treatment as 
     a sole community hospital or payment (on the basis of a 
     target rate as such as a hospital) because data are 
     unavailable for any cost reporting period due to changes in 
     ownership, changes in fiscal intermediaries, or other 
     extraordinary circumstances, so long as data for at least one

[[Page H6044]]

     applicable base cost reporting period is available.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to cost reporting periods beginning on or after 
     January 1, 2004.

     SEC. 415. EXTENSION OF TELEMEDICINE DEMONSTRATION PROJECT.

       Section 4207 of Balanced Budget Act of 1997 (Public Law 
     105-33) is amended--
       (1) in subsection (a)(4), by striking ``4-year'' and 
     inserting ``8-year''; and
       (2) in subsection (d)(3), by striking ``$30,000,000'' and 
     inserting ``$60,000,000''.

     SEC. 416. ADJUSTMENT TO THE MEDICARE INPATIENT HOSPITAL PPS 
                   WAGE INDEX TO REVISE THE LABOR-RELATED SHARE OF 
                   SUCH INDEX.

       (a) In General.--Section 1886(d)(3)(E) (42 U.S.C. 
     1395ww(d)(3)(E)) is amended--
       (1) by striking ``wage levels.--The Secretary'' and 
     inserting ``wage levels.--
       ``(i) In general.--Except as provided in clause (ii), the 
     Secretary''; and
       (2) by adding at the end the following new clause:
       ``(ii) Alternative proportion to be adjusted beginning in 
     fiscal year 2004.--
       ``(I) In general.--Except as provided in subclause (II), 
     for discharges occurring on or after October 1, 2003, the 
     Secretary shall substitute the `62 percent' for the 
     proportion described in the first sentence of clause (i).
       ``(II) Hold harmless for certain hospitals.--If the 
     application of subclause (I) would result in lower payments 
     to a hospital than would otherwise be made, then this 
     subparagraph shall be applied as if this clause had not been 
     enacted.''.
       (b) Waiving Budget Neutrality.--Section 1886(d)(3)(E) (42 
     U.S.C. 1395ww(d)(3)(E)), as amended by subsection (a), is 
     amended by adding at the end of clause (i) the following new 
     sentence: ``The Secretary shall apply the previous sentence 
     for any period as if the amendments made by section 402(a) of 
     the Medicare Prescription Drug and Modernization Act of 2003 
     had not been enacted.''.

     SEC. 417. MEDICARE INCENTIVE PAYMENT PROGRAM IMPROVEMENTS FOR 
                   PHYSICIAN SCARCITY.

       (a) Additional Bonus Payment for Certain Physician Scarcity 
     Areas.--
       (1) In general.--Section 1833 (42 U.S.C. 1395l) is amended 
     by adding at the end the following new subsection:
       ``(u) Incentive Payments for Physician Scarcity Areas.--
       ``(1) In general.--In the case of physicians' services 
     furnished in a year--
       ``(A) by a primary care physician in a primary care 
     scarcity county (identified under paragraph (4)); or
       ``(B) by a physician who is not a primary care physician in 
     a specialist care scarcity county (as so identified),

     in addition to the amount of payment that would otherwise be 
     made for such services under this part, there also shall be 
     paid an amount equal to 5 percent of the payment amount for 
     the service under this part.
       ``(2) Determination of ratios of physicians to medicare 
     beneficiaries in area.--Based upon available data, the 
     Secretary shall periodically determine, for each county or 
     equivalent area in the United States, the following:
       ``(A) Number of physicians practicing in the area.--The 
     number of physicians who furnish physicians' services in the 
     active practice of medicine or osteopathy in that county or 
     area, other than physicians whose practice is exclusively for 
     the Federal Government, physicians who are retired, or 
     physicians who only provide administrative services. Of such 
     number, the number of such physicians who are--
       ``(i) primary care physicians; or
       ``(ii) physicians who are not primary care physicians.
       ``(B) Number of medicare beneficiaries residing in the 
     area.--The number of individuals who are residing in the 
     county and are entitled to benefits under part A or enrolled 
     under this part, or both.
       ``(C) Determination of ratios.--
       ``(i) Primary care ratio.--The ratio (in this paragraph 
     referred to as the `primary care ratio') of the number of 
     primary care physicians (determined under subparagraph 
     (A)(i)), to number of medicare beneficiaries determined under 
     subparagraph (B).
       ``(ii) Specialist care ratio.--The ratio (in this paragraph 
     referred to as the `specialist care ratio') of the number of 
     other physicians (determined under subparagraph (A)(ii)), to 
     number of medicare beneficiaries determined under 
     subparagraph (B).
       ``(3) Ranking of counties.--The Secretary shall rank each 
     such county or area based separately on its primary care 
     ratio and its specialist care ratio.
       ``(4) Identification of counties.--The Secretary shall 
     identify--
       ``(A) those counties and areas (in this paragraph referred 
     to as `primary care scarcity counties') with the lowest 
     primary care ratios that represent, if each such county or 
     area were weighted by the number of medicare beneficiaries 
     determined under paragraph (2)(B), an aggregate total of 20 
     percent of the total of the medicare beneficiaries determined 
     under such paragraph; and
       ``(B) those counties and areas (in this subsection referred 
     to as `specialist care scarcity counties') with the lowest 
     specialist care ratios that represent, if each such county or 
     area were weighted by the number of medicare beneficiaries 
     determined under paragraph (2)(B), an aggregate total of 20 
     percent of the total of the medicare beneficiaries determined 
     under such paragraph.

     There is no administrative or judicial review respecting the 
     identification of a county or area or the assignment of a 
     specialty of any physician under this paragraph.
       ``(5) Rural census tracks.--To the extent feasible, the 
     Secretary shall treat a rural census tract of a metropolitan 
     statistical area (as determined under the most recent 
     modification of the Goldsmith Modification, originally 
     published in the Federal Register on February 27, 1992 (57 
     Fed. Reg. 6725) as an equivalent area for purposes of 
     qualifying as a primary care scarcity county or specialist 
     care scarcity county under this subsection.
       ``(6) Physician Defined.--For purposes of this paragraph, 
     the term `physician' means a physician described in section 
     1861(r)(1) and the term `primary care physician' means a 
     physician who is identified in the available data as a 
     general practitioner, family practice practitioner, general 
     internist, or obstetrician or gynecologist.
       ``(7) Publication of list of counties.--In carrying out 
     this subsection for a year, the Secretary shall include, as 
     part of the proposed and final rule to implement the 
     physician fee schedule under section 1848 for the year, a 
     list of all areas which will qualify as a primary care 
     scarcity county or specialist care scarcity county under this 
     subsection for the year involved.''.
       (2) Effective date.--The amendments made by subsection (a) 
     shall apply to physicians' services furnished or after 
     January 1, 2004.
       (b) Improvement to Medicare Incentive Payment Program.--
       (1) In general.--Section 1833(m) (42 U.S.C. 1395l(m)) is 
     amended--
       (A) by inserting ``(1)'' after ``(m)''; and
       (B) by adding at the end the following new paragraphs:
       ``(2) The Secretary shall establish procedures under which 
     the Secretary, and not the physician furnishing the service, 
     is responsible for determining when a payment is required to 
     be made under paragraph (1).
       ``(3) In carrying out paragraph (1) for a year, the 
     Secretary shall include, as part of the proposed and final 
     rule to implement the physician fee schedule under section 
     1848 for the year, a list of all areas which will qualify as 
     a health professional shortage area under paragraph (1) for 
     the year involved.''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply to physicians' services furnished or after 
     January 1, 2004.

     SEC. 418. RURAL HOSPICE DEMONSTRATION PROJECT.

       (a) In General.--The Secretary shall conduct a 
     demonstration project for the delivery of hospice care to 
     medicare beneficiaries in rural areas. Under the project 
     medicare beneficiaries who are unable to receive hospice care 
     in the home for lack of an appropriate caregiver are provided 
     such care in a facility of 20 or fewer beds which offers, 
     within its walls, the full range of services provided by 
     hospice programs under section 1861(dd) of the Social 
     Security Act (42 U.S.C. 1395x(dd)).
       (b) Scope of Project.--The Secretary shall conduct the 
     project under this section with respect to no more than 3 
     hospice programs over a period of not longer than 5 years 
     each.
       (c) Compliance with Conditions.--Under the demonstration 
     project--
       (1) the hospice program shall comply with otherwise 
     applicable requirements, except that it shall not be required 
     to offer services outside of the home or to meet the 
     requirements of section 1861(dd)(2)(A)(iii) of the Social 
     Security Act; and
       (2) payments for hospice care shall be made at the rates 
     otherwise applicable to such care under title XVIII of such 
     Act.

     The Secretary may require the program to comply with such 
     additional quality assurance standards for its provision of 
     services in its facility as the Secretary deems appropriate.
       (d) Report.--Upon completion of the project, the Secretary 
     shall submit a report to Congress on the project and shall 
     include in the report recommendations regarding extension of 
     such project to hospice programs serving rural areas.

                 TITLE V--PROVISIONS RELATING TO PART A

                Subtitle A--Inpatient Hospital Services

     SEC. 501. REVISION OF ACUTE CARE HOSPITAL PAYMENT UPDATES.

       Section 1886(b)(3)(B)(i) (42 U.S.C. 1395ww(b)(3)(B)(i)) is 
     amended--
       (1) by striking ``and'' at the end of subclause (XVIII);
       (2) by striking subclause (XIX); and
       (3) by inserting after subclause (XVIII) the following new 
     subclauses:
       ``(XIX) for each of fiscal years 2004 through 2006, the 
     market basket percentage increase minus 0.4 percentage points 
     for hospitals in all areas; and
       ``(XX) for fiscal year 2007 and each subsequent fiscal 
     year, the market basket percentage increase for hospitals in 
     all areas.''.

     SEC. 502. RECOGNITION OF NEW MEDICAL TECHNOLOGIES UNDER 
                   INPATIENT HOSPITAL PPS.

       (a) Improving Timeliness of Data Collection.--Section 
     1886(d)(5)(K) (42 U.S.C. 1395ww(d)(5)(K)) is amended by 
     adding at the end the following new clause:
       ``(vii) Under the mechanism under this subparagraph, the 
     Secretary shall provide for the addition of new diagnosis and 
     procedure codes in April 1 of each year, but the addition of 
     such codes shall not require the Secretary to adjust the 
     payment (or diagnosis-

[[Page H6045]]

     related group classification) under this subsection until the 
     fiscal year that begins after such date.''.
       (b) Eligibility Standard for Technology Outliers.--
       (1) Minimum period for recognition of new technologies.--
     Section 1886(d)(5)(K)(vi) (42 U.S.C. 1395ww(d)(5)(K)(vi)) is 
     amended--
       (A) by inserting ``(I)'' after ``(vi)''; and
       (B) by adding at the end the following new subclause:
       ``(II) Under such criteria, a service or technology shall 
     not be denied treatment as a new service or technology on the 
     basis of the period of time in which the service or 
     technology has been in use if such period ends before the end 
     of the 2-to-3-year period that begins on the effective date 
     of implementation of a code under ICD-9-CM (or a successor 
     coding methodology) that enables the identification of 
     specific discharges in which the service or technology has 
     been used.''.
       (2) Adjustment of threshold.--Section 1886(d)(5)(K)(ii)(I) 
     (42 U.S.C. 1395ww(d)(5)(K)(ii)(I)) is amended by inserting 
     ``(applying a threshold specified by the Secretary that is 
     the lesser of 75 percent of the standardized amount 
     (increased to reflect the difference between cost and 
     charges) or 75 percent of one standard deviation for the 
     diagnosis-related group involved)'' after ``is inadequate''.
       (3) Criterion for substantial improvement.--Section 
     1886(d)(5)(K)(vi) (42 U.S.C. 1395ww(d)(5)(K)(vi)), as amended 
     by paragraph (1), is further amended by adding at the end the 
     following subclause:
       ``(III) The Secretary shall by regulation provide for 
     further clarification of the criteria applied to determine 
     whether a new service or technology represents an advance in 
     medical technology that substantially improves the diagnosis 
     or treatment of beneficiaries. Under such criteria, in 
     determining whether a new service or technology represents an 
     advance in medical technology that substantially improves the 
     diagnosis or treatment of beneficiaries, the Secretary shall 
     deem a service or technology as meeting such requirement if 
     the service or technology is a drug or biological that is 
     designated under section 506 of the Federal Food, Drug, and 
     Cosmetic Act, approved under section 314.510 or 601.41 of 
     title 21, Code of Federal Regulations, or designated for 
     priority review when the marketing application for such drug 
     or biological was filed or is a medical device for which an 
     exemption has been granted under section 520(m) of such Act, 
     or for which priority review has been provided under section 
     515(d)(5) of such Act. Nothing in this subclause shall be 
     construed as effecting the authority of the Secretary to 
     determine whether items and services are medically necessary 
     and appropriate under section 1862(a)(1).''.
       (4) Process for public input.--Section 1886(d)(5)(K) (42 
     U.S.C. 1395ww(d)(5)(K)), as amended by paragraph (1), is 
     amended--
       (A) in clause (i), by adding at the end the following: 
     ``Such mechanism shall be modified to meet the requirements 
     of clause (viii).''; and
       (B) by adding at the end the following new clause:
       ``(viii) The mechanism established pursuant to clause (i) 
     shall be adjusted to provide, before publication of a 
     proposed rule, for public input regarding whether a new 
     service or technology not described in the second sentence of 
     clause (vi)(III) represents an advance in medical technology 
     that substantially improves the diagnosis or treatment of 
     beneficiaries as follows:
       ``(I) The Secretary shall make public and periodically 
     update a list of all the services and technologies for which 
     an application for additional payment under this subparagraph 
     is pending.
       ``(II) The Secretary shall accept comments, 
     recommendations, and data from the public regarding whether 
     the service or technology represents a substantial 
     improvement.
       ``(III) The Secretary shall provide for a meeting at which 
     organizations representing hospitals, physicians, medicare 
     beneficiaries, manufacturers, and any other interested party 
     may present comments, recommendations, and data to the 
     clinical staff of the Centers for Medicare & Medicaid 
     Services before publication of a notice of proposed 
     rulemaking regarding whether service or technology represents 
     a substantial improvement.''.
       (c) Preference for Use of DRG Adjustment.--Section 
     1886(d)(5)(K) (42 U.S.C. 1395ww(d)(5)(K)) is further amended 
     by adding at the end the following new clause:
       ``(ix) Before establishing any add-on payment under this 
     subparagraph with respect to a new technology, the Secretary 
     shall seek to identify one or more diagnosis-related groups 
     associated with such technology, based on similar clinical or 
     anatomical characteristics and the cost of the technology. 
     Within such groups the Secretary shall assign an eligible new 
     technology into a diagnosis-related group where the average 
     costs of care most closely approximate the costs of care of 
     using the new technology. No add-on payment under this 
     subparagraph shall be made with respect to such new 
     technology and this clause shall not affect the application 
     of paragraph (4)(C)(iii).''.
       (d) Improvement in Payment for New Technology.--Section 
     1886(d)(5)(K)(ii)(III) (42 U.S.C. 1395ww(d)(5)(K)(ii)(III)) 
     is amended by inserting after ``the estimated average cost of 
     such service or technology'' the following: ``(based on the 
     marginal rate applied to costs under subparagraph (A))''.
       (e) Establishment of New Funding for Hospital Inpatient 
     Technology.--
       (1) In general.--Section 1886(d)(5)(K)(ii)(III) (42 U.S.C. 
     1395ww(d)(5)(K)(ii)(III)) is amended by striking ``subject to 
     paragraph (4)(C)(iii),''.
       (2) Not budget neutral.--There shall be no reduction or 
     other adjustment in payments under section 1886 of the Social 
     Security Act because an additional payment is provided under 
     subsection (d)(5)(K)(ii)(III) of such section.
       (f) Effective Date.--
       (1) In general.--The Secretary shall implement the 
     amendments made by this section so that they apply to 
     classification for fiscal years beginning with fiscal year 
     2005.
       (2) Reconsiderations of applications for fiscal year 2004 
     that are denied.--In the case of an application for a 
     classification of a medical service or technology as a new 
     medical service or technology under section 1886(d)(5)(K) of 
     the Social Security Act (42 U.S.C. 1395ww(d)(5)(K)) that was 
     filed for fiscal year 2004 and that is denied--
       (A) the Secretary shall automatically reconsider the 
     application as an application for fiscal year 2005 under the 
     amendments made by this section; and
       (B) the maximum time period otherwise permitted for such 
     classification of the service or technology shall be extended 
     by 12 months.

     SEC. 503. INCREASE IN FEDERAL RATE FOR HOSPITALS IN PUERTO 
                   RICO.

       Section 1886(d)(9) (42 U.S.C. 1395ww(d)(9)) is amended--
       (1) in subparagraph (A)--
       (A) in clause (i), by striking ``for discharges beginning 
     on or after October 1, 1997, 50 percent (and for discharges 
     between October 1, 1987, and September 30, 1997, 75 
     percent)'' and inserting ``the applicable Puerto Rico 
     percentage (specified in subparagraph (E))''; and
       (B) in clause (ii), by striking ``for discharges beginning 
     in a fiscal year beginning on or after October 1, 1997, 50 
     percent (and for discharges between October 1, 1987, and 
     September 30, 1997, 25 percent)'' and inserting ``the 
     applicable Federal percentage (specified in subparagraph 
     (E))''; and
       (2) by adding at the end the following new subparagraph:
       ``(E) For purposes of subparagraph (A), for discharges 
     occurring--
       ``(i) on or after October 1, 1987, and before October 1, 
     1997, the applicable Puerto Rico percentage is 75 percent and 
     the applicable Federal percentage is 25 percent;
       ``(ii) on or after October 1, 1997, and before October 1, 
     2003, the applicable Puerto Rico percentage is 50 percent and 
     the applicable Federal percentage is 50 percent;
       ``(iii) during fiscal year 2004, the applicable Puerto Rico 
     percentage is 41 percent and the applicable Federal 
     percentage is 59 percent;
       ``(iv) during fiscal year 2005, the applicable Puerto Rico 
     percentage is 33 percent and the applicable Federal 
     percentage is 67 percent; and
       ``(v) on or after October 1, 2005, the applicable Puerto 
     Rico percentage is 25 percent and the applicable Federal 
     percentage is 75 percent.''.

     SEC. 504. WAGE INDEX ADJUSTMENT RECLASSIFICATION REFORM .

       (a) In General.--Section 1886(d) (42 U.S.C. 1395ww(d)) is 
     amended by adding at the end the following:
       ``(11)(A) In order to recognize commuting patterns among 
     Metropolitan Statistical Areas and between such Areas and 
     rural areas, the Secretary shall establish a process, upon 
     application of a subsection (d) hospital that establishes 
     that it is a qualifying hospital described in subparagraph 
     (B), for an increase of the wage index applied under 
     paragraph (3)(E) for the hospital in the amount computed 
     under subparagraph (D).
       ``(B) A qualifying hospital described in this subparagraph 
     is a subsection (d) hospital--
       ``(i) the average wages of which exceed the average wages 
     for the area in which the hospital is located; and
       ``(ii) which has at least 10 percent of its employees who 
     reside in one or more higher wage index areas.
       ``(C) For purposes of this paragraph, the term `higher wage 
     index area' means, with respect to a hospital, an area with a 
     wage index that exceeds that of the area in which the 
     hospital is located.
       ``(D) The increase in the wage index under subparagraph (A) 
     for a hospital shall be equal to the percentage of the 
     employees of the hospital that resides in any higher wage 
     index area multiplied by the sum of the products, for each 
     higher wage index area of--
       ``(i) the difference between (I) the wage index for such 
     area, and (II) the wage index of the area in which the 
     hospital is located (before the application of this 
     paragraph); and
       ``(ii) the number of employees of the hospital that reside 
     in such higher wage index area divided by the total number of 
     such employees that reside in all high wage index areas.
       ``(E) The process under this paragraph shall be based upon 
     the process used by the Medicare Geographic Classification 
     Review Board under paragraph (10) with respect to data 
     submitted by hospitals to the Board on the location of 
     residence of hospital employees and wages under the 
     applicable schedule established for geographic 
     reclassification.
       ``(F) A reclassification under this paragraph shall be 
     effective for a period of 3 fiscal years, except that the 
     Secretary shall establish procedures under which a subsection 
     (d) hospital may elect to terminate such reclassification 
     before the end of such period.
       ``(G) A hospital that is reclassified under this paragraph 
     for a period is not eligible for

[[Page H6046]]

     reclassification under paragraphs (8) or (10) during that 
     period.
       ``(H) Any increase in a wage index under this paragraph for 
     a hospital shall not be taken into account for purposes of--
       ``(i) computing the wage index for the area in which the 
     hospital is located or any other area; or
       ``(ii) applying any budget neutrality adjustment with 
     respect to such index under paragraph (8)(D).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall first apply to the wage index for discharges occurring 
     on or after October 1, 2004.

     SEC. 505. MEDPAC REPORT ON SPECIALTY HOSPITALS.

       (a) MedPAC Study.--The Medicare Payment Advisory Commission 
     shall conduct a study of specialty hospitals compared with 
     other similar general acute care hospitals under the medicare 
     program. Such study shall examine--
       (1) whether there are excessive self-referrals;
       (2) quality of care furnished;
       (3) the impact of specialty hospitals on such general acute 
     care hospitals; and
       (4) differences in the scope of services, medicaid 
     utilization, and uncompensated care furnished.
       (b) Report.--Not later than 1 year after the date of the 
     enactment of this Act, the Secretary shall submit to Congress 
     a report on the study conducted under subsection (a), and 
     shall include any recommendations for legislation or 
     administrative change as the Secretary determines 
     appropriate.

                      Subtitle B--Other Provisions

     SEC. 511. PAYMENT FOR COVERED SKILLED NURSING FACILITY 
                   SERVICES.

       (a) Adjustment to RUGs for AIDS Residents.--Paragraph (12) 
     of section 1888(e) (42 U.S.C. 1395yy(e)) is amended to read 
     as follows:
       ``(12) Adjustment for residents with aids.--
       ``(A) In general.--Subject to subparagraph (B), in the case 
     of a resident of a skilled nursing facility who is afflicted 
     with acquired immune deficiency syndrome (AIDS), the per diem 
     amount of payment otherwise applicable shall be increased by 
     128 percent to reflect increased costs associated with such 
     residents.
       ``(B) Sunset.--Subparagraph (A) shall not apply on and 
     after such date as the Secretary certifies that there is an 
     appropriate adjustment in the case mix under paragraph 
     (4)(G)(i) to compensate for the increased costs associated 
     with residents described in such subparagraph.''.
       (b) Effective Date.--The amendment made by paragraph (1) 
     shall apply to services furnished on or after October 1, 
     2003.

     SEC. 512. COVERAGE OF HOSPICE CONSULTATION SERVICES.

       (a) Coverage of Hospice Consultation Services.--Section 
     1812(a) (42 U.S.C. 1395d(a)) is amended--
       (1) by striking ``and'' at the end of paragraph (3);
       (2) by striking the period at the end of paragraph (4) and 
     inserting ``; and''; and
       (3) by inserting after paragraph (4) the following new 
     paragraph:
       ``(5) for individuals who are terminally ill, have not made 
     an election under subsection (d)(1), and have not previously 
     received services under this paragraph, services that are 
     furnished by a physician who is either the medical director 
     or an employee of a hospice program and that consist of--
       ``(A) an evaluation of the individual's need for pain and 
     symptom management;
       ``(B) counseling the individual with respect to end-of-life 
     issues and care options; and
       ``(C) advising the individual regarding advanced care 
     planning.''.
       (b) Payment.--Section 1814(i) (42 U.S.C. l395f(i)) is 
     amended by adding at the end the following new paragraph:
       ``(4) The amount paid to a hospice program with respect to 
     the services under section 1812(a)(5) for which payment may 
     be made under this part shall be equal to an amount 
     equivalent to the amount established for an office or other 
     outpatient visit for evaluation and management associated 
     with presenting problems of moderate severity under the fee 
     schedule established under section 1848(b), other than the 
     portion of such amount attributable to the practice expense 
     component.''.
       (c) Conforming Amendment.--Section 1861(dd)(2)(A)(i) (42 
     U.S.C. 1395x(dd)(2)(A)(i)) is amended by inserting before the 
     comma at the end the following: ``and services described in 
     section 1812(a)(5)''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to services provided by a hospice program on or 
     after January 1, 2004.

     SEC. 513. CORRECTION OF TRUST FUND HOLDINGS.

       (a) In General.--Within 120 days after the effective date 
     of this section, the Secretary of the Treasury shall take the 
     actions described in subsection (b) with respect to the 
     Federal Hospital Insurance Trust Fund (in this section 
     referred to as the ``Trust Fund'') with the goal being that, 
     after the actions are taken, the holdings of the Trust Fund 
     will replicate, to the extent practicable in the judgment of 
     the Secretary of the Treasury, in consultation with the 
     Secretary, the obligations that would have been held by the 
     trust fund if the clerical error had not occurred.
       (b) Obligations Issued and Redeemed.--The Secretary of the 
     Treasury shall--
       (1) issue to the Trust Fund obligations under chapter 31 of 
     title 31, United States Code, that bear issue dates, interest 
     rates, and maturity dates as the obligations that--
       (A) would have been issued to the Trust Fund if the 
     clerical error had not occurred; or
       (B) were issued to the Trust Fund and were redeemed by 
     reason of the clerical error; and
       (2) redeem from the Trust Fund obligations that would have 
     been redeemed from the Trust Fund if the clerical error had 
     not occurred.
       (c) Appropriation to Trust Fund.--Within 120 days after the 
     effective date of this section, there is hereby appropriated 
     to the Trust Fund, out of any money in the Treasury not 
     otherwise appropriated, an amount determined by the Secretary 
     of the Treasury, in consultation with the Secretary of Health 
     and Human Services, to be equal to the interest income lost 
     by the trust fund through the date of credit by reason of the 
     clerical error.
       (d) Clerical Error Defined.--For purposes of this section, 
     the term ``clerical error'' means the failure to have 
     transferred the correct amount from the general fund to the 
     Trust Fund, which failure occurred on April 15, 2001.

                TITLE VI--PROVISIONS RELATING TO PART B

                    Subtitle A--Physicians' Services

     SEC. 601. REVISION OF UPDATES FOR PHYSICIANS' SERVICES.

       (a) Update for 2004 and 2005.--
       (1) In general.--Section 1848(d) (42 U.S.C. 1395w-4(d)) is 
     amended by adding at the end the following new paragraph:
       ``(5) Update for 2004 and 2005.--The update to the single 
     conversion factor established in paragraph (1)(C) for each of 
     2004 and 2005 shall be not less than 1.5 percent.''.
       (2) Conforming amendment.--Paragraph (4)(B) of such section 
     is amended, in the matter before clause (i), by inserting 
     ``and paragraph (5)'' after ``subparagraph (D)''.
       (3) Not treated as change in law and regulation in 
     sustainable growth rate determination.--The amendments made 
     by this subsection shall not be treated as a change in law 
     for purposes of applying section 1848(f)(2)(D) of the Social 
     Security Act (42 U.S.C. 1395w-4(f)(2)(D)).
       (b) Use of 10-Year Rolling Average in Computing Gross 
     Domestic Product.--
       (1) In general.--Section 1848(f)(2)(C) (42 U.S.C. 1395w-
     4(f)(2)(C)) is amended--
       (A) by striking ``projected'' and inserting ``annual 
     average''; and
       (B) by striking ``from the previous applicable period to 
     the applicable period involved'' and inserting ``during the 
     10-year period ending with the applicable period involved''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to computations of the sustainable growth rate 
     for years beginning with 2003.

     SEC. 602. STUDIES ON ACCESS TO PHYSICIANS' SERVICES.

       (a) GAO Study on Beneficiary Access to Physicians' 
     Services.--
       (1) Study.--The Comptroller General of the United States 
     shall conduct a study on access of medicare beneficiaries to 
     physicians' services under the medicare program. The study 
     shall include--
       (A) an assessment of the use by beneficiaries of such 
     services through an analysis of claims submitted by 
     physicians for such services under part B of the medicare 
     program;
       (B) an examination of changes in the use by beneficiaries 
     of physicians' services over time;
       (C) an examination of the extent to which physicians are 
     not accepting new medicare beneficiaries as patients.
       (2) Report.--Not later than 18 months after the date of the 
     enactment of this Act, the Comptroller General shall submit 
     to Congress a report on the study conducted under paragraph 
     (1). The report shall include a determination whether--
       (A) data from claims submitted by physicians under part B 
     of the medicare program indicate potential access problems 
     for medicare beneficiaries in certain geographic areas; and
       (B) access by medicare beneficiaries to physicians' 
     services may have improved, remained constant, or 
     deteriorated over time.
       (b) Study and Report on Supply of Physicians.--
       (1) Study.--The Secretary shall request the Institute of 
     Medicine of the National Academy of Sciences to conduct a 
     study on the adequacy of the supply of physicians (including 
     specialists) in the United States and the factors that affect 
     such supply.
       (2) Report to congress.--Not later than 2 years after the 
     date of enactment of this section, the Secretary shall submit 
     to Congress a report on the results of the study described in 
     paragraph (1), including any recommendations for legislation.
       (c) GAO Study of Medicare Payment for Inhalation Therapy.--
       (1) Study.--The Comptroller General of the United States 
     shall conduct a study to examine the adequacy of current 
     reimbursements for inhalation therapy under the medicare 
     program.
       (2) Report.--Not later than May 1, 2004, the Comptroller 
     General shall submit to Congress a report on the study 
     conducted under paragraph (1).

[[Page H6047]]

     SEC. 603. MEDPAC REPORT ON PAYMENT FOR PHYSICIANS' SERVICES.

       (a) Practice Expense Component.--Not later than 1 year 
     after the date of the enactment of this Act, the Medicare 
     Payment Advisory Commission shall submit to Congress a report 
     on the effect of refinements to the practice expense 
     component of payments for physicians' services, after the 
     transition to a full resource-based payment system in 2002, 
     under section 1848 of the Social Security Act (42 U.S.C. 
     1395w-4). Such report shall examine the following matters by 
     physician specialty:
       (1) The effect of such refinements on payment for 
     physicians' services.
       (2) The interaction of the practice expense component with 
     other components of and adjustments to payment for 
     physicians' services under such section.
       (3) The appropriateness of the amount of compensation by 
     reason of such refinements.
       (4) The effect of such refinements on access to care by 
     medicare beneficiaries to physicians' services.
       (5) The effect of such refinements on physician 
     participation under the medicare program.
       (b) Volume of Physician Services.--The Medicare Payment 
     Advisory Commission shall submit to Congress a report on the 
     extent to which increases in the volume of physicians' 
     services under part B of the medicare program are a result of 
     care that improves the health and well-being of medicare 
     beneficiaries. The study shall include the following:
       (1) An analysis of recent and historic growth in the 
     components that the Secretary includes under the sustainable 
     growth rate (under section 1848(f) of the Social Security 
     Act).
       (2) An examination of the relative growth of volume in 
     physician services between medicare beneficiaries and other 
     populations.
       (3) An analysis of the degree to which new technology, 
     including coverage determinations of the Centers for Medicare 
     & Medicaid Services, has affected the volume of physicians' 
     services.
       (4) An examination of the impact on volume of demographic 
     changes.
       (5) An examination of shifts in the site of service of 
     services that influence the number and intensity of services 
     furnished in physicians' offices and the extent to which 
     changes in reimbursement rates to other providers have 
     affected these changes.
       (6) An evaluation of the extent to which the Centers for 
     Medicare & Medicaid Services takes into account the impact of 
     law and regulations on the sustainable growth rate.

     SEC. 604. INCLUSION OF PODIATRISTS AND DENTISTS UNDER PRIVATE 
                   CONTRACTING AUTHORITY.

       Section 1802(b)(5)(B) (42 U.S.C. 1395a(b)(5)(B)) is amended 
     by striking ``section 1861(r)(1)'' and inserting ``paragraphs 
     (1), (2), and (3) of section 1861(r)''.

     SEC. 605. ESTABLISHMENT OF FLOOR ON WORK GEOGRAPHIC 
                   ADJUSTMENT.

       (a) Minimum Index.--Section 1848(e)(1) (42 U.S.C. 1395w-
     4(e)(1)) is amended by adding at the end the following new 
     subparagraph:
       ``(E) Floor at 1.0 on work geographic index.--
       ``(i) In general.--Subject to clause (ii), after 
     calculating the work geographic index in subparagraph 
     (A)(iii), for purposes of payment for services furnished on 
     or after January 1, 2004, and before January 1, 2006, the 
     Secretary shall increase the work geographic index to 1.00 
     for any locality for which such work geographic index is less 
     than 1.00.
       ``(ii) Secretarial discretion.--Clause (i) shall have no 
     force or effect in law if the Secretary determines, taking 
     into account the report of the Comptroller General under 
     section 605(b)(2) of the Medicare Prescription Drug and 
     Modernization Act of 2003, that there is no sound economic 
     rationale for the implementation of that clause.''.
       (b) GAO Report.--
       (1) Evaluation.--As part of the study on geographic 
     differences in payments for physicians' services conducted 
     under section 413, the Comptroller General of the United 
     States shall evaluate the following:
       (A) Whether there is a sound economic basis for the 
     implementation of the adjustment of the work geographic index 
     under section 1848(e)(1) of the Social Security Act under 
     subsection (a) in those areas in which the adjustment 
     applies.
       (B) The effect of such adjustment on physician location and 
     retention in areas affected by such adjustment, taking into 
     account--
       (i) differences in recruitment costs and retention rates 
     for physicians, including specialists, between large urban 
     areas and other areas; and
       (ii) the mobility of physicians, including specialists, 
     over the last decade.
       (C) The appropriateness of establishing a floor of 1.0 for 
     the work geographic index.
       (2) Report.--By not later than September 1, 2004, the 
     Comptroller General shall submit to Congress and to the 
     Secretary a report on the evaluation conducted under 
     paragraph (1).

                    Subtitle B--Preventive Services

     SEC. 611. COVERAGE OF AN INITIAL PREVENTIVE PHYSICAL 
                   EXAMINATION.

       (a) Coverage.--Section 1861(s)(2) (42 U.S.C. 1395x(s)(2)) 
     is amended--
       (1) in subparagraph (U), by striking ``and'' at the end;
       (2) in subparagraph (V), by inserting ``and'' at the end; 
     and
       (3) by adding at the end the following new subparagraph:
       ``(W) an initial preventive physical examination (as 
     defined in subsection (ww));''.
       (b) Services Described.--Section 1861 (42 U.S.C. 1395x) is 
     amended by adding at the end the following new subsection:

               ``Initial Preventive Physical Examination

       ``(ww) The term `initial preventive physical examination' 
     means physicians' services consisting of a physical 
     examination with the goal of health promotion and disease 
     detection and includes items and services (excluding clinical 
     laboratory tests), as determined by the Secretary, consistent 
     with the recommendations of the United States Preventive 
     Services Task Force.''.
       (c) Waiver of Deductible and Coinsurance.--
       (1) Deductible.--The first sentence of section 1833(b) (42 
     U.S.C. 1395l(b)) is amended--
       (A) by striking ``and'' before ``(6)'', and
       (B) by inserting before the period at the end the 
     following: ``, and (7) such deductible shall not apply with 
     respect to an initial preventive physical examination (as 
     defined in section 1861(ww))''.
       (2) Coinsurance.--Section 1833(a)(1) (42 U.S.C. 
     1395l(a)(1)) is amended--
       (A) in clause (N), by inserting ``(or 100 percent in the 
     case of an initial preventive physical examination, as 
     defined in section 1861(ww))'' after ``80 percent''; and
       (B) in clause (O), by inserting ``(or 100 percent in the 
     case of an initial preventive physical examination, as 
     defined in section 1861(ww))'' after ``80 percent''.
       (d) Payment as Physicians' Services.--Section 1848(j)(3) 
     (42 U.S.C. 1395w-4(j)(3)) is amended by inserting ``(2)(W),'' 
     after ``(2)(S),''.
       (e) Other Conforming Amendments.--Section 1862(a) (42 
     U.S.C. 1395y(a)) is amended--
       (1) in paragraph (1)--
       (A) by striking ``and'' at the end of subparagraph (H);
       (B) by striking the semicolon at the end of subparagraph 
     (I) and inserting ``, and''; and
       (C) by adding at the end the following new subparagraph:
       ``(J) in the case of an initial preventive physical 
     examination, which is performed not later than 6 months after 
     the date the individual's first coverage period begins under 
     part B;''; and
       (2) in paragraph (7), by striking ``or (H)'' and inserting 
     ``(H), or (J)''.
       (f) Effective Date.--The amendments made by this section 
     shall apply to services furnished on or after January 1, 
     2004, but only for individuals whose coverage period begins 
     on or after such date.

     SEC. 612. COVERAGE OF CHOLESTEROL AND BLOOD LIPID SCREENING.

       (a) Coverage.--Section 1861(s)(2) (42 U.S.C. 1395x(s)(2)), 
     as amended by section 611(a), is amended--
       (1) in subparagraph (V), by striking ``and'' at the end;
       (2) in subparagraph (W), by inserting ``and'' at the end; 
     and
       (3) by adding at the end the following new subparagraph:
       ``(X) cholesterol and other blood lipid screening tests (as 
     defined in subsection (XX));''.
       (b) Services Described.--Section 1861 (42 U.S.C. 1395x), as 
     amended by section 611(b), is amended by adding at the end 
     the following new subsection:

           ``Cholesterol and Other Blood Lipid Screening Test

       ``(xx)(1) The term `cholesterol and other blood lipid 
     screening test' means diagnostic testing of cholesterol and 
     other lipid levels of the blood for the purpose of early 
     detection of abnormal cholesterol and other lipid levels.
       ``(2) The Secretary shall establish standards, in 
     consultation with appropriate organizations, regarding the 
     frequency and type of cholesterol and other blood lipid 
     screening tests, except that such frequency may not be more 
     often than once every 2 years.''.
       (c) Frequency.--Section 1862(a)(1) (42 U.S.C. 1395y(a)(1)), 
     as amended by section 611(e), is amended--
       (1) by striking ``and'' at the end of subparagraph (I);
       (2) by striking the semicolon at the end of subparagraph 
     (J) and inserting ``; and''; and
       (3) by adding at the end the following new subparagraph:
       ``(K) in the case of a cholesterol and other blood lipid 
     screening test (as defined in section 1861(xx)(1)), which is 
     performed more frequently than is covered under section 
     1861(xx)(2).''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to tests furnished on or after January 1, 2005.

     SEC. 613. WAIVER OF DEDUCTIBLE FOR COLORECTAL CANCER 
                   SCREENING TESTS.

       (a) In General.--The first sentence of section 1833(b) (42 
     U.S.C. 1395l(b)), as amended by section 611(c)(1), is 
     amended--
       (1) by striking ``and'' before ``(7)''; and
       (2) by inserting before the period at the end the 
     following: ``, and (8) such deductible shall not apply with 
     respect to colorectal cancer screening tests (as described in 
     section 1861(pp)(1))''.
       (b) Conforming Amendments.--Paragraphs (2)(C)(ii) and 
     (3)(C)(ii) of section 1834(d) (42 U.S.C. 1395m(d)) are each 
     amended--
       (1) by striking ``deductible and'' in the heading; and
       (2) in subclause (I), by striking ``deductible or'' each 
     place it appears.
       (c) Effective Date.--The amendment made by this section 
     shall apply to items

[[Page H6048]]

     and services furnished on or after Janaury 1, 2004.

     SEC. 614. IMPROVED PAYMENT FOR CERTAIN MAMMOGRAPHY SERVICES.

       (a) Exclusion from OPD Fee Schedule.--Section 
     1833(t)(1)(B)(iv) (42 U.S.C. 1395l(t)(1)(B)(iv)) is amended 
     by inserting before the period at the end the following: 
     ``and does not include screening mammography (as defined in 
     section 1861(jj)) and unilateral and bilateral diagnostic 
     mammography''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to mammography performed on or after January 1, 
     2004.

                       Subtitle C--Other Services

     SEC. 621. HOSPITAL OUTPATIENT DEPARTMENT (HOPD) PAYMENT 
                   REFORM.

       (a) Payment for Drugs.--
       (1) Modification of ambulatory payment classification (apc) 
     groups.--Section 1833(t) (42 U.S.C. 1395l(t)) is amended--
       (A) by redesignating paragraph (13) as paragraph (14); and
       (B) by inserting after paragraph (12) the following new 
     paragraph:
       ``(13) Drug apc payment rates.--
       ``(A) In general.--With respect to payment for covered OPD 
     services that includes a specified covered outpatient drug 
     (defined in subparagraph (B)), the amount provided for 
     payment for such drug under the payment system under this 
     subsection for services furnished in--
       ``(i) 2004, 2005, or 2006, shall in no case--

       ``(I) exceed 95 percent of the average wholesale price for 
     the drug; or
       ``(II) be less than the transition percentage (under 
     subparagraph (C)) of the average wholesale price for the 
     drug; or

       ``(ii) a subsequent year, shall be equal to the average 
     price for the drug for that area and year established under 
     the competitive acquisition program under section 1847A as 
     calculated and applied by the Secretary for purposes of this 
     paragraph.
       ``(B) Specified covered outpatient drug defined.--
       ``(i) In general.--In this paragraph, the term `specified 
     covered outpatient drug' means, subject to clause (ii), a 
     covered outpatient drug (as defined in 1927(k)(2), that is--

       ``(I) a radiopharmaceutical; or
       ``(II) a drug or biological for which payment was made 
     under paragraph (6) (relating to pass-through payments) on or 
     before December 31, 2002.

       ``(ii) Exception.--Such term does not include--

       ``(I) a drug for which payment is first made on or after 
     January 1, 2003, under paragraph (6); or
       ``(II) a drug for a which a temporary HCPCS code has not 
     been assigned.

       ``(C) Transition towards historical average acquisition 
     cost.--The transition percentage under this subparagraph for 
     drugs furnished in a year is determined in accordance with 
     the following table:

 
                                          The transition percentage for--
 
 
                                                     Innovator
             For the year--                Single    multiple    Generic
                                           source     source      drugs
                                            drugs   drugs are--   are--
                                            are--
 
2004....................................       83%       81.5%       46%
2005....................................       77%         75%       46%
2006....................................       71%         68%       46%
 

       ``(D) Payment for new drugs until temporary HCPCS code 
     assigned.--With respect to payment for covered OPD services 
     that includes a covered outpatient drug (as defined in 
     1927(k)) for a which a temporary HCPCS code has not been 
     assigned, the amount provided for payment for such drug under 
     the payment system under this subsection shall be equal to 95 
     percent of the average wholesale price for the drug.
       ``(E) Classes of drugs.--For purposes of this paragraph, 
     each of the following shall be treated as a separate class of 
     drugs:
       ``(i) Sole source drugs.--A sole source drug which for 
     purposes of this paragraph means a drug or biological that is 
     not a multiple source drug (as defined in subclauses (I) and 
     (II) of section 1927(k)(7)(A)(i)) and is not a drug approved 
     under an abbreviated new drug application under section 
     355(j) of the Federal Food, Drug, and Cosmetic Act.
       ``(ii) Innovator multiple source drugs.--Innovator multiple 
     source drugs (as defined in section 1927(k)(7)(A)(ii)).
       ``(iii) Noninnovator multiple source drugs.--Noninnovator 
     multiple source drugs (as defined in section 
     1927(k)(7)(A)(iii)).
       ``(F) Inapplicability of expenditures in determining 
     conversion factors.--Additional expenditures resulting from 
     this paragraph and paragraph (14)(C) in a year shall not be 
     taken into account in establishing the conversion factor for 
     that year.''.
       (2) Reduction in threshold for separate apcs for drugs.--
     Section 1833(t)(14), as redesignated by paragraph (1)(A), is 
     amended by adding at the end the following new subparagraph:
       ``(B) Threshold for establishment of separate apcs for 
     drugs.--The Secretary shall reduce the threshold for the 
     establishment of separate ambulatory payment classification 
     groups (APCs) with respect to drugs to $50 per 
     administration.''.
       (3) Exclusion of separate drug apcs from outlier 
     payments.--Section 1833(t)(5) is amended by adding at the end 
     the following new subparagraph:
       ``(E) Exclusion of separate drug apcs from outlier 
     payments.--No additional payment shall be made under 
     subparagraph (A) in the case of ambulatory procedure codes 
     established separately for drugs.''.
       (4) Payment for pass through drugs.--Clause (i) of section 
     1833(t)(6)(D) (42 U.S.C. 1395l(t)(6)(D)) is amended by 
     inserting after ``under section 1842(o)'' the following: 
     ``(or if the drug is covered under a competitive acquisition 
     contract under section 1847A for an area, an amount 
     determined by the Secretary equal to the average price for 
     the drug for that area and year established under such 
     section as calculated and applied by the Secretary for 
     purposes of this paragraph)''.
       (5) Effective date.--The amendments made by this subsection 
     shall apply to services furnished on or after January 1, 
     2004.
       (b) Special Payment for Brachytherapy.--
       (1) In general.--Section 1833(t)(14), as so redesignated 
     and amended by subsection (a)(2), is amended by adding at the 
     end the following new subparagraph:
       ``(C) Payment for devices of brachytherapy at charges 
     adjusted to cost.--Notwithstanding the preceding provisions 
     of this subsection, for a device of brachytherapy furnished 
     on or after January 1, 2004, and before January 1, 2007, the 
     payment basis for the device under this subsection shall be 
     equal to the hospital's charges for each device furnished, 
     adjusted to cost.''.
       (2) Specification of groups for brachytherapy devices.--
     Section 1833(t)(2) (42 U.S.C. 1395l(t)(2) is amended--
       (A) in subparagraph (F), by striking ``and'' at the end;
       (B) in subparagraph (G), by striking the period at the end 
     and inserting ``; and''; and
       (C) by adding at the end the following new subparagraph:
       ``(H) with respect to devices of brachytherapy, the 
     Secretary shall create additional groups of covered OPD 
     services that classify such devices separately from the other 
     services (or group of services) paid for under this 
     subsection in a manner reflecting the number, isotope, and 
     radioactive intensity of such devices furnished, including 
     separate groups for palladium-103 and iodine-125 devices.''.
       (3) GAO report.--The Comptroller General of the United 
     States shall conduct a study to determine appropriate payment 
     amounts under section 1833(t)(13)(B) of the Social Security 
     Act, as added by paragraph (1), for devices of brachytherapy. 
     Not later than January 1, 2005, the Comptroller General shall 
     submit to Congress and the Secretary a report on the study 
     conducted under this paragraph, and shall include specific 
     recommendations for appropriate payments for such devices.
       (c) Application of Functional Equivalence Test.--
       (1) In general.--Section 1833(t)(6) (42 U.S.C. 1395l(t)(6)) 
     is amended by adding at the end the following new 
     subparagraph:
       ``(F) Limitation on application of functional equivalence 
     standard.--The Secretary may not apply a `functional 
     equivalence' payment standard (including such standard 
     promulgated on November 1, 2002) or any other similar 
     standard in order to deem a particular product to be 
     functionally equivalent (or a similar standard) unless the 
     Commissioner of Food and Drugs establishes a functional 
     equivalence standard and certifies, under such standards, 
     that the two products are functionally equivalent. If the 
     Commissioner makes such a certification with respect to two 
     or more products, the Secretary may, after complying with 
     applicable rulemaking requirements, implement such standard 
     with respect to such products under this subsection.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to the application of a functional equivalence 
     standard to a drug or biological on or after the date of the 
     enactment of this Act, unless such application was being made 
     to such drug or biological prior to June 13, 2003.
       (d) Hospital Acquisition Cost Study.--
       (1) In general.--The Secretary shall conduct a study on the 
     costs incurred by hospitals in acquiring covered outpatient 
     drugs for which payment is made under section 1833(t) of the 
     Social Security Act (42 U.S.C. 1395l(t)).
       (2) Drugs covered.--The study in paragraph (1) shall not 
     include those drugs for which the acquisition costs is less 
     than $50 per administration.
       (3) Representative sample of hospitals.--In conducting the 
     study under paragraph (1), the Secretary shall collect data 
     from a statistically valid sample of hospitals with an urban/
     rural stratification.
       (4) Report.--Not later than January 1, 2006, the Secretary 
     shall submit to Congress a report on the study conducted 
     under paragraph (1), and shall include recommendations with 
     respect to the following:
       (A) Whether the study should be repeated, and if so, how 
     frequently.
       (B) Whether the study produced useful data on hospital 
     acquisition cost.
       (C) Whether data produced in the study is appropriate for 
     use in making adjustments to payments for drugs and 
     biologicals under section 1847A of the Social Security Act.
       (D) Whether separate estimates can be made of overhead 
     costs, including handing and administering costs for drugs.

     SEC. 622. PAYMENT FOR AMBULANCE SERVICES.

       (a) Phase-In Providing Floor Using Blend of Fee Schedule 
     and Regional Fee Schedules.--Section 1834(l) (42 U.S.C. 
     1395m(l)), as amended by section 410(a), is amended--

[[Page H6049]]

       (1) in paragraph (2)(E), by inserting ``consistent with 
     paragraph (11)'' after ``in an efficient and fair manner''; 
     and
       (2) by adding at the end the following new paragraph:
       ``(11) Phase-in providing floor using blend of fee schedule 
     and regional fee schedules.--In carrying out the phase-in 
     under paragraph (2)(E) for each level of service furnished in 
     a year, the portion of the payment amount that is based on 
     the fee schedule shall be the greater of the amount 
     determined under such fee schedule (without regard to this 
     paragraph) or the following blended rate of the fee schedule 
     under paragraph (1) and of a regional fee schedule for the 
     region involved:
       ``(A) For 2004, the blended rate shall be based 20 percent 
     on the fee schedule under paragraph (1) and 80 percent on the 
     regional fee schedule.
       ``(B) For 2005, the blended rate shall be based 40 percent 
     on the fee schedule under paragraph (1) and 60 percent on the 
     regional fee schedule.
       ``(C) For 2006, the blended rate shall be based 60 percent 
     on the fee schedule under paragraph (1) and 40 percent on the 
     regional fee schedule.
       ``(D) For 2007, 2008, and 2009, the blended rate shall be 
     based 80 percent on the fee schedule under paragraph (1) and 
     20 percent on the regional fee schedule.
       ``(E) For 2010 and each succeeding year, the blended rate 
     shall be based 100 percent on the fee schedule under 
     paragraph (1).
     For purposes of this paragraph, the Secretary shall establish 
     a regional fee schedule for each of the 9 Census divisions 
     using the methodology (used in establishing the fee schedule 
     under paragraph (1)) to calculate a regional conversion 
     factor and a regional mileage payment rate and using the same 
     payment adjustments and the same relative value units as used 
     in the fee schedule under such paragraph.''.
       (b) Adjustment in Payment for Certain Long Trips.--Section 
     1834(l), as amended by subsection (a), is further amended by 
     adding at the end the following new paragraph:
       ``(12) Adjustment in payment for certain long trips.--In 
     the case of ground ambulance services furnished on or after 
     January 1, 2004, and before January 1, 2009, regardless of 
     where the transportation originates, the fee schedule 
     established under this subsection shall provide that, with 
     respect to the payment rate for mileage for a trip above 50 
     miles the per mile rate otherwise established shall be 
     increased by \1/4\ of the payment per mile otherwise 
     applicable to such miles.''.
       (c) GAO Report on Costs and Access.--Not later than 
     December 31, 2005, the Comptroller General of the United 
     States shall submit to Congress an initial report on how 
     costs differ among the types of ambulance providers and on 
     access, supply, and quality of ambulance services in those 
     regions and States that have a reduction in payment under the 
     medicare ambulance fee schedule (under section 1834(l) of the 
     Social Security Act, as amended by this section). Not later 
     than December 31, 2007, the Comptroller General shall submit 
     to Congress a final report on such access and supply.
       (d) Effective Date.--The amendments made by this section 
     shall apply to ambulance services furnished on or after 
     January 1, 2004.

     SEC. 623. RENAL DIALYSIS SERVICES.

       (a) Demonstration of Alternative Delivery Models.--
       (1) Use of advisory board.--In carrying out the 
     demonstration project relating to improving care for people 
     with end-stage renal disease through alternative delivery 
     models (as published in the Federal Register of June 4, 
     2003), the Secretary shall establish an advisory board 
     comprised of representatives described in paragraph (2) to 
     provide advice and recommendations with respect to the 
     establishment and operation of such demonstration project.
       (2) Representatives.--Representatives referred to in 
     paragraph (1) include representatives of the following:
       (A) Patient organizations.
       (B) Clinicians.
       (C) The medicare payment advisory commission, established 
     under section 1805 of the Social Security Act (42 U.S.C. 
     1395b-6).
       (D) The National Kidney Foundation.
       (E) The National Institute of Diabetes and Digestive and 
     Kidney Diseases of National Institutes of Health.
       (F) End-stage renal disease networks.
       (G) Medicare contractors to monitor quality of care.
       (I) providers of services and renal dialysis facilities 
     furnishing end-stage renal disease services.
       (J) Economists.
       (K) Researchers.
       (b) Restoring Composite Rate Exceptions for Pediatric 
     Facilities.--
       (1) In general.--Section 422(a)(2) of BIPA is amended--
       (A) in subparagraph (A), by striking ``and (C)'' and 
     inserting ``, (C), and (D)'';
       (B) in subparagraph (B), by striking ``In the case'' and 
     inserting ``Subject to subparagraph (D), in the case''; and
       (C) by adding at the end the following new subparagraph:
       ``(D) Inapplicability to pediatric facilities.--
     Subparagraphs (A) and (B) shall not apply, as of October 1, 
     2002, to pediatric facilities that do not have an exception 
     rate described in subparagraph (C) in effect on such date. 
     For purposes of this subparagraph, the term `pediatric 
     facility' means a renal facility at least 50 percent of whose 
     patients are individuals under 18 years of age.''.
       (2) Conforming amendment.--The fourth sentence of section 
     1881(b)(7) (42 U.S.C. 1395rr(b)(7)), as amended by subsection 
     (b), is further amended by striking ``Until'' and inserting 
     ``Subject to section 422(a)(2) of the Medicare, Medicaid, and 
     SCHIP Benefits Improvement and Protection Act of 2000, and 
     until''.
       (c) Increase in Renal Dialysis Composite Rate for Services 
     Furnished in 2004.--Notwithstanding any other provision of 
     law, with respect to payment under part B of title XVIII of 
     the Social Security Act for renal dialysis services furnished 
     in 2004, the composite payment rate otherwise established 
     under section 1881(b)(7) of such Act (42 U.S.C. 1395rr(b)(7)) 
     shall be increased by 1.6 percent.

     SEC. 624. ONE-YEAR MORATORIUM ON THERAPY CAPS; PROVISIONS 
                   RELATING TO REPORTS.

       (a) 1-Year Moratorium on Therapy Caps.--Section 1833(g)(4) 
     (42 U.S.C. 1395l(g)(4)) is amended by striking ``and 2002'' 
     and inserting ``2002, and 2004''.
       (b) Prompt Submission of Overdue Reports on Payment and 
     Utilization of Outpatient Therapy Services.--Not later than 
     December 31, 2003, the Secretary shall submit to Congress the 
     reports required under section 4541(d)(2) of the Balanced 
     Budget Act of 1997 (relating to alternatives to a single 
     annual dollar cap on outpatient therapy) and under section 
     221(d) of the Medicare, Medicaid, and SCHIP Balanced Budget 
     Refinement Act of 1999 (relating to utilization patterns for 
     outpatient therapy).
       (c) Identification of Conditions and Diseases Justifying 
     Waiver of Therapy Cap.--
       (1) Study.--The Secretary shall request the Institute of 
     Medicine of the National Academy of Sciences to identify 
     conditions or diseases that should justify conducting an 
     assessment of the need to waive the therapy caps under 
     section 1833(g)(4) of the Social Security Act (42 U.S.C. 
     1395l(g)(4)).
       (2) Reports to congress.--
       (A) Preliminary report.--Not later than July 1, 2004, the 
     Secretary shall submit to Congress a preliminary report on 
     the conditions and diseases identified under paragraph (1).
       (B) Final report.--Not later than September 1, 2004, the 
     Secretary shall submit to Congress a final report on such 
     conditions and diseases.
       (C) Recommendations.--Not later than October 1, 2004, the 
     Secretary shall submit to Congress a recommendation of 
     criteria, with respect to such conditions and disease, under 
     which a waiver of the therapy caps would apply.
       (d) GAO Study of Patient Access to Physical Therapist 
     Services.--
       (1) Study.--The Comptroller General of the United States 
     shall conduct a study on access to physical therapist 
     services in States authorizing such services without a 
     physician referral and in States that require such a 
     physician referral. The study shall--
       (A) examine the use of and referral patterns for physical 
     therapist services for patients age 50 and older in States 
     that authorize such services without a physician referral and 
     in States that require such a physician referral;
       (B) examine the use of and referral patterns for physical 
     therapist services for patients who are medicare 
     beneficiaries;
       (C) examine the potential effect of prohibiting a physician 
     from referring patients to physical therapy services owned by 
     the physician and provided in the physician's office;
       (D) examine the delivery of physical therapists' services 
     within the facilities of Department of Defense; and
       (E) analyze the potential impact on medicare beneficiaries 
     and on expenditures under the medicare program of eliminating 
     the need for a physician referral and physician certification 
     for physical therapist services under the medicare program.
       (2) Report.--The Comptroller General shall submit to 
     Congress a report on the study conducted under paragraph (1) 
     by not later than 1 year after the date of the enactment of 
     this Act.

     SEC. 625. ADJUSTMENT TO PAYMENTS FOR SERVICES FURNISHED IN 
                   AMBULATORY SURGICAL CENTERS.

       Section 1833(i)(2)(C) (42 U.S.C. 1395l(i)(2)(C)) is amended 
     in the last sentence by inserting ``and each of fiscal years 
     2004 through 2008'' after ``In each of the fiscal years 1998 
     through 2002''.

     SEC. 626. PAYMENT FOR CERTAIN SHOES AND INSERTS UNDER THE FEE 
                   SCHEDULE FOR ORTHOTICS AND PROSTHETICS.

       (a) In General.--Section 1833(o) (42 U.S.C. 1395l(o)) is 
     amended--
       (1) in paragraph (1), by striking ``no more than the limits 
     established under paragraph (2)'' and inserting ``no more 
     than the amount of payment applicable under paragraph (2)''; 
     and
       (2) in paragraph (2), to read as follows:
       ``(2)(A) Except as provided by the Secretary under 
     subparagraphs (B) and (C), the amount of payment under this 
     paragraph for custom molded shoes, extra depth shoes, and 
     inserts shall be the amount determined for such items by the 
     Secretary under section 1834(h).
       ``(B) The Secretary or a carrier may establish payment 
     amounts for shoes and inserts that are lower than the amount 
     established under section 1834(h) if the Secretary finds that 
     shoes and inserts of an appropriate quality are readily 
     available at or below the amount established under such 
     section.

[[Page H6050]]

       ``(C) In accordance with procedures established by the 
     Secretary, an individual entitled to benefits with respect to 
     shoes described in section 1861(s)(12) may substitute 
     modification of such shoes instead of obtaining one (or more, 
     as specified by the Secretary) pair of inserts (other than 
     the original pair of inserts with respect to such shoes). In 
     such case, the Secretary shall substitute, for the payment 
     amount established under section 1834(h), a payment amount 
     that the Secretary estimates will assure that there is no net 
     increase in expenditures under this subsection as a result of 
     this subparagraph.''.
       (b) Conforming Amendments.--(1) Section 1834(h)(4)(C) (42 
     U.S.C. 1395m(h)(4)(C)) is amended by inserting ``(and 
     includes shoes described in section 1861(s)(12))'' after ``in 
     section 1861(s)(9)''.
       (2) Section 1842(s)(2) (42 U.S.C. 1395u(s)(2)) is amended 
     by striking subparagraph (C).
       (c) Effective Date.--The amendments made by this section 
     shall apply to items furnished on or after January 1, 2004.

     SEC. 627. WAIVER OF PART B LATE ENROLLMENT PENALTY FOR 
                   CERTAIN MILITARY RETIREES; SPECIAL ENROLLMENT 
                   PERIOD.

       (a) Waiver of Penalty.--
       (1) In general.--Section 1839(b) (42 U.S.C. 1395r(b)) is 
     amended by adding at the end the following new sentence: ``No 
     increase in the premium shall be effected for a month in the 
     case of an individual who is 65 years of age or older, who 
     enrolls under this part during 2001, 2002, 2003, or 2004 and 
     who demonstrates to the Secretary before December 31, 2004, 
     that the individual is a covered beneficiary (as defined in 
     section 1072(5) of title 10, United States Code). The 
     Secretary of Health and Human Services shall consult with the 
     Secretary of Defense in identifying individuals described in 
     the previous sentence.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to premiums for months beginning with January 
     2004. The Secretary of Health and Human Services shall 
     establish a method for providing rebates of premium penalties 
     paid for months on or after January 2004 for which a penalty 
     does not apply under such amendment but for which a penalty 
     was previously collected.
       (b) Medicare Part B Special Enrollment Period.--
       (1) In general.--In the case of any individual who, as of 
     the date of the enactment of this Act, is 65 years of age or 
     older, is eligible to enroll but is not enrolled under part B 
     of title XVIII of the Social Security Act, and is a covered 
     beneficiary (as defined in section 1072(5) of title 10, 
     United States Code), the Secretary of Health and Human 
     Services shall provide for a special enrollment period during 
     which the individual may enroll under such part. Such period 
     shall begin as soon as possible after the date of the 
     enactment of this Act and shall end on December 31, 2004.
       (2) Coverage period.--In the case of an individual who 
     enrolls during the special enrollment period provided under 
     paragraph (1), the coverage period under part B of title 
     XVIII of the Social Security Act shall begin on the first day 
     of the month following the month in which the individual 
     enrolls.

     SEC. 628. PART B DEDUCTIBLE.

       Section 1833(b) (42 U.S.C. 1395l(b)) is amended--
       (1) by striking ``1991 and'' and inserting ``1991,''; and
       (2) by striking ``and subsequent years'' and inserting 
     ``and each subsequent year through 2003, and for a subsequent 
     year after 2003 the amount of such deductible for the 
     previous year increased by the annual percentage increase in 
     the monthly actuarial rate under section 1839(a)(1) ending 
     with such subsequent year (rounded to the nearest $1)''.

     SEC. 629. EXTENSION OF COVERAGE OF INTRAVENOUS IMMUNE 
                   GLOBULIN (IVIG) FOR THE TREATMENT OF PRIMARY 
                   IMMUNE DEFICIENCY DISEASES IN THE HOME.

       (a) In General.--Section 1861 (42 U.S.C. 1395x), as amended 
     by sections 611(a) and 612(a) is amended--
       (1) in subsection (s)(2)--
       (A) by striking ``and'' at the end of subparagraph (W);
       (B) by adding ``and'' at the end of subparagraph (X); and
       (C) by adding at the end the following new subparagraph:
       ``(Y) intravenous immune globulin for the treatment of 
     primary immune deficiency diseases in the home (as defined in 
     subsection (yy));''; and
       (2) by adding at the end the following new subsection:

                     ``Intravenous Immune Globulin

       ``(yy) The term `intravenous immune globulin' means an 
     approved pooled plasma derivative for the treatment in the 
     patient's home of a patient with a diagnosed primary immune 
     deficiency disease, but not including items or services 
     related to the administration of the derivative, if a 
     physician determines administration of the derivative in the 
     patient's home is medically appropriate.''.
       (b) Payment as a Drug or Biological.--Section 1833(a)(1)(S) 
     (42 U.S.C. 1395l(a)(1)(S)) is amended by inserting 
     ``(including intravenous immune globulin (as defined in 
     section 1861(yy)))'' after ``with respect to drugs and 
     biologicals''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to items furnished administered on or after 
     January 1, 2004.

     SEC. 630. MEDICARE COVERAGE OF DIABETES LABORATORY DIAGNOSTIC 
                   TESTS.

       (a) Coverage.--Section 1861(s)(2) (42 U.S.C. 1395x(s)(2)), 
     as amended by sections 611 and 612, is amended--
       (1) in subparagraph (W), by striking ``and'' at the end;
       (2) in subparagraph (X), by adding ``and'' at the end; and
       (3) by adding at the end the following new subparagraph:
       ``(Y) diabetes screening tests and services (as defined in 
     subsection (yy));''.
       (b) Services Described.--Section 1861 (42 U.S.C. 1395x), as 
     amended by sections 611 and 612, is further amended by adding 
     at the end the following new subsection:

                ``Diabetes Screening Tests and Services

       ``(yy)(1) The term `diabetes screening tests' means 
     diagnostic testing furnished to an individual at risk for 
     diabetes (as defined in paragraph (2)) for the purpose of 
     early detection of diabetes, including--
       ``(A) a fasting plasma glucose test; and
       ``(B) such other tests, and modifications to tests, as the 
     Secretary determines appropriate, in consultation with 
     appropriate organizations.
       ``(2) For purposes of paragraph (1), the term `individual 
     at risk for diabetes' means an individual who has any, a 
     combination of, or all of the following risk factors for 
     diabetes:
       ``(A) A family history of diabetes.
       ``(B) Overweight defined as a body mass index greater than 
     or equal to 25 kg/m2.
       ``(C) Habitual physical inactivity.
       ``(D) Belonging to a high-risk ethnic or racial group.
       ``(E) Previous identification of an elevated impaired 
     fasting glucose.
       ``(F) Identification of impaired glucose tolerance.
       ``(G) Hypertension.
       ``(H) Dyslipidemia.
       ``(I) History of gestational diabetes mellitus or delivery 
     of a baby weighing greater than 9 pounds.
       ``(J) Polycystic ovary syndrome.
       ``(3) The Secretary shall establish standards, in 
     consultation with appropriate organizations, regarding the 
     frequency of diabetes screening tests, except that such 
     frequency may not be more often than twice within the 12-
     month period following the date of the most recent diabetes 
     screening test of that individual.''.
       (c) Frequency.--Section 1862(a)(1) (42 U.S.C. 1395y(a)(1)), 
     as amended by sections 611 and 612, is amended--
       (1) by striking ``and'' at the end of subparagraph (J);
       (2) by striking the semicolon at the end of subparagraph 
     (K) and inserting ``; and''; and
       (3) by adding at the end the following new subparagraph:
       ``(L) in the case of a diabetes screening tests or service 
     (as defined in section 1861(yy)(1)), which is performed more 
     frequently than is covered under section 1861(yy)(3).''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to tests furnished on or after the date that is 
     90 days after the date of enactment of this Act.

     SEC. 631. DEMONSTRATION PROJECT FOR COVERAGE OF CERTAIN 
                   PRESCRIPTION DRUGS AND BIOLOGICS.

       (a) Demonstration Project.--The Secretary shall conduct a 
     demonstration project under part B of title XVIII of the 
     Social Security Act under which payment is made for drugs or 
     biologics that are prescribed as replacements for drugs and 
     biologicals described in section 1861(s)(2)(A) or 
     1861(s)(2)(Q) of such Act (42 U.S.C. 1395x(s)(2)(A), 
     1395x(s)(2)(Q))), or both, for which payment is made under 
     such part.
       (b) Demonstration Project Sites.--The project established 
     under this section shall be conducted in 3 States selected by 
     the Secretary.
       (c) Duration.--The Secretary shall conduct the 
     demonstration project for the 2-year period beginning on the 
     date that is 90 days after the date of the enactment of this 
     Act, but in no case may the project extend beyond December 
     31, 2005.
       (d) Limitation.--Under the demonstration project over the 
     duration of the project, the Secretary may not provide--
       (1) coverage for more than 10,000 patients; and
       (2) more than $100,000,000 in funding.
       (e) Report.--Not later than January 1, 2006, the Secretary 
     shall submit to Congress a report on the project. The report 
     shall include an evaluation of patient access to care and 
     patient outcomes under the project, as well as an analysis of 
     the cost effectiveness of the project, including an 
     evaluation of the costs savings (if any) to the medicare 
     program attributable to reduced physicians' services and 
     hospital outpatient departments services for administration 
     of the biological.

            TITLE VII--PROVISIONS RELATING TO PARTS A AND B

                    Subtitle A--Home Health Services

     SEC. 701. UPDATE IN HOME HEALTH SERVICES.

       (a) Change to Calender Year Update.--
       (1) In general.--Section 1895(b) (42 U.S.C. 1395fff(b)(3)) 
     is amended--
       (A) in paragraph (3)(B)(i)--
       (i) by striking ``each fiscal year (beginning with fiscal 
     year 2002)'' and inserting ``fiscal year 2002 and for fiscal 
     year 2003 and for each subsequent year (beginning with 
     2004)''; and
       (ii) by inserting ``or year'' after ``the fiscal year'';
       (B) in paragraph (3)(B)(ii)(II), by striking ``any 
     subsequent fiscal year'' and inserting ``2004 and any 
     subsequent year'';

[[Page H6051]]

       (C) in paragraph (3)(B)(iii), by inserting ``or year'' 
     after ``fiscal year'' each place it appears;
       (D) in paragraph (3)(B)(iv)--
       (i) by inserting ``or year'' after ``fiscal year'' each 
     place it appears; and
       (ii) by inserting ``or years'' after ``fiscal years''; and
       (E) in paragraph (5), by inserting ``or year'' after 
     ``fiscal year''.
       (2) Transition rule.--The standard prospective payment 
     amount (or amounts) under section 1895(b)(3) of the Social 
     Security Act for the calendar quarter beginning on October 1, 
     2003, shall be such amount (or amounts) for the previous 
     calendar quarter.
       (b) Changes in Updates for 2004, 2005, and 2006.--Section 
     1895(b)(3)(B)(ii) (42 U.S.C. 1395fff(b)(3)(B)(ii)), as 
     amended by subsection (a)(1)(B), is amended--
       (1) by striking ``or'' at the end of subclause (I);
       (2) by redesignating subclause (II) as subclause (III);
       (3) in subclause (III), as so redesignated, by striking 
     ``2004'' and inserting ``2007''; and
       (4) by inserting after subclause (I) the following new 
     subclause:

       ``(II) each of 2004, 2005, and 2006 the home health market 
     basket percentage increase minus 0.4 percentage points; or''.

     SEC. 702. ESTABLISHMENT OF REDUCED COPAYMENT FOR A HOME 
                   HEALTH SERVICE EPISODE OF CARE FOR CERTAIN 
                   BENEFICIARIES.

       (a) Part A.--
       (1) In general.--Section 1813(a) (42 U.S.C. 1395e(a)) is 
     amended by adding at the end the following new paragraph:
       ``(5)(A)(i) Subject to clause (ii), the amount payable for 
     home health services furnished to the individual under this 
     title for each episode of care beginning in a year (beginning 
     with 2004) shall be reduced by a copayment equal to the 
     copayment amount specified in subparagraph (B)(ii) for such 
     year.
       ``(ii) The copayment under clause (i) shall not apply--
       ``(I) in the case of an individual who has been determined 
     to be entitled to medical assistance under section 
     1902(a)(10)(A) or 1902(a)(10)(C) or to be a qualified 
     medicare beneficiary (as defined in section 1905(p)(1)), a 
     specified low-income medicare beneficiary described in 
     section 1902(a)(10)(E)(iii), or a qualifying individual 
     described in section 1902(a)(10)(E)(iv)(I); and
       ``(II) in the case of an episode of care which consists of 
     4 or fewer visits.
       ``(B)(i) The Secretary shall estimate, before the beginning 
     of each year (beginning with 2004), the national average 
     payment under this title per episode for home health services 
     projected for the year involved.
       ``(ii) For each year the copayment amount under this clause 
     is equal to 1.5 percent of the national average payment 
     estimated for the year involved under clause (i). Any amount 
     determined under the preceding sentence which is not a 
     multiple of $5 shall be rounded to the nearest multiple of 
     $5.
       ``(iii) There shall be no administrative or judicial review 
     under section 1869, 1878, or otherwise of the estimation of 
     average payment under clause (i).''.
       (2) Timely implementation.--Unless the Secretary of Health 
     and Human Services otherwise provides on a timely basis, the 
     copayment amount specified under section 1813(a)(5)(B)(ii) of 
     the Social Security Act (as added by paragraph (1)) for 2004 
     shall be deemed to be $40.
       (b) Conforming Provisions.--
       (1) Section 1833(a)(2)(A) (42 U.S.C. 1395l(a)(2)(A)) is 
     amended by inserting ``less the copayment amount applicable 
     under section 1813(a)(5)'' after ``1895''.
       (2) Section 1866(a)(2)(A)(i) (42 U.S.C. 1395cc(a)(2)(A)(i)) 
     is amended--
       (A) by striking ``or coinsurance'' and inserting ``, 
     coinsurance, or copayment''; and
       (B) by striking ``or (a)(4)'' and inserting ``(a)(4), or 
     (a)(5)''.

     SEC. 703. MEDPAC STUDY ON MEDICARE MARGINS OF HOME HEALTH 
                   AGENCIES.

       (a) Study.--The Medicare Payment Advisory Commission shall 
     conduct a study of payment margins of home health agencies 
     under the home health prospective payment system under 
     section 1895 of the Social Security Act (42 U.S.C. 1395fff). 
     Such study shall examine whether systematic differences in 
     payment margins are related to differences in case mix (as 
     measured by home health resource groups (HHRGs)) among such 
     agencies. The study shall use the partial or full-year cost 
     reports filed by home health agencies.
       (b) Report.--Not later than 2 years after the date of the 
     enactment of this Act, the Commission shall submit to 
     Congress a report on the study under subsection (a).

     SEC. 704. DEMONSTRATION PROJECT TO CLARIFY THE DEFINITION OF 
                   HOMEBOUND.

       (a) Demonstration Project.--Not later than 180 days after 
     the date of the enactment of this Act, the Secretary shall 
     conduct a two-year demonstration project under part B of 
     title XVIII of the Social Security Act under which medicare 
     beneficiaries with chronic conditions described in subsection 
     (b) are deemed to be homebound for purposes of receiving home 
     health services under the medicare program.
       (b) Medicare Beneficiary Described.--For purposes of 
     subsection (a), a medicare beneficiary is eligible to be 
     deemed to be homebound, without regard to the purpose, 
     frequency, or duration of absences from the home, if--
       (1) the beneficiary has been certified by one physician as 
     an individual who has a permanent and severe condition that 
     will not improve;
       (2) the beneficiary requires the individual to receive 
     assistance from another individual with at least 3 out of the 
     5 activities of daily living for the rest of the individual's 
     life;
       (3) the beneficiary requires skilled nursing services on a 
     permanent basis and the skilled nursing is more than 
     medication management;
       (4) either (A) an attendant is needed during the day to 
     monitor and treat the beneficiary's medical condition, or (B) 
     the beneficiary needs daily skilled nursing on a permanent 
     basis and the skilled nursing is more than medication 
     management; and
       (5) the beneficiary requires technological assistance or 
     the assistance of another person to leave the home.
       (c) Demonstration Project Sites.--The demonstration project 
     established under this section shall be conducted in 3 States 
     selected by the Secretary to represent the Northeast, 
     Midwest, and Western regions of the United States.
       (d) Limitation on Number of Participants.--The aggregate 
     number of such beneficiaries that may participate in the 
     project may not exceed 15,000.
       (e) Data.--The Secretary shall collect such data on the 
     demonstration project with respect to the provision of home 
     health services to medicare beneficiaries that relates to 
     quality of care, patient outcomes, and additional costs, if 
     any, to the medicare program.
       (f) Report to Congress.--Not later than 1 year after the 
     date of the completion of the demonstration project under 
     this section, the Secretary shall submit to Congress a report 
     on the project using the data collected under subsection (e) 
     and shall include--
       (1) an examination of whether the provision of home health 
     services to medicare beneficiaries under the project--
       (A) adversely effects the provision of home health services 
     under the medicare program; or
       (B) directly causes an unreasonable increase of 
     expenditures under the medicare program for the provision of 
     such services that is directly attributable to such 
     clarification;
       (2) the specific data evidencing the amount of any increase 
     in expenditures that is a directly attributable to the 
     demonstration project (expressed both in absolute dollar 
     terms and as a percentage) above expenditures that would 
     otherwise have been incurred for home health services under 
     the medicare program; and
       (3) specific recommendations to exempt permanently and 
     severely disabled homebound beneficiaries from restrictions 
     on the length, frequency and purpose of their absences from 
     the home to qualify for home health services without 
     incurring additional unreasonable costs to the medicare 
     program.
       (g) Waiver Authority.--The Secretary shall waive compliance 
     with the requirements of title XVIII of the Social Security 
     Act (42 U.S.C. 1395 et seq.) to such extent and for such 
     period as the Secretary determines is necessary to conduct 
     demonstration projects.
       (h) Construction.--Nothing in this section shall be 
     construed as waiving any applicable civil monetary penalty, 
     criminal penalty, or other remedy available to the Secretary 
     under title XI or title XVIII of the Social Security Act for 
     acts prohibited under such titles, including penalties for 
     false certifications for purposes of receipt of items or 
     services under the medicare program.
       (i) Authorization of Appropriations.--Payments for the 
     costs of carrying out the demonstration project under this 
     section shall be made from the Federal Supplementary 
     Insurance Trust Fund under section 1841 of such Act (42 
     U.S.C. 1395t).
       (j) Definitions.--In this section:
       (1) Medicare beneficiary.--The term ``medicare 
     beneficiary'' means an individual who is enrolled under part 
     B of title XVIII of the Social Security Act.
       (2) Home health services.--The term ``home health 
     services'' has the meaning given such term in section 1861(m) 
     of the Social Security Act (42 U.S.C. 1395x(m)).
       (3) Activities of daily living defined.--The term 
     ``activities of daily living'' means eating, toileting, 
     transferring, bathing, and dressing.
       (4) Secretary.--The term ``Secretary'' means the Secretary 
     of Health and Human Services.

             Subtitle B--Direct Graduate Medical Education

     SEC. 711. EXTENSION OF UPDATE LIMITATION ON HIGH COST 
                   PROGRAMS.

       Section 1886(h)(2)(D)(iv) (42 U.S.C. 1395ww(h)(2)(D)(iv)) 
     is amended--
       (1) in subclause (I)--
       (A) by inserting ``and 2004 through 2013'' after ``and 
     2002''; and
       (B) by inserting ``or during the period beginning with 
     fiscal year 2004 and ending with fiscal year 2013'' after 
     ``during fiscal year 2001 or fiscal year 2002''; and
       (2) in subclause (II)--
       (A) by striking ``fiscal year 2004, or fiscal year 2005,'' 
     and
       (B) by striking ``For a'' and inserting ``For the''.

                  Subtitle C--Chronic Care Improvement

     SEC. 721. VOLUNTARY CHRONIC CARE IMPROVEMENT UNDER 
                   TRADITIONAL FEE-FOR-SERVICE.

       Title XVIII, as amended by section 105(a), is amended by 
     inserting after section 1807 the following new section:


                       ``chronic care improvement

       ``Sec. 1808. (a) In General.--

[[Page H6052]]

       ``(1) In general.--The Secretary shall establish a process 
     for providing chronic care improvement programs in each CCIA 
     region for medicare beneficiaries who are not enrolled under 
     part C or E and who have certain chronic conditions, such as 
     congestive heart failure, diabetes, chronic obstructive 
     pulmonary disease (COPD), stroke, prostate and colon cancer, 
     hypertension, or other disease as identified by the Secretary 
     as appropriate for chronic care improvement. Such a process 
     shall begin to be implemented no later than 1 year after the 
     date of the enactment of this section.
       ``(2) Terminology.--For purposes of this section:
       ``(A) CCIA region.--The term `CCIA region' means a chronic 
     care improvement administrative region delineated under 
     subsection (b)(2).
       ``(B) Chronic care improvement program.--The terms `chronic 
     care improvement program' and `program' means such a program 
     provided by a contractor under this section.
       ``(C) Contractor.--The term `contractor' means an entity 
     with a contract to provide a chronic care improvement program 
     in a CCIA region under this section.
       ``(D) Individual plan.--The term `individual plan' means a 
     chronic care improvement plan established under subsection 
     (c)(5) for an individual.
       ``(3) Construction.--Nothing in this section shall be 
     construed as expanding the amount, duration, or scope of 
     benefits under this title.
       ``(b) Competitive Bidding Process.--
       ``(1) In general.--Under this section the Secretary shall 
     award contracts to qualified entities for chronic care 
     improvement programs for each CCIA region under this section 
     through a competitive bidding process.
       ``(2) Process.--Under such process--
       ``(A) the Secretary shall delineate the United States into 
     multiple chronic care improvement administrative regions; and
       ``(B) the Secretary shall select at least 2 winning bidders 
     in each CCIA region on the basis of the ability of each 
     bidder to carry out a chronic care improvement program in 
     accordance with this section, in order to achieve improved 
     health and financial outcomes.
       ``(3) Eligible contractor.--A contractor may be a disease 
     improvement organization, health insurer, provider 
     organization, a group of physicians, or any other legal 
     entity that the Secretary determines appropriate.
       ``(c) Chronic Care Improvement Programs.--
       ``(1) In general.--Each contract under this section shall 
     provide for the operation of a chronic care improvement 
     program by a contractor in a CCIA region consistent with this 
     subsection.
       ``(2) Identification of prospective program participants.--
     Each contractor shall have a method for identifying medicare 
     beneficiaries in the region to whom it will offer services 
     under its program. The contractor shall identify such 
     beneficiaries through claims or other data and other means 
     permitted consistent with applicable disclosure provisions.
       ``(3) Initial contact by secretary.--The Secretary shall 
     communicate with each beneficiary identified under paragraph 
     (2) as a prospective participant in one or more programs 
     concerning participation in a program. Such communication may 
     be made by the Secretary (or on behalf of the Secretary) and 
     shall include information on the following:
       ``(A) A description of the advantages to the beneficiary in 
     participating in a program.
       ``(B) Notification that the contractor offering a program 
     may contact the beneficiary directly concerning such 
     participation.
       ``(C) Notification that participation in a program is 
     voluntary.
       ``(D) A description of the method for the beneficiary to 
     select the single program in which the beneficiary wishes to 
     participate and for declining to participate and a method for 
     obtaining additional information concerning such 
     participation.
       ``(4) Participation.--A medicare beneficiary may 
     participate in only one program under this section and may 
     terminate participation at any time in a manner specified by 
     the Secretary.
       ``(5) Individual chronic care improvement plans.--
       ``(A) In general.--For each beneficiary participating in a 
     program of a contractor under this section, the contractor 
     shall develop with the beneficiary an individualized, goal-
     oriented chronic care improvement plan.
       ``(B) Elements of individual plan.--Each individual plan 
     developed under subparagraph (A) shall include a single point 
     of contact to coordinate care and the following, as 
     appropriate:
       ``(i) Self-improvement education for the beneficiary (such 
     as education for disease management through medical nutrition 
     therapy) and support education for health care providers, 
     primary caregivers, and family members.
       ``(ii) Coordination of health care services, such as 
     application of a prescription drug regimen and home health 
     services.
       ``(iii) Collaboration with physicians and other providers 
     to enhance communication of relevant clinical information.
       ``(iv) The use of monitoring technologies that enable 
     patient guidance through the exchange of pertinent clinical 
     information, such as vital signs, symptomatic information, 
     and health self-assessment.
       ``(v) The provision of information about hospice care, pain 
     and palliative care, and end-of-life care.
       ``(C) Contractor responsibilities.--In establishing and 
     carrying out individual plans under a program, a contractor 
     shall, directly or through subcontractors--
       ``(i) guide participants in managing their health, 
     including all their co-morbidities, and in performing 
     activities as specified under the elements of the plan;
       ``(ii) use decision support tools such as evidence-based 
     practice guidelines or other criteria as determined by the 
     Secretary; and
       ``(iii) develop a clinical information database to track 
     and monitor each participant across settings and to evaluate 
     outcomes.
       ``(6) Additional requirements.--The Secretary may establish 
     additional requirements for programs and contractors under 
     this section.
       ``(7) Accreditation.--The Secretary may provide that 
     programs that are accredited by qualified organizations may 
     be deemed to meet such requirements under this section as the 
     Secretary may specify.
       ``(c) Contract Terms.--
       ``(1) In general.--A contract under this section shall 
     contain such terms and conditions as the Secretary may 
     specify consistent with this section. The Secretary may not 
     enter into a contract with an entity under this section 
     unless the entity meets such clinical, quality improvement, 
     financial, and other requirements as the Secretary deems to 
     be appropriate for the population to be served.
       ``(2) Use of subcontractors permitted.--A contractor may 
     carry out a program directly or through contracts with 
     subcontractors.
       ``(3) Budget neutral payment condition.--In entering into a 
     contract with an entity under this subsection, the Secretary 
     shall establish payment rates that assure that there will be 
     no net aggregate increase in payments under this title over 
     any period of 3 years or longer, as agreed to by the 
     Secretary. Under this section, the Secretary shall assure 
     that medicare program outlays plus administrative expenses 
     (that would not have been paid under this title without 
     implementation of this section), including contractor fees, 
     shall not exceed the expenditures that would have been 
     incurred under this title for a comparable population in the 
     absence of the program under this section for the 3-year 
     contract period.
       ``(4) At risk relationship.--For purposes of section 
     1128B(b)(3)(F), a contract under this section shall be 
     treated as a risk-sharing arrangement referred to in such 
     section.
       ``(5) Performance standards.--Payment to contractors under 
     this section shall be subject to the contractor's meeting of 
     clinical and financial performance standards set by the 
     Secretary.
       ``(6) Contractor outcomes report.--Each contractor offering 
     a program shall monitor and report to the Secretary, in a 
     manner specified by the Secretary, the quality of care and 
     efficacy of such program in terms of--
       ``(A) process measures, such as reductions in errors of 
     treatment and rehospitalization rates;
       ``(B) beneficiary and provider satisfaction;
       ``(C) health outcomes; and
       ``(D) financial outcomes.
       ``(7) Phased in implementation.--Nothing in this section 
     shall be construed as preventing the Secretary from phasing 
     in the implementation of programs.
       ``(d) Biannual Outcomes Reports.--The Secretary shall 
     submit to the Congress biannual reports on the implementation 
     of this section. Each such report shall include information 
     on--
       ``(1) the scope of implementation (in terms of both regions 
     and chronic conditions);
       ``(2) program design; and
       ``(3) improvements in health outcomes and financial 
     efficiencies that result from such implementation.
       ``(e) Clinical Trials.--The Secretary shall conduct 
     randomized clinical trials, that compare program participants 
     with medicare beneficiaries who are offered, but decline, to 
     participate, in order to assess the potential of programs 
     to--
       ``(1) reduce costs under this title; and
       ``(2) improve health outcomes under this title.
       ``(f) Authorization of Appropriations.--There are 
     authorized to be appropriated to the Secretary, in 
     appropriate part from the Hospital Insurance Trust Fund and 
     the Supplementary Medical Insurance Trust Fund, such sums as 
     may be necessary to provide for contracts with chronic care 
     improvement programs under this section.
       ``(g) Limitation on Funding.--In no case shall the funding 
     under this section exceed $100,000,000 over a period of 3 
     years.''.

     SEC. 722. CHRONIC CARE IMPROVEMENT UNDER MEDICARE ADVANTAGE 
                   AND ENHANCED FEE-FOR-SERVICE PROGRAMS.

       (a) Under Medicare Advantage Program.--Section 1852 (42 
     U.S.C. 1395w-22) is amended--
       (1) by amending subsection (e) to read as follows:
       ``(e) Implementation of Chronic Care Improvement Programs 
     for Beneficiaries with Multiple or Sufficiently Severe 
     Chronic Conditions.--
       ``(1) In general.--Each Medicare Advantage organization 
     with respect to each Medicare Advantage plan it offers shall 
     have in

[[Page H6053]]

     effect, for enrollees with multiple or sufficiently severe 
     chronic conditions, a chronic care improvement program that 
     is designed to manage the needs of such enrollees and that 
     meets the requirements of this subsection.
       ``(2) Enrollee with multiple or sufficiently severe chronic 
     conditions.--For purposes of this subsection, the term 
     `enrollee with multiple or sufficiently severe chronic 
     conditions' means, with respect to an enrollee in a Medicare 
     Advantage plan of a Medicare Advantage organization, an 
     enrollee in the plan who has one or more chronic conditions, 
     such as congestive heart failure, diabetes, COPD, stroke, 
     prostate and colon cancer, hypertension, or other disease as 
     identified by the organization as appropriate for chronic 
     care improvement.
       ``(3) General requirements.--
       ``(A) In general.--Each chronic care improvement program 
     under this subsection shall be conducted consistent with this 
     subsection.
       ``(B) Identification of enrollees.--Each such program shall 
     have a method for monitoring and identifying enrollees with 
     multiple or sufficiently severe chronic conditions that meet 
     the organization's criteria for participation under the 
     program.
       ``(C) Development of plans.--For an enrollee identified 
     under subparagraph (B) for participation in a program, the 
     program shall develop, with the enrollee's consent, an 
     individualized, goal-oriented chronic care improvement plan 
     for chronic care improvement.
       ``(D) Elements of plans.--Each chronic care improvement 
     plan developed under subparagraph (C) shall include a single 
     point of contact to coordinate care and the following, as 
     appropriate:
       ``(i) Self-improvement education for the enrollee (such as 
     education for disease management through medical nutrition 
     therapy) and support education for health care providers, 
     primary caregivers, and family members.
       ``(ii) Coordination of health care services, such as 
     application of a prescription drug regimen and home health 
     services.
       ``(iii) Collaboration with physicians and other providers 
     to enhance communication of relevant clinical information.
       ``(iv) The use of monitoring technologies that enable 
     patient guidance through the exchange of pertinent clinical 
     information, such as vital signs, symptomatic information, 
     and health self-assessment.
       ``(v) The provision of information about hospice care, pain 
     and palliative care, and end-of-life care.
       ``(E) Organization responsibilities.--In establishing and 
     carrying out chronic care improvement plans for participants 
     under this paragraph, a Medicare Advantage organization 
     shall, directly or through subcontractors--
       ``(i) guide participants in managing their health, 
     including all their co-morbidities, and in performing the 
     activities as specified under the elements of the plan;
       ``(ii) use decision support tools such as evidence-based 
     practice guidelines or other criteria as determined by the 
     Secretary; and
       ``(iii) develop a clinical information database to track 
     and monitor each participant across settings and to evaluate 
     outcomes.
       ``(3) Additional requirements.--The Secretary may establish 
     additional requirements for chronic care improvement programs 
     under this section.
       ``(4) Accreditation.--The Secretary may provide that 
     chronic care improvement programs that are accredited by 
     qualified organizations may be deemed to meet such 
     requirements under this subsection as the Secretary may 
     specify.
       ``(5) Outcomes report.--Each Medicare Advantage 
     organization with respect to its chronic care improvement 
     program under this subsection shall monitor and report to the 
     Secretary information on the quality of care and efficacy of 
     such program as the Secretary may require.''; and
       (2) by amending subparagraph (I) of subsection (c)(1) to 
     read as follows:
       ``(I) Chronic care improvement program.--A description of 
     the organization's chronic care improvement program under 
     subsection (e).''.
       (b) Application under Enhanced Fee-for-Service Program.--
     Section 1860E-2(c)(3), as inserted by section 201(a), is 
     amended by inserting ``, including subsection (e) (relating 
     to implementation of chronic care improvement programs)'' 
     after ``The provisions of section 1852''.
       (c) Effective Date.--The amendments made by this section 
     shall apply for contract years beginning on or after 1 year 
     after the date of the enactment of this Act.

     SEC. 723. INSTITUTE OF MEDICINE REPORT.

       (a) Study.--
       (1) In general.--The Secretary of Health and Human Services 
     shall contract with the Institute of Medicine of the National 
     Academy of Sciences to conduct a study of the barriers to 
     effective integrated care improvement for medicare 
     beneficiaries with multiple or severe chronic conditions 
     across settings and over time and to submit a report under 
     subsection (b).
       (2) Specific items.--The study shall examine the statutory 
     and regulatory barriers to coordinating care across settings 
     for medicare beneficiaries in transition from one setting to 
     another (such as between hospital, nursing facility, home 
     health, hospice, and home). The study shall specifically 
     identify the following:
       (A) Clinical, financial, or administrative requirements in 
     the medicare program that present barriers to effective, 
     seamless transitions across care settings.
       (B) Policies that impede the establishment of 
     administrative and clinical information systems to track 
     health status, utilization, cost, and quality data across 
     settings.
       (C) State-level requirements that may present barriers to 
     better care for medicare beneficiaries.
       (3) Consultation.--The study under this subsection shall be 
     conducted in consultation with experts in the field of 
     chronic care, consumers, and family caregivers, working to 
     integrate care delivery and create more seamless transitions 
     across settings and over time.
       (b) Report.--The report under this subsection shall be 
     submitted to the Secretary and Congress not later than 18 
     months after the date of the enactment of this Act.

     SEC. 724. MEDPAC REPORT.

       (a) Evaluation.--shall conduct an evaluation that includes 
     a description of the status of the implementation of chronic 
     care improvement programs under section 1808 of the Social 
     Security Act, the quality of health care services provided to 
     individuals in such program, the health status of the 
     participants of such program, and the cost savings attributed 
     to implementation of such program.
       (b) Report.--Not later than 2 years after the date of 
     implementation of such chronic care improvement programs, the 
     Commission shall submit a report on such evaluation.

                      Subtitle D--Other Provisions

     SEC. 731. MODIFICATIONS TO MEDICARE PAYMENT ADVISORY 
                   COMMISSION (MEDPAC).

       (a) Examination of Budget Consequences.--Section 1805(b) 
     (42 U.S.C. 1395b-6(b)) is amended by adding at the end the 
     following new paragraph:
       ``(8) Examination of budget consequences.--Before making 
     any recommendations, the Commission shall examine the budget 
     consequences of such recommendations, directly or through 
     consultation with appropriate expert entities.''.
       (b) Consideration of Efficient Provision of Services.--
     Section 1805(b)(2)(B)(i) (42 U.S.C. 1395b-6(b)(2)(B)(i)) is 
     amended by inserting ``the efficient provision of'' after 
     ``expenditures for''.
       (c) Application of Disclosure Requirements.--
       (1) In general.--Section 1805(c)(2)(D) (42 U.S.C. 1395b-
     6(c)(2)(D)) is amended by adding at the end the following: 
     ``Members of the Commission shall be treated as employees of 
     the Congress for purposes of applying title I of the Ethics 
     in Government Act of 1978 (Public Law 95-521).''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on January 1, 2004.
       (d) Additional Reports.--
       (1) Data needs and sources.--The Medicare Payment Advisory 
     Commission shall conduct a study, and submit a report to 
     Congress by not later than June 1, 2004, on the need for 
     current data, and sources of current data available, to 
     determine the solvency and financial circumstances of 
     hospitals and other medicare providers of services. The 
     Commission shall examine data on uncompensated care, as well 
     as the share of uncompensated care accounted for by the 
     expenses for treating illegal aliens.
       (2) Use of tax-related returns.--Using return information 
     provided under Form 990 of the Internal Revenue Service, the 
     Commission shall submit to Congress, by not later than June 
     1, 2004, a report on the following:
       (A) Investments, endowments, and fundraising of hospitals 
     participating under the medicare program and related 
     foundations.
       (B) Access to capital financing for private and for not-
     for-profit hospitals.

     SEC. 732. DEMONSTRATION PROJECT FOR MEDICAL ADULT DAY CARE 
                   SERVICES.

       (a) Establishment.--Subject to the succeeding provisions of 
     this section, the Secretary of Health and Human Services 
     shall establish a demonstration project (in this section 
     referred to as the ``demonstration project'') under which the 
     Secretary shall, as part of a plan of an episode of care for 
     home health services established for a medicare beneficiary, 
     permit a home health agency, directly or under arrangements 
     with a medical adult day care facility, to provide medical 
     adult day care services as a substitute for a portion of home 
     health services that would otherwise be provided in the 
     beneficiary's home.
       (b) Payment.--
       (1) In general.--The amount of payment for an episode of 
     care for home health services, a portion of which consists of 
     substitute medical adult day care services, under the 
     demonstration project shall be made at a rate equal to 95 
     percent of the amount that would otherwise apply for such 
     home health services under section 1895 of the Social 
     Security Act (42 u.s.c. 1395fff). In no case may a home 
     health agency, or a medical adult day care facility under 
     arrangements with a home health agency, separately charge a 
     beneficiary for medical adult day care services furnished 
     under the plan of care.
       (2) Budget neutrality for demonstration project.--
     Notwithstanding any other provision of law, the Secretary 
     shall provide for an appropriate reduction in the aggregate 
     amount of additional payments made under section 1895 of the 
     Social Security Act (42 U.S.C. 1395fff) to reflect any 
     increase in

[[Page H6054]]

     amounts expended from the Trust Funds as a result of the 
     demonstration project conducted under this section.
       (c) Demonstration Project Sites.--The project established 
     under this section shall be conducted in not more than 5 
     States selected by the Secretary that license or certify 
     providers of services that furnish medical adult day care 
     services.
       (d) Duration.--The Secretary shall conduct the 
     demonstration project for a period of 3 years.
       (e) Voluntary Participation.--Participation of medicare 
     beneficiaries in the demonstration project shall be 
     voluntary. The total number of such beneficiaries that may 
     participate in the project at any given time may not exceed 
     15,000.
       (f) Preference in Selecting Agencies.--In selecting home 
     health agencies to participate under the demonstration 
     project, the Secretary shall give preference to those 
     agencies that are currently licensed or certified through 
     common ownership and control to furnish medical adult day 
     care services.
       (g) Waiver Authority.--The Secretary may waive such 
     requirements of title XVIII of the Social Security Act as may 
     be necessary for the purposes of carrying out the 
     demonstration project, other than waiving the requirement 
     that an individual be homebound in order to be eligible for 
     benefits for home health services.
       (h) Evaluation and Report.--The Secretary shall conduct an 
     evaluation of the clinical and cost effectiveness of the 
     demonstration project. Not later 30 months after the 
     commencement of the project, the Secretary shall submit to 
     Congress a report on the evaluation, and shall include in the 
     report the following:
       (1) An analysis of the patient outcomes and costs of 
     furnishing care to the medicare beneficiaries participating 
     in the project as compared to such outcomes and costs to 
     beneficiaries receiving only home health services for the 
     same health conditions.
       (2) Such recommendations regarding the extension, 
     expansion, or termination of the project as the Secretary 
     determines appropriate.
       (i) Definitions.--In this section:
       (1) Home health agency.--The term ``home health agency'' 
     has the meaning given such term in section 1861(o) of the 
     Social Security Act (42 U.S.C. 1395x(o)).
       (2) Medical adult day care facility.--The term ``medical 
     adult day care facility'' means a facility that--
       (A) has been licensed or certified by a State to furnish 
     medical adult day care services in the State for a continuous 
     2-year period;
       (B) is engaged in providing skilled nursing services and 
     other therapeutic services directly or under arrangement with 
     a home health agency;
       (C) meets such standards established by the Secretary to 
     assure quality of care and such other requirements as the 
     Secretary finds necessary in the interest of the health and 
     safety of individuals who are furnished services in the 
     facility; and
       (D) provides medical adult day care services.
       (3) Medical adult day care services.--The term ``medical 
     adult day care services'' means--
       (A) home health service items and services described in 
     paragraphs (1) through (7) of section 1861(m) furnished in a 
     medical adult day care facility;
       (B) a program of supervised activities furnished in a group 
     setting in the facility that--
       (i) meet such criteria as the Secretary determines 
     appropriate; and
       (ii) is designed to promote physical and mental health of 
     the individuals; and
       (C) such other services as the Secretary may specify.
       (4) Medicare beneficiary.--The term ``medicare 
     beneficiary'' means an individual entitled to benefits under 
     part A of this title, enrolled under part B of this title, or 
     both.

     SEC. 733. IMPROVEMENTS IN NATIONAL AND LOCAL COVERAGE 
                   DETERMINATION PROCESS TO RESPOND TO CHANGES IN 
                   TECHNOLOGY.

       (a) National and Local Coverage Determination Process.--
       (1) In general.--Section 1862 (42 U.S.C. 1395y) is 
     amended--
       (A) in the third sentence of subsection (a) by inserting 
     ``consistent with subsection (k)'' after ``the Secretary 
     shall ensure''; and
       (B) by adding at the end the following new subsection:
       ``(k) National and Local Coverage Determination Process.--
       ``(1) Factors and evidence used in making national coverage 
     determinations.--The Secretary shall make available to the 
     public the factors considered in making national coverage 
     determinations of whether an item or service is reasonable 
     and necessary. The Secretary shall develop guidance documents 
     to carry out this paragraph in a manner similar to the 
     development of guidance documents under section 701(h) of the 
     Federal Food, Drug, and Cosmetic Act (21 U.S.C. 371(h)).
       ``(2) Timeframe for decisions on requests for national 
     coverage determinations.--In the case of a request for a 
     national coverage determination that--
       ``(A) does not require a technology assessment from an 
     outside entity or deliberation from the Medicare Coverage 
     Advisory Committee, the decision on the request shall be made 
     not later than 6 months after the date of the request; or
       ``(B) requires such an assessment or deliberation and in 
     which a clinical trial is not requested, the decision on the 
     request shall be made not later than 9 months after the date 
     of the request.
       ``(3) Process for public comment in national coverage 
     determinations.--At the end of the 6-month period (or 9-month 
     period for requests described in paragraph (2)(B)) that 
     begins on the date a request for a national coverage 
     determination is made, the Secretary shall--
       ``(A) make a draft of proposed decision on the request 
     available to the public through the Medicare Internet site of 
     the Department of Health and Human Services or other 
     appropriate means;
       ``(B) provide a 30-day period for public comment on such 
     draft;
       ``(C) make a final decision on the request within 60 days 
     of the conclusion of the 30-day period referred to under 
     subparagraph (B);
       ``(D) include in such final decision summaries of the 
     public comments received and responses thereto;
       ``(E) make available to the public the clinical evidence 
     and other data used in making such a decision when the 
     decision differs from the recommendations of the Medicare 
     Coverage Advisory Committee; and
       ``(F) in the case of a decision to grant the coverage 
     determination, assign a temporary or permanent code and 
     implement the coding change.
       ``(4) Consultation with outside experts in certain national 
     coverage determinations.--With respect to a request for a 
     national coverage determination for which there is not a 
     review by the Medicare Coverage Advisory Committee, the 
     Secretary shall consult with appropriate outside clinical 
     experts.
       ``(5) Local coverage determination process.--With respect 
     to local coverage determinations made on or after January 1, 
     2004--
       ``(A) Plan to promote consistency of coverage 
     determinations.--The Secretary shall develop a plan to 
     evaluate new local coverage determinations to determine which 
     determinations should be adopted nationally and to what 
     extent greater consistency can be achieved among local 
     coverage determinations.
       ``(B) Consultation.--The Secretary shall require the fiscal 
     intermediaries or carriers providing services within the same 
     area to consult on all new local coverage determinations 
     within the area.
       ``(C) Dissemination of information.--The Secretary should 
     serve as a center to disseminate information on local 
     coverage determinations among fiscal intermediaries and 
     carriers to reduce duplication of effort.
       ``(6) National and local coverage determination defined.--
     For purposes of this subsection, the terms `national coverage 
     determination' and `local coverage determination' have the 
     meaning given such terms in paragraphs (1)(B) and (2)(B), 
     respectively, of section 1869(f).''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply to national and local coverage determinations as 
     of January 1, 2004.
       (b) Medicare Coverage of Routine Costs Associated With 
     Certain Clinical Trials.--
       (1) In general.--With respect to the coverage of routine 
     costs of care for beneficiaries participating in a qualifying 
     clinical trial, as set forth on the date of the enactment of 
     this Act in National Coverage Determination 30-1 of the 
     Medicare Coverage Issues Manual, the Secretary shall deem 
     clinical trials conducted in accordance with an 
     investigational device exemption approved under section 
     520(g) of the Federal Food, Drug, and Cosmetic Act (42 U.S.C. 
     360j(g)) to be automatically qualified for such coverage.
       (2) Rule of construction.--Nothing in this subsection shall 
     be construed as authorizing or requiring the Secretary to 
     modify the regulations set forth on the date of the enactment 
     of this Act at subpart B of part 405 of title 42, Code of 
     Federal Regulations, or subpart A of part 411 of such title, 
     relating to coverage of, and payment for, a medical device 
     that is the subject of an investigational device exemption by 
     the Food and Drug Administration (except as may be necessary 
     to implement paragraph (1)).
       (3) Effective date.--This subsection shall apply to 
     clinical trials begun before, on, or after the date of the 
     enactment of this Act and to items and services furnished on 
     or after such date.
       (c) Issuance of Temporary National Codes.--Not later than 
     January 1, 2004, the Secretary shall implement revised 
     procedures for the issuance of temporary national HCPCS codes 
     under part B of title XVIII of the Social Security Act.

     SEC. 734. TREATMENT OF CERTAIN PHYSICIAN PATHOLOGY SERVICES.

       (a) In General.--Section 1848(i) (42 U.S.C. 1395w-4(i)) is 
     amended by adding at the end the following new paragraph:
       ``(4) Treatment of certain inpatient physician pathology 
     services.--
       ``(A) In general.--With respect to services furnished on or 
     after January 1, 2004, and before January 1, 2009, if an 
     independent laboratory furnishes the technical component of a 
     physician pathology service to a fee-for-service medicare 
     beneficiary who is an inpatient or outpatient of a covered 
     hospital, the Secretary shall treat such component as a 
     service for which payment shall be made to the laboratory 
     under this section and not as

[[Page H6055]]

     an inpatient hospital service for which payment is made to 
     the hospital under section 1886(d) or as a hospital 
     outpatient service for which payment is made to the hospital 
     under section 1833(t).
       ``(B) Definitions.--In this paragraph:
       ``(i) Covered hospital.--

       ``(I) In general.--The term `covered hospital' means, with 
     respect to an inpatient or outpatient, a hospital that had an 
     arrangement with an independent laboratory that was in effect 
     as of July 22, 1999, under which a laboratory furnished the 
     technical component of physician pathology services to fee-
     for-service medicare beneficiaries who were hospital 
     inpatients or outpatients, respectively, and submitted claims 
     for payment for such component to a carrier with a contract 
     under section 1842 and not to the hospital.
       ``(II) Change in ownership does not affect determination.--
     A change in ownership with respect to a hospital on or after 
     the date referred to in subclause (I) shall not affect the 
     determination of whether such hospital is a covered hospital 
     for purposes of such subclause.

       ``(ii) Fee-for-service medicare beneficiary.--The term 
     `fee-for-service medicare beneficiary' means an individual 
     who is entitled to benefits under part A, or enrolled under 
     this part, or both, but is not enrolled in any of the 
     following:

       ``(I) A Medicare+Choice plan under part C.
       ``(II) A plan offered by an eligible organization under 
     section 1876.
       ``(III) A program of all-inclusive care for the elderly 
     (PACE) under section 1894.
       ``(IV) A social health maintenance organization (SHMO) 
     demonstration project established under section 4018(b) of 
     the Omnibus Budget Reconciliation Act of 1987 (Public Law 
     100-203).''.

       (b) Conforming Amendment.--Section 542 of the Medicare, 
     Medicaid, and SCHIP Benefits Improvement and Protection Act 
     of 2000 (114 Stat. 2763A-550), as enacted into law by section 
     1(a)(6) of Public Law 106-554, is repealed.
       (c) Effective Dates.--The amendments made by this section 
     shall take effect as if included in the enactment of the 
     Medicare, Medicaid, and SCHIP Benefits Improvement and 
     Protection Act of 2000 (Appendix F, 114 Stat. 2763A-463), as 
     enacted into law by section 1(a)(6) of Public Law 106-554.

     SEC. 735. CLINICAL INVESTIGATION OF MEDICARE PANCREATIC ISLET 
                   CELL TRANSPLANTS.

       The Secretary shall authorize payment under title XVIII of 
     the Social Security Act for the routine costs for items and 
     services for medicare beneficiaries received as part of a 
     clinical investigation of pancreatic islet cell transplants 
     conducted by the National Institutes of Health.

     SEC. 736. DEMONSTRATION PROJECT FOR CONSUMER-DIRECTED CHRONIC 
                   OUTPATIENT SERVICES.

       (a) Establishment.--
       (1) In general.--Subject to the succeeding provisions of 
     this section, the Secretary shall establish demonstration 
     projects (in this section referred to as ``demonstration 
     projects'') under which the Secretary shall evaluate methods 
     that improve the quality of care provided to medicare 
     beneficiaries with chronic conditions and that reduce 
     expenditures that would otherwise be made under the medicare 
     program on behalf of such individuals for such chronic 
     conditions, such methods to include permitting those 
     beneficiaries to direct their own health care needs and 
     services.
       (2) Medicare beneficiaries with chronic conditions 
     defined.--In this section, the term ``medicare beneficiaries 
     with chronic conditions'' means an individual entitled to 
     benefits under part A of title XVIII of the Social Security 
     Act, and enrolled under part B of such title, but who is not 
     enrolled under part C of such title who is diagnosed as 
     having one or more chronic conditions (as defined by the 
     Secretary), such as diabetes.
       (b) Design of Projects.--
       (1) In general.--In establishing the demonstration projects 
     under this section, the Secretary shall evaluate practices 
     employed by group health plans and practices under State 
     plans for medical assistance under the medicaid program under 
     title XIX of the Social Security Act that permit patients to 
     self-direct the provision of personal care services.
       (2) Scope of services.--The Secretary shall determine the 
     appropriate scope of personal care services that would apply 
     under the demonstration projects.
       (c) Voluntary Participation.--Participation of medicare 
     beneficiaries in the demonstration projects shall be 
     voluntary.
       (d) Demonstration Projects Sites.--Not later than 2 years 
     after the date of the enactment of this Act, the Secretary 
     shall conduct no fewer than 3 demonstration projects 
     established under this section. Of those demonstration 
     projects, the Secretary shall conduct at least one in each of 
     the following areas:
       (1) An urban area.
       (2) A rural area.
       (3) An area that the Secretary determines has a medicare 
     population with rate of incidence of diabetes that 
     significantly exceeds the national average rate of all areas.
       (e) Evaluation and Report.--
       (1) Evaluations.--The Secretary shall conduct evaluations 
     of the clinical and cost effectiveness of the demonstration 
     projects.
       (2) Reports.--Not later than 2 years after the commencement 
     of the demonstration projects, and biannually thereafter, the 
     Secretary shall submit to Congress a report on the 
     evaluation, and shall include in the report the following:
       (A) An analysis of the patient outcomes and costs of 
     furnishing care to the medicare beneficiaries participating 
     in the projects as compared to such outcomes and costs to 
     other beneficiaries for the same health conditions.
       (B) Evaluation of patient satisfaction under the 
     demonstration projects.
       (C) Such recommendations regarding the extension, 
     expansion, or termination of the projects as the Secretary 
     determines appropriate.

              TITLE VIII--MEDICARE BENEFITS ADMINISTRATION

     SEC. 801. ESTABLISHMENT OF MEDICARE BENEFITS ADMINISTRATION.

       (a) In General.--Title XVIII (42 U.S.C. 1395 et seq.), as 
     amended by sections 105 and 721, is amended by inserting 
     after 1808 the following new section:


                   ``medicare benefits administration

       ``Sec. 1809. (a) Establishment.--There is established 
     within the Department of Health and Human Services an agency 
     to be known as the Medicare Benefits Administration.
       ``(b) Administrator; Deputy Administrator; Chief Actuary.--
       ``(1) Administrator.--
       ``(A) In general.--The Medicare Benefits Administration 
     shall be headed by an administrator to be known as the 
     `Medicare Benefits Administrator' (in this section referred 
     to as the `Administrator') who shall be appointed by the 
     President, by and with the advice and consent of the Senate. 
     The Administrator shall be in direct line of authority to the 
     Secretary.
       ``(B) Compensation.--The Administrator shall be paid at the 
     rate of basic pay payable for level III of the Executive 
     Schedule under section 5314 of title 5, United States Code.
       ``(C) Term of office.--The Administrator shall be appointed 
     for a term of 4 years. In any case in which a successor does 
     not take office at the end of an Administrator's term of 
     office, that Administrator may continue in office until the 
     entry upon office of such a successor. An Administrator 
     appointed to a term of office after the commencement of such 
     term may serve under such appointment only for the remainder 
     of such term.
       ``(D) General authority.--The Administrator shall be 
     responsible for the exercise of all powers and the discharge 
     of all duties of the Administration, and shall have authority 
     and control over all personnel and activities thereof.
       ``(E) Rulemaking authority.--The Administrator may 
     prescribe such rules and regulations as the Administrator 
     determines necessary or appropriate to carry out the 
     functions of the Administration. The regulations prescribed 
     by the Administrator shall be subject to the rulemaking 
     procedures established under section 553 of title 5, United 
     States Code. The Administrator shall provide for the issuance 
     of new regulations to carry out parts C, D, and E.
       ``(F) Authority to establish organizational units.--The 
     Administrator may establish, alter, consolidate, or 
     discontinue such organizational units or components within 
     the Administration as the Administrator considers necessary 
     or appropriate, except as specified in this section.
       ``(G) Authority to delegate.--The Administrator may assign 
     duties, and delegate, or authorize successive redelegations 
     of, authority to act and to render decisions, to such 
     officers and employees of the Administration as the 
     Administrator may find necessary. Within the limitations of 
     such delegations, redelegations, or assignments, all official 
     acts and decisions of such officers and employees shall have 
     the same force and effect as though performed or rendered by 
     the Administrator.
       ``(2) Deputy administrator.--
       ``(A) In general.--There shall be a Deputy Administrator of 
     the Medicare Benefits Administration who shall be appointed 
     by the President, by and with the advice and consent of the 
     Senate.
       ``(B) Compensation.--The Deputy Administrator shall be paid 
     at the rate of basic pay payable for level IV of the 
     Executive Schedule under section 5315 of title 5, United 
     States Code.
       ``(C) Term of office.--The Deputy Administrator shall be 
     appointed for a term of 4 years. In any case in which a 
     successor does not take office at the end of a Deputy 
     Administrator's term of office, such Deputy Administrator may 
     continue in office until the entry upon office of such a 
     successor. A Deputy Administrator appointed to a term of 
     office after the commencement of such term may serve under 
     such appointment only for the remainder of such term.
       ``(D) Duties.--The Deputy Administrator shall perform such 
     duties and exercise such powers as the Administrator shall 
     from time to time assign or delegate. The Deputy 
     Administrator shall be Acting Administrator of the 
     Administration during the absence or disability of the 
     Administrator and, unless the President designates another 
     officer of the Government as Acting Administrator, in the 
     event of a vacancy in the office of the Administrator.
       ``(3) Chief actuary.--
       ``(A) In general.--There is established in the 
     Administration the position of Chief Actuary. The Chief 
     Actuary shall be appointed by, and in direct line of 
     authority to, the Administrator of such Administration. The 
     Chief Actuary shall be appointed from among individuals who 
     have demonstrated, by their education and experience, 
     superior

[[Page H6056]]

     expertise in the actuarial sciences. The Chief Actuary may be 
     removed only for cause.
       ``(B) Compensation.--The Chief Actuary shall be compensated 
     at the highest rate of basic pay for the Senior Executive 
     Service under section 5382(b) of title 5, United States Code.
       ``(C) Duties.--The Chief Actuary shall exercise such duties 
     as are appropriate for the office of the Chief Actuary and in 
     accordance with professional standards of actuarial 
     independence.
       ``(4) Secretarial coordination of program administration.--
     The Secretary shall ensure appropriate coordination between 
     the Administrator and the Administrator of the Centers for 
     Medicare & Medicaid Services in carrying out the programs 
     under this title.
       ``(c) Duties; Administrative Provisions.--
       ``(1) Duties.--
       ``(A) General duties.--The Administrator shall carry out 
     parts C, D, and E, including--
       ``(i) negotiating, entering into, and enforcing, contracts 
     with plans for the offering of Medicare Advantage plans under 
     part C and EFFS plans under part E, including the offering of 
     qualified prescription drug coverage under such plans; and
       ``(ii) negotiating, entering into, and enforcing, contracts 
     with PDP sponsors for the offering of prescription drug plans 
     under part D.
       ``(B) Other duties.--The Administrator shall carry out any 
     duty provided for under part C, part D, or part E, including 
     demonstration projects carried out in part or in whole under 
     such parts, the programs of all-inclusive care for the 
     elderly (PACE program) under section 1894, the social health 
     maintenance organization (SHMO) demonstration projects 
     (referred to in section 4104(c) of the Balanced Budget Act of 
     1997), medicare cost contractors under section 1876(h), and 
     through a Medicare Advantage 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 card.--The Administrator shall 
     carry out section 1807 (relating to the medicare prescription 
     drug discount card endorsement program).
       ``(D) Noninterference.--In carrying out its duties with 
     respect to the provision of qualified prescription drug 
     coverage to beneficiaries under this title, the Administrator 
     may not--
       ``(i) require a particular formulary or institute a price 
     structure for the reimbursement of covered outpatient drugs;
       ``(ii) interfere in any way with negotiations between PDP 
     sponsors and Medicare Advantage organizations and EFFS 
     organizations and drug manufacturers, wholesalers, or other 
     suppliers of covered outpatient drugs; and
       ``(iii) otherwise interfere with the competitive nature of 
     providing such coverage through such sponsors and 
     organizations.
       ``(E) Annual reports.--Not later March 31 of each year, the 
     Administrator shall submit to Congress and the President a 
     report on the administration of parts C, D, and E during the 
     previous fiscal year.
       ``(2) Staff.--
       ``(A) In general.--The Administrator, with the approval of 
     the Secretary, may employ, without regard to chapter 31 of 
     title 5, United States Code, other than sections 3102 through 
     3108, 3110 through 3113, 3136m and 3151, such officers and 
     employees as are necessary to administer the activities to be 
     carried out through the Medicare Benefits Administration. The 
     Administrator shall employ staff with appropriate and 
     necessary expertise in negotiating contracts in the private 
     sector.
       ``(B) Flexibility with respect to compensation.--
       ``(i) In general.--The staff of the Medicare Benefits 
     Administration shall, subject to clause (ii), be paid without 
     regard to the provisions of chapter 51 (other than section 
     5101) and chapter 53 (other than section 5301) 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.
       ``(C) Limitation on full-time equivalent staffing for 
     current cms functions being transferred.--The Administrator 
     may not employ under this paragraph a number of full-time 
     equivalent employees, to carry out functions that were 
     previously conducted by the Centers for Medicare & Medicaid 
     Services and that are conducted by the Administrator by 
     reason of this section, that exceeds the number of such full-
     time equivalent employees authorized to be employed by the 
     Centers for Medicare & Medicaid Services to conduct such 
     functions as of the date of the enactment of this Act.
       ``(3) Redelegation of certain functions of the centers for 
     medicare & medicaid services.--
       ``(A) In general.--The Secretary, the Administrator, and 
     the Administrator of the Centers for Medicare & Medicaid 
     Services shall establish an appropriate transition of 
     responsibility in order to redelegate the administration of 
     part C from the Secretary and the Administrator of the 
     Centers for Medicare & Medicaid Services to the Administrator 
     as is appropriate to carry out the purposes of this section.
       ``(B) Transfer of data and information.--The Secretary 
     shall ensure that the Administrator of the Centers for 
     Medicare & Medicaid Services transfers to the Administrator 
     of the Medicare Benefits Administration such information and 
     data in the possession of the Administrator of the Centers 
     for Medicare & Medicaid Services as the Administrator of the 
     Medicare Benefits Administration requires to carry out the 
     duties described in paragraph (1).
       ``(C) Construction.--Insofar as a responsibility of the 
     Secretary or the Administrator of the Centers for Medicare & 
     Medicaid Services is redelegated to the Administrator under 
     this section, any reference to the Secretary or the 
     Administrator of the Centers for Medicare & Medicaid Services 
     in this title or title XI with respect to such responsibility 
     is deemed to be a reference to the Administrator.
       ``(d) Office of Beneficiary Assistance.--
       ``(1) Establishment.--The Secretary shall establish within 
     the Medicare Benefits Administration an Office of Beneficiary 
     Assistance to coordinate functions relating to outreach and 
     education of medicare beneficiaries under this title, 
     including the functions described in paragraph (2). The 
     Office shall be separate operating division within the 
     Administration.
       ``(2) Dissemination of information on benefits and appeals 
     rights.--
       ``(A) Dissemination of benefits information.--The Office of 
     Beneficiary Assistance shall disseminate, directly or through 
     contract, to medicare beneficiaries, by mail, by posting on 
     the Internet site of the Medicare Benefits Administration and 
     through a toll-free telephone number, information with 
     respect to the following:
       ``(i) Benefits, and limitations on payment (including cost-
     sharing, stop-loss provisions, and formulary restrictions) 
     under parts C, D, and E.
       ``(ii) Benefits, and limitations on payment under parts A 
     and B, including information on medicare supplemental 
     policies under section 1882.
     Such information shall be presented in a manner so that 
     medicare beneficiaries may compare benefits under parts A, B, 
     D, and medicare supplemental policies with benefits under 
     Medicare Advantage plans under part C and EFFS plans under 
     part E.
       ``(B) Dissemination of appeals rights information.--The 
     Office of Beneficiary Assistance shall disseminate to 
     medicare beneficiaries in the manner provided under 
     subparagraph (A) a description of procedural rights 
     (including grievance and appeals procedures) of beneficiaries 
     under the original medicare fee-for-service program under 
     parts A and B, the Medicare Advantage program under part C, 
     the Voluntary Prescription Drug Benefit Program under part D, 
     and the Enhanced Fee-for-Service program under part E.
       ``(e) Medicare Policy Advisory Board.--
       ``(1) Establishment.--There is established within the 
     Medicare Benefits Administration the Medicare Policy Advisory 
     Board (in this section referred to the `Board'). The Board 
     shall advise, consult with, and make recommendations to the 
     Administrator of the Medicare Benefits Administration with 
     respect to the administration of parts C, D, and E, including 
     the review of payment policies under such parts.
       ``(2) Reports.--
       ``(A) In general.--With respect to matters of the 
     administration of parts C, D, and E the Board shall submit to 
     Congress and to the Administrator of the Medicare Benefits 
     Administration 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 such parts, including the topics described 
     in subparagraph (B). Each such report shall be published in 
     the Federal Register.
       ``(B) Topics described.--Reports required under 
     subparagraph (A) may include the following topics:
       ``(i) Fostering competition.--Recommendations or proposals 
     to increase competition under parts C, D, and E for services 
     furnished to medicare beneficiaries.
       ``(ii) Education and enrollment.--Recommendations for the 
     improvement to efforts to provide medicare beneficiaries 
     information and education on the program under this title, 
     and specifically parts C, D, and E, and the program for 
     enrollment under the title.
       ``(iii) Implementation of risk-adjustment.--Evaluation of 
     the implementation under section 1853(a)(3)(C) of the risk 
     adjustment methodology to payment rates under that section to 
     Medicare Advantage organizations offering Medicare Advantage 
     plans (and the corresponding payment provisions under part E) 
     that accounts for variations in per capita costs based on 
     health status, geography, and other demographic factors.
       ``(iv) Rural access.--Recommendations to improve 
     competition and access to plans under parts C, D, and E in 
     rural areas.
       ``(C) 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.
       ``(3) Duty of administrator of medicare benefits 
     administration.--With respect to any report submitted by the 
     Board under

[[Page H6057]]

     paragraph (2)(A), not later than 90 days after the report is 
     submitted, the Administrator of the Medicare Benefits 
     Administration shall submit to Congress and the President an 
     analysis of recommendations made by the Board in such report. 
     Each such analysis shall be published in the Federal 
     Register.
       ``(4) Membership.--
       ``(A) Appointment.--Subject to the succeeding provisions of 
     this paragraph, the Board shall consist of seven members to 
     be appointed as follows:
       ``(i) Three members shall be appointed by the President.
       ``(ii) Two members shall be appointed by the Speaker of the 
     House of Representatives, with the advice of the chairmen and 
     the ranking minority members of the Committees on Ways and 
     Means and on Energy and Commerce of the House of 
     Representatives.
       ``(iii) Two members shall be appointed by the President pro 
     tempore of the Senate with the advice of the chairman and the 
     ranking minority member of the Senate Committee on Finance.
       ``(B) 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 and experience in health care benefits management, 
     exceptionally qualified to perform the duties of members of 
     the Board.
       ``(C) Prohibition on inclusion of federal employees.--No 
     officer or employee of the United States may serve as a 
     member of the Board.
       ``(5) Compensation.--Members of the Board shall receive, 
     for each day (including travel time) they are engaged in the 
     performance of the functions of the board, compensation at 
     rates not to exceed the daily equivalent to the annual rate 
     in effect for level IV of the Executive Schedule under 
     section 5315 of title 5, United States Code.
       ``(6) Terms of office.--
       ``(A) In general.--The term of office of members of the 
     Board shall be 3 years.
       ``(B) Terms of initial appointees.--As designated by the 
     President at the time of appointment, of the members first 
     appointed--
       ``(i) one shall be appointed for a term of 1 year;
       ``(ii) three shall be appointed for terms of 2 years; and
       ``(iii) three shall be appointed for terms of 3 years.
       ``(C) Reappointments.--Any person appointed as a member of 
     the Board may not serve for more than 8 years.
       ``(D) Vacancy.--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.
       ``(7) Chair.--The Chair of the Board shall be elected by 
     the members. The term of office of the Chair shall be 3 
     years.
       ``(8) Meetings.--The Board shall meet at the call of the 
     Chair, but in no event less than three times during each 
     fiscal year.
       ``(9) Director and staff.--
       ``(A) Appointment of director.--The Board shall have a 
     Director who shall be appointed by the Chair.
       ``(B) In general.--With the approval of the Board, the 
     Director may appoint, without regard to chapter 31 of title 
     5, United States Code, such additional personnel as the 
     Director considers appropriate.
       ``(C) Flexibility with respect to compensation.--
       ``(i) In general.--The Director and staff of the Board 
     shall, subject to clause (ii), be paid without regard to the 
     provisions of chapter 51 and chapter 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.
       ``(D) Assistance from the administrator of the medicare 
     benefits administration.--The Administrator of the Medicare 
     Benefits Administration shall make available to the Board 
     such information and other assistance as it may require to 
     carry out its functions.
       ``(10) Contract authority.--The Board may contract with and 
     compensate government and private agencies or persons to 
     carry out its duties under this subsection, without regard to 
     section 3709 of the Revised Statutes (41 U.S.C. 5).
       ``(f) Funding.--There is authorized to be appropriated, in 
     appropriate part from the Federal Hospital Insurance Trust 
     Fund and from the Federal Supplementary Medical Insurance 
     Trust Fund (including the Medicare Prescription Drug 
     Account), such sums as are necessary to carry out this 
     section.''.
       (b) Effective Date.--
       (1) In general.--The amendment made by subsection (a) shall 
     take effect on the date of the enactment of this Act.
       (2) Duties with respect to eligibility determinations and 
     enrollment.--The Administrator of the Medicare Benefits 
     Administration shall carry out enrollment under title XVIII 
     of the Social Security Act, make eligibility determinations 
     under such title, and carry out parts C and E of such title 
     for years beginning or after January 1, 2006.
       (3) Transition.--Before the date the Administrator of the 
     Medicare Benefits Administration is appointed and assumes 
     responsibilities under this section and section 1807 of the 
     Social Security Act, the Secretary of Health and Human 
     Services shall provide for the conduct of any 
     responsibilities of such Administrator that are otherwise 
     provided under law.
       (c) Miscellaneous Administrative Provisions.--
       (1) Administrator as member of the board of trustees of the 
     medicare trust funds.--Section 1817(b) and section 1841(b) 
     (42 U.S.C. 1395i(b), 1395t(b)) are each amended by striking 
     ``and the Secretary of Health and Human Services, all ex 
     officio,'' and inserting ``the Secretary of Health and Human 
     Services, and the Administrator of the Medicare Benefits 
     Administration, all ex officio,''.
       (2) Increase in grade to executive level iii for the 
     administrator of the centers for medicare & medicaid 
     services; level for medicare benefits administrator.--
       (A) In general.--Section 5314 of title 5, United States 
     Code, by adding at the end the following:
       ``Administrator of the Centers for Medicare & Medicaid 
     Services.
       ``Administrator of the Medicare Benefits Administration.''.
       (B) Conforming amendment.--Section 5315 of such title is 
     amended by striking ``Administrator of the Health Care 
     Financing Administration.''.
       (C) Effective date.--The amendments made by this paragraph 
     take effect on January 1, 2004.

         TITLE IX--REGULATORY REDUCTION AND CONTRACTING REFORM

                     Subtitle A--Regulatory Reform

     SEC. 901. CONSTRUCTION; DEFINITION OF SUPPLIER.

       (a) Construction.--Nothing in this title shall be 
     construed--
       (1) to compromise or affect existing legal remedies for 
     addressing fraud or abuse, whether it be criminal 
     prosecution, civil enforcement, or administrative remedies, 
     including under sections 3729 through 3733 of title 31, 
     United States Code (known as the False Claims Act); or
       (2) to prevent or impede the Department of Health and Human 
     Services in any way from its ongoing efforts to eliminate 
     waste, fraud, and abuse in the medicare program.
     Furthermore, the consolidation of medicare administrative 
     contracting set forth in this Act does not constitute 
     consolidation of the Federal Hospital Insurance Trust Fund 
     and the Federal Supplementary Medical Insurance Trust Fund or 
     reflect any position on that issue.
       (b) Definition of Supplier.--Section 1861 (42 U.S.C. 1395x) 
     is amended by inserting after subsection (c) the following 
     new subsection:

                               ``Supplier

       ``(d) The term `supplier' means, unless the context 
     otherwise requires, a physician or other practitioner, a 
     facility, or other entity (other than a provider of services) 
     that furnishes items or services under this title.''.

     SEC. 902. ISSUANCE OF REGULATIONS.

       (a) Regular Timeline for Publication of Final Rules.--
       (1) In general.--Section 1871(a) (42 U.S.C. 1395hh(a)) is 
     amended by adding at the end the following new paragraph:
       ``(3)(A) The Secretary, in consultation with the Director 
     of the Office of Management and Budget, shall establish and 
     publish a regular timeline for the publication of final 
     regulations based on the previous publication of a proposed 
     regulation or an interim final regulation.
       ``(B) Such timeline may vary among different regulations 
     based on differences in the complexity of the regulation, the 
     number and scope of comments received, and other relevant 
     factors, but shall not be longer than 3 years except under 
     exceptional circumstances. If the Secretary intends to vary 
     such timeline with respect to the publication of a final 
     regulation, the Secretary shall cause to have published in 
     the Federal Register notice of the different timeline by not 
     later than the timeline previously established with respect 
     to such regulation. Such notice shall include a brief 
     explanation of the justification for such variation.
       ``(C) In the case of interim final regulations, upon the 
     expiration of the regular timeline established under this 
     paragraph for the publication of a final regulation after 
     opportunity for public comment, the interim final regulation 
     shall not continue in effect unless the Secretary publishes 
     (at the end of the regular timeline and, if applicable, at 
     the end of each succeeding 1-year period) a notice of 
     continuation of the regulation that includes an explanation 
     of why the regular timeline (and any subsequent 1-year 
     extension) was not complied with. If such a notice is 
     published, the regular timeline (or such timeline as 
     previously extended under this paragraph) for publication of 
     the final regulation shall be treated as having been extended 
     for 1 additional year.
       ``(D) The Secretary shall annually submit to Congress a 
     report that describes the instances in which the Secretary 
     failed to publish a final regulation within the applicable 
     regular timeline under this paragraph and that provides an 
     explanation for such failures.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on the date of the enactment of this Act. 
     The Secretary shall provide for an appropriate transition to 
     take into account the backlog of previously published interim 
     final regulations.

[[Page H6058]]

       (b) Limitations on New Matter in Final Regulations.--
       (1) In general.--Section 1871(a) (42 U.S.C. 1395hh(a)), as 
     amended by subsection (a), is amended by adding at the end 
     the following new paragraph:
       ``(4) If the Secretary publishes a final regulation that 
     includes a provision that is not a logical outgrowth of a 
     previously published notice of proposed rulemaking or interim 
     final rule, such provision shall be treated as a proposed 
     regulation and shall not take effect until there is the 
     further opportunity for public comment and a publication of 
     the provision again as a final regulation.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to final regulations published on or after the 
     date of the enactment of this Act.

     SEC. 903. COMPLIANCE WITH CHANGES IN REGULATIONS AND 
                   POLICIES.

       (a) No Retroactive Application of Substantive Changes.--
       (1) In general.--Section 1871 (42 U.S.C. 1395hh), as 
     amended by section 902(a), is amended by adding at the end 
     the following new subsection:
       ``(e)(1)(A) A substantive change in regulations, manual 
     instructions, interpretative rules, statements of policy, or 
     guidelines of general applicability under this title shall 
     not be applied (by extrapolation or otherwise) retroactively 
     to items and services furnished before the effective date of 
     the change, unless the Secretary determines that--
       ``(i) such retroactive application is necessary to comply 
     with statutory requirements; or
       ``(ii) failure to apply the change retroactively would be 
     contrary to the public interest.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to substantive changes issued on or after the 
     date of the enactment of this Act.
       (b) Timeline for Compliance With Substantive Changes After 
     Notice.--
       (1) In general.--Section 1871(e)(1), as added by subsection 
     (a), is amended by adding at the end the following:
       ``(B)(i) Except as provided in clause (ii), a substantive 
     change referred to in subparagraph (A) shall not become 
     effective before the end of the 30-day period that begins on 
     the date that the Secretary has issued or published, as the 
     case may be, the substantive change.
       ``(ii) The Secretary may provide for such a substantive 
     change to take effect on a date that precedes the end of the 
     30-day period under clause (i) if the Secretary finds that 
     waiver of such 30-day period is necessary to comply with 
     statutory requirements or that the application of such 30-day 
     period is contrary to the public interest. If the Secretary 
     provides for an earlier effective date pursuant to this 
     clause, the Secretary shall include in the issuance or 
     publication of the substantive change a finding described in 
     the first sentence, and a brief statement of the reasons for 
     such finding.
       ``(C) No action shall be taken against a provider of 
     services or supplier with respect to noncompliance with such 
     a substantive change for items and services furnished before 
     the effective date of such a change.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to compliance actions undertaken on or after the 
     date of the enactment of this Act.
       (c) Reliance on Guidance.--
       (1) In general.--Section 1871(e), as added by subsection 
     (a), is further amended by adding at the end the following 
     new paragraph:
       ``(2)(A) If--
       ``(i) a provider of services or supplier follows the 
     written guidance (which may be transmitted electronically) 
     provided by the Secretary or by a medicare contractor (as 
     defined in section 1889(g)) acting within the scope of the 
     contractor's contract authority, with respect to the 
     furnishing of items or services and submission of a claim for 
     benefits for such items or services with respect to such 
     provider or supplier;
       ``(ii) the Secretary determines that the provider of 
     services or supplier has accurately presented the 
     circumstances relating to such items, services, and claim to 
     the contractor in writing; and
       ``(iii) the guidance was in error;
     the provider of services or supplier shall not be subject to 
     any sanction (including any penalty or requirement for 
     repayment of any amount) if the provider of services or 
     supplier reasonably relied on such guidance.
       ``(B) Subparagraph (A) shall not be construed as preventing 
     the recoupment or repayment (without any additional penalty) 
     relating to an overpayment insofar as the overpayment was 
     solely the result of a clerical or technical operational 
     error.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on the date of the enactment of this Act 
     but shall not apply to any sanction for which notice was 
     provided on or before the date of the enactment of this Act.

     SEC. 904. REPORTS AND STUDIES RELATING TO REGULATORY REFORM.

       (a) GAO Study on Advisory Opinion Authority.--
       (1) Study.--The Comptroller General of the United States 
     shall conduct a study to determine the feasibility and 
     appropriateness of establishing in the Secretary authority to 
     provide legally binding advisory opinions on appropriate 
     interpretation and application of regulations to carry out 
     the medicare program under title XVIII of the Social Security 
     Act. Such study shall examine the appropriate timeframe for 
     issuing such advisory opinions, as well as the need for 
     additional staff and funding to provide such opinions.
       (2) Report.--The Comptroller General shall submit to 
     Congress a report on the study conducted under paragraph (1) 
     by not later than one year after the date of the enactment of 
     this Act.
       (b) Report on Legal and Regulatory Inconsistencies.--
     Section 1871 (42 U.S.C. 1395hh), as amended by section 2(a), 
     is amended by adding at the end the following new subsection:
       ``(f)(1) Not later than 2 years after the date of the 
     enactment of this subsection, and every 2 years thereafter, 
     the Secretary shall submit to Congress a report with respect 
     to the administration of this title and areas of 
     inconsistency or conflict among the various provisions under 
     law and regulation.
       ``(2) In preparing a report under paragraph (1), the 
     Secretary shall collect--
       ``(A) information from individuals entitled to benefits 
     under part A or enrolled under part B, or both, providers of 
     services, and suppliers and from the Medicare Beneficiary 
     Ombudsman and the Medicare Provider Ombudsman with respect to 
     such areas of inconsistency and conflict; and
       ``(B) information from medicare contractors that tracks the 
     nature of written and telephone inquiries.
       ``(3) A report under paragraph (1) shall include a 
     description of efforts by the Secretary to reduce such 
     inconsistency or conflicts, and recommendations for 
     legislation or administrative action that the Secretary 
     determines appropriate to further reduce such inconsistency 
     or conflicts.''.

                     Subtitle B--Contracting Reform

     SEC. 911. INCREASED FLEXIBILITY IN MEDICARE ADMINISTRATION.

       (a) Consolidation and Flexibility in Medicare 
     Administration.--
       (1) In general.--Title XVIII is amended by inserting after 
     section 1874 the following new section:


          ``contracts with medicare administrative contractors

       ``Sec. 1874A. (a) Authority.--
       ``(1) Authority to enter into contracts.--The Secretary may 
     enter into contracts with any eligible entity to serve as a 
     medicare administrative contractor with respect to the 
     performance of any or all of the functions described in 
     paragraph (4) or parts of those functions (or, to the extent 
     provided in a contract, to secure performance thereof by 
     other entities).
       ``(2) Eligibility of entities.--An entity is eligible to 
     enter into a contract with respect to the performance of a 
     particular function described in paragraph (4) only if--
       ``(A) the entity has demonstrated capability to carry out 
     such function;
       ``(B) the entity complies with such conflict of interest 
     standards as are generally applicable to Federal acquisition 
     and procurement;
       ``(C) the entity has sufficient assets to financially 
     support the performance of such function; and
       ``(D) the entity meets such other requirements as the 
     Secretary may impose.
       ``(3) Medicare administrative contractor defined.--For 
     purposes of this title and title XI--
       ``(A) In general.--The term `medicare administrative 
     contractor' means an agency, organization, or other person 
     with a contract under this section.
       ``(B) Appropriate medicare administrative contractor.--With 
     respect to the performance of a particular function in 
     relation to an individual entitled to benefits under part A 
     or enrolled under part B, or both, a specific provider of 
     services or supplier (or class of such providers of services 
     or suppliers), the `appropriate' medicare administrative 
     contractor is the medicare administrative contractor that has 
     a contract under this section with respect to the performance 
     of that function in relation to that individual, provider of 
     services or supplier or class of provider of services or 
     supplier.
       ``(4) Functions described.--The functions referred to in 
     paragraphs (1) and (2) are payment functions, provider 
     services functions, and functions relating to services 
     furnished to individuals entitled to benefits under part A or 
     enrolled under part B, or both, as follows:
       ``(A) Determination of payment amounts.--Determining 
     (subject to the provisions of section 1878 and to such review 
     by the Secretary as may be provided for by the contracts) the 
     amount of the payments required pursuant to this title to be 
     made to providers of services, suppliers and individuals.
       ``(B) Making payments.--Making payments described in 
     subparagraph (A) (including receipt, disbursement, and 
     accounting for funds in making such payments).
       ``(C) Beneficiary education and assistance.--Providing 
     education and outreach to individuals entitled to benefits 
     under part A or enrolled under part B, or both, and providing 
     assistance to those individuals with specific issues, 
     concerns or problems.
       ``(D) Provider consultative services.--Providing 
     consultative services to institutions, agencies, and other 
     persons to enable them to establish and maintain fiscal 
     records necessary for purposes of this title and otherwise to 
     qualify as providers of services or suppliers.
       ``(E) Communication with providers.--Communicating to 
     providers of services and suppliers any information or 
     instructions furnished to the medicare administrative

[[Page H6059]]

     contractor by the Secretary, and facilitating communication 
     between such providers and suppliers and the Secretary.
       ``(F) Provider education and technical assistance.--
     Performing the functions relating to provider education, 
     training, and technical assistance.
       ``(G) Additional functions.--Performing such other 
     functions as are necessary to carry out the purposes of this 
     title.
       ``(5) Relationship to mip contracts.--
       ``(A) Nonduplication of duties.--In entering into contracts 
     under this section, the Secretary shall assure that functions 
     of medicare administrative contractors in carrying out 
     activities under parts A and B do not duplicate activities 
     carried out under the Medicare Integrity Program under 
     section 1893. The previous sentence shall not apply with 
     respect to the activity described in section 1893(b)(5) 
     (relating to prior authorization of certain items of durable 
     medical equipment under section 1834(a)(15)).
       ``(B) Construction.--An entity shall not be treated as a 
     medicare administrative contractor merely by reason of having 
     entered into a contract with the Secretary under section 
     1893.
       ``(6) Application of federal acquisition regulation.--
     Except to the extent inconsistent with a specific requirement 
     of this title, the Federal Acquisition Regulation applies to 
     contracts under this title.
       ``(b) Contracting Requirements.--
       ``(1) Use of competitive procedures.--
       ``(A) In general.--Except as provided in laws with general 
     applicability to Federal acquisition and procurement or in 
     subparagraph (B), the Secretary shall use competitive 
     procedures when entering into contracts with medicare 
     administrative contractors under this section, taking into 
     account performance quality as well as price and other 
     factors.
       ``(B) Renewal of contracts.--The Secretary may renew a 
     contract with a medicare administrative contractor under this 
     section from term to term without regard to section 5 of 
     title 41, United States Code, or any other provision of law 
     requiring competition, if the medicare administrative 
     contractor has met or exceeded the performance requirements 
     applicable with respect to the contract and contractor, 
     except that the Secretary shall provide for the application 
     of competitive procedures under such a contract not less 
     frequently than once every five years.
       ``(C) Transfer of functions.--The Secretary may transfer 
     functions among medicare administrative contractors 
     consistent with the provisions of this paragraph. The 
     Secretary shall ensure that performance quality is considered 
     in such transfers. The Secretary shall provide public notice 
     (whether in the Federal Register or otherwise) of any such 
     transfer (including a description of the functions so 
     transferred, a description of the providers of services and 
     suppliers affected by such transfer, and contact information 
     for the contractors involved).
       ``(D) Incentives for quality.--The Secretary shall provide 
     incentives for medicare administrative contractors to provide 
     quality service and to promote efficiency.
       ``(2) Compliance with requirements.--No contract under this 
     section shall be entered into with any medicare 
     administrative contractor unless the Secretary finds that 
     such medicare administrative contractor will perform its 
     obligations under the contract efficiently and effectively 
     and will meet such requirements as to financial 
     responsibility, legal authority, quality of services 
     provided, and other matters as the Secretary finds pertinent.
       ``(3) Performance requirements.--
       ``(A) Development of specific performance requirements.--In 
     developing contract performance requirements, the Secretary 
     shall develop performance requirements applicable to 
     functions described in subsection (a)(4).
       ``(B) Consultation.-- In developing such requirements, the 
     Secretary may consult with providers of services and 
     suppliers, organizations representing individuals entitled to 
     benefits under part A or enrolled under part B, or both, and 
     organizations and agencies performing functions necessary to 
     carry out the purposes of this section with respect to such 
     performance requirements.
       ``(C) Inclusion in contracts.--All contractor performance 
     requirements shall be set forth in the contract between the 
     Secretary and the appropriate medicare administrative 
     contractor. Such performance requirements--
       ``(i) shall reflect the performance requirements developed 
     under subparagraph (A), but may include additional 
     performance requirements;
       ``(ii) shall be used for evaluating contractor performance 
     under the contract; and
       ``(iii) shall be consistent with the written statement of 
     work provided under the contract.
       ``(4) Information requirements.--The Secretary shall not 
     enter into a contract with a medicare administrative 
     contractor under this section unless the contractor agrees--
       ``(A) to furnish to the Secretary such timely information 
     and reports as the Secretary may find necessary in performing 
     his functions under this title; and
       ``(B) to maintain such records and afford such access 
     thereto as the Secretary finds necessary to assure the 
     correctness and verification of the information and reports 
     under subparagraph (A) and otherwise to carry out the 
     purposes of this title.
       ``(5) Surety bond.--A contract with a medicare 
     administrative contractor under this section may require the 
     medicare administrative contractor, and any of its officers 
     or employees certifying payments or disbursing funds pursuant 
     to the contract, or otherwise participating in carrying out 
     the contract, to give surety bond to the United States in 
     such amount as the Secretary may deem appropriate.
       ``(c) Terms and Conditions.--
       ``(1) In general.--A contract with any medicare 
     administrative contractor under this section may contain such 
     terms and conditions as the Secretary finds necessary or 
     appropriate and may provide for advances of funds to the 
     medicare administrative contractor for the making of payments 
     by it under subsection (a)(4)(B).
       ``(2) Prohibition on mandates for certain data 
     collection.--The Secretary may not require, as a condition of 
     entering into, or renewing, a contract under this section, 
     that the medicare administrative contractor match data 
     obtained other than in its activities under this title with 
     data used in the administration of this title for purposes of 
     identifying situations in which the provisions of section 
     1862(b) may apply.
       ``(d) Limitation on Liability of Medicare Administrative 
     Contractors and Certain Officers.--
       ``(1) Certifying officer.--No individual designated 
     pursuant to a contract under this section as a certifying 
     officer shall, in the absence of the reckless disregard of 
     the individual's obligations or the intent by that individual 
     to defraud the United States, be liable with respect to any 
     payments certified by the individual under this section.
       ``(2) Disbursing officer.--No disbursing officer shall, in 
     the absence of the reckless disregard of the officer's 
     obligations or the intent by that officer to defraud the 
     United States, be liable with respect to any payment by such 
     officer under this section if it was based upon an 
     authorization (which meets the applicable requirements for 
     such internal controls established by the Comptroller 
     General) of a certifying officer designated as provided in 
     paragraph (1) of this subsection.
       ``(3) Liability of medicare administrative contractor.--
       ``(A) In general.--No medicare administrative contractor 
     shall be liable to the United States for a payment by a 
     certifying or disbursing officer unless, in connection with 
     such payment, the medicare administrative contractor acted 
     with reckless disregard of its obligations under its medicare 
     administrative contract or with intent to defraud the United 
     States.
       ``(B) Relationship to false claims act.--Nothing in this 
     subsection shall be construed to limit liability for conduct 
     that would constitute a violation of sections 3729 through 
     3731 of title 31, United States Code (commonly known as the 
     `False Claims Act').
       ``(4) Indemnification by secretary.--
       ``(A) In general.--Subject to subparagraphs (B) and (D), in 
     the case of a medicare administrative contractor (or a person 
     who is a director, officer, or employee of such a contractor 
     or who is engaged by the contractor to participate directly 
     in the claims administration process) who is made a party to 
     any judicial or administrative proceeding arising from or 
     relating directly to the claims administration process under 
     this title, the Secretary may, to the extent the Secretary 
     determines to be appropriate and as specified in the contract 
     with the contractor, indemnify the contractor and such 
     persons.
       ``(B) Conditions.--The Secretary may not provide 
     indemnification under subparagraph (A) insofar as the 
     liability for such costs arises directly from conduct that is 
     determined by the judicial proceeding or by the Secretary to 
     be criminal in nature, fraudulent, or grossly negligent. If 
     indemnification is provided by the Secretary with respect to 
     a contractor before a determination that such costs arose 
     directly from such conduct, the contractor shall reimburse 
     the Secretary for costs of indemnification.
       ``(C) Scope of indemnification.--Indemnification by the 
     Secretary under subparagraph (A) may include payment of 
     judgments, settlements (subject to subparagraph (D)), awards, 
     and costs (including reasonable legal expenses).
       ``(D) Written approval for settlements.--A contractor or 
     other person described in subparagraph (A) may not propose to 
     negotiate a settlement or compromise of a proceeding 
     described in such subparagraph without the prior written 
     approval of the Secretary to negotiate such settlement or 
     compromise. Any indemnification under subparagraph (A) with 
     respect to amounts paid under a settlement or compromise of a 
     proceeding described in such subparagraph are conditioned 
     upon prior written approval by the Secretary of the final 
     settlement or compromise.
       ``(E) Construction.--Nothing in this paragraph shall be 
     construed--
       ``(i) to change any common law immunity that may be 
     available to a medicare administrative contractor or person 
     described in subparagraph (A); or
       ``(ii) to permit the payment of costs not otherwise 
     allowable, reasonable, or allocable under the Federal 
     Acquisition Regulations.''.
       (2) Consideration of incorporation of current law 
     standards.--In developing contract performance requirements 
     under section 1874A(b) of the Social Security Act, as 
     inserted by paragraph (1), the Secretary shall consider 
     inclusion of the performance

[[Page H6060]]

     standards described in sections 1816(f)(2) of such Act 
     (relating to timely processing of reconsiderations and 
     applications for exemptions) and section 1842(b)(2)(B) of 
     such Act (relating to timely review of determinations and 
     fair hearing requests), as such sections were in effect 
     before the date of the enactment of this Act.
       (b) Conforming Amendments to Section 1816 (Relating to 
     Fiscal Intermediaries).--Section 1816 (42 U.S.C. 1395h) is 
     amended as follows:
       (1) The heading is amended to read as follows:


        ``provisions relating to the administration of part a''.

       (2) Subsection (a) is amended to read as follows:
       ``(a) The administration of this part shall be conducted 
     through contracts with medicare administrative contractors 
     under section 1874A.''.
       (3) Subsection (b) is repealed.
       (4) Subsection (c) is amended--
       (A) by striking paragraph (1); and
       (B) in each of paragraphs (2)(A) and (3)(A), by striking 
     ``agreement under this section'' and inserting ``contract 
     under section 1874A that provides for making payments under 
     this part''.
       (5) Subsections (d) through (i) are repealed.
       (6) Subsections (j) and (k) are each amended--
       (A) by striking ``An agreement with an agency or 
     organization under this section'' and inserting ``A contract 
     with a medicare administrative contractor under section 1874A 
     with respect to the administration of this part''; and
       (B) by striking ``such agency or organization'' and 
     inserting ``such medicare administrative contractor'' each 
     place it appears.
       (7) Subsection (l) is repealed.
       (c) Conforming Amendments to Section 1842 (Relating to 
     Carriers).--Section 1842 (42 U.S.C. 1395u) is amended as 
     follows:
       (1) The heading is amended to read as follows:


        ``provisions relating to the administration of part b''.

       (2) Subsection (a) is amended to read as follows:
       ``(a) The administration of this part shall be conducted 
     through contracts with medicare administrative contractors 
     under section 1874A.''.
       (3) Subsection (b) is amended--
       (A) by striking paragraph (1);
       (B) in paragraph (2)--
       (i) by striking subparagraphs (A) and (B);
       (ii) in subparagraph (C), by striking ``carriers'' and 
     inserting ``medicare administrative contractors''; and
       (iii) by striking subparagraphs (D) and (E);
       (C) in paragraph (3)--
       (i) in the matter before subparagraph (A), by striking 
     ``Each such contract shall provide that the carrier'' and 
     inserting ``The Secretary'';
       (ii) by striking ``will'' the first place it appears in 
     each of subparagraphs (A), (B), (F), (G), (H), and (L) and 
     inserting ``shall'';
       (iii) in subparagraph (B), in the matter before clause (i), 
     by striking ``to the policyholders and subscribers of the 
     carrier'' and inserting ``to the policyholders and 
     subscribers of the medicare administrative contractor'';
       (iv) by striking subparagraphs (C), (D), and (E);
       (v) in subparagraph (H)--

       (I) by striking ``if it makes determinations or payments 
     with respect to physicians' services,'' in the matter 
     preceding clause (i); and
       (II) by striking ``carrier'' and inserting ``medicare 
     administrative contractor'' in clause (i);

       (vi) by striking subparagraph (I);
       (vii) in subparagraph (L), by striking the semicolon and 
     inserting a period;
       (viii) in the first sentence, after subparagraph (L), by 
     striking ``and shall contain'' and all that follows through 
     the period; and
       (ix) in the seventh sentence, by inserting ``medicare 
     administrative contractor,'' after ``carrier,''; and
       (D) by striking paragraph (5);
       (E) in paragraph (6)(D)(iv), by striking ``carrier'' and 
     inserting ``medicare administrative contractor''; and
       (F) in paragraph (7), by striking ``the carrier'' and 
     inserting ``the Secretary'' each place it appears.
       (4) Subsection (c) is amended--
       (A) by striking paragraph (1);
       (B) in paragraph (2)(A), by striking ``contract under this 
     section which provides for the disbursement of funds, as 
     described in subsection (a)(1)(B),'' and inserting ``contract 
     under section 1874A that provides for making payments under 
     this part'';
       (C) in paragraph (3)(A), by striking ``subsection 
     (a)(1)(B)'' and inserting ``section 1874A(a)(3)(B)'';
       (D) in paragraph (4), in the matter preceding subparagraph 
     (A), by striking ``carrier'' and inserting ``medicare 
     administrative contractor''; and
       (E) by striking paragraphs (5) and (6).
       (5) Subsections (d), (e), and (f) are repealed.
       (6) Subsection (g) is amended by striking ``carrier or 
     carriers'' and inserting ``medicare administrative contractor 
     or contractors''.
       (7) Subsection (h) is amended--
       (A) in paragraph (2)--
       (i) by striking ``Each carrier having an agreement with the 
     Secretary under subsection (a)'' and inserting ``The 
     Secretary''; and
       (ii) by striking ``Each such carrier'' and inserting ``The 
     Secretary'';
       (B) in paragraph (3)(A)--
       (i) by striking ``a carrier having an agreement with the 
     Secretary under subsection (a)'' and inserting ``medicare 
     administrative contractor having a contract under section 
     1874A that provides for making payments under this part''; 
     and
       (ii) by striking ``such carrier'' and inserting ``such 
     contractor'';
       (C) in paragraph (3)(B)--
       (i) by striking ``a carrier'' and inserting ``a medicare 
     administrative contractor'' each place it appears; and
       (ii) by striking ``the carrier'' and inserting ``the 
     contractor'' each place it appears; and
       (D) in paragraphs (5)(A) and (5)(B)(iii), by striking 
     ``carriers'' and inserting ``medicare administrative 
     contractors'' each place it appears.
       (8) Subsection (l) is amended--
       (A) in paragraph (1)(A)(iii), by striking ``carrier'' and 
     inserting ``medicare administrative contractor''; and
       (B) in paragraph (2), by striking ``carrier'' and inserting 
     ``medicare administrative contractor''.
       (9) Subsection (p)(3)(A) is amended by striking ``carrier'' 
     and inserting ``medicare administrative contractor''.
       (10) Subsection (q)(1)(A) is amended by striking 
     ``carrier''.
       (d) Effective Date; Transition Rule.--
       (1) Effective date.--
       (A) In general.--Except as otherwise provided in this 
     subsection, the amendments made by this section shall take 
     effect on October 1, 2005, and the Secretary is authorized to 
     take such steps before such date as may be necessary to 
     implement such amendments on a timely basis.
       (B) Construction for current contracts.--Such amendments 
     shall not apply to contracts in effect before the date 
     specified under subparagraph (A) that continue to retain the 
     terms and conditions in effect on such date (except as 
     otherwise provided under this Act, other than under this 
     section) until such date as the contract is let out for 
     competitive bidding under such amendments.
       (C) Deadline for competitive bidding.--The Secretary shall 
     provide for the letting by competitive bidding of all 
     contracts for functions of medicare administrative 
     contractors for annual contract periods that begin on or 
     after October 1, 2010.
       (D) Waiver of provider nomination provisions during 
     transition.--During the period beginning on the date of the 
     enactment of this Act and before the date specified under 
     subparagraph (A), the Secretary may enter into new agreements 
     under section 1816 of the Social Security Act (42 U.S.C. 
     1395h) without regard to any of the provider nomination 
     provisions of such section.
       (2) General transition rules.--The Secretary shall take 
     such steps, consistent with paragraph (1)(B) and (1)(C), as 
     are necessary to provide for an appropriate transition from 
     contracts under section 1816 and section 1842 of the Social 
     Security Act (42 U.S.C. 1395h, 1395u) to contracts under 
     section 1874A, as added by subsection (a)(1).
       (3) Authorizing continuation of mip functions under current 
     contracts and agreements and under rollover contracts.--The 
     provisions contained in the exception in section 1893(d)(2) 
     of the Social Security Act (42 U.S.C. 1395ddd(d)(2)) shall 
     continue to apply notwithstanding the amendments made by this 
     section, and any reference in such provisions to an agreement 
     or contract shall be deemed to include a contract under 
     section 1874A of such Act, as inserted by subsection (a)(1), 
     that continues the activities referred to in such provisions.
       (e) References.--On and after the effective date provided 
     under subsection (d)(1), any reference to a fiscal 
     intermediary or carrier under title XI or XVIII of the Social 
     Security Act (or any regulation, manual instruction, 
     interpretative rule, statement of policy, or guideline issued 
     to carry out such titles) shall be deemed a reference to a 
     medicare administrative contractor (as provided under section 
     1874A of the Social Security Act).
       (f) Reports on Implementation.--
       (1) Plan for implementation.--By not later than October 1, 
     2004, the Secretary shall submit a report to Congress and the 
     Comptroller General of the United States that describes the 
     plan for implementation of the amendments made by this 
     section. The Comptroller General shall conduct an evaluation 
     of such plan and shall submit to Congress, not later than 6 
     months after the date the report is received, a report on 
     such evaluation and shall include in such report such 
     recommendations as the Comptroller General deems appropriate.
       (2) Status of implementation.--The Secretary shall submit a 
     report to Congress not later than October 1, 2008, that 
     describes the status of implementation of such amendments and 
     that includes a description of the following:
       (A) The number of contracts that have been competitively 
     bid as of such date.
       (B) The distribution of functions among contracts and 
     contractors.
       (C) A timeline for complete transition to full competition.
       (D) A detailed description of how the Secretary has 
     modified oversight and management of medicare contractors to 
     adapt to full competition.

[[Page H6061]]

     SEC. 912. REQUIREMENTS FOR INFORMATION SECURITY FOR MEDICARE 
                   ADMINISTRATIVE CONTRACTORS.

       (a) In General.--Section 1874A, as added by section 
     911(a)(1), is amended by adding at the end the following new 
     subsection:
       ``(e) Requirements for Information Security.--
       ``(1) Development of information security program.--A 
     medicare administrative contractor that performs the 
     functions referred to in subparagraphs (A) and (B) of 
     subsection (a)(4) (relating to determining and making 
     payments) shall implement a contractor-wide information 
     security program to provide information security for the 
     operation and assets of the contractor with respect to such 
     functions under this title. An information security program 
     under this paragraph shall meet the requirements for 
     information security programs imposed on Federal agencies 
     under paragraphs (1) through (8) of section 3544(b) of title 
     44, United States Code (other than the requirements under 
     paragraphs (2)(D)(i), (5)(A), and (5)(B) of such section).
       ``(2) Independent audits.--
       ``(A) Performance of annual evaluations.--Each year a 
     medicare administrative contractor that performs the 
     functions referred to in subparagraphs (A) and (B) of 
     subsection (a)(4) (relating to determining and making 
     payments) shall undergo an evaluation of the information 
     security of the contractor with respect to such functions 
     under this title. The evaluation shall--
       ``(i) be performed by an entity that meets such 
     requirements for independence as the Inspector General of the 
     Department of Health and Human Services may establish; and
       ``(ii) test the effectiveness of information security 
     control techniques of an appropriate subset of the 
     contractor's information systems (as defined in section 
     3502(8) of title 44, United States Code) relating to such 
     functions under this title and an assessment of compliance 
     with the requirements of this subsection and related 
     information security policies, procedures, standards and 
     guidelines, including policies and procedures as may be 
     prescribed by the Director of the Office of Management and 
     Budget and applicable information security standards 
     promulgated under section 11331 of title 40, United States 
     Code.
       ``(B) Deadline for initial evaluation.--
       ``(i) New contractors.--In the case of a medicare 
     administrative contractor covered by this subsection that has 
     not previously performed the functions referred to in 
     subparagraphs (A) and (B) of subsection (a)(4) (relating to 
     determining and making payments) as a fiscal intermediary or 
     carrier under section 1816 or 1842, the first independent 
     evaluation conducted pursuant subparagraph (A) shall be 
     completed prior to commencing such functions.
       ``(ii) Other contractors.--In the case of a medicare 
     administrative contractor covered by this subsection that is 
     not described in clause (i), the first independent evaluation 
     conducted pursuant subparagraph (A) shall be completed within 
     1 year after the date the contractor commences functions 
     referred to in clause (i) under this section.
       ``(C) Reports on evaluations.--
       ``(i) To the department of health and human services.--The 
     results of independent evaluations under subparagraph (A) 
     shall be submitted promptly to the Inspector General of the 
     Department of Health and Human Services and to the Secretary.
       ``(ii) To congress.--The Inspector General of Department of 
     Health and Human Services shall submit to Congress annual 
     reports on the results of such evaluations, including 
     assessments of the scope and sufficiency of such evaluations.
       ``(iii) Agency reporting.--The Secretary shall address the 
     results of such evaluations in reports required under section 
     3544(c) of title 44, United States Code.''.
       (b) Application of Requirements to Fiscal Intermediaries 
     and Carriers.--
       (1) In general.--The provisions of section 1874A(e)(2) of 
     the Social Security Act (other than subparagraph (B)), as 
     added by subsection (a), shall apply to each fiscal 
     intermediary under section 1816 of the Social Security Act 
     (42 U.S.C. 1395h) and each carrier under section 1842 of such 
     Act (42 U.S.C. 1395u) in the same manner as they apply to 
     medicare administrative contractors under such provisions.
       (2) Deadline for initial evaluation.--In the case of such a 
     fiscal intermediary or carrier with an agreement or contract 
     under such respective section in effect as of the date of the 
     enactment of this Act, the first evaluation under section 
     1874A(e)(2)(A) of the Social Security Act (as added by 
     subsection (a)), pursuant to paragraph (1), shall be 
     completed (and a report on the evaluation submitted to the 
     Secretary) by not later than 1 year after such date.

                   Subtitle C--Education and Outreach

     SEC. 921. PROVIDER EDUCATION AND TECHNICAL ASSISTANCE.

       (a) Coordination of Education Funding.--
       (1) In general.--Title XVIII is amended by inserting after 
     section 1888 the following new section:


             ``provider education and technical assistance

       ``Sec. 1889. (a) Coordination of Education Funding.--The 
     Secretary shall coordinate the educational activities 
     provided through medicare contractors (as defined in 
     subsection (g), including under section 1893) in order to 
     maximize the effectiveness of Federal education efforts for 
     providers of services and suppliers.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on the date of the enactment of this Act.
       (3) Report.--Not later than October 1, 2004, the Secretary 
     shall submit to Congress a report that includes a description 
     and evaluation of the steps taken to coordinate the funding 
     of provider education under section 1889(a) of the Social 
     Security Act, as added by paragraph (1).
       (b) Incentives To Improve Contractor Performance.--
       (1) In general.--Section 1874A, as added by section 
     911(a)(1) and as amended by section 912(a), is amended by 
     adding at the end the following new subsection:
       ``(f) Incentives To Improve Contractor Performance in 
     Provider Education and Outreach.--The Secretary shall use 
     specific claims payment error rates or similar methodology of 
     medicare administrative contractors in the processing or 
     reviewing of medicare claims in order to give such 
     contractors an incentive to implement effective education and 
     outreach programs for providers of services and suppliers.''.
       (2) Application to fiscal intermediaries and carriers.--The 
     provisions of section 1874A(f) of the Social Security Act, as 
     added by paragraph (1), shall apply to each fiscal 
     intermediary under section 1816 of the Social Security Act 
     (42 U.S.C. 1395h) and each carrier under section 1842 of such 
     Act (42 U.S.C. 1395u) in the same manner as they apply to 
     medicare administrative contractors under such provisions.
       (3) GAO report on adequacy of methodology.--Not later than 
     October 1, 2004, the Comptroller General of the United States 
     shall submit to Congress and to the Secretary a report on the 
     adequacy of the methodology under section 1874A(f) of the 
     Social Security Act, as added by paragraph (1), and shall 
     include in the report such recommendations as the Comptroller 
     General determines appropriate with respect to the 
     methodology.
       (4) Report on use of methodology in assessing contractor 
     performance.--Not later than October 1, 2004, the Secretary 
     shall submit to Congress a report that describes how the 
     Secretary intends to use such methodology in assessing 
     medicare contractor performance in implementing effective 
     education and outreach programs, including whether to use 
     such methodology as a basis for performance bonuses. The 
     report shall include an analysis of the sources of identified 
     errors and potential changes in systems of contractors and 
     rules of the Secretary that could reduce claims error rates.
       (c) Provision of Access to and Prompt Responses From 
     Medicare Administrative Contractors.--
       (1) In general.--Section 1874A, as added by section 
     911(a)(1) and as amended by section 912(a) and subsection 
     (b), is further amended by adding at the end the following 
     new subsection:
       ``(g) Communications with Beneficiaries, Providers of 
     Services and Suppliers.--
       ``(1) Communication strategy.--The Secretary shall develop 
     a strategy for communications with individuals entitled to 
     benefits under part A or enrolled under part B, or both, and 
     with providers of services and suppliers under this title.
       ``(2) Response to written inquiries.--Each medicare 
     administrative contractor shall, for those providers of 
     services and suppliers which submit claims to the contractor 
     for claims processing and for those individuals entitled to 
     benefits under part A or enrolled under part B, or both, with 
     respect to whom claims are submitted for claims processing, 
     provide general written responses (which may be through 
     electronic transmission) in a clear, concise, and accurate 
     manner to inquiries of providers of services, suppliers and 
     individuals entitled to benefits under part A or enrolled 
     under part B, or both, concerning the programs under this 
     title within 45 business days of the date of receipt of such 
     inquiries.
       ``(3) Response to toll-free lines.--The Secretary shall 
     ensure that each medicare administrative contractor shall 
     provide, for those providers of services and suppliers which 
     submit claims to the contractor for claims processing and for 
     those individuals entitled to benefits under part A or 
     enrolled under part B, or both, with respect to whom claims 
     are submitted for claims processing, a toll-free telephone 
     number at which such individuals, providers of services and 
     suppliers may obtain information regarding billing, coding, 
     claims, coverage, and other appropriate information under 
     this title.
       ``(4) Monitoring of contractor responses.--
       ``(A) In general.--Each medicare administrative contractor 
     shall, consistent with standards developed by the Secretary 
     under subparagraph (B)--
       ``(i) maintain a system for identifying who provides the 
     information referred to in paragraphs (2) and (3); and
       ``(ii) monitor the accuracy, consistency, and timeliness of 
     the information so provided.
       ``(B) Development of standards.--
       ``(i) In general.--The Secretary shall establish and make 
     public standards to monitor the accuracy, consistency, and 
     timeliness of the information provided in response to written 
     and telephone inquiries under this subsection. Such standards 
     shall be consistent with the performance requirements 
     established under subsection (b)(3).

[[Page H6062]]

       ``(ii) Evaluation.--In conducting evaluations of individual 
     medicare administrative contractors, the Secretary shall take 
     into account the results of the monitoring conducted under 
     subparagraph (A) taking into account as performance 
     requirements the standards established under clause (i). The 
     Secretary shall, in consultation with organizations 
     representing providers of services, suppliers, and 
     individuals entitled to benefits under part A or enrolled 
     under part B, or both, establish standards relating to the 
     accuracy, consistency, and timeliness of the information so 
     provided.
       ``(C) Direct monitoring.--Nothing in this paragraph shall 
     be construed as preventing the Secretary from directly 
     monitoring the accuracy, consistency, and timeliness of the 
     information so provided.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect October 1, 2004.
       (3) Application to fiscal intermediaries and carriers.--The 
     provisions of section 1874A(g) of the Social Security Act, as 
     added by paragraph (1), shall apply to each fiscal 
     intermediary under section 1816 of the Social Security Act 
     (42 U.S.C. 1395h) and each carrier under section 1842 of such 
     Act (42 U.S.C. 1395u) in the same manner as they apply to 
     medicare administrative contractors under such provisions.
       (d) Improved Provider Education and Training.--
       (1) In general.--Section 1889, as added by subsection (a), 
     is amended by adding at the end the following new 
     subsections:
       ``(b) Enhanced Education and Training.--
       ``(1) Additional resources.--There are authorized to be 
     appropriated to the Secretary (in appropriate part from the 
     Federal Hospital Insurance Trust Fund and the Federal 
     Supplementary Medical Insurance Trust Fund) $25,000,000 for 
     each of fiscal years 2005 and 2006 and such sums as may be 
     necessary for succeeding fiscal years.
       ``(2) Use.--The funds made available under paragraph (1) 
     shall be used to increase the conduct by medicare contractors 
     of education and training of providers of services and 
     suppliers regarding billing, coding, and other appropriate 
     items and may also be used to improve the accuracy, 
     consistency, and timeliness of contractor responses.
       ``(c) Tailoring Education and Training Activities for Small 
     Providers or Suppliers.--
       ``(1) In general.--Insofar as a medicare contractor 
     conducts education and training activities, it shall tailor 
     such activities to meet the special needs of small providers 
     of services or suppliers (as defined in paragraph (2)).
       ``(2) Small provider of services or supplier.--In this 
     subsection, the term `small provider of services or supplier' 
     means--
       ``(A) a provider of services with fewer than 25 full-time-
     equivalent employees; or
       ``(B) a supplier with fewer than 10 full-time-equivalent 
     employees.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on October 1, 2004.
       (e) Requirement To Maintain Internet Sites.--
       (1) In general.--Section 1889, as added by subsection (a) 
     and as amended by subsection (d), is further amended by 
     adding at the end the following new subsection:
       ``(d) Internet Sites; FAQs.--The Secretary, and each 
     medicare contractor insofar as it provides services 
     (including claims processing) for providers of services or 
     suppliers, shall maintain an Internet site which--
       ``(1) provides answers in an easily accessible format to 
     frequently asked questions, and
       ``(2) includes other published materials of the contractor,
     that relate to providers of services and suppliers under the 
     programs under this title (and title XI insofar as it relates 
     to such programs).''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on October 1, 2004.
       (f) Additional Provider Education Provisions.--
       (1) In general.--Section 1889, as added by subsection (a) 
     and as amended by subsections (d) and (e), is further amended 
     by adding at the end the following new subsections:
       ``(e) Encouragement of Participation in Education Program 
     Activities.--A medicare contractor may not use a record of 
     attendance at (or failure to attend) educational activities 
     or other information gathered during an educational program 
     conducted under this section or otherwise by the Secretary to 
     select or track providers of services or suppliers for the 
     purpose of conducting any type of audit or prepayment review.
       ``(f) Construction.--Nothing in this section or section 
     1893(g) shall be construed as providing for disclosure by a 
     medicare contractor of information that would compromise 
     pending law enforcement activities or reveal findings of law 
     enforcement-related audits.
       ``(g) Definitions.--For purposes of this section, the term 
     `medicare contractor' includes the following:
       ``(1) A medicare administrative contractor with a contract 
     under section 1874A, including a fiscal intermediary with a 
     contract under section 1816 and a carrier with a contract 
     under section 1842.
       ``(2) An eligible entity with a contract under section 
     1893.
     Such term does not include, with respect to activities of a 
     specific provider of services or supplier an entity that has 
     no authority under this title or title IX with respect to 
     such activities and such provider of services or supplier.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on the date of the enactment of this Act.

     SEC. 922. SMALL PROVIDER TECHNICAL ASSISTANCE DEMONSTRATION 
                   PROGRAM.

       (a) Establishment.--
       (1) In general.--The Secretary shall establish a 
     demonstration program (in this section referred to as the 
     ``demonstration program'') under which technical assistance 
     described in paragraph (2) is made available, upon request 
     and on a voluntary basis, to small providers of services or 
     suppliers in order to improve compliance with the applicable 
     requirements of the programs under medicare program under 
     title XVIII of the Social Security Act (including provisions 
     of title XI of such Act insofar as they relate to such title 
     and are not administered by the Office of the Inspector 
     General of the Department of Health and Human Services).
       (2) Forms of technical assistance.--The technical 
     assistance described in this paragraph is--
       (A) evaluation and recommendations regarding billing and 
     related systems; and
       (B) information and assistance regarding policies and 
     procedures under the medicare program, including coding and 
     reimbursement.
       (3) Small providers of services or suppliers.--In this 
     section, the term ``small providers of services or 
     suppliers'' means--
       (A) a provider of services with fewer than 25 full-time-
     equivalent employees; or
       (B) a supplier with fewer than 10 full-time-equivalent 
     employees.
       (b) Qualification of Contractors.--In conducting the 
     demonstration program, the Secretary shall enter into 
     contracts with qualified organizations (such as peer review 
     organizations or entities described in section 1889(g)(2) of 
     the Social Security Act, as inserted by section 5(f)(1)) with 
     appropriate expertise with billing systems of the full range 
     of providers of services and suppliers to provide the 
     technical assistance. In awarding such contracts, the 
     Secretary shall consider any prior investigations of the 
     entity's work by the Inspector General of Department of 
     Health and Human Services or the Comptroller General of the 
     United States.
       (c) Description of Technical Assistance.--The technical 
     assistance provided under the demonstration program shall 
     include a direct and in-person examination of billing systems 
     and internal controls of small providers of services or 
     suppliers to determine program compliance and to suggest more 
     efficient or effective means of achieving such compliance.
       (d) Avoidance of Recovery Actions for Problems Identified 
     as Corrected.--The Secretary shall provide that, absent 
     evidence of fraud and notwithstanding any other provision of 
     law, any errors found in a compliance review for a small 
     provider of services or supplier that participates in the 
     demonstration program shall not be subject to recovery action 
     if the technical assistance personnel under the program 
     determine that--
       (1) the problem that is the subject of the compliance 
     review has been corrected to their satisfaction within 30 
     days of the date of the visit by such personnel to the small 
     provider of services or supplier; and
       (2) such problem remains corrected for such period as is 
     appropriate.
     The previous sentence applies only to claims filed as part of 
     the demonstration program and lasts only for the duration of 
     such program and only as long as the small provider of 
     services or supplier is a participant in such program.
       (e) GAO Evaluation.--Not later than 2 years after the date 
     of the date the demonstration program is first implemented, 
     the Comptroller General, in consultation with the Inspector 
     General of the Department of Health and Human Services, shall 
     conduct an evaluation of the demonstration program. The 
     evaluation shall include a determination of whether claims 
     error rates are reduced for small providers of services or 
     suppliers who participated in the program and the extent of 
     improper payments made as a result of the demonstration 
     program. The Comptroller General shall submit a report to the 
     Secretary and the Congress on such evaluation and shall 
     include in such report recommendations regarding the 
     continuation or extension of the demonstration program.
       (f) Financial Participation by Providers.--The provision of 
     technical assistance to a small provider of services or 
     supplier under the demonstration program is conditioned upon 
     the small provider of services or supplier paying an amount 
     estimated (and disclosed in advance of a provider's or 
     supplier's participation in the program) to be equal to 25 
     percent of the cost of the technical assistance.
       (g) Authorization of Appropriations.--There are authorized 
     to be appropriated to the Secretary (in appropriate part from 
     the Federal Hospital Insurance Trust Fund and the Federal 
     Supplementary Medical Insurance Trust Fund) to carry out the 
     demonstration program--
       (1) for fiscal year 2005, $1,000,000, and
       (2) for fiscal year 2006, $6,000,000.

     SEC. 923. MEDICARE PROVIDER OMBUDSMAN; MEDICARE BENEFICIARY 
                   OMBUDSMAN.

       (a) Medicare Provider Ombudsman.--Section 1868 (42 U.S.C. 
     1395ee) is amended--

[[Page H6063]]

       (1) by adding at the end of the heading the following: ``; 
     medicare provider ombudsman'';
       (2) by inserting ``Practicing Physicians Advisory 
     Council.--(1)'' after ``(a)'';
       (3) in paragraph (1), as so redesignated under paragraph 
     (2), by striking ``in this section'' and inserting ``in this 
     subsection'';
       (4) by redesignating subsections (b) and (c) as paragraphs 
     (2) and (3), respectively; and
       (5) by adding at the end the following new subsection:
       ``(b) Medicare Provider Ombudsman.--The Secretary shall 
     appoint within the Department of Health and Human Services a 
     Medicare Provider Ombudsman. The Ombudsman shall--
       ``(1) provide assistance, on a confidential basis, to 
     providers of services and suppliers with respect to 
     complaints, grievances, and requests for information 
     concerning the programs under this title (including 
     provisions of title XI insofar as they relate to this title 
     and are not administered by the Office of the Inspector 
     General of the Department of Health and Human Services) and 
     in the resolution of unclear or conflicting guidance given by 
     the Secretary and medicare contractors to such providers of 
     services and suppliers regarding such programs and provisions 
     and requirements under this title and such provisions; and
       ``(2) submit recommendations to the Secretary for 
     improvement in the administration of this title and such 
     provisions, including--
       ``(A) recommendations to respond to recurring patterns of 
     confusion in this title and such provisions (including 
     recommendations regarding suspending imposition of sanctions 
     where there is widespread confusion in program 
     administration), and
       ``(B) recommendations to provide for an appropriate and 
     consistent response (including not providing for audits) in 
     cases of self-identified overpayments by providers of 
     services and suppliers.
     The Ombudsman shall not serve as an advocate for any 
     increases in payments or new coverage of services, but may 
     identify issues and problems in payment or coverage 
     policies.''.
       (b) Medicare Beneficiary Ombudsman.--Title XVIII, as 
     previously amended, is amended by inserting after section 
     1809 the following new section:


                    ``medicare beneficiary ombudsman

       ``Sec. 1810. (a) In General.--The Secretary shall appoint 
     within the Department of Health and Human Services a Medicare 
     Beneficiary Ombudsman who shall have expertise and experience 
     in the fields of health care and education of (and assistance 
     to) individuals entitled to benefits under this title.
       ``(b) Duties.--The Medicare Beneficiary Ombudsman shall--
       ``(1) receive complaints, grievances, and requests for 
     information submitted by individuals entitled to benefits 
     under part A or enrolled under part B, or both, with respect 
     to any aspect of the medicare program;
       ``(2) provide assistance with respect to complaints, 
     grievances, and requests referred to in paragraph (1), 
     including--
       ``(A) assistance in collecting relevant information for 
     such individuals, to seek an appeal of a decision or 
     determination made by a fiscal intermediary, carrier, 
     Medicare+Choice organization, or the Secretary;
       ``(B) assistance to such individuals with any problems 
     arising from disenrollment from a Medicare+Choice plan under 
     part C; and
       ``(C) assistance to such individuals in presenting 
     information under section 1860D-2(b)(4)(D)(v); and
       ``(3) submit annual reports to Congress and the Secretary 
     that describe the activities of the Office and that include 
     such recommendations for improvement in the administration of 
     this title as the Ombudsman determines appropriate.
     The Ombudsman shall not serve as an advocate for any 
     increases in payments or new coverage of services, but may 
     identify issues and problems in payment or coverage policies.
       ``(c) Working With Health Insurance Counseling Programs.--
     To the extent possible, the Ombudsman shall work with health 
     insurance counseling programs (receiving funding under 
     section 4360 of Omnibus Budget Reconciliation Act of 1990) to 
     facilitate the provision of information to individuals 
     entitled to benefits under part A or enrolled under part B, 
     or both regarding Medicare+Choice plans and changes to those 
     plans. Nothing in this subsection shall preclude further 
     collaboration between the Ombudsman and such programs.''.
       (c) Deadline for Appointment.--The Secretary shall appoint 
     the Medicare Provider Ombudsman and the Medicare Beneficiary 
     Ombudsman, under the amendments made by subsections (a) and 
     (b), respectively, by not later than 1 year after the date of 
     the enactment of this Act.
       (d) Funding.--There are authorized to be appropriated to 
     the Secretary (in appropriate part from the Federal Hospital 
     Insurance Trust Fund and the Federal Supplementary Medical 
     Insurance Trust Fund) to carry out the provisions of 
     subsection (b) of section 1868 of the Social Security Act 
     (relating to the Medicare Provider Ombudsman), as added by 
     subsection (a)(5) and section 1807 of such Act (relating to 
     the Medicare Beneficiary Ombudsman), as added by subsection 
     (b), such sums as are necessary for fiscal year 2004 and each 
     succeeding fiscal year.
       (e) Use of Central, Toll-Free Number (1-800-MEDICARE).--
       (1) Phone triage system; listing in medicare handbook 
     instead of other toll-free numbers.--Section 1804(b) (42 
     U.S.C. 1395b-2(b)) is amended by adding at the end the 
     following: ``The Secretary shall provide, through the toll-
     free number 1-800-MEDICARE, for a means by which individuals 
     seeking information about, or assistance with, such programs 
     who phone such toll-free number are transferred (without 
     charge) to appropriate entities for the provision of such 
     information or assistance. Such toll-free number shall be the 
     toll-free number listed for general information and 
     assistance in the annual notice under subsection (a) instead 
     of the listing of numbers of individual contractors.''.
       (2) Monitoring accuracy.--
       (A) Study.--The Comptroller General of the United States 
     shall conduct a study to monitor the accuracy and consistency 
     of information provided to individuals entitled to benefits 
     under part A or enrolled under part B, or both, through the 
     toll-free number 1-800-MEDICARE, including an assessment of 
     whether the information provided is sufficient to answer 
     questions of such individuals. In conducting the study, the 
     Comptroller General shall examine the education and training 
     of the individuals providing information through such number.
       (B) Report.--Not later than 1 year after the date of the 
     enactment of this Act, the Comptroller General shall submit 
     to Congress a report on the study conducted under 
     subparagraph (A).

     SEC. 924. BENEFICIARY OUTREACH DEMONSTRATION PROGRAM.

       (a) In General.--The Secretary shall establish a 
     demonstration program (in this section referred to as the 
     ``demonstration program'') under which medicare specialists 
     employed by the Department of Health and Human Services 
     provide advice and assistance to individuals entitled to 
     benefits under part A of title XVIII of the Social Security 
     Act, or enrolled under part B of such title, or both, 
     regarding the medicare program at the location of existing 
     local offices of the Social Security Administration.
       (b) Locations.--
       (1) In general.--The demonstration program shall be 
     conducted in at least 6 offices or areas. Subject to 
     paragraph (2), in selecting such offices and areas, the 
     Secretary shall provide preference for offices with a high 
     volume of visits by individuals referred to in subsection 
     (a).
       (2) Assistance for rural beneficiaries.--The Secretary 
     shall provide for the selection of at least 2 rural areas to 
     participate in the demonstration program. In conducting the 
     demonstration program in such rural areas, the Secretary 
     shall provide for medicare specialists to travel among local 
     offices in a rural area on a scheduled basis.
       (c) Duration.--The demonstration program shall be conducted 
     over a 3-year period.
       (d) Evaluation and Report.--
       (1) Evaluation.--The Secretary shall provide for an 
     evaluation of the demonstration program. Such evaluation 
     shall include an analysis of--
       (A) utilization of, and satisfaction of those individuals 
     referred to in subsection (a) with, the assistance provided 
     under the program; and
       (B) the cost-effectiveness of providing beneficiary 
     assistance through out-stationing medicare specialists at 
     local offices of the Social Security Administration.
       (2) Report.--The Secretary shall submit to Congress a 
     report on such evaluation and shall include in such report 
     recommendations regarding the feasibility of permanently out-
     stationing medicare specialists at local offices of the 
     Social Security Administration.

     SEC. 925. INCLUSION OF ADDITIONAL INFORMATION IN NOTICES TO 
                   BENEFICIARIES ABOUT SKILLED NURSING FACILITY 
                   BENEFITS.

       (a) In General.--The Secretary shall provide that in 
     medicare beneficiary notices provided (under section 1806(a) 
     of the Social Security Act, 42 U.S.C. 1395b-7(a)) with 
     respect to the provision of post-hospital extended care 
     services under part A of title XVIII of the Social Security 
     Act, there shall be included information on the number of 
     days of coverage of such services remaining under such part 
     for the medicare beneficiary and spell of illness involved.
       (b) Effective Date.--Subsection (a) shall apply to notices 
     provided during calendar quarters beginning more than 6 
     months after the date of the enactment of this Act.

     SEC. 926. INFORMATION ON MEDICARE-CERTIFIED SKILLED NURSING 
                   FACILITIES IN HOSPITAL DISCHARGE PLANS.

       (a) Availability of Data.--The Secretary shall publicly 
     provide information that enables hospital discharge planners, 
     medicare beneficiaries, and the public to identify skilled 
     nursing facilities that are participating in the medicare 
     program.
       (b) Inclusion of Information in Certain Hospital Discharge 
     Plans.--
       (1) In general.--Section 1861(ee)(2)(D) (42 U.S.C. 
     1395x(ee)(2)(D)) is amended--
       (A) by striking ``hospice services'' and inserting 
     ``hospice care and post-hospital extended care services''; 
     and
       (B) by inserting before the period at the end the 
     following: ``and, in the case of individuals who are likely 
     to need post-hospital extended care services, the 
     availability of such services through facilities that 
     participate in the program under this title and that serve 
     the area in which the patient resides''.

[[Page H6064]]

       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply to discharge plans made on or after such date as 
     the Secretary shall specify, but not later than 6 months 
     after the date the Secretary provides for availability of 
     information under subsection (a).

                    Subtitle D--Appeals and Recovery

     SEC. 931. TRANSFER OF RESPONSIBILITY FOR MEDICARE APPEALS.

       (a) Transition Plan.--
       (1) In general.--Not later than October 1, 2004, the 
     Commissioner of Social Security and the Secretary shall 
     develop and transmit to Congress and the Comptroller General 
     of the United States a plan under which the functions of 
     administrative law judges responsible for hearing cases under 
     title XVIII of the Social Security Act (and related 
     provisions in title XI of such Act) are transferred from the 
     responsibility of the Commissioner and the Social Security 
     Administration to the Secretary and the Department of Health 
     and Human Services.
       (2) GAO evaluation.--The Comptroller General of the United 
     States shall evaluate the plan and, not later than the date 
     that is 6 months after the date on which the plan is received 
     by the Comptroller General, shall submit to Congress a report 
     on such evaluation.
       (b) Transfer of Adjudication Authority.--
       (1) In general.--Not earlier than July 1, 2005, and not 
     later than October 1, 2005, the Commissioner of Social 
     Security and the Secretary shall implement the transition 
     plan under subsection (a) and transfer the administrative law 
     judge functions described in such subsection from the Social 
     Security Administration to the Secretary.
       (2) Assuring independence of judges.--The Secretary shall 
     assure the independence of administrative law judges 
     performing the administrative law judge functions transferred 
     under paragraph (1) from the Centers for Medicare & Medicaid 
     Services and its contractors. In order to assure such 
     independence, the Secretary shall place such judges in an 
     administrative office that is organizationally and 
     functionally separate from such Centers. Such judges shall 
     report to, and be under the general supervision of, the 
     Secretary, but shall not report to, or be subject to 
     supervision by, another other officer of the Department.
       (3) Geographic distribution.--The Secretary shall provide 
     for an appropriate geographic distribution of administrative 
     law judges performing the administrative law judge functions 
     transferred under paragraph (1) throughout the United States 
     to ensure timely access to such judges.
       (4) Hiring authority.--Subject to the amounts provided in 
     advance in appropriations Act, the Secretary shall have 
     authority to hire administrative law judges to hear such 
     cases, giving priority to those judges with prior experience 
     in handling medicare appeals and in a manner consistent with 
     paragraph (3), and to hire support staff for such judges.
       (5) Financing.--Amounts payable under law to the 
     Commissioner for administrative law judges performing the 
     administrative law judge functions transferred under 
     paragraph (1) from the Federal Hospital Insurance Trust Fund 
     and the Federal Supplementary Medical Insurance Trust Fund 
     shall become payable to the Secretary for the functions so 
     transferred.
       (6) Shared resources.--The Secretary shall enter into such 
     arrangements with the Commissioner as may be appropriate with 
     respect to transferred functions of administrative law judges 
     to share office space, support staff, and other resources, 
     with appropriate reimbursement from the Trust Funds described 
     in paragraph (5).
       (c) Increased Financial Support.--In addition to any 
     amounts otherwise appropriated, to ensure timely action on 
     appeals before administrative law judges and the Departmental 
     Appeals Board consistent with section 1869 of the Social 
     Security Act (as amended by section 521 of BIPA, 114 Stat. 
     2763A-534), there are authorized to be appropriated (in 
     appropriate part from the Federal Hospital Insurance Trust 
     Fund and the Federal Supplementary Medical Insurance Trust 
     Fund) to the Secretary such sums as are necessary for fiscal 
     year 2005 and each subsequent fiscal year to--
       (1) increase the number of administrative law judges (and 
     their staffs) under subsection (b)(4);
       (2) improve education and training opportunities for 
     administrative law judges (and their staffs); and
       (3) increase the staff of the Departmental Appeals Board.
       (d) Conforming Amendment.--Section 1869(f)(2)(A)(i) (42 
     U.S.C. 1395ff(f)(2)(A)(i)), as added by section 522(a) of 
     BIPA (114 Stat. 2763A-543), is amended by striking ``of the 
     Social Security Administration''.

     SEC. 932. PROCESS FOR EXPEDITED ACCESS TO REVIEW.

       (a) Expedited Access to Judicial Review.--Section 1869(b) 
     (42 U.S.C. 1395ff(b)) as amended by BIPA, is amended--
       (1) in paragraph (1)(A), by inserting ``, subject to 
     paragraph (2),'' before ``to judicial review of the 
     Secretary's final decision'';
       (2) in paragraph (1)(F)--
       (A) by striking clause (ii);
       (B) by striking ``proceeding'' and all that follows through 
     ``determination'' and inserting ``determinations and 
     reconsiderations''; and
       (C) by redesignating subclauses (I) and (II) as clauses (i) 
     and (ii) and by moving the indentation of such subclauses 
     (and the matter that follows) 2 ems to the left; and
       (3) by adding at the end the following new paragraph:
       ``(2) Expedited access to judicial review.--
       ``(A) In general.--The Secretary shall establish a process 
     under which a provider of services or supplier that furnishes 
     an item or service or an individual entitled to benefits 
     under part A or enrolled under part B, or both, who has filed 
     an appeal under paragraph (1) may obtain access to judicial 
     review when a review panel (described in subparagraph (D)), 
     on its own motion or at the request of the appellant, 
     determines that no entity in the administrative appeals 
     process has the authority to decide the question of law or 
     regulation relevant to the matters in controversy and that 
     there is no material issue of fact in dispute. The appellant 
     may make such request only once with respect to a question of 
     law or regulation in a case of an appeal.
       ``(B) Prompt determinations.--If, after or coincident with 
     appropriately filing a request for an administrative hearing, 
     the appellant requests a determination by the appropriate 
     review panel that no review panel has the authority to decide 
     the question of law or regulations relevant to the matters in 
     controversy and that there is no material issue of fact in 
     dispute and if such request is accompanied by the documents 
     and materials as the appropriate review panel shall require 
     for purposes of making such determination, such review panel 
     shall make a determination on the request in writing within 
     60 days after the date such review panel receives the request 
     and such accompanying documents and materials. Such a 
     determination by such review panel shall be considered a 
     final decision and not subject to review by the Secretary.
       ``(C) Access to judicial review.--
       ``(i) In general.--If the appropriate review panel--

       ``(I) determines that there are no material issues of fact 
     in dispute and that the only issue is one of law or 
     regulation that no review panel has the authority to decide; 
     or
       ``(II) fails to make such determination within the period 
     provided under subparagraph (B);

     then the appellant may bring a civil action as described in 
     this subparagraph.
       ``(ii) Deadline for filing.--Such action shall be filed, in 
     the case described in--

       ``(I) clause (i)(I), within 60 days of date of the 
     determination described in such subparagraph; or
       ``(II) clause (i)(II), within 60 days of the end of the 
     period provided under subparagraph (B) for the determination.

       ``(iii) Venue.--Such action shall be brought in the 
     district court of the United States for the judicial district 
     in which the appellant is located (or, in the case of an 
     action brought jointly by more than one applicant, the 
     judicial district in which the greatest number of applicants 
     are located) or in the district court for the District of 
     Columbia.
       ``(iv) Interest on amounts in controversy.--Where a 
     provider of services or supplier seeks judicial review 
     pursuant to this paragraph, the amount in controversy shall 
     be subject to annual interest beginning on the first day of 
     the first month beginning after the 60-day period as 
     determined pursuant to clause (ii) and equal to the rate of 
     interest on obligations issued for purchase by the Federal 
     Hospital Insurance Trust Fund and by the Federal 
     Supplementary Medical Insurance Trust Fund for the month in 
     which the civil action authorized under this paragraph is 
     commenced, to be awarded by the reviewing court in favor of 
     the prevailing party. No interest awarded pursuant to the 
     preceding sentence shall be deemed income or cost for the 
     purposes of determining reimbursement due providers of 
     services or suppliers under this Act.
       ``(D) Review panels.--For purposes of this subsection, a 
     `review panel' is a panel consisting of 3 members (who shall 
     be administrative law judges, members of the Departmental 
     Appeals Board, or qualified individuals associated with a 
     qualified independent contractor (as defined in subsection 
     (c)(2)) or with another independent entity) designated by the 
     Secretary for purposes of making determinations under this 
     paragraph.''.
       (b) Application to Provider Agreement Determinations.--
     Section 1866(h)(1) (42 U.S.C. 1395cc(h)(1)) is amended--
       (1) by inserting ``(A)'' after ``(h)(1)''; and
       (2) by adding at the end the following new subparagraph:
       ``(B) An institution or agency described in subparagraph 
     (A) that has filed for a hearing under subparagraph (A) shall 
     have expedited access to judicial review under this 
     subparagraph in the same manner as providers of services, 
     suppliers, and individuals entitled to benefits under part A 
     or enrolled under part B, or both, may obtain expedited 
     access to judicial review under the process established under 
     section 1869(b)(2). Nothing in this subparagraph shall be 
     construed to affect the application of any remedy imposed 
     under section 1819 during the pendency of an appeal under 
     this subparagraph.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to appeals filed on or after October 1, 2004.
       (d) Expedited Review of Certain Provider Agreement 
     Determinations.--
       (1) Termination and certain other immediate remedies.--The 
     Secretary shall develop and implement a process to expedite

[[Page H6065]]

     proceedings under sections 1866(h) of the Social Security Act 
     (42 U.S.C. 1395cc(h)) in which the remedy of termination of 
     participation, or a remedy described in clause (i) or (iii) 
     of section 1819(h)(2)(B) of such Act (42 U.S.C. 1395i-
     3(h)(2)(B)) which is applied on an immediate basis, has been 
     imposed. Under such process priority shall be provided in 
     cases of termination.
       (2) Increased financial support.--In addition to any 
     amounts otherwise appropriated, to reduce by 50 percent the 
     average time for administrative determinations on appeals 
     under section 1866(h) of the Social Security Act (42 U.S.C. 
     1395cc(h)), there are authorized to be appropriated (in 
     appropriate part from the Federal Hospital Insurance Trust 
     Fund and the Federal Supplementary Medical Insurance Trust 
     Fund) to the Secretary such additional sums for fiscal year 
     2005 and each subsequent fiscal year as may be necessary. The 
     purposes for which such amounts are available include 
     increasing the number of administrative law judges (and their 
     staffs) and the appellate level staff at the Departmental 
     Appeals Board of the Department of Health and Human Services 
     and educating such judges and staffs on long-term care 
     issues.
       (e) Process for Reinstatement of Approval of Certain Snf 
     Training Programs.--
       (1) In general.--In the case of a termination of approval 
     of a nurse aide training program described in paragraph (2) 
     of a skilled nursing facility, the Secretary shall develop 
     and implement a process for the reinstatement of approval of 
     such program before the end of the mandatory 2 year 
     disapproval period if the facility and program is certified 
     by the Secretary, in coordination with the applicable State 
     survey and certification agency and after public notice, as 
     being in compliance with applicable requirements and as 
     having remedied any deficiencies in the facility or program 
     that resulted in noncompliance.
       (2) Termination of approval described.--A termination of 
     approval of a training program described in this paragraph is 
     a mandatory 2-year disapproval provided for under section 
     1819(f)(2)(B)(iii) of the Social Security Act (42 U.S.C. 
     1395i-3(f)(2)(B)(iii)) if the only basis for the mandatory 
     disapproval was the assessment of a civil money penalty of 
     not less than $5,000.

     SEC. 933. REVISIONS TO MEDICARE APPEALS PROCESS.

       (a) Requiring Full and Early Presentation of Evidence.--
       (1) In general.--Section 1869(b) (42 U.S.C. 1395ff(b)), as 
     amended by BIPA and as amended by section 932(a), is further 
     amended by adding at the end the following new paragraph:
       ``(3) Requiring full and early presentation of evidence by 
     providers.--A provider of services or supplier may not 
     introduce evidence in any appeal under this section that was 
     not presented at the reconsideration conducted by the 
     qualified independent contractor under subsection (c), unless 
     there is good cause which precluded the introduction of such 
     evidence at or before that reconsideration.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on October 1, 2004.
       (b) Use of Patients' Medical Records.--Section 
     1869(c)(3)(B)(i) (42 U.S.C. 1395ff(c)(3)(B)(i)), as amended 
     by BIPA, is amended by inserting ``(including the medical 
     records of the individual involved)'' after ``clinical 
     experience''.
       (c) Notice Requirements for Medicare Appeals.--
       (1) Initial determinations and redeterminations.--Section 
     1869(a) (42 U.S.C. 1395ff(a)), as amended by BIPA, is amended 
     by adding at the end the following new paragraphs:
       ``(4) Requirements of notice of determinations.--With 
     respect to an initial determination insofar as it results in 
     a denial of a claim for benefits--
       ``(A) the written notice on the determination shall 
     include--
       ``(i) the reasons for the determination, including whether 
     a local medical review policy or a local coverage 
     determination was used;
       ``(ii) the procedures for obtaining additional information 
     concerning the determination, including the information 
     described in subparagraph (B); and
       ``(iii) notification of the right to seek a redetermination 
     or otherwise appeal the determination and instructions on how 
     to initiate such a redetermination under this section; and
       ``(B) the person provided such notice may obtain, upon 
     request, the specific provision of the policy, manual, or 
     regulation used in making the determination.
       ``(5) Requirements of notice of redeterminations.--With 
     respect to a redetermination insofar as it results in a 
     denial of a claim for benefits--
       ``(A) the written notice on the redetermination shall 
     include--
       ``(i) the specific reasons for the redetermination;
       ``(ii) as appropriate, a summary of the clinical or 
     scientific evidence used in making the redetermination;
       ``(iii) a description of the procedures for obtaining 
     additional information concerning the redetermination; and
       ``(iv) notification of the right to appeal the 
     redetermination and instructions on how to initiate such an 
     appeal under this section;
       ``(B) such written notice shall be provided in printed form 
     and written in a manner calculated to be understood by the 
     individual entitled to benefits under part A or enrolled 
     under part B, or both; and
       ``(C) the person provided such notice may obtain, upon 
     request, information on the specific provision of the policy, 
     manual, or regulation used in making the redetermination.''.
       (2) Reconsiderations.--Section 1869(c)(3)(E) (42 U.S.C. 
     1395ff(c)(3)(E)), as amended by BIPA, is amended--
       (A) by inserting ``be written in a manner calculated to be 
     understood by the individual entitled to benefits under part 
     A or enrolled under part B, or both, and shall include (to 
     the extent appropriate)'' after ``in writing, ''; and
       (B) by inserting ``and a notification of the right to 
     appeal such determination and instructions on how to initiate 
     such appeal under this section'' after ``such decision,''.
       (3) Appeals.--Section 1869(d) (42 U.S.C. 1395ff(d)), as 
     amended by BIPA, is amended--
       (A) in the heading, by inserting ``; Notice'' after 
     ``Secretary''; and
       (B) by adding at the end the following new paragraph:
       ``(4) Notice.--Notice of the decision of an administrative 
     law judge shall be in writing in a manner calculated to be 
     understood by the individual entitled to benefits under part 
     A or enrolled under part B, or both, and shall include--
       ``(A) the specific reasons for the determination 
     (including, to the extent appropriate, a summary of the 
     clinical or scientific evidence used in making the 
     determination);
       ``(B) the procedures for obtaining additional information 
     concerning the decision; and
       ``(C) notification of the right to appeal the decision and 
     instructions on how to initiate such an appeal under this 
     section.''.
       (4) Submission of record for appeal.--Section 
     1869(c)(3)(J)(i) (42 U.S.C. 1395ff(c)(3)(J)(i)) by striking 
     ``prepare'' and inserting ``submit'' and by striking ``with 
     respect to'' and all that follows through ``and relevant 
     policies''.
       (d) Qualified Independent Contractors.--
       (1) Eligibility requirements of qualified independent 
     contractors.--Section 1869(c)(3) (42 U.S.C. 1395ff(c)(3)), as 
     amended by BIPA, is amended--
       (A) in subparagraph (A), by striking ``sufficient training 
     and expertise in medical science and legal matters'' and 
     inserting ``sufficient medical, legal, and other expertise 
     (including knowledge of the program under this title) and 
     sufficient staffing''; and
       (B) by adding at the end the following new subparagraph:
       ``(K) Independence requirements.--
       ``(i) In general.--Subject to clause (ii), a qualified 
     independent contractor shall not conduct any activities in a 
     case unless the entity--

       ``(I) is not a related party (as defined in subsection 
     (g)(5));
       ``(II) does not have a material familial, financial, or 
     professional relationship with such a party in relation to 
     such case; and
       ``(III) does not otherwise have a conflict of interest with 
     such a party.

       ``(ii) Exception for reasonable compensation.--Nothing in 
     clause (i) shall be construed to prohibit receipt by a 
     qualified independent contractor of compensation from the 
     Secretary for the conduct of activities under this section if 
     the compensation is provided consistent with clause (iii).
       ``(iii) Limitations on entity compensation.--Compensation 
     provided by the Secretary to a qualified independent 
     contractor in connection with reviews under this section 
     shall not be contingent on any decision rendered by the 
     contractor or by any reviewing professional.''.
       (2) Eligibility requirements for reviewers.--Section 1869 
     (42 U.S.C. 1395ff), as amended by BIPA, is amended--
       (A) by amending subsection (c)(3)(D) to read as follows:
       ``(D) Qualifications for reviewers.--The requirements of 
     subsection (g) shall be met (relating to qualifications of 
     reviewing professionals).''; and
       (B) by adding at the end the following new subsection:
       ``(g) Qualifications of Reviewers.--
       ``(1) In general.--In reviewing determinations under this 
     section, a qualified independent contractor shall assure 
     that--
       ``(A) each individual conducting a review shall meet the 
     qualifications of paragraph (2);
       ``(B) compensation provided by the contractor to each such 
     reviewer is consistent with paragraph (3); and
       ``(C) in the case of a review by a panel described in 
     subsection (c)(3)(B) composed of physicians or other health 
     care professionals (each in this subsection referred to as a 
     `reviewing professional'), a reviewing professional meets the 
     qualifications described in paragraph (4) and, where a claim 
     is regarding the furnishing of treatment by a physician 
     (allopathic or osteopathic) or the provision of items or 
     services by a physician (allopathic or osteopathic), a 
     reviewing professional shall be a physician (allopathic or 
     osteopathic).
       ``(2) Independence.--
       ``(A) In general.--Subject to subparagraph (B), each 
     individual conducting a review in a case shall--
       ``(i) not be a related party (as defined in paragraph (5));

[[Page H6066]]

       ``(ii) not have a material familial, financial, or 
     professional relationship with such a party in the case under 
     review; and
       ``(iii) not otherwise have a conflict of interest with such 
     a party.
       ``(B) Exception.--Nothing in subparagraph (A) shall be 
     construed to--
       ``(i) prohibit an individual, solely on the basis of a 
     participation agreement with a fiscal intermediary, carrier, 
     or other contractor, from serving as a reviewing professional 
     if--

       ``(I) the individual is not involved in the provision of 
     items or services in the case under review;
       ``(II) the fact of such an agreement is disclosed to the 
     Secretary and the individual entitled to benefits under part 
     A or enrolled under part B, or both, (or authorized 
     representative) and neither party objects; and
       ``(III) the individual is not an employee of the 
     intermediary, carrier, or contractor and does not provide 
     services exclusively or primarily to or on behalf of such 
     intermediary, carrier, or contractor;

       ``(ii) prohibit an individual who has staff privileges at 
     the institution where the treatment involved takes place from 
     serving as a reviewer merely on the basis of having such 
     staff privileges if the existence of such privileges is 
     disclosed to the Secretary and such individual (or authorized 
     representative), and neither party objects; or
       ``(iii) prohibit receipt of compensation by a reviewing 
     professional from a contractor if the compensation is 
     provided consistent with paragraph (3).

     For purposes of this paragraph, the term `participation 
     agreement' means an agreement relating to the provision of 
     health care services by the individual and does not include 
     the provision of services as a reviewer under this 
     subsection.
       ``(3) Limitations on reviewer compensation.--Compensation 
     provided by a qualified independent contractor to a reviewer 
     in connection with a review under this section shall not be 
     contingent on the decision rendered by the reviewer.
       ``(4) Licensure and expertise.--Each reviewing professional 
     shall be--
       ``(A) a physician (allopathic or osteopathic) who is 
     appropriately credentialed or licensed in one or more States 
     to deliver health care services and has medical expertise in 
     the field of practice that is appropriate for the items or 
     services at issue; or
       ``(B) a health care professional who is legally authorized 
     in one or more States (in accordance with State law or the 
     State regulatory mechanism provided by State law) to furnish 
     the health care items or services at issue and has medical 
     expertise in the field of practice that is appropriate for 
     such items or services.
       ``(5) Related party defined.--For purposes of this section, 
     the term `related party' means, with respect to a case under 
     this title involving a specific individual entitled to 
     benefits under part A or enrolled under part B, or both, any 
     of the following:
       ``(A) The Secretary, the medicare administrative contractor 
     involved, or any fiduciary, officer, director, or employee of 
     the Department of Health and Human Services, or of such 
     contractor.
       ``(B) The individual (or authorized representative).
       ``(C) The health care professional that provides the items 
     or services involved in the case.
       ``(D) The institution at which the items or services (or 
     treatment) involved in the case are provided.
       ``(E) The manufacturer of any drug or other item that is 
     included in the items or services involved in the case.
       ``(F) Any other party determined under any regulations to 
     have a substantial interest in the case involved.''.
       (3) Reducing minimum number of qualified independent 
     contractors.--Section 1869(c)(4) (42 U.S.C. 1395ff(c)(4)) is 
     amended by striking ``not fewer than 12 qualified independent 
     contractors under this subsection'' and inserting ``with a 
     sufficient number of qualified independent contractors (but 
     not fewer than 4 such contractors) to conduct 
     reconsiderations consistent with the timeframes applicable 
     under this subsection''.
       (4) Effective date.--The amendments made by paragraphs (1) 
     and (2) shall be effective as if included in the enactment of 
     the respective provisions of subtitle C of title V of BIPA, 
     (114 Stat. 2763A-534).
       (5) Transition.--In applying section 1869(g) of the Social 
     Security Act (as added by paragraph (2)), any reference to a 
     medicare administrative contractor shall be deemed to include 
     a reference to a fiscal intermediary under section 1816 of 
     the Social Security Act (42 U.S.C. 1395h) and a carrier under 
     section 1842 of such Act (42 U.S.C. 1395u).

     SEC. 934. PREPAYMENT REVIEW.

       (a) In General.--Section 1874A, as added by section 
     911(a)(1) and as amended by sections 912(b), 921(b)(1), and 
     921(c)(1), is further amended by adding at the end the 
     following new subsection:
       ``(h) Conduct of Prepayment Review.--
       ``(1) Conduct of random prepayment review.--
       ``(A) In general.--A medicare administrative contractor may 
     conduct random prepayment review only to develop a 
     contractor-wide or program-wide claims payment error rates or 
     under such additional circumstances as may be provided under 
     regulations, developed in consultation with providers of 
     services and suppliers.
       ``(B) Use of standard protocols when conducting prepayment 
     reviews.--When a medicare administrative contractor conducts 
     a random prepayment review, the contractor may conduct such 
     review only in accordance with a standard protocol for random 
     prepayment audits developed by the Secretary.
       ``(C) Construction.--Nothing in this paragraph shall be 
     construed as preventing the denial of payments for claims 
     actually reviewed under a random prepayment review.
       ``(D) Random prepayment review.--For purposes of this 
     subsection, the term `random prepayment review' means a 
     demand for the production of records or documentation absent 
     cause with respect to a claim.
       ``(2) Limitations on non-random prepayment review.--
       ``(A) Limitations on initiation of non-random prepayment 
     review.--A medicare administrative contractor may not 
     initiate non-random prepayment review of a provider of 
     services or supplier based on the initial identification by 
     that provider of services or supplier of an improper billing 
     practice unless there is a likelihood of sustained or high 
     level of payment error (as defined in subsection (i)(3)(A)).
       ``(B) Termination of non-random prepayment review.--The 
     Secretary shall issue regulations relating to the 
     termination, including termination dates, of non-random 
     prepayment review. Such regulations may vary such a 
     termination date based upon the differences in the 
     circumstances triggering prepayment review.''.
       (b) Effective Date.--
       (1) In general.--Except as provided in this subsection, the 
     amendment made by subsection (a) shall take effect 1 year 
     after the date of the enactment of this Act.
       (2) Deadline for promulgation of certain regulations.--The 
     Secretary shall first issue regulations under section 
     1874A(h) of the Social Security Act, as added by subsection 
     (a), by not later than 1 year after the date of the enactment 
     of this Act.
       (3) Application of standard protocols for random prepayment 
     review.--Section 1874A(h)(1)(B) of the Social Security Act, 
     as added by subsection (a), shall apply to random prepayment 
     reviews conducted on or after such date (not later than 1 
     year after the date of the enactment of this Act) as the 
     Secretary shall specify.
       (c) Application to Fiscal Intermediaries and Carriers.--The 
     provisions of section 1874A(h) of the Social Security Act, as 
     added by subsection (a), shall apply to each fiscal 
     intermediary under section 1816 of the Social Security Act 
     (42 U.S.C. 1395h) and each carrier under section 1842 of such 
     Act (42 U.S.C. 1395u) in the same manner as they apply to 
     medicare administrative contractors under such provisions.

     SEC. 935. RECOVERY OF OVERPAYMENTS.

       (a) In General.--Section 1893 (42 U.S.C. 1395ddd) is 
     amended by adding at the end the following new subsection:
       ``(f) Recovery of Overpayments.--
       ``(1) Use of repayment plans.--
       ``(A) In general.--If the repayment, within 30 days by a 
     provider of services or supplier, of an overpayment under 
     this title would constitute a hardship (as defined in 
     subparagraph (B)), subject to subparagraph (C), upon request 
     of the provider of services or supplier the Secretary shall 
     enter into a plan with the provider of services or supplier 
     for the repayment (through offset or otherwise) of such 
     overpayment over a period of at least 6 months but not longer 
     than 3 years (or not longer than 5 years in the case of 
     extreme hardship, as determined by the Secretary). Interest 
     shall accrue on the balance through the period of repayment. 
     Such plan shall meet terms and conditions determined to be 
     appropriate by the Secretary.
       ``(B) Hardship.--
       ``(i) In general.--For purposes of subparagraph (A), the 
     repayment of an overpayment (or overpayments) within 30 days 
     is deemed to constitute a hardship if--

       ``(I) in the case of a provider of services that files cost 
     reports, the aggregate amount of the overpayments exceeds 10 
     percent of the amount paid under this title to the provider 
     of services for the cost reporting period covered by the most 
     recently submitted cost report; or
       ``(II) in the case of another provider of services or 
     supplier, the aggregate amount of the overpayments exceeds 10 
     percent of the amount paid under this title to the provider 
     of services or supplier for the previous calendar year.

       ``(ii) Rule of application.--The Secretary shall establish 
     rules for the application of this subparagraph in the case of 
     a provider of services or supplier that was not paid under 
     this title during the previous year or was paid under this 
     title only during a portion of that year.
       ``(iii) Treatment of previous overpayments.--If a provider 
     of services or supplier has entered into a repayment plan 
     under subparagraph (A) with respect to a specific overpayment 
     amount, such payment amount under the repayment plan shall 
     not be taken into account under clause (i) with respect to 
     subsequent overpayment amounts.
       ``(C) Exceptions.--Subparagraph (A) shall not apply if--
       ``(i) the Secretary has reason to suspect that the provider 
     of services or supplier may file for bankruptcy or otherwise 
     cease to do business or discontinue participation in the 
     program under this title; or
       ``(ii) there is an indication of fraud or abuse committed 
     against the program.

[[Page H6067]]

       ``(D) Immediate collection if violation of repayment 
     plan.--If a provider of services or supplier fails to make a 
     payment in accordance with a repayment plan under this 
     paragraph, the Secretary may immediately seek to offset or 
     otherwise recover the total balance outstanding (including 
     applicable interest) under the repayment plan.
       ``(E) Relation to no fault provision.--Nothing in this 
     paragraph shall be construed as affecting the application of 
     section 1870(c) (relating to no adjustment in the cases of 
     certain overpayments).
       ``(2) Limitation on recoupment.--
       ``(A) In general.--In the case of a provider of services or 
     supplier that is determined to have received an overpayment 
     under this title and that seeks a reconsideration by a 
     qualified independent contractor on such determination under 
     section 1869(b)(1), the Secretary may not take any action (or 
     authorize any other person, including any medicare 
     contractor, as defined in subparagraph (C)) to recoup the 
     overpayment until the date the decision on the 
     reconsideration has been rendered. If the provisions of 
     section 1869(b)(1) (providing for such a reconsideration by a 
     qualified independent contractor) are not in effect, in 
     applying the previous sentence any reference to such a 
     reconsideration shall be treated as a reference to a 
     redetermination by the fiscal intermediary or carrier 
     involved.
       ``(B) Collection with interest.--Insofar as the 
     determination on such appeal is against the provider of 
     services or supplier, interest on the overpayment shall 
     accrue on and after the date of the original notice of 
     overpayment. Insofar as such determination against the 
     provider of services or supplier is later reversed, the 
     Secretary shall provide for repayment of the amount recouped 
     plus interest at the same rate as would apply under the 
     previous sentence for the period in which the amount was 
     recouped.
       ``(C) Medicare contractor defined.--For purposes of this 
     subsection, the term `medicare contractor' has the meaning 
     given such term in section 1889(g).
       ``(3) Limitation on use of extrapolation.--A medicare 
     contractor may not use extrapolation to determine overpayment 
     amounts to be recovered by recoupment, offset, or otherwise 
     unless--
       ``(A) there is a sustained or high level of payment error 
     (as defined by the Secretary by regulation); or
       ``(B) documented educational intervention has failed to 
     correct the payment error (as determined by the Secretary).
       ``(4) Provision of supporting documentation.--In the case 
     of a provider of services or supplier with respect to which 
     amounts were previously overpaid, a medicare contractor may 
     request the periodic production of records or supporting 
     documentation for a limited sample of submitted claims to 
     ensure that the previous practice is not continuing.
       ``(5) Consent settlement reforms.--
       ``(A) In general.--The Secretary may use a consent 
     settlement (as defined in subparagraph (D)) to settle a 
     projected overpayment.
       ``(B) Opportunity to submit additional information before 
     consent settlement offer.--Before offering a provider of 
     services or supplier a consent settlement, the Secretary 
     shall--
       ``(i) communicate to the provider of services or supplier--

       ``(I) that, based on a review of the medical records 
     requested by the Secretary, a preliminary evaluation of those 
     records indicates that there would be an overpayment;
       ``(II) the nature of the problems identified in such 
     evaluation; and
       ``(III) the steps that the provider of services or supplier 
     should take to address the problems; and

       ``(ii) provide for a 45-day period during which the 
     provider of services or supplier may furnish additional 
     information concerning the medical records for the claims 
     that had been reviewed.
       ``(C) Consent settlement offer.--The Secretary shall review 
     any additional information furnished by the provider of 
     services or supplier under subparagraph (B)(ii). Taking into 
     consideration such information, the Secretary shall determine 
     if there still appears to be an overpayment. If so, the 
     Secretary--
       ``(i) shall provide notice of such determination to the 
     provider of services or supplier, including an explanation of 
     the reason for such determination; and
       ``(ii) in order to resolve the overpayment, may offer the 
     provider of services or supplier--

       ``(I) the opportunity for a statistically valid random 
     sample; or
       ``(II) a consent settlement.

     The opportunity provided under clause (ii)(I) does not waive 
     any appeal rights with respect to the alleged overpayment 
     involved.
       ``(D) Consent settlement defined.--For purposes of this 
     paragraph, the term `consent settlement' means an agreement 
     between the Secretary and a provider of services or supplier 
     whereby both parties agree to settle a projected overpayment 
     based on less than a statistically valid sample of claims and 
     the provider of services or supplier agrees not to appeal the 
     claims involved.
       ``(6) Notice of over-utilization of codes.--The Secretary 
     shall establish, in consultation with organizations 
     representing the classes of providers of services and 
     suppliers, a process under which the Secretary provides for 
     notice to classes of providers of services and suppliers 
     served by the contractor in cases in which the contractor has 
     identified that particular billing codes may be overutilized 
     by that class of providers of services or suppliers under the 
     programs under this title (or provisions of title XI insofar 
     as they relate to such programs).
       ``(7) Payment audits.--
       ``(A) Written notice for post-payment audits.--Subject to 
     subparagraph (C), if a medicare contractor decides to conduct 
     a post-payment audit of a provider of services or supplier 
     under this title, the contractor shall provide the provider 
     of services or supplier with written notice (which may be in 
     electronic form) of the intent to conduct such an audit.
       ``(B) Explanation of findings for all audits.--Subject to 
     subparagraph (C), if a medicare contractor audits a provider 
     of services or supplier under this title, the contractor 
     shall--
       ``(i) give the provider of services or supplier a full 
     review and explanation of the findings of the audit in a 
     manner that is understandable to the provider of services or 
     supplier and permits the development of an appropriate 
     corrective action plan;
       ``(ii) inform the provider of services or supplier of the 
     appeal rights under this title as well as consent settlement 
     options (which are at the discretion of the Secretary);
       ``(iii) give the provider of services or supplier an 
     opportunity to provide additional information to the 
     contractor; and
       ``(iv) take into account information provided, on a timely 
     basis, by the provider of services or supplier under clause 
     (iii).
       ``(C) Exception.--Subparagraphs (A) and (B) shall not apply 
     if the provision of notice or findings would compromise 
     pending law enforcement activities, whether civil or 
     criminal, or reveal findings of law enforcement-related 
     audits.
       ``(8) Standard methodology for probe sampling.--The 
     Secretary shall establish a standard methodology for medicare 
     contractors to use in selecting a sample of claims for review 
     in the case of an abnormal billing pattern.''.
       (b) Effective Dates and Deadlines.--
       (1) Use of repayment plans.--Section 1893(f)(1) of the 
     Social Security Act, as added by subsection (a), shall apply 
     to requests for repayment plans made after the date of the 
     enactment of this Act.
       (2) Limitation on recoupment.--Section 1893(f)(2) of the 
     Social Security Act, as added by subsection (a), shall apply 
     to actions taken after the date of the enactment of this Act.
       (3) Use of extrapolation.--Section 1893(f)(3) of the Social 
     Security Act, as added by subsection (a), shall apply to 
     statistically valid random samples initiated after the date 
     that is 1 year after the date of the enactment of this Act.
       (4) Provision of supporting documentation.--Section 
     1893(f)(4) of the Social Security Act, as added by subsection 
     (a), shall take effect on the date of the enactment of this 
     Act.
       (5) Consent settlement.--Section 1893(f)(5) of the Social 
     Security Act, as added by subsection (a), shall apply to 
     consent settlements entered into after the date of the 
     enactment of this Act.
       (6) Notice of overutilization.--Not later than 1 year after 
     the date of the enactment of this Act, the Secretary shall 
     first establish the process for notice of overutilization of 
     billing codes under section 1893A(f)(6) of the Social 
     Security Act, as added by subsection (a).
       (7) Payment audits.--Section 1893A(f)(7) of the Social 
     Security Act, as added by subsection (a), shall apply to 
     audits initiated after the date of the enactment of this Act.
       (8) Standard for abnormal billing patterns.--Not later than 
     1 year after the date of the enactment of this Act, the 
     Secretary shall first establish a standard methodology for 
     selection of sample claims for abnormal billing patterns 
     under section 1893(f)(8) of the Social Security Act, as added 
     by subsection (a).

     SEC. 936. PROVIDER ENROLLMENT PROCESS; RIGHT OF APPEAL.

       (a) In General.--Section 1866 (42 U.S.C. 1395cc) is 
     amended--
       (1) by adding at the end of the heading the following: ``; 
     enrollment processes''; and
       (2) by adding at the end the following new subsection:
       ``(j) Enrollment Process for Providers of Services and 
     Suppliers.--
       ``(1) Enrollment process.--
       ``(A) In general.--The Secretary shall establish by 
     regulation a process for the enrollment of providers of 
     services and suppliers under this title.
       ``(B) Deadlines.--The Secretary shall establish by 
     regulation procedures under which there are deadlines for 
     actions on applications for enrollment (and, if applicable, 
     renewal of enrollment). The Secretary shall monitor the 
     performance of medicare administrative contractors in meeting 
     the deadlines established under this subparagraph.
       ``(C) Consultation before changing provider enrollment 
     forms.--The Secretary shall consult with providers of 
     services and suppliers before making changes in the provider 
     enrollment forms required of such providers and suppliers to 
     be eligible to submit claims for which payment may be made 
     under this title.
       ``(2) Hearing rights in cases of denial or non-renewal.--A 
     provider of services or supplier whose application to enroll 
     (or, if applicable, to renew enrollment) under this title is 
     denied may have a hearing and judicial review of such denial 
     under the procedures that apply under subsection (h)(1)(A) to 
     a

[[Page H6068]]

     provider of services that is dissatisfied with a 
     determination by the Secretary.''.
       (b) Effective Dates.--
       (1) Enrollment process.--The Secretary shall provide for 
     the establishment of the enrollment process under section 
     1866(j)(1) of the Social Security Act, as added by subsection 
     (a)(2), within 6 months after the date of the enactment of 
     this Act.
       (2) Consultation.--Section 1866(j)(1)(C) of the Social 
     Security Act, as added by subsection (a)(2), shall apply with 
     respect to changes in provider enrollment forms made on or 
     after January 1, 2004.
       (3) Hearing rights.--Section 1866(j)(2) of the Social 
     Security Act, as added by subsection (a)(2), shall apply to 
     denials occurring on or after such date (not later than 1 
     year after the date of the enactment of this Act) as the 
     Secretary specifies.

     SEC. 937. PROCESS FOR CORRECTION OF MINOR ERRORS AND 
                   OMISSIONS WITHOUT PURSUING APPEALS PROCESS.

       (a) Claims.--The Secretary shall develop, in consultation 
     with appropriate medicare contractors (as defined in section 
     1889(g) of the Social Security Act, as inserted by section 
     301(a)(1)) and representatives of providers of services and 
     suppliers, a process whereby, in the case of minor errors or 
     omissions (as defined by the Secretary) that are detected in 
     the submission of claims under the programs under title XVIII 
     of such Act, a provider of services or supplier is given an 
     opportunity to correct such an error or omission without the 
     need to initiate an appeal. Such process shall include the 
     ability to resubmit corrected claims.
       (b) Permitting Use of Corrected and Supplementary Data.--
       (1) In general.--Section 1886(d)(10)(D)(vi) (42 U.S.C. 
     1395ww(d)(10)(D)(vi)) is amended by adding after subclause 
     (II) at the end the following:
     ``Notwithstanding subclause (I), a hospital may submit, and 
     the Secretary may accept upon verification, data that 
     corrects or supplements the data described in such subclause 
     without regard to whether the corrected or supplementary data 
     relate to a cost report that has been settled.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to fiscal years beginning with fiscal year 2004.
       (3) Submittal and resubmittal of applications permitted for 
     fiscal year 2004.--
       (A) In general.--Notwithstanding any other provision of 
     law, a hospital may submit (or resubmit) an application for a 
     change described in section 1886(d)(10)(C)(i)(II) of the 
     Social Security Act for fiscal year 2004 if the hospital 
     demonstrates on a timely basis to the satisfaction of the 
     Secretary that the use of corrected or supplementary data 
     under the amendment made by paragraph (1) would materially 
     affect the approval of such an application.
       (B) Application of budget neutrality.--If one or more 
     hospital's applications are approved as a result of paragraph 
     (1) and subparagraph (A) for fiscal year 2004, the Secretary 
     shall make a proportional adjustment in the standardized 
     amounts determined under section 1886(d)(3) of the Social 
     Security Act (42 U.S.C. 1395ww(d)(3)) for fiscal year 2004 to 
     assure that approval of such applications does not result in 
     aggregate payments under section 1886(d) of such Act that are 
     greater or less than those that would otherwise be made if 
     paragraph (1) and subparagraph (A) did not apply.

     SEC. 938. PRIOR DETERMINATION PROCESS FOR CERTAIN ITEMS AND 
                   SERVICES; ADVANCE BENEFICIARY NOTICES.

       (a) In General.--Section 1869 (42 U.S.C. 1395ff(b)), as 
     amended by sections 521 and 522 of BIPA and section 
     933(d)(2)(B), is further amended by adding at the end the 
     following new subsection:
       ``(h) Prior Determination Process for Certain Items and 
     Services.--
       ``(1) Establishment of process.--
       ``(A) In general.--With respect to a medicare 
     administrative contractor that has a contract under section 
     1874A that provides for making payments under this title with 
     respect to eligible items and services described in 
     subparagraph (C), the Secretary shall establish a prior 
     determination process that meets the requirements of this 
     subsection and that shall be applied by such contractor in 
     the case of eligible requesters.
       ``(B) Eligible requester.--For purposes of this subsection, 
     each of the following shall be an eligible requester:
       ``(i) A physician, but only with respect to eligible items 
     and services for which the physician may be paid directly.
       ``(ii) An individual entitled to benefits under this title, 
     but only with respect to an item or service for which the 
     individual receives, from the physician who may be paid 
     directly for the item or service, an advance beneficiary 
     notice under section 1879(a) that payment may not be made (or 
     may no longer be made) for the item or service under this 
     title.
       ``(C) Eligible items and services.--For purposes of this 
     subsection and subject to paragraph (2), eligible items and 
     services are items and services which are physicians' 
     services (as defined in paragraph (4)(A) of section 1848(f) 
     for purposes of calculating the sustainable growth rate under 
     such section).
       ``(2) Secretarial flexibility.--The Secretary shall 
     establish by regulation reasonable limits on the categories 
     of eligible items and services for which a prior 
     determination of coverage may be requested under this 
     subsection. In establishing such limits, the Secretary may 
     consider the dollar amount involved with respect to the item 
     or service, administrative costs and burdens, and other 
     relevant factors.
       ``(3) Request for prior determination.--
       ``(A) In general.--Subject to paragraph (2), under the 
     process established under this subsection an eligible 
     requester may submit to the contractor a request for a 
     determination, before the furnishing of an eligible item or 
     service involved as to whether the item or service is covered 
     under this title consistent with the applicable requirements 
     of section 1862(a)(1)(A) (relating to medical necessity).
       ``(B) Accompanying documentation.--The Secretary may 
     require that the request be accompanied by a description of 
     the item or service, supporting documentation relating to the 
     medical necessity for the item or service, and any other 
     appropriate documentation. In the case of a request submitted 
     by an eligible requester who is described in paragraph 
     (1)(B)(ii), the Secretary may require that the request also 
     be accompanied by a copy of the advance beneficiary notice 
     involved.
       ``(4) Response to request.--
       ``(A) In general.--Under such process, the contractor shall 
     provide the eligible requester with written notice of a 
     determination as to whether--
       ``(i) the item or service is so covered;
       ``(ii) the item or service is not so covered; or
       ``(iii) the contractor lacks sufficient information to make 
     a coverage determination.

     If the contractor makes the determination described in clause 
     (iii), the contractor shall include in the notice a 
     description of the additional information required to make 
     the coverage determination.
       ``(B) Deadline to respond.--Such notice shall be provided 
     within the same time period as the time period applicable to 
     the contractor providing notice of initial determinations on 
     a claim for benefits under subsection (a)(2)(A).
       ``(C) Informing beneficiary in case of physician request.--
     In the case of a request in which an eligible requester is 
     not the individual described in paragraph (1)(B)(ii), the 
     process shall provide that the individual to whom the item or 
     service is proposed to be furnished shall be informed of any 
     determination described in clause (ii) (relating to a 
     determination of non-coverage) and the right (referred to in 
     paragraph (6)(B)) to obtain the item or service and have a 
     claim submitted for the item or service.
       ``(5) Effect of determinations.--
       ``(A) Binding nature of positive determination.--If the 
     contractor makes the determination described in paragraph 
     (4)(A)(i), such determination shall be binding on the 
     contractor in the absence of fraud or evidence of 
     misrepresentation of facts presented to the contractor.
       ``(B) Notice and right to redetermination in case of a 
     denial.--
       ``(i) In general.--If the contractor makes the 
     determination described in paragraph (4)(A)(ii)--

       ``(I) the eligible requester has the right to a 
     redetermination by the contractor on the determination that 
     the item or service is not so covered; and
       ``(II) the contractor shall include in notice under 
     paragraph (4)(A) a brief explanation of the basis for the 
     determination, including on what national or local coverage 
     or noncoverage determination (if any) the determination is 
     based, and the right to such a redetermination.

       ``(ii) Deadline for redeterminations.--The contractor shall 
     complete and provide notice of such redetermination within 
     the same time period as the time period applicable to the 
     contractor providing notice of redeterminations relating to a 
     claim for benefits under subsection (a)(3)(C)(ii).
       ``(6) Limitation on further review.--
       ``(A) In general.--Contractor determinations described in 
     paragraph (4)(A)(ii) or (4)(A)(iii) (and redeterminations 
     made under paragraph (5)(B)), relating to pre-service claims 
     are not subject to further administrative appeal or judicial 
     review under this section or otherwise.
       ``(B) Decision not to seek prior determination or negative 
     determination does not impact right to obtain services, seek 
     reimbursement, or appeal rights.--Nothing in this subsection 
     shall be construed as affecting the right of an individual 
     who--
       ``(i) decides not to seek a prior determination under this 
     subsection with respect to items or services; or
       ``(ii) seeks such a determination and has received a 
     determination described in paragraph (4)(A)(ii),

     from receiving (and submitting a claim for) such items 
     services and from obtaining administrative or judicial review 
     respecting such claim under the other applicable provisions 
     of this section. Failure to seek a prior determination under 
     this subsection with respect to items and services shall not 
     be taken into account in such administrative or judicial 
     review.
       ``(C) No prior determination after receipt of services.--
     Once an individual is provided items and services, there 
     shall be no prior determination under this subsection with 
     respect to such items or services.''.
       (b) Effective Date; Transition.--
       (1) Effective date.--The Secretary shall establish the 
     prior determination process under the amendment made by 
     subsection (a) in such a manner as to provide for the 
     acceptance of requests for determinations under such process 
     filed not later than 18 months after the date of the 
     enactment of this Act.
       (2) Transition.--During the period in which the amendment 
     made by subsection

[[Page H6069]]

     (a) has become effective but contracts are not provided under 
     section 1874A of the Social Security Act with medicare 
     administrative contractors, any reference in section 1869(g) 
     of such Act (as added by such amendment) to such a contractor 
     is deemed a reference to a fiscal intermediary or carrier 
     with an agreement under section 1816, or contract under 
     section 1842, respectively, of such Act.
       (3) Limitation on application to sgr.--For purposes of 
     applying section 1848(f)(2)(D) of the Social Security Act (42 
     U.S.C. 1395w-4(f)(2)(D)), the amendment made by subsection 
     (a) shall not be considered to be a change in law or 
     regulation.
       (c) Provisions Relating to Advance Beneficiary Notices; 
     Report on Prior Determination Process.--
       (1) Data collection.--The Secretary shall establish a 
     process for the collection of information on the instances in 
     which an advance beneficiary notice (as defined in paragraph 
     (5)) has been provided and on instances in which a 
     beneficiary indicates on such a notice that the beneficiary 
     does not intend to seek to have the item or service that is 
     the subject of the notice furnished.
       (2) Outreach and education.--The Secretary shall establish 
     a program of outreach and education for beneficiaries and 
     providers of services and other persons on the appropriate 
     use of advance beneficiary notices and coverage policies 
     under the medicare program.
       (3) GAO report report on use of advance beneficiary 
     notices.--Not later than 18 months after the date on which 
     section 1869(g) of the Social Security Act (as added by 
     subsection (a)) takes effect, the Comptroller General of the 
     United States shall submit to Congress a report on the use of 
     advance beneficiary notices under title XVIII of such Act. 
     Such report shall include information concerning the 
     providers of services and other persons that have provided 
     such notices and the response of beneficiaries to such 
     notices.
       (4) GAO report on use of prior determination process.--Not 
     later than 18 months after the date on which section 1869(g) 
     of the Social Security Act (as added by subsection (a)) takes 
     effect, the Comptroller General of the United States shall 
     submit to Congress a report on the use of the prior 
     determination process under such section. Such report shall 
     include--
       (A) information concerning the types of procedures for 
     which a prior determination has been sought, determinations 
     made under the process, and changes in receipt of services 
     resulting from the application of such process; and
       (B) an evaluation of whether the process was useful for 
     physicians (and other suppliers) and beneficiaries, whether 
     it was timely, and whether the amount of information required 
     was burdensome to physicians and beneficiaries.
       (5) Advance beneficiary notice defined.--In this 
     subsection, the term ``advance beneficiary notice'' means a 
     written notice provided under section 1879(a) of the Social 
     Security Act (42 U.S.C. 1395pp(a)) to an individual entitled 
     to benefits under part A or B of title XVIII of such Act 
     before items or services are furnished under such part in 
     cases where a provider of services or other person that would 
     furnish the item or service believes that payment will not be 
     made for some or all of such items or services under such 
     title.

                  Subtitle V--Miscellaneous Provisions

     SEC. 941. POLICY DEVELOPMENT REGARDING EVALUATION AND 
                   MANAGEMENT (E & M) DOCUMENTATION GUIDELINES.

       (a) In General.--The Secretary may not implement any new 
     documentation guidelines for, or clinical examples of, 
     evaluation and management physician services under the title 
     XVIII of the Social Security Act on or after the date of the 
     enactment of this Act unless the Secretary--
       (1) has developed the guidelines in collaboration with 
     practicing physicians (including both generalists and 
     specialists) and provided for an assessment of the proposed 
     guidelines by the physician community;
       (2) has established a plan that contains specific goals, 
     including a schedule, for improving the use of such 
     guidelines;
       (3) has conducted appropriate and representative pilot 
     projects under subsection (b) to test modifications to the 
     evaluation and management documentation guidelines;
       (4) finds that the objectives described in subsection (c) 
     will be met in the implementation of such guidelines; and
       (5) has established, and is implementing, a program to 
     educate physicians on the use of such guidelines and that 
     includes appropriate outreach.

     The Secretary shall make changes to the manner in which 
     existing evaluation and management documentation guidelines 
     are implemented to reduce paperwork burdens on physicians.
       (b) Pilot Projects to Test Evaluation and Management 
     Documentation Guidelines.--
       (1) In general.--The Secretary shall conduct under this 
     subsection appropriate and representative pilot projects to 
     test new evaluation and management documentation guidelines 
     referred to in subsection (a).
       (2) Length and consultation.--Each pilot project under this 
     subsection shall--
       (A) be voluntary;
       (B) be of sufficient length as determined by the Secretary 
     to allow for preparatory physician and medicare contractor 
     education, analysis, and use and assessment of potential 
     evaluation and management guidelines; and
       (C) be conducted, in development and throughout the 
     planning and operational stages of the project, in 
     consultation with practicing physicians (including both 
     generalists and specialists).
       (3) Range of pilot projects.--Of the pilot projects 
     conducted under this subsection--
       (A) at least one shall focus on a peer review method by 
     physicians (not employed by a medicare contractor) which 
     evaluates medical record information for claims submitted by 
     physicians identified as statistical outliers relative to 
     definitions published in the Current Procedures Terminology 
     (CPT) code book of the American Medical Association;
       (B) at least one shall focus on an alternative method to 
     detailed guidelines based on physician documentation of face 
     to face encounter time with a patient;
       (C) at least one shall be conducted for services furnished 
     in a rural area and at least one for services furnished 
     outside such an area; and
       (D) at least one shall be conducted in a setting where 
     physicians bill under physicians' services in teaching 
     settings and at least one shall be conducted in a setting 
     other than a teaching setting.
       (4) Banning of targeting of pilot project participants.--
     Data collected under this subsection shall not be used as the 
     basis for overpayment demands or post-payment audits. Such 
     limitation applies only to claims filed as part of the pilot 
     project and lasts only for the duration of the pilot project 
     and only as long as the provider is a participant in the 
     pilot project.
       (5) Study of impact.--Each pilot project shall examine the 
     effect of the new evaluation and management documentation 
     guidelines on--
       (A) different types of physician practices, including those 
     with fewer than 10 full-time-equivalent employees (including 
     physicians); and
       (B) the costs of physician compliance, including education, 
     implementation, auditing, and monitoring.
       (6) Periodic reports.--The Secretary shall submit to 
     Congress periodic reports on the pilot projects under this 
     subsection.
       (c) Objectives for Evaluation and Management Guidelines.--
     The objectives for modified evaluation and management 
     documentation guidelines developed by the Secretary shall be 
     to--
       (1) identify clinically relevant documentation needed to 
     code accurately and assess coding levels accurately;
       (2) decrease the level of non-clinically pertinent and 
     burdensome documentation time and content in the physician's 
     medical record;
       (3) increase accuracy by reviewers; and
       (4) educate both physicians and reviewers.
       (d) Study of Simpler, Alternative Systems of Documentation 
     for Physician Claims.--
       (1) Study.--The Secretary shall carry out a study of the 
     matters described in paragraph (2).
       (2) Matters described.--The matters referred to in 
     paragraph (1) are--
       (A) the development of a simpler, alternative system of 
     requirements for documentation accompanying claims for 
     evaluation and management physician services for which 
     payment is made under title XVIII of the Social Security Act; 
     and
       (B) consideration of systems other than current coding and 
     documentation requirements for payment for such physician 
     services.
       (3) Consultation with practicing physicians.--In designing 
     and carrying out the study under paragraph (1), the Secretary 
     shall consult with practicing physicians, including 
     physicians who are part of group practices and including both 
     generalists and specialists.
       (4) Application of hipaa uniform coding requirements.--In 
     developing an alternative system under paragraph (2), the 
     Secretary shall consider requirements of administrative 
     simplification under part C of title XI of the Social 
     Security Act.
       (5) Report to congress.--(A) Not later than October 1, 
     2005, the Secretary shall submit to Congress a report on the 
     results of the study conducted under paragraph (1).
       (B) The Medicare Payment Advisory Commission shall conduct 
     an analysis of the results of the study included in the 
     report under subparagraph (A) and shall submit a report on 
     such analysis to Congress.
       (e) Study on Appropriate Coding of Certain Extended Office 
     Visits.--The Secretary shall conduct a study of the 
     appropriateness of coding in cases of extended office visits 
     in which there is no diagnosis made. Not later than October 
     1, 2005, the Secretary shall submit a report to Congress on 
     such study and shall include recommendations on how to code 
     appropriately for such visits in a manner that takes into 
     account the amount of time the physician spent with the 
     patient.
       (f) Definitions.--In this section--
       (1) the term ``rural area'' has the meaning given that term 
     in section 1886(d)(2)(D) of the Social Security Act, 42 
     U.S.C. 1395ww(d)(2)(D); and
       (2) the term ``teaching settings'' are those settings 
     described in section 415.150 of title 42, Code of Federal 
     Regulations.

     SEC. 942. IMPROVEMENT IN OVERSIGHT OF TECHNOLOGY AND 
                   COVERAGE.

       (a) Council for Technology and Innovation.--Section 1868 
     (42 U.S.C. 1395ee), as

[[Page H6070]]

     amended by section 921(a), is amended by adding at the end 
     the following new subsection:
       ``(c) Council for Technology and Innovation.--
       ``(1) Establishment.--The Secretary shall establish a 
     Council for Technology and Innovation within the Centers for 
     Medicare & Medicaid Services (in this section referred to as 
     `CMS').
       ``(2) Composition.--The Council shall be composed of senior 
     CMS staff and clinicians and shall be chaired by the 
     Executive Coordinator for Technology and Innovation 
     (appointed or designated under paragraph (4)).
       ``(3) Duties.--The Council shall coordinate the activities 
     of coverage, coding, and payment processes under this title 
     with respect to new technologies and procedures, including 
     new drug therapies, and shall coordinate the exchange of 
     information on new technologies between CMS and other 
     entities that make similar decisions.
       ``(4) Executive coordinator for technology and 
     innovation.--The Secretary shall appoint (or designate) a 
     noncareer appointee (as defined in section 3132(a)(7) of 
     title 5, United States Code) who shall serve as the Executive 
     Coordinator for Technology and Innovation. Such executive 
     coordinator shall report to the Administrator of CMS, shall 
     chair the Council, shall oversee the execution of its duties, 
     and shall serve as a single point of contact for outside 
     groups and entities regarding the coverage, coding, and 
     payment processes under this title.''.
       (b) Methods for Determining Payment Basis For New Lab 
     Tests.--Section 1833(h) (42 U.S.C. 1395l(h)) is amended by 
     adding at the end the following:
       ``(8)(A) The Secretary shall establish by regulation 
     procedures for determining the basis for, and amount of, 
     payment under this subsection for any clinical diagnostic 
     laboratory test with respect to which a new or substantially 
     revised HCPCS code is assigned on or after January 1, 2005 
     (in this paragraph referred to as `new tests').
       ``(B) Determinations under subparagraph (A) shall be made 
     only after the Secretary--
       ``(i) makes available to the public (through an Internet 
     site and other appropriate mechanisms) a list that includes 
     any such test for which establishment of a payment amount 
     under this subsection is being considered for a year;
       ``(ii) on the same day such list is made available, causes 
     to have published in the Federal Register notice of a meeting 
     to receive comments and recommendations (and data on which 
     recommendations are based) from the public on the appropriate 
     basis under this subsection for establishing payment amounts 
     for the tests on such list;
       ``(iii) not less than 30 days after publication of such 
     notice convenes a meeting, that includes representatives of 
     officials of the Centers for Medicare & Medicaid Services 
     involved in determining payment amounts, to receive such 
     comments and recommendations (and data on which the 
     recommendations are based);
       ``(iv) taking into account the comments and recommendations 
     (and accompanying data) received at such meeting, develops 
     and makes available to the public (through an Internet site 
     and other appropriate mechanisms) a list of proposed 
     determinations with respect to the appropriate basis for 
     establishing a payment amount under this subsection for each 
     such code, together with an explanation of the reasons for 
     each such determination, the data on which the determinations 
     are based, and a request for public written comments on the 
     proposed determination; and
       ``(v) taking into account the comments received during the 
     public comment period, develops and makes available to the 
     public (through an Internet site and other appropriate 
     mechanisms) a list of final determinations of the payment 
     amounts for such tests under this subsection, together with 
     the rationale for each such determination, the data on which 
     the determinations are based, and responses to comments and 
     suggestions received from the public.
       ``(C) Under the procedures established pursuant to 
     subparagraph (A), the Secretary shall--
       ``(i) set forth the criteria for making determinations 
     under subparagraph (A); and
       ``(ii) make available to the public the data (other than 
     proprietary data) considered in making such determinations.
       ``(D) The Secretary may convene such further public 
     meetings to receive public comments on payment amounts for 
     new tests under this subsection as the Secretary deems 
     appropriate.
       ``(E) For purposes of this paragraph:
       ``(i) The term `HCPCS' refers to the Health Care Procedure 
     Coding System.
       ``(ii) A code shall be considered to be `substantially 
     revised' if there is a substantive change to the definition 
     of the test or procedure to which the code applies (such as a 
     new analyte or a new methodology for measuring an existing 
     analyte-specific test).''.
       (c) GAO Study on Improvements in External Data Collection 
     for Use in the Medicare Inpatient Payment System.--
       (1) Study.--The Comptroller General of the United States 
     shall conduct a study that analyzes which external data can 
     be collected in a shorter time frame by the Centers for 
     Medicare & Medicaid Services for use in computing payments 
     for inpatient hospital services. The study may include an 
     evaluation of the feasibility and appropriateness of using of 
     quarterly samples or special surveys or any other methods. 
     The study shall include an analysis of whether other 
     executive agencies, such as the Bureau of Labor Statistics in 
     the Department of Commerce, are best suited to collect this 
     information.
       (2) Report.--By not later than October 1, 2004, the 
     Comptroller General shall submit a report to Congress on the 
     study under paragraph (1).
       (d) Process for Adoption of ICD Codes as Data Standard.--
     Section 1172(f) (42 U.S.C. 1320d-1(f)) is amended by 
     inserting after the first sentence the following: 
     ``Notwithstanding the first sentence of this subsection, if 
     the National Committee on Vital and Health Statistics has not 
     made a recommendation to the Secretary, within 1 year after 
     the date of the enactment of this sentence, with respect to 
     the adoption of the International Classification of Diseases, 
     10th Revision, Procedure Coding System (`ICD-10-PCS') and the 
     International Classification of Diseases, 10th Revision, 
     Clinical Modification (`ICD-10-CM') as a standard under this 
     part, then the Secretary may adopt ICD-10-PCS and ICD-10-CM 
     as such a standard.''.

     SEC. 943. TREATMENT OF HOSPITALS FOR CERTAIN SERVICES UNDER 
                   MEDICARE SECONDARY PAYOR (MSP) PROVISIONS.

       (a) In General.--The Secretary shall not require a hospital 
     (including a critical access hospital) to ask questions (or 
     obtain information) relating to the application of section 
     1862(b) of the Social Security Act (relating to medicare 
     secondary payor provisions) in the case of reference 
     laboratory services described in subsection (b), if the 
     Secretary does not impose such requirement in the case of 
     such services furnished by an independent laboratory.
       (b) Reference Laboratory Services Described.--Reference 
     laboratory services described in this subsection are clinical 
     laboratory diagnostic tests (or the interpretation of such 
     tests, or both) furnished without a face-to-face encounter 
     between the individual entitled to benefits under part A or 
     enrolled under part B, or both, and the hospital involved and 
     in which the hospital submits a claim only for such test or 
     interpretation.

     SEC. 944. EMTALA IMPROVEMENTS.

       (a) Payment for EMTALA-Mandated Screening and Stabilization 
     Services.--
       (1) In general.--Section 1862 (42 U.S.C. 1395y) is amended 
     by inserting after subsection (c) the following new 
     subsection:
       ``(d) For purposes of subsection (a)(1)(A), in the case of 
     any item or service that is required to be provided pursuant 
     to section 1867 to an individual who is entitled to benefits 
     under this title, determinations as to whether the item or 
     service is reasonable and necessary shall be made on the 
     basis of the information available to the treating physician 
     or practitioner (including the patient's presenting symptoms 
     or complaint) at the time the item or service was ordered or 
     furnished by the physician or practitioner (and not on the 
     patient's principal diagnosis). When making such 
     determinations with respect to such an item or service, the 
     Secretary shall not consider the frequency with which the 
     item or service was provided to the patient before or after 
     the time of the admission or visit.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to items and services furnished on or after 
     January 1, 2004.
       (b) Notification of Providers When EMTALA Investigation 
     Closed.--Section 1867(d) (42 U.S.C. 42 U.S.C. 1395dd(d)) is 
     amended by adding at the end the following new paragraph:
       ``(4) Notice upon closing an investigation.--The Secretary 
     shall establish a procedure to notify hospitals and 
     physicians when an investigation under this section is 
     closed.''.
       (c) Prior Review by Peer Review Organizations in EMTALA 
     Cases Involving Termination of Participation.--
       (1) In general.--Section 1867(d)(3) (42 U.S.C. 
     1395dd(d)(3)) is amended--
       (A) in the first sentence, by inserting ``or in terminating 
     a hospital's participation under this title'' after ``in 
     imposing sanctions under paragraph (1)''; and
       (B) by adding at the end the following new sentences: 
     ``Except in the case in which a delay would jeopardize the 
     health or safety of individuals, the Secretary shall also 
     request such a review before making a compliance 
     determination as part of the process of terminating a 
     hospital's participation under this title for violations 
     related to the appropriateness of a medical screening 
     examination, stabilizing treatment, or an appropriate 
     transfer as required by this section, and shall provide a 
     period of 5 days for such review. The Secretary shall provide 
     a copy of the organization's report to the hospital or 
     physician consistent with confidentiality requirements 
     imposed on the organization under such part B.''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply to terminations of participation initiated on or 
     after the date of the enactment of this Act.
       (d) Modification of Requirment for Medical Screening 
     Examinations for Patients Not Requesting Emergency Department 
     Services.--
       (1) In general.--Section 1867(a) (42 U.S.C. 1395dd(a)) is 
     amended--
       (A) by designating all that follows ``(a) Medical Screening 
     Requirement.--'' as paragraph (1) with the heading ``In 
     general.--'';
       (B) by aligning such paragraph with the paragraph added by 
     paragraph (3); and

[[Page H6071]]

       (C) by adding at the end the following new paragraph:
       ``(2) Exception for certain cases.--The requirement for an 
     appropriate medical screening examination under paragraph (1) 
     shall not apply in the case of an individual who comes to the 
     emergency department and neither the individual, nor another 
     person on the individual's behalf, requests examination or 
     treatment for an emergency medical condition (such as a 
     request solely for preventive services, such as blood 
     pressure screening or non-emergency laboratory and diagnostic 
     tests).''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply to terminations of participation initiated on or 
     after the date of the enactment of this Act.

     SEC. 945. EMERGENCY MEDICAL TREATMENT AND ACTIVE LABOR ACT 
                   (EMTALA) TECHNICAL ADVISORY GROUP.

       (a) Establishment.--The Secretary shall establish a 
     Technical Advisory Group (in this section referred to as the 
     ``Advisory Group'') to review issues related to the Emergency 
     Medical Treatment and Labor Act (EMTALA) and its 
     implementation. In this section, the term ``EMTALA'' refers 
     to the provisions of section 1867 of the Social Security Act 
     (42 U.S.C. 1395dd).
       (b) Membership.--The Advisory Group shall be composed of 19 
     members, including the Administrator of the Centers for 
     Medicare & Medicaid Services and the Inspector General of the 
     Department of Health and Human Services and of which--
       (1) 4 shall be representatives of hospitals, including at 
     least one public hospital, that have experience with the 
     application of EMTALA and at least 2 of which have not been 
     cited for EMTALA violations;
       (2) 7 shall be practicing physicians drawn from the fields 
     of emergency medicine, cardiology or cardiothoracic surgery, 
     orthopedic surgery, neurosurgery, pediatrics or a pediatric 
     subspecialty, obstetrics-gynecology, and psychiatry, with not 
     more than one physician from any particular field;
       (3) 2 shall represent patients;
       (4) 2 shall be staff involved in EMTALA investigations from 
     different regional offices of the Centers for Medicare & 
     Medicaid Services; and
       (5) 1 shall be from a State survey office involved in 
     EMTALA investigations and 1 shall be from a peer review 
     organization, both of whom shall be from areas other than the 
     regions represented under paragraph (4).

     In selecting members described in paragraphs (1) through (3), 
     the Secretary shall consider qualified individuals nominated 
     by organizations representing providers and patients.
       (c) General Responsibilities.--The Advisory Group--
       (1) shall review EMTALA regulations;
       (2) may provide advice and recommendations to the Secretary 
     with respect to those regulations and their application to 
     hospitals and physicians;
       (3) shall solicit comments and recommendations from 
     hospitals, physicians, and the public regarding the 
     implementation of such regulations; and
       (4) may disseminate information on the application of such 
     regulations to hospitals, physicians, and the public.
       (d) Administrative Matters.--
       (1) Chairperson.--The members of the Advisory Group shall 
     elect a member to serve as chairperson of the Advisory Group 
     for the life of the Advisory Group.
       (2) Meetings.--The Advisory Group shall first meet at the 
     direction of the Secretary. The Advisory Group shall then 
     meet twice per year and at such other times as the Advisory 
     Group may provide.
       (e) Termination.--The Advisory Group shall terminate 30 
     months after the date of its first meeting.
       (f) Waiver of Administrative Limitation.--The Secretary 
     shall establish the Advisory Group notwithstanding any 
     limitation that may apply to the number of advisory 
     committees that may be established (within the Department of 
     Health and Human Services or otherwise).

     SEC. 946. AUTHORIZING USE OF ARRANGEMENTS TO PROVIDE CORE 
                   HOSPICE SERVICES IN CERTAIN CIRCUMSTANCES.

       (a) In General.--Section 1861(dd)(5) (42 U.S.C. 
     1395x(dd)(5)) is amended by adding at the end the following:
       ``(D) In extraordinary, exigent, or other non-routine 
     circumstances, such as unanticipated periods of high patient 
     loads, staffing shortages due to illness or other events, or 
     temporary travel of a patient outside a hospice program's 
     service area, a hospice program may enter into arrangements 
     with another hospice program for the provision by that other 
     program of services described in paragraph (2)(A)(ii)(I). The 
     provisions of paragraph (2)(A)(ii)(II) shall apply with 
     respect to the services provided under such arrangements.
       ``(E) A hospice program may provide services described in 
     paragraph (1)(A) other than directly by the program if the 
     services are highly specialized services of a registered 
     professional nurse and are provided non-routinely and so 
     infrequently so that the provision of such services directly 
     would be impracticable and prohibitively expensive.''.
       (b) Conforming Payment Provision.--Section 1814(i) (42 
     U.S.C. 1395f(i)) is amended by adding at the end the 
     following new paragraph:
       ``(4) In the case of hospice care provided by a hospice 
     program under arrangements under section 1861(dd)(5)(D) made 
     by another hospice program, the hospice program that made the 
     arrangements shall bill and be paid for the hospice care.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to hospice care provided on or after the date of 
     the enactment of this Act.

     SEC. 947. APPLICATION OF OSHA BLOODBORNE PATHOGENS STANDARD 
                   TO CERTAIN HOSPITALS.

       (a) In General.--Section 1866 (42 U.S.C. 1395cc) is 
     amended--
       (1) in subsection (a)(1)--
       (A) in subparagraph (R), by striking ``and'' at the end;
       (B) in subparagraph (S), by striking the period at the end 
     and inserting ``, and''; and
       (C) by inserting after subparagraph (S) the following new 
     subparagraph:
       ``(T) in the case of hospitals that are not otherwise 
     subject to the Occupational Safety and Health Act of 1970, to 
     comply with the Bloodborne Pathogens standard under section 
     1910.1030 of title 29 of the Code of Federal Regulations (or 
     as subsequently redesignated).''; and
       (2) by adding at the end of subsection (b) the following 
     new paragraph:
       ``(4)(A) A hospital that fails to comply with the 
     requirement of subsection (a)(1)(T) (relating to the 
     Bloodborne Pathogens standard) is subject to a civil money 
     penalty in an amount described in subparagraph (B), but is 
     not subject to termination of an agreement under this 
     section.
       ``(B) The amount referred to in subparagraph (A) is an 
     amount that is similar to the amount of civil penalties that 
     may be imposed under section 17 of the Occupational Safety 
     and Health Act of 1970 for a violation of the Bloodborne 
     Pathogens standard referred to in subsection (a)(1)(T) by a 
     hospital that is subject to the provisions of such Act.
       ``(C) A civil money penalty under this paragraph shall be 
     imposed and collected in the same manner as civil money 
     penalties under subsection (a) of section 1128A are imposed 
     and collected under that section.''.
       (b) Effective Date.--The amendments made by this subsection 
     (a) shall apply to hospitals as of July 1, 2004.

     SEC. 948. BIPA-RELATED TECHNICAL AMENDMENTS AND CORRECTIONS.

       (a) Technical Amendments Relating to Advisory Committee 
     under BIPA Section 522.--(1) Subsection (i) of section 1114 
     (42 U.S.C. 1314)--
       (A) is transferred to section 1862 and added at the end of 
     such section; and
       (B) is redesignated as subsection (j).
       (2) Section 1862 (42 U.S.C. 1395y) is amended--
       (A) in the last sentence of subsection (a), by striking 
     ``established under section 1114(f)''; and
       (B) in subsection (j), as so transferred and redesignated--
       (i) by striking ``under subsection (f)''; and
       (ii) by striking ``section 1862(a)(1)'' and inserting 
     ``subsection (a)(1)''.
       (b) Terminology Corrections.--(1) Section 1869(c)(3)(I)(ii) 
     (42 U.S.C. 1395ff(c)(3)(I)(ii)), as amended by section 521 of 
     BIPA, is amended--
       (A) in subclause (III), by striking ``policy'' and 
     inserting ``determination''; and
       (B) in subclause (IV), by striking ``medical review 
     policies'' and inserting ``coverage determinations''.
       (2) Section 1852(a)(2)(C) (42 U.S.C. 1395w-22(a)(2)(C)) is 
     amended by striking ``policy'' and ``policy'' and inserting 
     ``determination'' each place it appears and 
     ``determination'', respectively.
       (c) Reference Corrections.--Section 1869(f)(4) (42 U.S.C. 
     1395ff(f)(4)), as added by section 522 of BIPA, is amended--
       (1) in subparagraph (A)(iv), by striking ``subclause (I), 
     (II), or (III)'' and inserting ``clause (i), (ii), or 
     (iii)'';
       (2) in subparagraph (B), by striking ``clause (i)(IV)'' and 
     ``clause (i)(III)'' and inserting ``subparagraph (A)(iv)'' 
     and ``subparagraph (A)(iii)'', respectively; and
       (3) in subparagraph (C), by striking ``clause (i)'', 
     ``subclause (IV)'' and ``subparagraph (A)'' and inserting 
     ``subparagraph (A)'', ``clause (iv)'' and ``paragraph 
     (1)(A)'', respectively each place it appears.
       (d) Other Corrections.--Effective as if included in the 
     enactment of section 521(c) of BIPA, section 1154(e) (42 
     U.S.C. 1320c-3(e)) is amended by striking paragraph (5).
       (e) Effective Date.--Except as otherwise provided, the 
     amendments made by this section shall be effective as if 
     included in the enactment of BIPA.

     SEC. 949. CONFORMING AUTHORITY TO WAIVE A PROGRAM EXCLUSION.

       The first sentence of section 1128(c)(3)(B) (42 U.S.C. 
     1320a-7(c)(3)(B)) is amended to read as follows: ``Subject to 
     subparagraph (G), in the case of an exclusion under 
     subsection (a), the minimum period of exclusion shall be not 
     less than five years, except that, upon the request of the 
     administrator of a Federal health care program (as defined in 
     section 1128B(f)) who determines that the exclusion would 
     impose a hardship on individuals entitled to benefits under 
     part A of title XVIII or enrolled under part B of such title, 
     or both, the Secretary may waive the exclusion under 
     subsection (a)(1), (a)(3), or (a)(4) with respect to that 
     program in the case of an individual or entity that is the 
     sole community physician or sole source of essential 
     specialized services in a community.''.

     SEC. 950. TREATMENT OF CERTAIN DENTAL CLAIMS.

       (a) In General.--Section 1862 (42 U.S.C. 1395y) is amended 
     by adding after subsection (g) the following new subsection:

[[Page H6072]]

       ``(h)(1) Subject to paragraph (2), a group health plan (as 
     defined in subsection (a)(1)(A)(v)) providing supplemental or 
     secondary coverage to individuals also entitled to services 
     under this title shall not require a medicare claims 
     determination under this title for dental benefits 
     specifically excluded under subsection (a)(12) as a condition 
     of making a claims determination for such benefits under the 
     group health plan.
       ``(2) A group health plan may require a claims 
     determination under this title in cases involving or 
     appearing to involve inpatient dental hospital services or 
     dental services expressly covered under this title pursuant 
     to actions taken by the Secretary.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect on the date that is 60 days after the date 
     of the enactment of this Act.

     SEC. 951. FURNISHING HOSPITALS WITH INFORMATION TO COMPUTE 
                   DSH FORMULA.

       Beginning not later than 1 year after the date of the 
     enactment of this Act, the Secretary shall arrange to furnish 
     to subsection (d) hospitals (as defined in section 
     1886(d)(1)(B) of the Social Security Act, 42 U.S.C. 
     1395ww(d)(1)(B)) the data necessary for such hospitals to 
     compute the number of patient days used in computing the 
     disproportionate patient percentage under such section for 
     that hospital for the current cost reporting year. Such data 
     shall also be furnished to other hospitals which would 
     qualify for additional payments under part A of title XVIII 
     of the Social Security Act on the basis of such data.

     SEC. 952. REVISIONS TO REASSIGNMENT PROVISIONS.

       (a) In General.--Section 1842(b)(6)(A) (42 U.S.C. 
     1395u(b)(6)(A)) is amended by striking ``or (ii) (where the 
     service was provided in a hospital, critical access hospital, 
     clinic, or other facility) to the facility in which the 
     service was provided if there is a contractual arrangement 
     between such physician or other person and such facility 
     under which such facility submits the bill for such 
     service,'' and inserting ``or (ii) where the service was 
     provided under a contractual arrangement between such 
     physician or other person and an entity (as defined by the 
     Secretary), to the entity if, under the contractual 
     arrangement, the entity submits the bill for the service and 
     the contractual arrangement meets such other program 
     integrity and other safeguards as the Secretary may determine 
     to be appropriate,''.
       (b) Conforming Amendment.--The second sentence of section 
     1842(b)(6) (42 U.S.C. 1395u(b)(6)) is amended by striking 
     ``except to an employer or facility'' and inserting ``except 
     to an employer, entity, or other person''.
       (c) Effective Date.--The amendments made by section shall 
     apply to payments made on or after the date of the enactment 
     of this Act.

     SEC. 953. OTHER PROVISIONS.

       (a) GAO Reports on the Physician Compensation.--
       (1) Sustainable Growth Rate and Updates.--Not later than 6 
     months after the date of the enactment of this Act, the 
     Comptroller General of the United States shall submit to 
     Congress a report on the appropriateness of the updates in 
     the conversion factor under subsection (d)(3) of section 1848 
     of the Social Security Act (42 U.S.C. 1395w-4), including the 
     appropriateness of the sustainable growth rate formula under 
     subsection (f) of such section for 2002 and succeeding years. 
     Such report shall examine the stability and predictability of 
     such updates and rate and alternatives for the use of such 
     rate in the updates.
       (2) Physician compensation generally.--Not later than 12 
     months after the date of the enactment of this Act, the 
     Comptroller General shall submit to Congress a report on all 
     aspects of physician compensation for services furnished 
     under title XVIII of the Social Security Act, and how those 
     aspects interact and the effect on appropriate compensation 
     for physician services. Such report shall review alternatives 
     for the physician fee schedule under section 1848 of such 
     title (42 U.S.C. 1395w-4).
       (b) Annual Publication of List of National Coverage 
     Determinations.--The Secretary shall provide, in an 
     appropriate annual publication available to the public, a 
     list of national coverage determinations made under title 
     XVIII of the Social Security Act in the previous year and 
     information on how to get more information with respect to 
     such determinations.
       (c) GAO Report on Flexibility in Applying Home Health 
     Conditions of Participation to Patients Who Are Not Medicare 
     Beneficiaries.--Not later than 6 months after the date of the 
     enactment of this Act, the Comptroller General of the United 
     States shall submit to Congress a report on the implications 
     if there were flexibility in the application of the medicare 
     conditions of participation for home health agencies with 
     respect to groups or types of patients who are not medicare 
     beneficiaries. The report shall include an analysis of the 
     potential impact of such flexible application on clinical 
     operations and the recipients of such services and an 
     analysis of methods for monitoring the quality of care 
     provided to such recipients.
       (d) OIG Report on Notices Relating to Use of Hospital 
     Lifetime Reserve Days.--Not later than 1 year after the date 
     of the enactment of this Act, the Inspector General of the 
     Department of Health and Human Services shall submit a report 
     to Congress on--
       (1) the extent to which hospitals provide notice to 
     medicare beneficiaries in accordance with applicable 
     requirements before they use the 60 lifetime reserve days 
     described in section 1812(a)(1) of the Social Security Act 
     (42 U.S.C. 1395d(a)(1)); and
       (2) the appropriateness and feasibility of hospitals 
     providing a notice to such beneficiaries before they 
     completely exhaust such lifetime reserve days.

     SEC. 954. TEMPORARY SUSPENSION OF OASIS REQUIREMENT FOR 
                   COLLECTION OF DATA ON NON-MEDICARE AND NON-
                   MEDICAID PATIENTS.

       (a) In General.--During the period described in subsection 
     (b), the Secretary may not require, under section 4602(e) of 
     the Balanced Budget Act of 1997 or otherwise under OASIS, a 
     home health agency to gather or submit information that 
     relates to an individual who is not eligible for benefits 
     under either title XVIII or title XIX of the Social Security 
     Act (such information in this section referred to as ``non-
     medicare/medicaid OASIS information'').
       (b) Period of Suspension.--The period described in this 
     subsection--
       (1) begins on the date of the enactment of this Act; and
       (2) ends on the last day of the 2nd month beginning after 
     the date as of which the Secretary has published final 
     regulations regarding the collection and use by the Centers 
     for Medicare & Medicaid Services of non-medicare/medicaid 
     OASIS information following the submission of the report 
     required under subsection (c).
       (c) Report.--
       (1) Study.--The Secretary shall conduct a study on how non-
     medicare/medicaid OASIS information is and can be used by 
     large home health agencies. Such study shall examine--
       (A) whether there are unique benefits from the analysis of 
     such information that cannot be derived from other 
     information available to, or collected by, such agencies; and
       (B) the value of collecting such information by small home 
     health agencies compared to the administrative burden related 
     to such collection.

     In conducting the study the Secretary shall obtain 
     recommendations from quality assessment experts in the use of 
     such information and the necessity of small, as well as 
     large, home health agencies collecting such information.
       (2) Report.--The Secretary shall submit to Congress a 
     report on the study conducted under paragraph (1) by not 
     later than 18 months after the date of the enactment of this 
     Act.
       (d) Construction.--Nothing in this section shall be 
     construed as preventing home health agencies from collecting 
     non-medicare/medicaid OASIS information for their own use.

                           TITLE X--MEDICAID

     SEC. 1001. MEDICAID DISPROPORTIONATE SHARE HOSPITAL (DSH) 
                   PAYMENTS.

       Section 1923(f)(3) (42 U.S.C. 1396r-4(f)(3)) is amended--
       (1) in subparagraph (A), by striking ``subparagraph (B)'' 
     and inserting ``subparagraphs (B) and (C)''; and
       (2) by adding at the end the following new subparagraphs:
       ``(C) Special, Temporary Increase in aLloTments on a One-
     time, Non-cumulative basis.--The DSH allotment for any 
     State--
       ``(i) for fiscal year 2004 is equal to 120 percent of the 
     DSH allotment for the State for fiscal year 2003 under this 
     paragraph, notwithstanding subparagraph (B); and
       ``(ii) for each succeeding fiscal year is equal to the DSH 
     allotment for the State for fiscal year 2004 or, in the case 
     of fiscal years beginning with the fiscal year specified in 
     subparagraph (D) for that State, the percentage change in the 
     consumer price index for all urban consumers (all items; U.S. 
     city average), for the previous fiscal year.
       ``(D) Fiscal year specified.--For purposes of subparagraph 
     (C)(ii), the fiscal year specified in this subparagraph for a 
     State is the first fiscal year for which the Secretary 
     estimates that the DSH allotment for that State will equal 
     (or no longer exceed) the DSH allotment for that State under 
     the law as in effect before the date of the enactment of this 
     subparagraph.''.

     SEC. 1002. CLARIFICATION OF INCLUSION OF INPATIENT DRUG 
                   PRICES CHARGED TO CERTAIN PUBLIC HOSPITALS IN 
                   THE BEST PRICE EXEMPTIONS FOR THE MEDICAID DRUG 
                   REBATE PROGRAM.

       (a) In General.--Section 1927(c)(1)(C)(i)(I) (42 U.S.C. 
     1396r-8(c)(1)(C)(i)(I)) is amended by inserting before the 
     semicolon the following: ``(including inpatient prices 
     charged to hospitals described in section 340B(a)(4)(L) of 
     the Public Health Service Act)''.
       (b) Anti-Diversion Protection.--Section 1927(c)(1)(C) (42 
     U.S.C. 1396r-8(c)(1)(C)) is amended by adding at the end the 
     following:
       ``(iii) Application of auditing and recordkeeping 
     requirements.--With respect to a covered entity described in 
     section 340B(a)(4)(L) of the Public Health Service Act, any 
     drug purchased for inpatient use shall be subject to the 
     auditing and recordkeeping requirements described in section 
     340B(a)(5)(C) of the Public Health Service Act.''.

             TITLE XI--ACCESS TO AFFORDABLE PHARMACEUTICALS

            Subtitle A--Access to Affordable Pharmaceuticals

     SEC. 1101. 30-MONTH STAY-OF-EFFECTIVENESS PERIOD.

       (a) Abbreviated New Drug Applications.--Section 505(j) of 
     the Federal Food,

[[Page H6073]]

     Drug, and Cosmetic Act (21 U.S.C. 355(j)) is amended--
       (1) in paragraph (2)--
       (A) by striking subparagraph (B) and inserting the 
     following:
       ``(B) Notice of opinion that patent is invalid or will not 
     be infringed.--
       ``(i) Agreement to give notice.--An applicant that makes a 
     certification described in subparagraph (A)(vii)(IV) shall 
     include in the application a statement that the applicant 
     will give notice as required by this subparagraph.
       ``(ii) Timing of notice.--An applicant that makes a 
     certification described in subparagraph (A)(vii)(IV) shall 
     give notice as required under this subparagraph--
       ``(I) if the certification is in the application, not later 
     than 20 days after the date of the postmark on the notice 
     with which the Secretary informs the applicant that the 
     application has been filed; or
       ``(II) if the certification is in an amendment or 
     supplement to the application, at the time at which the 
     applicant submits the amendment or supplement, regardless of 
     whether the applicant has already given notice with respect 
     to another such certification contained in the application or 
     in an amendment or supplement to the application.
       ``(iii) Recipients of notice.--An applicant required under 
     this subparagraph to give notice shall give notice to--
       ``(I) each owner of the patent that is the subject of the 
     certification (or a representative of the owner designated to 
     receive such a notice); and
       ``(II) the holder of the approved application under 
     subsection (b) for the drug that is claimed by the patent or 
     a use of which is claimed by the patent (or a representative 
     of the holder designated to receive such a notice).
       ``(iv) Contents of notice.--A notice required under this 
     subparagraph shall--
       ``(I) state that an application that contains data from 
     bioavailability or bioequivalence studies has been submitted 
     under this subsection for the drug with respect to which the 
     certification is made to obtain approval to engage in the 
     commercial manufacture, use, or sale of the drug before the 
     expiration of the patent referred to in the certification; 
     and
       ``(II) include a detailed statement of the factual and 
     legal basis of the opinion of the applicant that the patent 
     is invalid or will not be infringed.''; and
       (B) by adding at the end the following subparagraph:
       ``(D)(i) An applicant may not amend or supplement an 
     application to seek approval of a drug referring to a 
     different listed drug from the listed drug identified in the 
     application as submitted to the Secretary.
       ``(ii) With respect to the drug for which an application is 
     submitted, nothing in this subsection prohibits an applicant 
     from amending or supplementing the application to seek 
     approval of a different strength.''; and
       (2) in paragraph (5)--
       (A) in subparagraph (B)--
       (i) by striking ``under the following'' and inserting ``by 
     applying the following to each certification made under 
     paragraph (2)(A)(vii)''; and
       (ii) in clause (iii)--

       (I) in the first sentence, by striking ``unless'' and all 
     that follows and inserting ``unless, before the expiration of 
     45 days after the date on which the notice described in 
     paragraph (2)(B) is received, an action is brought for 
     infringement of the patent that is the subject of the 
     certification and for which information was submitted to the 
     Secretary under subsection (b)(1) or (c)(2) before the date 
     on which the application (excluding an amendment or 
     supplement to the application), which the Secretary later 
     determines to be substantially complete, was submitted.''; 
     and
       (II) in the second sentence--

       (aa) by striking subclause (I) and inserting the following:
       ``(I) if before the expiration of such period the district 
     court decides that the patent is invalid or not infringed 
     (including any substantive determination that there is no 
     cause of action for patent infringement or invalidity), the 
     approval shall be made effective on--
       ``(aa) the date on which the court enters judgment 
     reflecting the decision; or
       ``(bb) the date of a settlement order or consent decree 
     signed and entered by the court stating that the patent that 
     is the subject of the certification is invalid or not 
     infringed;'';
       (bb) by striking subclause (II) and inserting the 
     following:
       ``(II) if before the expiration of such period the district 
     court decides that the patent has been infringed--
       ``(aa) if the judgment of the district court is appealed, 
     the approval shall be made effective on--

       ``(AA) the date on which the court of appeals decides that 
     the patent is invalid or not infringed (including any 
     substantive determination that there is no cause of action 
     for patent infringement or invalidity); or
       ``(BB) the date of a settlement order or consent decree 
     signed and entered by the court of appeals stating that the 
     patent that is the subject of the certification is invalid or 
     not infringed; or

       ``(bb) if the judgment of the district court is not 
     appealed or is affirmed, the approval shall be made effective 
     on the date specified by the district court in a court order 
     under section 271(e)(4)(A) of title 35, United States 
     Code;'';
       (cc) in subclause (III), by striking ``on the date of such 
     court decision.'' and inserting ``as provided in subclause 
     (I); or'';
       (dd) by inserting after subclause (III) the following:
       ``(IV) if before the expiration of such period the court 
     grants a preliminary injunction prohibiting the applicant 
     from engaging in the commercial manufacture or sale of the 
     drug until the court decides the issues of patent validity 
     and infringement and if the court decides that such patent 
     has been infringed, the approval shall be made effective as 
     provided in subclause (II).''; and
       (ee) in the matter after and below subclause (IV) (as added 
     by item (dd)), by striking ``Until the expiration'' and all 
     that follows;
       (B) by redesignating subparagraphs (C) and (D) as 
     subparagraphs (E) and (F), respectively; and
       (C) by inserting after subparagraph (B) the following:
       ``(C) Civil action to obtain patent certainty.--
       ``(i) Declaratory judgment absent infringement action.--

       ``(I) In general.--No action may be brought under section 
     2201 of title 28, United States Code, by an applicant under 
     paragraph (2) for a declaratory judgment with respect to a 
     patent which is the subject of the certification referred to 
     in subparagraph (B)(iii) unless the forty-five day period 
     referred to in such subparagraph has expired, and unless, if 
     the notice provided under paragraph (2)(B) relates to 
     noninfringement, the notice was accompanied by a document 
     described in subclause (II). Any such action shall be brought 
     in the judicial district where the defendant has its 
     principal place of business or a regular and established 
     place of business.
       ``(II) Right of confidential access to application.--For 
     purposes of subclause (I), the document described in this 
     subclause is a document providing a right of confidential 
     access to the application of the applicant under paragraph 
     (2) for the purpose of determining whether an action referred 
     to in subparagraph (B)(iii) should be brought. The document 
     providing the right of confidential access shall contain such 
     restrictions as to persons entitled to access, and on the use 
     and disposition of any information accessed, as would apply 
     had a protective order been entered for the purpose of 
     protecting trade secrets and other confidential business 
     information. Any person provided a right of confidential 
     access shall review the application for the sole and limited 
     purpose of evaluating possible infringement of the patent 
     that is the subject of the certification under paragraph 
     (2)(A)(vii)(IV) and for no other purpose, and may not 
     disclose information of no relevance to any issue of patent 
     infringement to any person other than a person provided a 
     right of confidential access. Further, the application may be 
     redacted by the applicant to remove any information of no 
     relevance to any issue of patent infringement.

       ``(ii) Counterclaim to infringement action.--

       ``(I) In general.--If an owner of the patent or the holder 
     of the approved application under subsection (b) for the drug 
     that is claimed by the patent or a use of which is claimed by 
     the patent brings a patent infringement action against the 
     applicant, the applicant may assert a counterclaim seeking an 
     order requiring the holder to correct or delete the patent 
     information submitted by the holder under subsection (b) or 
     (c) on the ground that the patent does not claim either--

       ``(aa) the drug for which the application was approved; or
       ``(bb) an approved method of using the drug.

       ``(II) No independent cause of action.--Subclause (I) does 
     not authorize the assertion of a claim described in subclause 
     (I) in any civil action or proceeding other than a 
     counterclaim described in subclause (I).

       ``(iii) No damages.--An applicant shall not be entitled to 
     damages in a civil action under subparagraph (i) or a 
     counterclaim under subparagraph (ii).''.
       (b) Applications Generally.--Section 505 of the Federal 
     Food, Drug, and Cosmetic Act (21 U.S.C. 355) is amended--
       (1) in subsection (b)--
       (A) by striking paragraph (3) and inserting the following:
       ``(3) Notice of opinion that patent is invalid or will not 
     be infringed.--
       ``(A) Agreement to give notice.--An applicant that makes a 
     certification described in paragraph (2)(A)(iv) shall include 
     in the application a statement that the applicant will give 
     notice as required by this paragraph.
       ``(B) Timing of notice.--An applicant that makes a 
     certification described in paragraph (2)(A)(iv) shall give 
     notice as required under this paragraph--
       ``(i) if the certification is in the application, not later 
     than 20 days after the date of the postmark on the notice 
     with which the Secretary informs the applicant that the 
     application has been filed; or
       ``(ii) if the certification is in an amendment or 
     supplement to the application, at the time at which the 
     applicant submits the amendment or supplement, regardless of 
     whether the applicant has already given notice with respect 
     to another such certification contained in the application or 
     in an amendment or supplement to the application.

[[Page H6074]]

       ``(C) Recipients of notice.--An applicant required under 
     this paragraph to give notice shall give notice to--
       ``(i) each owner of the patent that is the subject of the 
     certification (or a representative of the owner designated to 
     receive such a notice); and
       ``(ii) the holder of the approved application under this 
     subsection for the drug that is claimed by the patent or a 
     use of which is claimed by the patent (or a representative of 
     the holder designated to receive such a notice).
       ``(D) Contents of notice.--A notice required under this 
     paragraph shall--
       ``(i) state that an application that contains data from 
     bioavailability or bioequivalence studies has been submitted 
     under this subsection for the drug with respect to which the 
     certification is made to obtain approval to engage in the 
     commercial manufacture, use, or sale of the drug before the 
     expiration of the patent referred to in the certification; 
     and
       ``(ii) include a detailed statement of the factual and 
     legal basis of the opinion of the applicant that the patent 
     is invalid or will not be infringed.''; and
       (B)(i) by redesignating paragraph (4) as paragraph (5); and
       (ii) by inserting after paragraph (3) the following 
     paragraph:
       ``(4)(A) An applicant may not amend or supplement an 
     application referred to in paragraph (2) to seek approval of 
     a drug that is a different drug than the drug identified in 
     the application as submitted to the Secretary.
       ``(B) With respect to the drug for which such an 
     application is submitted, nothing in this subsection or 
     subsection (c)(3) prohibits an applicant from amending or 
     supplementing the application to seek approval of a different 
     strength.''; and
       (2) in subsection (c)(3)--
       (A) in the first sentence, by striking ``under the 
     following'' and inserting ``by applying the following to each 
     certification made under subsection (b)(2)(A)(iv)'';
       (B) in subparagraph (C)--
       (i) in the first sentence, by striking ``unless'' and all 
     that follows and inserting ``unless, before the expiration of 
     45 days after the date on which the notice described in 
     subsection (b)(3) is received, an action is brought for 
     infringement of the patent that is the subject of the 
     certification and for which information was submitted to the 
     Secretary under paragraph (2) or subsection (b)(1) before the 
     date on which the application (excluding an amendment or 
     supplement to the application) was submitted.'';
       (ii) in the second sentence--

       (I) by striking ``paragraph (3)(B)'' and inserting 
     ``subsection (b)(3)'';
       (II) by striking clause (i) and inserting the following:

       ``(i) if before the expiration of such period the district 
     court decides that the patent is invalid or not infringed 
     (including any substantive determination that there is no 
     cause of action for patent infringement or invalidity), the 
     approval shall be made effective on--
       ``(I) the date on which the court enters judgment 
     reflecting the decision; or
       ``(II) the date of a settlement order or consent decree 
     signed and entered by the court stating that the patent that 
     is the subject of the certification is invalid or not 
     infringed;'';

       (III) by striking clause (ii) and inserting the following:

       ``(ii) if before the expiration of such period the district 
     court decides that the patent has been infringed--
       ``(I) if the judgment of the district court is appealed, 
     the approval shall be made effective on--

       ``(aa) the date on which the court of appeals decides that 
     the patent is invalid or not infringed (including any 
     substantive determination that there is no cause of action 
     for patent infringement or invalidity); or
       ``(bb) the date of a settlement order or consent decree 
     signed and entered by the court of appeals stating that the 
     patent that is the subject of the certification is invalid or 
     not infringed; or

       ``(II) if the judgment of the district court is not 
     appealed or is affirmed, the approval shall be made effective 
     on the date specified by the district court in a court order 
     under section 271(e)(4)(A) of title 35, United States 
     Code;'';

       (IV) in clause (iii), by striking ``on the date of such 
     court decision.'' and inserting ``as provided in clause (i); 
     or'';
       (V) by inserting after clause (iii), the following:

       ``(iv) if before the expiration of such period the court 
     grants a preliminary injunction prohibiting the applicant 
     from engaging in the commercial manufacture or sale of the 
     drug until the court decides the issues of patent validity 
     and infringement and if the court decides that such patent 
     has been infringed, the approval shall be made effective as 
     provided in clause (ii).''; and

       (VI) in the matter after and below clause (iv) (as added by 
     subclause (V)), by striking ``Until the expiration'' and all 
     that follows; and

       (iii) in the third sentence, by striking ``paragraph 
     (3)(B)'' and inserting ``subsection (b)(3)'';
       (C) by redesignating subparagraph (D) as subparagraph (E); 
     and
       (D) by inserting after subparagraph (C) the following:
       ``(D) Civil action to obtain patent certainty.--
       ``(i) Declaratory judgment absent infringement action.--

       ``(I) In general.--No action may be brought under section 
     2201 of title 28, United States Code, by an applicant 
     referred to in subsection (b)(2) for a declaratory judgment 
     with respect to a patent which is the subject of the 
     certification referred to in subparagraph (C) unless the 
     forty-five day period referred to in such subparagraph has 
     expired, and unless, if the notice the applicant provided 
     under subsection (b)(3) relates to noninfringement, the 
     notice was accompanied by a document described in subclause 
     (II). Any such action shall be brought in the judicial 
     district where the defendant has its principal place of 
     business or a regular and established place of business.
       ``(II) Right of confidential access to application.--For 
     purposes of subclause (I), the document described in this 
     subclause is a document providing a right of confidential 
     access to the application of the applicant referred to in 
     subsection (b)(2) for the purpose of determining whether an 
     action referred to in subparagraph (C) should be brought. The 
     document providing the right of confidential access shall 
     contain such restrictions as to persons entitled to access, 
     and on the use and disposition of any information accessed, 
     as would apply had a protective order been entered for the 
     purpose of protecting trade secrets and other confidential 
     business information. Any person provided a right of 
     confidential access shall review the application for the sole 
     and limited purpose of evaluating possible infringement of 
     the patent that is the subject of the certification under 
     subsection (b)(2)(A)(iv) and for no other purpose, and may 
     not disclose information of no relevance to any issue of 
     patent infringement to any person other than a person 
     provided a right of confidential access. Further, the 
     application may be redacted by the applicant to remove any 
     information of no relevance to any issue of patent 
     infringement.

       ``(ii) Counterclaim to infringement action.--

       ``(I) In general.--If an owner of the patent or the holder 
     of the approved application under subsection (b) for the drug 
     that is claimed by the patent or a use of which is claimed by 
     the patent brings a patent infringement action against the 
     applicant, the applicant may assert a counterclaim seeking an 
     order requiring the holder to correct or delete the patent 
     information submitted by the holder under subsection (b) or 
     this subsection on the ground that the patent does not claim 
     either--

       ``(aa) the drug for which the application was approved; or
       ``(bb) an approved method of using the drug.

       ``(II) No independent cause of action.--Subclause (I) does 
     not authorize the assertion of a claim described in subclause 
     (I) in any civil action or proceeding other than a 
     counterclaim described in subclause (I).

       ``(iii) No damages.--An applicant shall not be entitled to 
     damages in a civil action under clause (i) or a counterclaim 
     under clause (ii).''.
       (c) Applicability.--
       (1) In general.--Except as provided in paragraphs (2) and 
     (3), the amendments made by subsections (a), (b), and (c) 
     apply to any proceeding under section 505 of the Federal 
     Food, Drug, and Cosmetic Act (21 U.S.C. 355) that is pending 
     on or after the date of enactment of this Act regardless of 
     the date on which the proceeding was commenced or is 
     commenced.
       (2) Notice of opinion that patent is invalid or will not be 
     infringed.--The amendments made by subsections (a)(1) and 
     (b)(1) apply with respect to any certification under 
     subsection (b)(2)(A)(iv) or (j)(2)(A)(vii)(IV) of section 505 
     of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355) 
     after the date of enactment of this Act in an application 
     filed under subsection (b)(2) or (j) of that section or in an 
     amendment or supplement to an application filed under 
     subsection (b)(2) or (j) of that section.
       (3) Effective date of approval.--The amendments made by 
     subsections (a)(2)(A)(ii)(I) and (b)(2)(B)(i) apply with 
     respect to any patent information submitted under subsection 
     (b)(1) or (c)(2) of section 505 of the Federal Food, Drug, 
     and Cosmetic Act (21 U.S.C. 355) made after the date of 
     enactment of this Act.

     SEC. 1102. FORFEITURE OF 180-DAY EXCLUSIVITY PERIOD.

       (a) In General.--Section 505(j)(5) of the Federal Food, 
     Drug, and Cosmetic Act (21 U.S.C. 355(j)(5)) (as amended by 
     section 1101) is amended--
       (1) in subparagraph (B), by striking clause (iv) and 
     inserting the following:
       ``(iv) 180-day exclusivity period.--
       ``(I) Definitions.--In this paragraph:
       ``(aa) 180-day exclusivity period.--The term `180-day 
     exclusivity period' means the 180-day period ending on the 
     day before the date on which an application submitted by an 
     applicant other than a first applicant could become effective 
     under this clause.
       ``(bb) First applicant.--As used in this subsection, the 
     term `first applicant' means an applicant that, on the first 
     day on which a substantially complete application containing 
     a certification described in paragraph (2)(A)(vii)(IV) is 
     submitted for approval of a drug, submits a substantially 
     complete application containing a certification described in 
     paragraph (2)(A)(vii)(IV) for the drug.

[[Page H6075]]

       ``(cc) Substantially complete application.--As used in this 
     subsection, the term `substantially complete application' 
     means an application under this subsection that on its face 
     is sufficiently complete to permit a substantive review and 
     contains all the information required by paragraph (2)(A).
       ``(dd) Tentative approval.--

       ``(AA) In general.--The term `tentative approval' means 
     notification to an applicant by the Secretary that an 
     application under this subsection meets the requirements of 
     paragraph (2)(A), but cannot receive effective approval 
     because the application does not meet the requirements of 
     this subparagraph, there is a period of exclusivity for the 
     listed drug under subparagraph (E) or section 505A, or there 
     is a 7-year period of exclusivity for the listed drug under 
     section 527.
       ``(BB) Limitation.--A drug that is granted tentative 
     approval by the Secretary is not an approved drug and shall 
     not have an effective approval until the Secretary issues an 
     approval after any necessary additional review of the 
     application.

       ``(II) Effectiveness of application.--Subject to 
     subparagraph (D), if the application contains a certification 
     described in paragraph (2)(A)(vii)(IV) and is for a drug for 
     which a first applicant has submitted an application 
     containing such a certification, the application shall be 
     made effective on the date that is 180 days after the date of 
     the first commercial marketing of the drug (including the 
     commercial marketing of the listed drug) by any first 
     applicant.''; and
       (2) by inserting after subparagraph (C) the following:
       ``(D) Forfeiture of 180-day exclusivity period.--
       ``(i) Definition of forfeiture event.--In this 
     subparagraph, the term `forfeiture event', with respect to an 
     application under this subsection, means the occurrence of 
     any of the following:

       ``(I) Failure to market.--The first applicant fails to 
     market the drug by the later of--

       ``(aa) the earlier of the date that is--
       ``(AA) 75 days after the date on which the approval of the 
     application of the first applicant is made effective under 
     subparagraph (B)(iii); or
       ``(BB) 30 months after the date of submission of the 
     application of the first applicant; or
       ``(bb) with respect to the first applicant or any other 
     applicant (which other applicant has received tentative 
     approval), the date that is 75 days after the date as of 
     which, as to each of the patents with respect to which the 
     first applicant submitted a certification qualifying the 
     first applicant for the 180-day exclusivity period under 
     subparagraph (B)(iv), at least 1 of the following has 
     occurred:
       ``(AA) In an infringement action brought against that 
     applicant with respect to the patent or in a declaratory 
     judgment action brought by that applicant with respect to the 
     patent, a court enters a final decision from which no appeal 
     (other than a petition to the Supreme Court for a writ of 
     certiorari) has been or can be taken that the patent is 
     invalid or not infringed.
       ``(BB) In an infringement action or a declaratory judgment 
     action described in subitem (AA), a court signs a settlement 
     order or consent decree that enters a final judgment that 
     includes a finding that the patent is invalid or not 
     infringed.
       ``(CC) The patent expires.
       ``(DD) The patent is withdrawn by the holder of the 
     application approved under subsection (b).

       ``(II) Withdrawal of application.--The first applicant 
     withdraws the application or the Secretary considers the 
     application to have been withdrawn as a result of a 
     determination by the Secretary that the application does not 
     meet the requirements for approval under paragraph (4).
       ``(III) Amendment of certification.--The first applicant 
     amends or withdraws the certification for all of the patents 
     with respect to which that applicant submitted a 
     certification qualifying the applicant for the 180-day 
     exclusivity period.
       ``(IV) Failure to obtain tentative approval.--The first 
     applicant fails to obtain tentative approval of the 
     application within 30 months after the date on which the 
     application is filed, unless the failure is caused by a 
     change in or a review of the requirements for approval of the 
     application imposed after the date on which the application 
     is filed.
       ``(V) Agreement with another applicant, the listed drug 
     application holder, or a patent owner.--The first applicant 
     enters into an agreement with another applicant under this 
     subsection for the drug, the holder of the application for 
     the listed drug, or an owner of the patent that is the 
     subject of the certification under paragraph (2)(A)(vii)(IV), 
     the Federal Trade Commission or the Attorney General files a 
     complaint, and there is a final decision of the Federal Trade 
     Commission or the court with regard to the complaint from 
     which no appeal (other than a petition to the Supreme Court 
     for a writ of certiorari) has been or can be taken that the 
     agreement has violated the antitrust laws (as defined in 
     section 1 of the Clayton Act (15 U.S.C. 12), except that the 
     term includes section 5 of the Federal Trade Commission Act 
     (15 U.S.C. 45) to the extent that that section applies to 
     unfair methods of competition).
       ``(VI) Expiration of all patents.--All of the patents as to 
     which the applicant submitted a certification qualifying it 
     for the 180-day exclusivity period have expired.

       ``(ii) Forfeiture.--The 180-day exclusivity period 
     described in subparagraph (B)(iv) shall be forfeited by a 
     first applicant if a forfeiture event occurs with respect to 
     that first applicant.
       ``(iii) Subsequent applicant.--If all first applicants 
     forfeit the 180-day exclusivity period under clause (ii)--

       ``(I) approval of any application containing a 
     certification described in paragraph (2)(A)(vii)(IV) shall be 
     made effective in accordance with subparagraph (B)(iii); and
       ``(II) no applicant shall be eligible for a 180-day 
     exclusivity period.''.

       (b) Effective Date.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendment made by subsection (a) shall be effective only with 
     respect to an application filed under section 505(j) of the 
     Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)) after 
     the date of enactment of this Act for a listed drug for which 
     no certification under section 505(j)(2)(A)(vii)(IV) of that 
     Act was made before the date of enactment of this Act.
       (2) Collusive agreements.--If a forfeiture event described 
     in section 505(j)(5)(D)(i)(V) of that Act occurs in the case 
     of an applicant, the applicant shall forfeit the 180-day 
     period under section 505(j)(5)(B)(iv) of that Act without 
     regard to when the first certification under section 
     505(j)(2)(A)(vii)(IV) of that Act for the listed drug was 
     made.
       (3) Decision of a court when the 180-day exclusivity period 
     has not been triggered.--With respect to an application filed 
     before, on, or after the date of enactment of this Act for a 
     listed drug for which a certification under section 
     505(j)(2)(A)(vii)(IV) of that Act was made before the date of 
     enactment of this Act and for which neither of the events 
     described in subclause (I) or (II) of section 
     505(j)(5)(B)(iv) of that Act (as in effect on the day before 
     the date of enactment of this Act) has occurred on or before 
     the date of enactment of this Act, the term ``decision of a 
     court'' as used in clause (iv) of section 505(j)(5)(B) of 
     that Act means a final decision of a court from which no 
     appeal (other than a petition to the Supreme Court for a writ 
     of certiorari) has been or can be taken.

     SEC. 1103. BIOAVAILABILITY AND BIOEQUIVALENCE.

       (a) In General.--Section 505(j)(8) of the Federal Food, 
     Drug, and Cosmetic Act (21 U.S.C. 355(j)(8)) is amended--
       (1) by striking subparagraph (A) and inserting the 
     following:
       ``(A)(i) The term `bioavailability' means the rate and 
     extent to which the active ingredient or therapeutic 
     ingredient is absorbed from a drug and becomes available at 
     the site of drug action.
       ``(ii) For a drug that is not intended to be absorbed into 
     the bloodstream, the Secretary may assess bioavailability by 
     scientifically valid measurements intended to reflect the 
     rate and extent to which the active ingredient or therapeutic 
     ingredient becomes available at the site of drug action.''; 
     and
       (2) by adding at the end the following:
       ``(C) For a drug that is not intended to be absorbed into 
     the bloodstream, the Secretary may establish alternative, 
     scientifically valid methods to show bioequivalence if the 
     alternative methods are expected to detect a significant 
     difference between the drug and the listed drug in safety and 
     therapeutic effect.''.
       (b) Effect of Amendment.--The amendment made by subsection 
     (a) does not alter the standards for approval of drugs under 
     section 505(j) of the Federal Food, Drug, and Cosmetic Act 
     (21 U.S.C. 355(j)).

     SEC. 1104. CONFORMING AMENDMENTS.

       Section 505A of the Federal Food, Drug, and Cosmetic Act 
     (21 U.S.C. 355a) is amended--
       (1) in subsections (b)(1)(A)(i) and (c)(1)(A)(i), by 
     striking ``(j)(5)(D)(ii)'' each place it appears and 
     inserting ``(j)(5)(F)(ii)'';
       (2) in subsections (b)(1)(A)(ii) and (c)(1)(A)(ii), by 
     striking ``(j)(5)(D)'' each place it appears and inserting 
     ``(j)(5)(F)''; and
       (3) in subsections (e) and (l), by striking 
     ``505(j)(5)(D)'' each place it appears and inserting 
     ``505(j)(5)(F)''.

              Subtitle B--Federal Trade Commission Review

     SEC. 1111. DEFINITIONS.

       In this subtitle:
       (1) ANDA.--The term ``ANDA'' means an abbreviated drug 
     application, as defined under section 201(aa) of the Federal 
     Food, Drug, and Cosmetic Act.
       (2) Brand name drug.--The term ``brand name drug'' means a 
     drug for which an application is approved under section 
     505(c) of the Federal Food, Drug, and Cosmetic Act, including 
     an application referred to in section 505(b)(2) of such Act.
       (3) Brand name drug company.--The term ``brand name drug 
     company'' means the party that holds the approved application 
     referred to in paragraph (2) for a brand name drug that is a 
     listed drug in an ANDA, or a party that is the owner of a 
     patent for which information is submitted for such drug under 
     subsection (b) or (c) of section 505 of the Federal Food, 
     Drug, and Cosmetic Act.
       (4) Commission.--The term ``Commission'' means the Federal 
     Trade Commission.
       (5) Generic drug.--The term ``generic drug'' means a drug 
     for which an application under section 505(j) of the Federal 
     Food, Drug, and Cosmetic Act is approved.
       (6) Generic drug applicant.--The term ``generic drug 
     applicant'' means a person who has filed or received approval 
     for an ANDA under section 505(j) of the Federal Food, Drug, 
     and Cosmetic Act.

[[Page H6076]]

       (7) Listed drug.--The term ``listed drug'' means a brand 
     name drug that is listed under section 505(j)(7) of the 
     Federal Food, Drug, and Cosmetic Act.

     SEC. 1112. NOTIFICATION OF AGREEMENTS.

       (a) Agreement With Brand Name Drug Company.--
       (1) Requirement.--A generic drug applicant that has 
     submitted an ANDA containing a certification under section 
     505(j)(2)(A)(vii)(IV) of the Federal Food, Drug, and Cosmetic 
     Act and a brand name drug company that enter into an 
     agreement described in paragraph (2) shall each file the 
     agreement in accordance with subsection (c). The agreement 
     shall be filed prior to the date of the first commercial 
     marketing of the generic drug that is the subject of the 
     ANDA.
       (2) Subject matter of agreement.--An agreement described in 
     this paragraph between a generic drug applicant and a brand 
     name drug company is an agreement regarding--
       (A) the manufacture, marketing or sale of the brand name 
     drug that is the listed drug in the ANDA involved;
       (B) the manufacture, marketing, or sale of the generic drug 
     for which the ANDA was submitted; or
       (C) the 180-day period referred to in section 
     505(j)(5)(B)(iv) of the Federal Food, Drug, and Cosmetic Act 
     as it applies to such ANDA or to any other ANDA based on the 
     same brand name drug.
       (b) Agreement With Another Generic Drug Applicant.--
       (1) Requirement.--A generic drug applicant that has 
     submitted an ANDA containing a certification under section 
     505(j)(2)(A)(vii)(IV) of the Federal Food, Drug, and Cosmetic 
     Act with respect to a listed drug and another generic drug 
     applicant that has submitted an ANDA containing such a 
     certification for the same listed drug shall each file the 
     agreement in accordance with subsection (c). The agreement 
     shall be filed prior to the date of the first commercial 
     marketing of either of the generic drugs for which such ANDAs 
     were submitted.
       (2) Subject matter of agreement.--An agreement described in 
     this paragraph between two generic drug applicants is an 
     agreement regarding the 180-day period referred to in section 
     505(j)(5)(B)(iv) of the Federal Food, Drug, and Cosmetic Act 
     as it applies to the ANDAs with which the agreement is 
     concerned.
       (c) Filing.--
       (1) Agreement.--The parties that are required in subsection 
     (a) or (b) to file an agreement in accordance with this 
     subsection shall file with the Commission the text of any 
     such agreement, except that such parties are not required to 
     file an agreement that solely concerns--
       (A) purchase orders for raw material supplies;
       (B) equipment and facility contracts;
       (C) employment or consulting contracts; or
       (D) packaging and labeling contracts.
       (2) Other agreements.--The parties that are required in 
     subsection (a) or (b) to file an agreement in accordance with 
     this subsection shall file with the Commission the text of 
     any agreements between the parties that are not described in 
     such subsections and are contingent upon, provide a 
     contingent condition for, or are otherwise related to an 
     agreement that is required in subsection (a) or (b) to be 
     filed in accordance with this subsection.
       (3) Description.--In the event that any agreement required 
     in subsection (a) or (b) to be filed in accordance with this 
     subsection has not been reduced to text, each of the parties 
     involved shall file written descriptions of such agreement 
     that are sufficient to disclose all the terms and conditions 
     of the agreement.

     SEC. 1113. FILING DEADLINES.

       Any filing required under section 1112 shall be filed with 
     the Commission not later than 10 business days after the date 
     the agreements are executed.

     SEC. 1114. DISCLOSURE EXEMPTION.

       Any information or documentary material filed with the 
     Commission pursuant to this subtitle shall be exempt from 
     disclosure under section 552 of title 5, United States Code, 
     and no such information or documentary material may be made 
     public, except as may be relevant to any administrative or 
     judicial action or proceeding. Nothing in this section is 
     intended to prevent disclosure to either body of Congress or 
     to any duly authorized committee or subcommittee of the 
     Congress.

     SEC. 1115. ENFORCEMENT.

       (a) Civil Penalty.--Any brand name drug company or generic 
     drug applicant which fails to comply with any provision of 
     this subtitle shall be liable for a civil penalty of not more 
     than $11,000, for each day during which such entity is in 
     violation of this subtitle. Such penalty may be recovered in 
     a civil action brought by the United States, or brought by 
     the Commission in accordance with the procedures established 
     in section 16(a)(1) of the Federal Trade Commission Act (15 
     U.S.C. 56(a)).
       (b) Compliance and Equitable Relief.--If any brand name 
     drug company or generic drug applicant fails to comply with 
     any provision of this subtitle, the United States district 
     court may order compliance, and may grant such other 
     equitable relief as the court in its discretion determines 
     necessary or appropriate, upon application of the Commission.

     SEC. 1116. RULEMAKING.

       The Commission, by rule in accordance with section 553 of 
     title 5, United States Code, consistent with the purposes of 
     this subtitle--
       (1) may define the terms used in this subtitle;
       (2) may exempt classes of persons or agreements from the 
     requirements of this subtitle; and
       (3) may prescribe such other rules as may be necessary and 
     appropriate to carry out the purposes of this subtitle.

     SEC. 1117. SAVINGS CLAUSE.

       Any action taken by the Commission, or any failure of the 
     Commission to take action, under this subtitle shall not at 
     any time bar any proceeding or any action with respect to any 
     agreement between a brand name drug company and a generic 
     drug applicant, or any agreement between generic drug 
     applicants, under any other provision of law, nor shall any 
     filing under this subtitle constitute or create a presumption 
     of any violation of any competition laws.

     SEC. 1118. EFFECTIVE DATE.

       This subtitle shall--
       (1) take effect 30 days after the date of enactment of this 
     Act; and
       (2) shall apply to agreements described in section 1112 
     that are entered into 30 days after the date of enactment of 
     this Act.

             Subtitle C--Importation of Prescription Drugs

     SEC. 1121. IMPORTATION OF PRESCRIPTION DRUGS.

       (a) In General.--Chapter VIII of the Federal Food, Drug, 
     and Cosmetic Act (21 U.S.C. 381 et seq.) is amended by 
     striking section 804 and inserting the following:

     ``SEC. 804. IMPORTATION OF PRESCRIPTION DRUGS.

       ``(a) Definitions.--In this section:
       ``(1) Importer.--The term `importer' means a pharmacist or 
     wholesaler.
       ``(2) Pharmacist.--The term `pharmacist' means a person 
     licensed by a State to practice pharmacy, including the 
     dispensing and selling of prescription drugs.
       ``(3) Prescription drug.--The term `prescription drug' 
     means a drug subject to section 503(b), other than--
       ``(A) a controlled substance (as defined in section 102 of 
     the Controlled Substances Act (21 U.S.C. 802));
       ``(B) a biological product (as defined in section 351 of 
     the Public Health Service Act (42 U.S.C. 262));
       ``(C) an infused drug (including a peritoneal dialysis 
     solution);
       ``(D) an intravenously injected drug;
       ``(E) a drug that is inhaled during surgery; or
       ``(F) a drug which is a parenteral drug, the importation of 
     which pursuant to subsection (b) is determined by the 
     Secretary to pose a threat to the public health, in which 
     case section 801(d)(1) shall continue to apply.
       ``(4) Qualifying laboratory.--The term `qualifying 
     laboratory' means a laboratory in the United States that has 
     been approved by the Secretary for the purposes of this 
     section.
       ``(5) Wholesaler.--
       ``(A) In general.--The term `wholesaler' means a person 
     licensed as a wholesaler or distributor of prescription drugs 
     in the United States under section 503(e)(2)(A).
       ``(B) Exclusion.--The term `wholesaler' does not include a 
     person authorized to import drugs under section 801(d)(1).
       ``(b) Regulations.--The Secretary shall promulgate 
     regulations permitting pharmacists and wholesalers to import 
     prescription drugs from Canada into the United States.
       ``(c) Limitation.--The regulations under subsection (b) 
     shall--
       ``(1) require that each prescription drug imported under 
     the regulations complies with section 505 (including with 
     respect to being safe and effective for the intended use of 
     the prescription drug), with sections 501 and 502, and with 
     all other applicable requirements of this Act;
       ``(2) require that an importer of a prescription drug under 
     the regulations comply with subsections (d)(1) and (e);
       ``(3) require that any prescription drug from Canada 
     imported by a domestic pharmacist or wholesaler under this 
     section be contained in packaging which the Secretary has 
     determined to be reasonably certain to be tamper-resistant 
     and not capable of counterfeiting;
       ``(4) require that all prescription drugs from Canada 
     imported by a domestic pharmacist or a wholesaler under this 
     section contain a statement designed to inform the end-user 
     of such drug that such drug has been imported from a foreign 
     seller other than a manufacturer;
       ``(5) require that only prescription drugs which have not 
     left the possession of the first Canadian recipient of such 
     prescription drugs after receipt from the manufacturer of 
     such prescription drugs be eligible for importation into the 
     United States under this section;
       ``(6) require, if determined appropriate by the Secretary, 
     that all prescription drugs imported from Canada under this 
     section by domestic pharmacists and wholesalers enter the 
     United States through ports of entry designated by the 
     Secretary for purposes of this section;
       ``(7) contain any additional provisions determined by the 
     Secretary to be appropriate to protect the public health; and
       ``(8) contain any additional provisions determined by the 
     Secretary to be appropriate

[[Page H6077]]

     to facilitate the importation of prescription drugs that do 
     not jeopardize the public health.
       ``(d) Information and Records.--
       ``(1) In general.--The regulations under subsection (b) 
     shall require an importer of a prescription drug under 
     subsection (b) to submit to the Secretary the following 
     information and documentation:
       ``(A) The name and quantity of the active ingredient of the 
     prescription drug.
       ``(B) A description of the dosage form of the prescription 
     drug.
       ``(C) The date on which the prescription drug is shipped.
       ``(D) The quantity of the prescription drug that is 
     shipped.
       ``(E) The point of origin and destination of the 
     prescription drug.
       ``(F) The price paid and the price charged by the importer 
     for the prescription drug.
       ``(G) Documentation from the foreign seller specifying--
       ``(i) the original source of the prescription drug; and
       ``(ii) the quantity of each lot of the prescription drug 
     originally received by the seller from that source.
       ``(H) The lot or control number assigned to the 
     prescription drug by the manufacturer of the prescription 
     drug.
       ``(I) The name, address, telephone number, and professional 
     license number (if any) of the importer.
       ``(J)(i) Documentation demonstrating that the prescription 
     drug was received by the recipient from the manufacturer and 
     subsequently shipped by the first foreign recipient to the 
     importer.
       ``(ii) Documentation of the quantity of each lot of the 
     prescription drug received by the first foreign recipient 
     demonstrating that the quantity being imported into the 
     United States is not more than the quantity that was received 
     by the first foreign recipient.
       ``(iii) In the case of an initial imported shipment, 
     documentation demonstrating that each batch of the 
     prescription drug in the shipment was statistically sampled 
     and tested for authenticity and degradation.
       ``(K) Certification from the importer or manufacturer of 
     the prescription drug that the prescription drug--
       ``(i) is approved for marketing in the United States and is 
     not adulterated or misbranded; and
       ``(ii) meets all labeling requirements under this Act.
       ``(L) Laboratory records, including complete data derived 
     from all tests necessary to ensure that the prescription drug 
     is in compliance with established specifications and 
     standards.
       ``(M) Documentation demonstrating that the testing required 
     by subparagraphs (J) and (L) was conducted at a qualifying 
     laboratory.
       ``(N) Any other information that the Secretary determines 
     is necessary to ensure the protection of the public health.
       ``(2) Maintenance by the secretary.--The Secretary shall 
     maintain information and documentation submitted under 
     paragraph (1) for such period of time as the Secretary 
     determines to be necessary.
       ``(e) Testing.--The regulations under subsection (b) shall 
     require--
       ``(1) that testing described in subparagraphs (J) and (L) 
     of subsection (d)(1) be conducted by the importer or by the 
     manufacturer of the prescription drug at a qualified 
     laboratory;
       ``(2) if the tests are conducted by the importer--
       ``(A) that information needed to--
       ``(i) authenticate the prescription drug being tested; and
       ``(ii) confirm that the labeling of the prescription drug 
     complies with labeling requirements under this Act;

     be supplied by the manufacturer of the prescription drug to 
     the pharmacist or wholesaler; and
       ``(B) that the information supplied under subparagraph (A) 
     be kept in strict confidence and used only for purposes of 
     testing under this section; and
       ``(3) may include such additional provisions as the 
     Secretary determines to be appropriate to provide for the 
     protection of trade secrets and commercial or financial 
     information that is privileged or confidential.
       ``(f) Registration of Foreign Sellers.--Any establishment 
     within Canada engaged in the distribution of a prescription 
     drug that is imported or offered for importation into the 
     United States shall register with the Secretary the name and 
     place of business of the establishment and the name of the 
     United States agent for the establishment.
       ``(g) Suspension of Importation.--The Secretary shall 
     require that importations of a specific prescription drug or 
     importations by a specific importer under subsection (b) be 
     immediately suspended on discovery of a pattern of 
     importation of that specific prescription drug or by that 
     specific importer of drugs that are counterfeit or in 
     violation of any requirement under this section, until an 
     investigation is completed and the Secretary determines that 
     the public is adequately protected from counterfeit and 
     violative prescription drugs being imported under subsection 
     (b).
       ``(h) Approved Labeling.--The manufacturer of a 
     prescription drug shall provide an importer written 
     authorization for the importer to use, at no cost, the 
     approved labeling for the prescription drug.
       ``(i) Charitable Contributions.--Notwithstanding any other 
     provision of this section, section 801(d)(1) continues to 
     apply to a prescription drug that is donated or otherwise 
     supplied at no charge by the manufacturer of the drug to a 
     charitable or humanitarian organization (including the United 
     Nations and affiliates) or to a government of a foreign 
     country.
       ``(j) Waiver Authority for Importation by Individuals.--The 
     Secretary may, for drugs being imported from a licensed 
     Canadian pharmacy, grant to individuals, by regulation or on 
     a case-by-case basis, a waiver of the prohibition of 
     importation of a prescription drug or device or class of 
     prescription drugs or devices, under such conditions as the 
     Secretary determines to be appropriate. Such conditions shall 
     include conditions that such drug or device be--
       ``(1) in the possession of an individual when the 
     individual enters the United States;
       ``(2) imported by such individual from a licensed pharmacy 
     for personal use by the individual, not for resale, in 
     quantities that do not exceed a 90-day supply, which 
     individual will use the drug or device (or for a family 
     member of such individual);
       ``(3) accompanied by a copy of a valid prescription;
       ``(4) imported from Canada, from a seller registered with 
     the Secretary;
       ``(5) a prescription drug approved by the Secretary under 
     chapter V that is not adulterated or misbranded;
       ``(6) in the form of a final finished dosage that was 
     manufactured in an establishment registered under section 
     510; and
       ``(7) imported under such other conditions as the Secretary 
     determines to be necessary to ensure public safety.
       ``(k) Studies; Reports.--
       ``(1) By the institute of medicine of the national academy 
     of sciences.--
       ``(A) Study.--
       ``(i) In general.--The Secretary shall request that the 
     Institute of Medicine of the National Academy of Sciences 
     conduct a study of--

       ``(I) importations of prescription drugs made under the 
     regulations under subsection (b); and
       ``(II) information and documentation submitted under 
     subsection (d).

       ``(ii) Requirements.--In conducting the study, the 
     Institute of Medicine shall--

       ``(I) evaluate the compliance of importers with the 
     regulations under subsection (b);
       ``(II) compare the number of shipments under the 
     regulations under subsection (b) during the study period that 
     are determined to be counterfeit, misbranded, or adulterated, 
     and compare that number with the number of shipments made 
     during the study period within the United States that are 
     determined to be counterfeit, misbranded, or adulterated; and
       ``(III) consult with the Secretary to evaluate the effect 
     of importations under the regulations under subsection (b) on 
     trade and patent rights under Federal law.

       ``(B) Report.--Not later than 2 years after the effective 
     date of the regulations under subsection (b), the Institute 
     of Medicine shall submit to Congress a report describing the 
     findings of the study under subparagraph (A).
       ``(2) By the comptroller general.--
       ``(A) Study.--The Comptroller General of the United States 
     shall conduct a study to determine the effect of this section 
     on the price of prescription drugs sold to consumers at 
     retail.
       ``(B) Report.--Not later than 18 months after the effective 
     date of the regulations under subsection (b), the Comptroller 
     General of the United States shall submit to Congress a 
     report describing the findings of the study under 
     subparagraph (A).
       ``(l) Construction.--Nothing in this section limits the 
     authority of the Secretary relating to the importation of 
     prescription drugs, other than with respect to section 
     801(d)(1) as provided in this section.
       ``(m) Authorization of Appropriations.--There are 
     authorized to be appropriated such sums as are necessary to 
     carry out this section.
       ``(n) Conditions.--This section shall become effective only 
     if the Secretary demonstrates to the Congress that the 
     implementation of this section will--
       ``(1) pose no additional risk to the public's health and 
     safety; and
       ``(2) result in a significant reduction in the cost of 
     prescription drugs to the American consumer.''.
       (b) Conforming Amendments.--The Federal Food, Drug, and 
     Cosmetic Act is amended--
       (1) in section 301(aa) (21 U.S.C. 331(aa)), by striking 
     ``covered product in violation of section 804'' and inserting 
     ``prescription drug in violation of section 804''; and
       (2) in section 303(a)(6) (21 U.S.C. 333(a)(6), by striking 
     ``covered product pursuant to section 804(a)'' and inserting 
     ``prescription drug under section 804(b)''.

  The SPEAKER pro tempore. After 3 hours of debate on the bill, it 
shall be in order to consider the amendment printed in House Report 
108-181, if offered by the gentleman from New York (Mr. Rangel) or his 
designee, which shall be considered read, and shall be debatable for 1 
hour, equally divided and controlled by the proponent and an opponent.
  The gentleman from California (Mr. Thomas), the gentleman from New 
York (Mr. Rangel), the gentleman

[[Page H6078]]

from Louisiana (Mr. Tauzin), and the gentleman from Michigan (Mr. 
Dingell) each will control 45 minutes of debate on the bill.
  The Chair recognizes the gentleman from California (Mr. Thomas).
  Mr. THOMAS. Mr. Speaker, I yield myself such time as I may consume.
  As we begin the 3 hours of debate on the primary bill and an 
additional hour on the substitute, I do want to indicate that this day, 
in my opinion, has been too long in coming.
  I want to thank President Bush for his position during the campaign 
that Medicare needed to be modernized and we were overdue for putting 
prescription drugs in Medicare.

                              {time}  1900

  I believe he has continued to be firm in his resolve that both the 
House, and the Senate now for the first time, pass legislation so that 
we can conference a common bill and send it to him for his signature.
  I also want to thank the Speaker of the House. The gentleman from 
Illinois (Mr. Hastert) was involved in these discussions prior to our 
becoming the majority and, of course, prior to his becoming Speaker. If 
you examine H.R. 1, you will find that the Speaker has been willing to 
be the lead author. I think it is entirely proper and appropriate that 
the Speaker of the House lead the House through the most fundamental 
and important change in Medicare since its inception.
  I especially want to thank my colleague and friend and chairman of 
the Committee on Energy and Commerce, the gentleman from Louisiana (Mr. 
Tauzin). In this institution, where jurisdictions are guarded with a 
pretty vicious willingness to have turf wars whenever necessary to hang 
on to your jurisdiction, the working relationship with the shared 
jurisdiction of the Committee on Energy and Commerce and the Committee 
on Ways and Means has been a very pleasant experience, and the working 
relationship between the staff, of which I will have more to say a 
little bit later, could not have been better.
  And, frankly, the product we have before us, although the gentleman 
from Louisiana (Mr. Tauzin) joined me in the initial sponsorship of 
legislation, we could not have gotten it through both committees and 
back together again in the Committee on Rules to present to you here 
today as H.R. 1 without complete and open and very comradely behavior 
between the chairman of the Committee on Energy and Commerce and this 
committee, and I thank him for that.
  I especially thank the gentlewoman from Connecticut (Mrs. Johnson), 
who is the chairman of the Subcommittee on Health of the Committee on 
Ways and Means. The members of that committee have been very, very 
helpful in holding the hearings and continuing to shape this 
legislation. This bill, as it rightly should be, is the best piece of 
legislation that we have offered this House, notwithstanding the fact 
that twice previously we have passed Medicare modernization with 
prescription drugs.
  And let me say that I do want to single out two members of the 
Committee on Ways and Means, the gentleman from Iowa (Mr. Nussle), who 
also happens to be the chairman of the Committee on the Budget, and the 
gentleman from North Dakota (Mr. Pomeroy), who offered together a 
bipartisan amendment which was very significant in helping us redress 
the failure to provide those Americans especially in middle America but 
in principally rural areas with a fair and equitable Medicare program.
  I want to thank, and I do not want to go through every staff member, 
but I do want to thank the chief of our Subcommittee on Health staff 
John McManus for the enormous number of hours he and the staff have put 
in. You cannot produce as complex and difficult a piece of legislation 
as you have in front of you without the dedicated staff. And I mean not 
just on the committees, but the Congressional Budget Office, and I will 
mention from Leg Counsel Ed Grossman, who is an institutional glue. He 
is the one who spends the hours to make sure that the language makes 
sense in the legislative language that we have before us. He is 
absolutely indispensable to the functioning of this institution, and I 
want to personally thank him once again for the hours of commitment 
that he has put in to produce this piece of legislation.
  There are organizations and associations who have very strong 
feelings about the direction of Medicare and the changes that might be 
made, and I want to thank all of them for their openness and 
willingness to present comments upon which we reacted. Most recently, I 
think one of the more prominent organizations, formerly known as the 
American Association of Retired Persons, now AARP, and I am indebted to 
my colleague, the gentlewoman from California (Mrs. Capps), for 
circulating the letter from AARP, because I think it is very 
instructive. It provides us with an example of how these organizations 
point with pride and view with alarm some of the changes that are being 
made.
  For example, the opening paragraph in the letter addressed to me 
says, and I quote, ``AARP is encouraged by the advancement in the House 
of legislation to add prescription drug coverage to Medicare. Relief 
from the high cost of drugs is long overdue. Our members and all older 
Americans and their families expect and need legislation this year. We 
appreciate your efforts and leadership toward this end.''
  But they go on to say in the letter, in terms of a number of 
additional points, that they think certain areas need to be 
strengthened and perhaps some changes need to be made. For example, 
under low-income protections, they say, ``We are encouraged by the 
bill's inclusion of all Medicare beneficiaries, including dual 
eligibles.'' We spend $43 billion over the next decade picking up these 
low-income seniors. We believe they should be classified as seniors 
first in the Federal Medicare program and not low-income first, as they 
currently are today.
  But they go on to say that they are concerned because eligibility is 
limited by a restrictive assets test. And we took that letter to heart 
and we have examined that provision, notwithstanding the fact that the 
original bill doubled the assets provision under the SSI, Social 
Security provisions for low-income eligibility. The bill had doubled 
it. We examined it, we determined that perhaps we should go that extra 
mile. Under the bill before you today we have tripled it. We have 
tripled the SSI standards in terms of low-income protections. These are 
the kinds of exchanges that improved this legislation as we move 
forward.
  And let me say lastly that I am very pleased that the Senate, I 
believe, will pass legislation and join the House finally in conference 
to craft a piece of legislation that will become law. Mr. Speaker, I 
understand the rules of the House in terms of the very narrow line we 
must tread, and I am not allowed to mention a Senator, but just let me 
say that a senior Senator, who has been a leader in health care debate 
for a number of years, frankly needs to be commended, because without 
his courageous step forward I do not believe the Senate would have 
moved as quickly or as rapidly as they have to a conclusion on their 
legislation.
  I have enjoyed my conversations that I have had with him over the 
years, obviously more frequently as I have moved into a position to 
help effect adding prescription drugs to Medicare. Although we have 
profound differences in terms of our view oftentimes of the role of the 
Federal Government and assistance, we have never ever left the focus of 
policy, and although we may differ, the differences have always been 
over policy.
  Never, ever has he mentioned Jim Jones, Kool-aid, mass suicide. 
Never, ever in our discussions has he mentioned the Holocaust. Never, 
ever has he mentioned blacks or slavery. He has always carried on the 
discussion on the basis of substance and the differences that we have 
on substance and the fact that in this society, in this civil society, 
the debate ought to be over choices of a legislative nature rather than 
trying to create an atmosphere of fear. For that I am grateful for his 
friendship and the fact that we will meet in conference and, finally, 
seniors, who are the last bastion of paying the price of retail for 
drugs, that will no longer be the case. And for that, all of us will be 
grateful. Policy will have triumphed over politics.
  Mr. Speaker, I reserve the balance of my time.

[[Page H6079]]

                Announcement by the Speaker Pro Tempore

  The SPEAKER pro tempore (Mr. LaHood). Although it is permissible to 
refer to a Senator as the sponsor of legislation, other personal 
references are not permitted.
  Mr. RANGEL. Mr. Speaker, I yield such time as he may consume to the 
distinguished gentleman from Rhode Island (Mr. Kennedy).
  (Mr. KENNEDY of Rhode Island) asked and was given permission to 
revise and extend his remarks.)
  Mr. KENNEDY of Rhode Island. Mr. Speaker, I would just like to state 
for the record that the Senator from Massachusetts referred to is my 
father, and I rise in opposition to H.R. 1.
  Mr. Speaker, I rise in opposition to the Republican prescription drug 
bill.
  Our seniors know that Democrats have worked to provide them with 
universal, affordable, and reliable drug coverage.
  And they know that THIS bill is just another Republican attempt to 
dismantle Medicare.
  This bill won't help seniors . . . in fact, there is no guaranteed 
backstop to insure that there will be drug coverage in their area. 
Indeed, seniors may end up without ANY drug coverage . . . or forced 
into an HMO that they do not want to be in.
  And the problems with the bill today will only increase in 2010, when 
premium support and competitive bidding kicks in.
  Republicans divide this issue between helping our Nation's elderly 
now or helping our young in the future, but we can help both.
  James, a Boy Scout from Lincoln, Rhode Island, wrote to me because he 
is worried about his two grandmothers who cannot afford their 
medications.
  I hope he doesn't grow up only to realize that we passed a bill in 
Congress that actually made it worse for his loved ones.
  We should not disappoint James, his family, or the forty million 
Medicare beneficiaries in this Nation.
  Vote ``no'' on H.R. 1.
  Mr. RANGEL. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I think this is one of those days that we will never 
forget as legislators. This is one of those days that I think as 
legislators we will never forget. And even though we have some people 
who have not studied the bill that are so anxious to believe that they 
are going to get prescription drug relief, I think at the end of the 
day that they might be able to see that this is the first step that has 
been specifically designed not to reform the Medicare system as we know 
it but to dissolve it.
  There are some people who are honest enough, at least outside of this 
hallway, to admit that that is exactly what they would want to do, to 
dissolve the Medicare. Many of the people on the other side of the 
aisle, and perhaps a handful on our side, believe that health care 
should not be an entitlement, Social Security should not be an 
entitlement; that the free marketplace should be able to work its will; 
that government should not be involved in providing these type of 
services.
  Ultimately, I do believe that when the bill is studied and they see 
that the transfer of the ability to determine how much prescription 
drugs will cost, which prescriptions would be filled, what is the 
recipient entitled to, when does the bill lock into place, and at the 
year 2010 what do they do with the voucher if we do not have Medicare, 
all of these things, I think, will be answered at some time, but I 
really hope that they are answered today.
  We have many people that have worked hard on this bill; certainly the 
gentleman from Michigan (Mr. Dingell) has been a champion for health 
care for decades; the gentleman from California (Mr. Stark), who will 
be handling the remainder of this bill, the gentleman from New Jersey 
(Mr. Pallone), the gentleman from Ohio (Mr. Brown), and so many others. 
But as I have said so many times publicly, at some point in time people 
will be asking, when they were moving to dissolve Medicare, where were 
you and what were you doing?
  I think, as so many votes in the past, that people will remember this 
vote. And those of us who oppose this piece of legislation will be 
giving our colleagues an opportunity on voting for legislation that 
provides all of the coverage that the letter requested from AARP, and 
while parts of the letter was read, I think it is safe to say that the 
objections that were raised to the bill or the questions that they had 
hoped that would be changed, that that is handled in the substitute.
  Mr. Speaker, I ask unanimous consent to allocate the remainder of my 
time to the gentleman from California (Mr. Stark), with the 
understanding that he be permitted to allocate the rest of the 
remaining time.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from New York?
  There was no objection.
  Mr. THOMAS. Mr. Speaker, I yield 2 minutes to the gentleman from 
Florida (Mr. Foley), a member of the Committee on Ways and Means.
  Mr. FOLEY. Mr. Speaker, I thank the chairman for yielding me this 
time, and to both chairmen who have brought this bill to the floor, I 
congratulate them for this landmark legislation.
  During the rule debate, it was a little depressing to me to hear so 
many people refer to the fact that our seniors would not be able to 
figure these programs out. These people we are talking about survived 
the Depression, they fought in World War II and Korea, they taught us 
how to read and write, they taught us how to ride our bikes and drive 
our cars. They are our parents. They are smart enough to figure this 
out.
  I come from a district in Florida, the fifth largest population of 
Medicare recipients in the Nation, the fifth largest Medicare 
recipients in the Nation. When I go to town hall meetings, they do not 
ask for anything free. They want a break. They want a discount. They 
want an opportunity to shop. They want freedom in the marketplace. But 
they want security to know they will not go broke. This bill provides 
that.
  The bill provides for a discount card that I helped author, along 
with Senator Hagel, which provides immediate access to discount 
pharmaceutical prices. Real reforms in Medicare allowing generics, 
something I have heard about on this floor repeatedly from the other 
side of the aisle. We have to get generics to the market place sooner, 
faster, quicker, cheaper. That is in this bill.
  This bill provides for increased rural funding for hospitals, which 
is an incredibly important thing for people in my community and rural 
communities like Glades, Okeechobee, Hendry, and Highlands County. 
These are Medicare reforms that will save billions of dollars.

                              {time}  1915

  Yes, this is an historic night, not one to be celebrating fear and 
animosity or negative pessimism about our seniors, but rejoicing in the 
fact that we are helping them provide for themselves and their 
families.
  Yes, there is a phenomenal opportunity tonight to pass a bill that 
will help seniors in my community. And the instructions they gave me 
when I first ran for office and have continued to give me is do not 
make it free, do not make it cheap, do not make it for political 
purposes, make it so it works. This bill works, and I applaud the 
leadership for giving us a chance to make history tonight on the floor 
of the House.
  Mr. STARK. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, it is difficult to know where to begin to warn the 
seniors in this country about this sham of a bill and the beginning of 
the destruction of Medicare, as the Republicans have wanted to do for a 
number of years. There is no question that this is a major move toward 
privatizing Medicare. By the calculations that we have from the last 
feeble attempt to do this, of course Health and Human Services refuses 
to give us the most recent actuarial computations, but using the last 
ones, the Medicare premium for B in this drug benefit would rise to 
$142 a month if the premium could hold at $35.
  By 2010, all Medicare will be privatized and immediately there will 
be a means test, the first time ever, an attempt to turn a government 
program into a welfare program, and the interesting thing is that every 
senior's income data will be turned over to any insurance company in 
the United States that requests it. So seniors, so much for their 
privacy. Every one of those people that calls on the phone to sell you 
some hokey insurance is going to have complete data on your income 
courtesy of the Republicans.
  Mr. Speaker, the sad part even further is that the Republicans would 
like

[[Page H6080]]

to turn this over to private companies to operate it, and it is very 
interesting that one of the largest and best known private companies, 
Medco, a subsidiary of Merck was just indicted, or as they say, 
essentially indicted, by the U.S. Attorney in Philadelphia for a series 
of crimes committed on our Federal employees' health insurance 
benefits. This company that the Republicans would turn the management 
of this drug benefit over to was indicted for canceling, deleting and 
destroying patients mail order prescriptions to avoid penalties for 
late filing and mailing; shortchanging patients on the number of pills 
paid for; making false statements to the insurance plan they were 
contracted with about compliance with mailing timelines; calling and 
inducing physicians to authorize switching to higher cost medications 
while representing that this would save money for the insurance 
company, which was untrue; fabricating records of calls by pharmacists 
to physicians, and the list goes on.
  This is the type of company who supports the Republicans, and they in 
turn are paying back that favor by offering Medco and Merck and their 
ilk the opportunity to provide a so-called benefit to seniors. I say 
so-called benefit because the next cruel hoax in this bill is there is 
no benefit defined in the bill. Nowhere in the bill does it define a 
premium, nowhere in the bill does it define a copay, and nowhere in the 
bill does it define a benefit. Now, we can all do some math and the CBO 
actuaries tell us that the actuarial value of a suggested benefit might 
be $1,360. It is important to add that our actuarial benefit for our 
health employees' benefit plan is probably closer to $3,000, but there 
is nothing that states in this law that the U.S. Government shall 
create, provide, or require a benefit of any type. In other words, if 
the insurance companies cannot be induced or bribed into offering a 
benefit, there will not be any. This is a nothing bill. It does not 
provide a benefit.
  Now, I guess perhaps Members may not want to just take my word for 
it, so I think it is important to note what many others might say about 
the bill.
  Mr. Speaker, the Arizona Daily Star says that ``the Democratic bill 
is better in every respect,'' and that the House drug bill is ``awful'' 
and ``repulsive.''
  The Chicago Tribune says the Medicare debate ``has more to do with 
campaign 2004 than providing a prescription drug benefit.''
  The Long Island Newsday said that ``the proposals racing through the 
House are a mess. Unless they improve dramatically en route to passage, 
doing nothing would be better than enacting such flawed laws.''
  The Evansville Courier & Press says the ``ridiculously complex 
Medicare reform now being considered by Congress may be one of the more 
irresponsible measures in the long history of cradle-to-grave 
legislation.''
  The Akron Beacon Journal says that while the Medicare reform bills 
would address the lack of drug coverage in Medicare, beneficiaries 
might be ``no better off with the benefit than they are at present'' 
because ``on the key issues of affordability, the structure of 
premiums, deductibles and copayments, both versions follow an elaborate 
path to disappointment.'' The list goes on.
  In North Carolina, the Raleigh News Observer says the bill's actual 
benefit does not begin to outweigh the drawbacks of its so-called 
reforms.
  The Roanoke Times and World News says even if the drug bill passes, 
seniors still will have to fear the possibility they will face crushing 
drug bills.
  In Kansas, the Windfield Courier says the doughnut hole ``hurts many 
seniors when they need the help the most.'' ``The majority Republicans 
are at risk of passing a Medicare bill that looks, walks and talks like 
a political campaign creature.''
  Washington State, the Seattle Post-Intelligencer says what Congress 
finally sends to the White House will surely be a disappointment.
  The Oregonian says it is difficult to see the congressional proposals 
for Medicare drug coverage as much more than a big letdown. They are 
thin in coverage and convoluted in delivery.
  Mr. Speaker, I think we can sum this all up, people will say this is 
drug coverage for old folks. The truth is this bill is nothing but 
political coverage for the Republicans.
  Mr. Speaker, I reserve the balance of my time.
  Mr. THOMAS. Mr. Speaker, I yield myself 15 seconds.
  Mr. Speaker, Members will find periodically during this 3-hour debate 
that we will take a very short segment of time to make sure that when 
an outlandish, outrageous, untrue statement has been made, we will 
correct the record immediately.
  Mr. Speaker, I yield 1 minute to the gentlewoman from Connecticut 
(Mrs. Johnson), the chairman of the Subcommittee on Health for the 
Committee on Ways and Means.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, this bill does not allow 
the IRS to share your income information with insurance companies. The 
bill very clearly protects the confidentiality of your information, and 
there are criminal and civil penalties for violating those provisions. 
Violators can go to jail.
  It is true that for 5 percent of the seniors, they will have a higher 
threshold for catastrophic coverage. I personally do not believe that 
someone with a $200,000 income living in a gated community should have 
exactly the same subsidy as someone struggling along on $25,000 or 
$30,000 of income. I think that is a strength of this bill. But if 
someone does not want the government to tell you what your catastrophic 
threshold is, you can opt out and just take the highest threshold. That 
is your right. But only 5 percent will fall above the threshold, and we 
think that is progressive. We think we need to target this benefit at 
those who need it the most, and that is what we do.
  Mr. THOMAS. Mr. Speaker, I yield 2 minutes to the gentleman from 
Illinois (Mr. Crane), chairman of the Subcommittee on Trade, a long 
time member of the Committee on Ways and Means.
  (Mr. CRANE asked and was given permission to revise and extend his 
remarks.)
  Mr. CRANE. Mr. Speaker, I rise in support of H.R. 1, the Medicare 
Prescription Drug and Modernization Act of 2003. As a member of the 
Committee on Ways and Means' Subcommittee on Health, I can say with 
confidence that this bill is a fair and balanced approach towards 
providing millions of America's seniors with prescription drug 
coverage.
  Congress is long overdo in helping our seniors with the skyrocketing 
costs of their prescription medication. Seniors are struggling and we 
need to help them. But we cannot ignore that the current program 
without an expensive new drug benefit is not financially stable. The 
Medicare program is already struggling to provide a finite number of 
health services to nearly 41 million elderly and disabled. It is 
imperative that this House takes action before the retirement of the 
baby boom generation, which will add another 36 million beneficiaries 
to the Medicare roll. Simply adding a new drug benefit is not the 
answer.
  I support H.R. 1 because it includes a number of reforms that will 
ensure the long-term fiscal integrity of Medicare through 
modernization. This legislation gives seniors the same range of private 
health insurance plans available to Members of Congress and other 
Federal employees. If seniors do not want to enroll in a private plan, 
they have the option of staying in traditional fee-for-service.
  The time has come for Congress to work together to move past 
political rhetoric and provide prescription drug coverage for seniors. 
More importantly, it is time to institute reforms to ensure that future 
generations will have the security of knowing that Medicare will be 
there when they retire. I urge my colleagues on both sides of the aisle 
to support H.R. 1.
  Mr. STARK. Mr. Speaker, I yield 3 minutes to the gentleman from 
California (Mr. Matsui), a member of the Committee on Ways and Means.
  Mr. MATSUI. Mr. Speaker, I thank the gentleman for yielding me this 
time.
  I have to first of all say that I am extremely disappointed that my 
colleagues on the other side of the aisle have put this bill before us. 
It is a shame because if they would have thought through the matter 
better and instead of bringing up those tax cuts, particularly the 
dividend tax cut and

[[Page H6081]]

the capital gains tax cut, we could have gotten a bill on the floor 
that all Americans could be proud of, and every senior citizen in this 
country would not only be proud of, but would have an adequate benefit.
  I think this bill is a sham and I think instead of covering senior 
citizens, what we are doing is giving my Republican colleagues cover, 
political cover that eventually the senior citizens will lift and begin 
to understand what this bill is really all about. I guarantee Members 
by the fall of this year, senior citizens in America will understand 
this bill and they will be very, very unhappy with a vote in favor of 
this legislation.
  When we think about it for a minute, this bill does not do much at 
all. If a senior citizen has $5,000 worth of prescription drug coverage 
in any given year, the senior citizen will have to pay $4,000 
immediately, $4,000 of the first $5,000 of coverage before they can 
even get $1 of Federal government benefit. They have to have $670 that 
they have to pay out in the form of monthly premiums, in the form of 
copayments.

                              {time}  1930

  And so this bill is not a good bill for senior citizens.
  In addition to that, this bill will ultimately in the next 5 years 
begin the erosion of Medicare as we know it. Newt Gingrich had said 
when he became Speaker of the House a few years ago that he wanted to 
see Medicare wither on the vine. We had the gentleman from California 
(Mr. Thomas) just the other day say on national television, ``Those who 
say that the bill would end Medicare as we know it, our answer is, `We 
certainly hope so.' '' Because what they really want to do is privatize 
Medicare, make it so that insurance companies could increase premiums 
to whatever they want to do and only insure the healthy senior citizen 
so that the chronically ill will ultimately wither on the vine.
  This system that is being put forward today is one that will in fact 
do major damage to the Medicare system in America. Why did we have 
Medicare in 1964 in the first place? Because we knew senior citizens 
could not get coverage because seniors by their very nature are the 
ones that get ill and the ones that ultimately go into very, very 
difficult physical situations. And so ultimately what we are going to 
have is going back to 1964 with this legislation. That is their intent, 
because they want to see Medicare wither on the vine.
  This bill is a bad bill and we need to vote ``no'' on it so the 
American public understands exactly what my colleagues on the other 
side of the aisle are attempting to do.
  Mr. THOMAS. Mr. Speaker, I yield myself such time as I may consume.
  This is the first mention of the quote that I made, and it is not 
surprising that the quote is certainly truncated. Perhaps a journalism 
spot on The New York Times might be available to some of my colleagues 
given their ability to take reality and distort it. Here is my quote:
  ``Some of our friends on the other side of the aisle are saying that 
if this bill becomes law, it will be the end of Medicare as we know it. 
Our answer to that is, We certainly hope so. Why should seniors be the 
last group that pays retail prices for drugs?'' We have not heard that 
from the other side.
  ``Old-fashioned Medicare isn't very good. Why should the insurance 
for seniors be called MediGap? I think that indicates just how good the 
insurance is.'' We have not heard that from the other side.
  But what I did say was, you will hear scare tactics. But seniors with 
extremely high drug costs when this becomes law will save more than 60 
percent of their current costs if they spend $10,000 a year on 
prescription drugs today. That is real change. That is real progress, 
making Medicare a real day-to-day benefit. I would say to my 
colleagues, if you really think that current Medicare should not end, 
why in the world did you put up such a fit to have a substitute so that 
if we accept your bill, current Medicare as we know it will end as 
well? Half quotes are not going to get it done. Try the full quote, 
because if you do, you will vote ``yes'' on this bill.
  Mr. Speaker, it is my pleasure to yield to the gentleman from 
Pennsylvania (Mr. Gerlach) to enter into a colloquy.
  Mr. GERLACH. Mr. Speaker, I thank the gentleman from California for 
his dedication to adding a prescription drug benefit to Medicare. 
Members of the Pennsylvania delegation have some concerns as to whether 
State pharmaceutical assistance programs like PACE and PACENET in 
Pennsylvania will be able to fully coordinate their programs with 
Medicare drug plans to provide a seamless transition for beneficiaries 
and States that already have prescription drug plans.
  Mr. THOMAS. I will tell the gentleman from Pennsylvania that we have 
a generous amount, and we believe it will be appropriate; but certainly 
as we get to conference, our intent is to provide a seamless transition 
for beneficiaries and States and that will be done.
  Mr. GERLACH. I thank the gentleman.
  Mr. THOMAS. Mr. Speaker, it is my pleasure to yield 2 minutes to the 
gentleman from Pennsylvania (Mr. English), a member of the Committee on 
Ways and Means.
  Mr. ENGLISH. Mr. Speaker, I rise in strong support of the bill before 
the House today. This bill is the most historic and significant 
addition to Medicare in the program's history. This Medicare bill 
offers enormous benefits for all of Pennsylvania's seniors while saving 
the Commonwealth hundreds of millions of dollars. The Medicare 
Prescription Drug and Modernization Act provides all seniors with a 
thorough, flexible, and voluntary prescription drug plan while at the 
same time augmenting Pennsylvania's PACE plan. Importantly, for the 
nearly 2 million seniors in Pennsylvania, this bill would allow PACE to 
wrap around the Federal benefit which would largely supplant and build 
on PACE's current benefits. And to ensure that Pennsylvania's seniors 
get maximum drug coverage, this Medicare bill would allow PACE to pay 
for beneficiaries' copays under Medicare while at the same time 
counting those contributions toward out-of-pocket expenditures to more 
rapidly trigger catastrophic coverage.
  Our seniors have waited too long to receive the benefits that they 
deserve. This flexible, voluntary, and affordable plan would provide 
seniors with dependable benefits. This is a huge benefit for seniors in 
the roughly 10 States that have a significant State plan already in 
place.
  Mr. Speaker, this bill also provides real help to America's rural 
health providers to allow them to deliver the highest quality care to 
seniors and meet the demanding fiscal challenges that they currently 
face. In many rural areas like my own district of western Pennsylvania, 
inequities in Medicare's wage reimbursements and payments for hospitals 
often drive workers, especially skilled nurses, to look for jobs in 
higher-paying metropolitan hospitals and contribute to staffing 
shortages in many local communities.
  Several provisions in this bill mirror legislation I introduced 
earlier this year to help alleviate those high costs by increasing 
Medicare's salary reimbursements to our hospitals. These two provisions 
would pump $13.3 billion into the struggling rural health systems, and 
I am pleased to note that hospitals in my district alone would receive 
approximately $65 million as part of this fix. I ask for support for 
the bill.
  Mr. STARK. Mr. Speaker, I am pleased to yield 3 minutes to the 
gentleman from Michigan (Mr. Levin).
  (Mr. LEVIN asked and was given permission to revise and extend his 
remarks.)
  Mr. LEVIN. Mr. Speaker, the Republican bill contains a ticking time 
bomb, a ticking time bomb of Medicare privatization set to go off in 
2010. Under this bill, starting in 2010, seniors, in essence, would 
receive a voucher instead of Medicare's guaranteed benefits, instead of 
open access to doctors and hospitals and predictable costs.
  Seniors who cannot afford to pay more than they do right now would 
have to leave Medicare and join HMOs. This so-called benefit for 
prescription drugs in the Republican bill serves as a decoy, but it is 
not a very good one.
  The Republican drug plan is insurance without assurance. No assured 
premium, no assured deductible, no assured size of the gap between the 
basic coverage and stop-loss, no assured list of drugs, no assured list 
of pharmacies, no assured plan from one year to the

[[Page H6082]]

next. It could change from year to year.
  From the very beginning, Republicans have wanted to use prescription 
drugs as leverage to end Medicare. The President said earlier to 
seniors, we will give you some prescription drug help depending on 
whether you leave Medicare and join an HMO. And now what this 
Republican bill is doing is using a very inferior drug insurance plan 
in 2006, not until then, to make everything except HMOs unaffordable 
for seniors in 2010. The chairman did say just a few days ago, ``Old-
fashioned Medicare isn't very good,'' and I quote his quote. What 
Republicans call old-fashioned Medicare is the system of guaranteed 
benefits, set premiums and deductibles and access to doctors and 
hospitals that have served seniors so well since 1965. Republicans want 
to end all that, but current and future Medicare beneficiaries do not. 
And we Democrats intend to keep fighting for those good aspects of old-
fashioned Medicare. Indeed, it has been very, very, very good.
  Mr. THOMAS. Mr. Speaker, I yield myself such time as I may consume. 
If it has been very, very good, why did the Democrats fight for a 
substitute which will change the structure significantly?
  Mr. Speaker, I yield 1 minute to the gentlewoman from Connecticut 
(Mrs. Johnson) to point out once again an absolutely outrageous 
statement that cannot go unchallenged.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, scare tactics have no place 
in this debate. There are no vouchers in this bill. In 2010, a senior 
that wants to be in the Medicare program will be in the Medicare 
program exactly as they are now. They will be in that Medicare program 
and have that choice of the Medicare program in 2010, in 2011, in 2012, 
in 2013. They will never receive a voucher. That word is not in this 
legislation. It is used rhetorically to scare seniors. I want to assure 
the seniors listening that this bill represents the most dramatic 
expansion of benefits under Medicare since the program was founded, not 
only prescription drugs but additional preventive benefits and a whole 
system to support seniors with chronic illness.
  Mr. STARK. Mr. Speaker, I am happy to yield 3 minutes to the 
gentleman from Maryland (Mr. Cardin). The gentleman from Maryland 
understands that with proponents like Thomas and Johnson, the seniors 
do not need any scaring from us.
  Mr. CARDIN. Mr. Speaker, I oppose the passage of this bill. The 
passage will make it much more difficult for Congress to enact a 
meaningful prescription drug benefit for our Nation's seniors. Let me 
give you five reasons why.
  Reason number one. There is no guaranteed benefit in this bill. 
Unlike seeing a doctor or going to a hospital, we cannot tell our 
seniors that their prescription drugs will be covered. It will be 
different in different parts of the country. Mr. Speaker, I tried to 
correct that by offering an amendment in the Committee on Ways and 
Means, and it was rejected by the Republicans. I tried to give this 
body an opportunity to vote on it, but the Committee on Rules would not 
make that amendment in order.
  Reason number two. We are set on a course to privatize Medicare. Only 
private insurance can participate in the prescription drug coverage. 
Private insurance only has to offer a 1-year commitment. Mr. Speaker, 
my citizens of Maryland remember when we had Medicare+Choice; 100,000 
Marylanders lost their coverage when all eight HMOs left Maryland. It 
is irresponsible to claim that private insurance companies are eager to 
return to a market that they have abandoned in the past.
  Reason number three. This bill will jeopardize coverage for seniors 
who have good private retiree prescription drug coverage today. CBO has 
estimated that 30 percent of our seniors who currently have their own 
private coverage for prescription drugs through their prior employment 
will lose those benefits as a result of the enactment of this 
legislation.
  Reason number four. We are missing an opportunity to bring down drug 
prices. The legislation specifically prohibits our government from 
using the purchasing power of 40 million beneficiaries to lower drug 
prices just like the Canadians do.
  Reason number five. The benefits are inadequate. The Republicans 
project that this bill will provide for a $35 a month premium, $250 
deductible, then some help up to $2,000, but then our seniors are on 
their own for the next $2,900. Our seniors are expected to pay a $35-a-
month premium when they are not entitled to any benefit for a good part 
of the year. I think that is unrealistic.
  My Republican friends say, well, you only have $400 billion. We 
offered alternatives within $400 billion that would provide real 
benefits. I offered a substitute that said, look, if you cannot afford 
all drugs, let us at least cover drugs for those illnesses such as high 
blood pressure and coronary artery disease and diabetes and severe 
depression. But, no, the Committee on Rules would not allow this body 
to decide whether that would be a better package and a guaranteed 
benefit package.
  Mr. Speaker, I cannot support a bill that provides no guaranteed 
benefit, relies solely on the whim of private insurance companies, 
causes harm to seniors who currently have adequate prescription drug 
coverage, will not do enough to bring down the cost of prescription 
drugs, and provides inadequate benefits. Therefore, I will vote ``no'' 
on the Republican bill.
  Mr. THOMAS. Mr. Speaker, I yield myself 1 minute.
  You know, it just kind of makes you wonder what the Democrats did for 
30 years when they were the majority, because, you know, when 
Republicans became the majority in 1995, there was literally no 
prevention and wellness in Medicare. We are the ones that are supposed 
to be destroying Medicare? We are the ones that added diabetes. We are 
the ones that added osteoporosis. We are the ones that added prostate 
and colorectal screening. We are the ones that added the mammography. 
In fact, in this bill that they continue to speak against, we provide 
for the first time every new beneficiary should have a physical.

                              {time}  1945

  I want to underscore that. Every new beneficiary should have a 
physical. In addition to that, we believe that cholesterol screening 
has now been advanced, and it should be provided as well.
  I find it amazing that they go back to the same old scare statements.
  Read the bill. It is an enhanced and an improved Medicare. What in 
the world were you doing for 30 years? The fact of the matter is you 
did not have a competent challenge.
  What we have done is provide real change, and they are afraid those 
old frayed bumper stickers will not work anymore.
  Mr. Speaker, I yield 3 minutes to the gentlewoman from Washington 
(Ms. Dunn), a very valued member of the Committee on Ways and Means.
  Ms. DUNN. Mr. Speaker, I for one am very proud that the President in 
his State of the Union address directed the Congress to put together a 
program that will cost about $400 billion to provide prescription drugs 
for seniors because I think it is time to keep our promise to the 
people we represent and provide a comprehensive and voluntary 
prescription drug benefit for all seniors.
  We have all heard stories of seniors paying too much for prescription 
drugs. This problem is even more acute among low-income seniors, 
especially for women who comprise half of Medicare beneficiaries with 
annual incomes below 150 percent of the poverty level. In this bill we 
help seniors on fixed incomes and those with high drug costs. A woman, 
for example, with an income of less than $14,400 today, which is 150 
percent of poverty, will receive assistance from the Federal Government 
for prescription drugs. While all seniors will benefit, nearly 11 
million or 34 percent of Medicare beneficiaries will qualify for 
additional assistance when this bill is fully implemented.
  Improving Medicare is not only about providing a drug benefit, but it 
is also about giving seniors access to doctors, hospitals, Medicare 
HMOs, and other services they need. To ensure access to doctors, we 
address the low reimbursements that they are receiving. We also 
increase funding for rural hospitals so that seniors can get the health 
care service they need right in their community.
  For Medicare HMOs, this bill requires Medicare to accurately account 
for

[[Page H6083]]

military retirees in the formula and that means higher Medicare+Choice 
reimbursements in areas with military facilities. Strengthening 
Medicare also means improving the quality of life for every senior. For 
this reason I am very happy that we were able to provide preventative 
services like cholesterol screening, initial physical exams and chronic 
care management to help those seniors with serious diseases.
  Seniors will also have access to innovative treatments to deal with 
rheumatoid arthritis and other chronic diseases. This bill provides 
seniors immediate access to self-injectable biologics. Besides 
providing the choice of which drug works best for rheumatoid arthritis, 
these self-injectable treatments will allow seniors to receive 
treatments right in their homes instead of going to the hospital or to 
a physician's office and will take the burden off those hospitals, 
clinics and doctors.
  This is a real prescription drug plan, Mr. Speaker. It is one that 
provides up to 25 percent in drug discounts for manufacturers. It 
covers seniors to participate in the drug program, and it protects 
those with very high drug costs. It strengthens Medicare's future 
without compromising the benefits seniors enjoy today. I ask my 
colleagues to support a real prescription drug by passing this 
legislation.
  Mr. STARK. Mr. Speaker, I yield 3 minutes the gentleman from 
Washington (Mr. McDermott), a member of the Committee on Ways and 
Means, who understands that seniors are going to have to pay 4,000 
bucks for the first $5,000 of drugs regardless.
  Mr. McDERMOTT. Mr. Speaker, well the rubber stamp Congress is ready 
tonight. The drug companies, after they contributed and got the 
President elected, gave him this bill, and they said this is what we 
want. The President brought it up here. We are rubber stamping it out 
of here. Can you believe that the Senate, excuse me, in another part of 
this building they are considering something like 400 amendments, but 
we cannot have one because when you are using a rubber stamp, you 
cannot have one single amendment in here. Nothing can be improved in 
this bill. Can you believe it? It is like the Ten Commandments. It is 
perfect. It came down from God or somewhere, or the White House.
  This bill was put together by drug companies, 10 of them. They had 
$38 billion in profit last year. That is 50 percent of the profit of 
the Fortune 500. If the Members think they did not have an impact on 
this bill, why do they want to privatize? Why do they want to give no 
guaranteed benefit? Why do they want to have all openness in the world? 
And why do they put the one line in there that says that the Secretary 
cannot negotiate on behalf of 40 million people, soon to be 80 million 
people? They want it all broken up into little different pieces so they 
can divide and conquer. This little agency will get so much. But a 
little bit bigger one, we will give them a little bit higher benefit. 
They are going to divide and conquer the American people. This is a 
sham.
  In Canada they get their price reduced very simply by saying let us 
make the Canadian price the average of the G-7. The United States is 
way up here and Canada is way down there. Why could we not pass a 
little amendment in here that said let us give the average of the G-7? 
I do not know. In my State everybody goes across the border to Canada 
or they mail across the border. They do it in Vermont. They do it in 
New Hampshire. They do it in Maine. They do it in New York State. Why? 
Because everybody knows the Canadians have got a better deal than we. 
But you say no, no, we cannot make one change. When we are sent in here 
with our rubber stamp to approve of everything George Bush does, we 
have to give him the bill exactly as he sent it over here.
  The idea that you could come out here with a bill and say that we 
have a perfect piece of legislation, the seniors are like Abraham 
Lincoln. Do you remember, the founder of the Republican Party? He said, 
You can fool some people all of the time and all of the people some of 
the time, but you cannot fool all the people all of the time.
  I know the President is going to raise $200 billion for ads in this 
campaign to say this, I got this from that rubber-stamped Congress and 
it is good for you, and he is going to give the tax cuts and the child 
never left behind, and he is going to give this stuff, and every one of 
those is phony. The child never left behind? He puts a budget out here 
$17 billion short to fund it, and the people are going to figure it 
out.
  Counting on believing that the American people are stupid is not a 
good political way to go. Vote against this bill because the rubber 
stamp is wrong.
  Mr. THOMAS. Mr. Speaker, I yield 3 minutes to the gentleman from 
Florida (Mr. Shaw), a valued member of the Committee on Ways and Means.
  Mr. SHAW. Mr. Speaker, I thank the chairman for yielding me this 
time.
  This is probably, I think without question, one of the most important 
sessions that this Congress has had regarding Medicare since its 
inception. We have heard a lot of argument about old fashioned Medicare 
and new Medicare and the changes, and the truth be known, both 
political parties understand that medical treatment has changed in the 
last 40 some years since Medicare first came on line. We know that. 
Drugs are more important to keep the seniors out of hospitals, to keep 
them mobile, to keep their quality of life moving. So this is a very 
important thing, and it is important that we put this in the Medicare 
law. And it is very important that we make it where the seniors can 
afford it.
  Florida has the seven most heavily used Medicare congressional 
districts in the country. I have seen on more than one occasion, while 
standing in line waiting for a prescription to be filled, somebody 
going up. I have a very vivid memory of the last one I saw, this 
elderly lady coming up and finding out what her prescription drugs was 
going to cost and looking at this bottle and that bottle and then 
handing that bottle back. She was low income. This bill will take care 
of her. She will be taken care of under this bill, and she will not 
have to give that bottle back because she needs it. These are 
prescription medicines, these are what control her quality of life, and 
this is a good bill.
  The Republican bill looks after the low-income people first, and it 
also takes care of those who are the heavy drug users because of the 
illnesses that they are suffering from. Obviously we can sweeten the 
pie by increasing the expenditures, but we heard tonight one of the 
Members from the other side was saying that we are letting it wither on 
the vine. We are putting $400 billion into Medicare. We are propping it 
up. We are putting some reforms in there, we are putting some cost 
containments in there that is going to make it a better deal. The price 
of drugs because of the Republican bill will come down, and the people 
that need it most, the heavy users and the low income, will be taken 
care of.
  This is a very good bill. It is one that the Congress should 
definitely, definitely pass. H.R. 1, its time has come and it is time 
for this Congress to act. I compliment the chairman and all of those 
who did this very complex bill and put it together. It is a good bill 
and it is one this Congress should pass.
  Mr. STARK. Mr. Speaker, I yield 3 minutes to the gentleman from 
Wisconsin (Mr. Kleczka), a member of the Committee on Ways and Means, 
who, unlike the authors of this bill, did not spend his entire life in 
the public trough but actually worked in private enterprise; so he 
understands what privatization is.
  Mr. KLECZKA. Mr. Speaker, I worked for an insurance company before I 
was elected to the legislature.
  So with that as an opening, Mr. Speaker, let me say to the body that 
in my view this is the beginning of the end of the Medicare program. 
For 38 years Medicare has provided seniors with quality health care, a 
defined benefit, and whether one lived in California, Alaska, Maine, or 
Florida, the premium was the same, they knew what the benefit was, and 
they knew what the services were, and it has worked.
  So there are those in this House who say there has been a change in 
the way we deliver medicine today, and that is called drug therapy. Let 
us add that coverage to the Medicare program and we can use the 
purchasing power of the Federal Government to get the best deal on 
drugs for in excess of 40 million people. And there are those on the 
other side of the aisle who say no, we do not want to do that, and the 
reason is because that is going to cut into the

[[Page H6084]]

drug profits of their friends, the drug companies. But know full well, 
Mr. Speaker, we do it for the VA and it works and it works well.
  So instead of doing a benefit connected to the Medicare program, what 
we are doing is we are going to send our seniors out to the private 
insurance market, we are going to tell them go shop for a drug-only 
policy. The policy that is being offered in this bill has one big 
problem, and that is once one spends $2,000 on drugs in any one year 
coverage stops until their expenditures total $4,900. Know full well 
during that period they are paying 100 percent of their drug cost. 
Their premiums go on. They are paying premiums and getting no benefit. 
There is something wrong with that system, and that is why this bill is 
very bad in that respect.
  The other problem with the bill is we had this program for a couple 
years now called Medicare+Choice, and we are going to show those 
seniors that the private market who did not want them 35 years ago 
wants them now. They are holding their arms open. We want the seniors 
because we know they have a lot of drug costs and a lot of health care 
costs. So the Committee on Ways and Means and this Congress go along 
with this Medicare+Choice. What it is, is a private insurance company 
selling policies to seniors. Milwaukee, where I come from, has four of 
these companies and they were peddling these policies and offering the 
sun and the moon and all of a sudden bingo, three of them go belly up, 
the seniors have to scurry to get back into some type of Medicare 
program, and today we have one left. One left.

                              {time}  2000

  And the reimbursement for that one Medicare+Choice program is 110 
percent of the Medicare rate. So clearly, we are not saving a heck of a 
lot of money with that Medicare choice plan.
  Well, it is a failed experiment, Mr. Speaker. So what are we doing in 
this bill? We are changing the name. We are going to call it Medicare 
Advantage, and it is supposed to look and smell better; but, my 
friends, it is the same thing that has failed in the past. It will fail 
again.
  Mr. Speaker, I urge a ``no'' vote on this legislation.
  Mr. THOMAS. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, well, I guess, if all of the innovations are going to 
fail, what will be left is the current Medicare. I find it interesting 
that one of the reasons the gentleman from Wisconsin (Mr. Kleczka), my 
friend, is going to vote against the bill is because there is no 
government ultimate negotiation of the price.
  Let me tell my colleagues a story, and I believe before I give my 
colleagues the punch line, they will know the story. We have government 
negotiation of price. And as is typically the case, currently, in law, 
in the Medicaid program, it is called ``best price.'' That is where 
government determines how much the drug is going to cost. It is going 
to be the best price.
  When we looked at ways to change Medicare, we looked at the ``best 
price'' concept. Guess what? We sat down with the Congressional Budget 
Office and we said, what would happen if we did not use best price? 
They sat down and calculated and they said, you know, if you actually 
had competition for the drugs, instead of putting in the government 
phony floor of ``best price,'' you could save $18 billion. Do my 
colleagues know why we do not have government negotiating the price? It 
would cost us tens of billions of dollars over a real negotiation on 
drugs. Yet, here we are, hearing the same old same old: I am going to 
vote ``no'' because we do not have government dictating the price. That 
is what has gotten us into the problem in the first place.
  Mr. Speaker, it is my real pleasure to yield 3 minutes to the 
gentleman from Illinois (Mr. Weller), a member of the Committee on Ways 
and Means.
  (Mr. WELLER asked and was given permission to revise and extend his 
remarks.)
  Mr. WELLER. Mr. Speaker, tonight we hear some partisan political 
rhetoric, particularly from the other side of the aisle, who began this 
process by announcing they were going to oppose the bill. It does not 
matter what is in it; they are going to oppose it.
  So I think the important question that we really should ask is: What 
does this mean, this modernization of Medicare? What does it mean that 
we are modernizing Medicare for the 21st century? What does it mean 
that we are investing $400 billion in modernizing Medicare with 
prescription drugs?
  When I think of prescription drug coverage, I think of the seniors 
who I have met over the 9 years I have had the privilege of serving in 
this body. They are men and women who I have talked with in their homes 
who sit there and they sit in that easy chair and right next to their 
chair, they have that tray, a tray full of pill bottles, and they 
talked and shared with me the choices they have had to make, whether or 
not they go to the drugstore, the grocery store that particular week 
because of the expenses they are facing because of rising prescription 
drug costs.
  Well, those are the people that are the primary beneficiaries of this 
legislation. Because we have a plan before us that helps those who are 
truly needy, low-income, by ensuring they pay no premiums; and for 
others, they pay a pretty affordable premium. This plan would cost a 
senior about $35 a month, $1 a day. Think about that. A dollar a day 
for a senior participating in this plan. And if you qualify for 
Medicare today and you are going to be eligible tomorrow, you qualify 
and are able to take advantage of this new prescription drug plan. But 
for a dollar a day, it is projected you could save anywhere from 30 to 
70 percent of your prescription drug costs.
  Think about that. When you think of that elderly man or woman who you 
have had the opportunity to talk with in their home and sit there while 
they are seated in that chair, perhaps they are home-bound, they have 
that tray of pill bottles, and they are, frankly, very concerned 
because they cannot do much else, other than buy their drugs and 
hopefully get to the grocery store, they are going to really benefit 
from this plan. It is affordable. It is available for all seniors.
  We also give seniors choices. It is affordable, a dollar a day, $35 a 
month; it provides real savings, 30 to 70 percent that is projected by 
nonpartisan analysts who look at this and say, what does it really 
mean, is the question they ask. To qualify for Medicare, you qualify 
for this program, and you are going to have choice. You do not have to 
pick the one-size-fits-all that some of my friends on the other side of 
the aisle want to have and say, seniors, you only get one choice, and 
we are going to tell you what it is.
  Mr. Speaker, we are going to give seniors more than one choice so 
they can find a plan that best fits them. Think about that. That is 
what this really means. We are helping seniors who need help with their 
prescription drug costs. We are modernizing Medicare for the 21st 
century. We have a plan that is almost 50 years old that has not 
changed. We are going to modernize it. The most important choice that 
seniors face today is, of course, the availability and affordability of 
prescription drug costs.
  Mr. Speaker, this is a commonsense plan. It deserves bipartisan 
support. I hope my friends on the other side of the aisle will do the 
right thing. I recognize that they set out today with a decision to 
oppose the bill, regardless of what is in it. Well, let us work 
together. Let us provide a bipartisan vote to provide prescription drug 
coverage that will help every senior in America.
  Mr. STARK. Mr. Speaker, I yield myself such time as I may consume, 
because I do not intend to let unsubstantiated remarks go unchallenged 
either.
  We do not oppose this bill because of what is in it, because there is 
nothing in it. There are no benefits in it. There is nothing in the 
bill except to spend money to get private insurance companies, if they 
decide to come.
  Mr. Speaker, I yield 3 minutes to the gentleman from Georgia (Mr. 
Lewis), who recognizes that.
  Mr. LEWIS of Georgia. Mr. Speaker, here we are once again debating 
Medicare. Thirty-eight years ago, the Republicans did not like 
Medicare, and they do not like it now. In 1965, 88 percent of 
Republicans voted against Medicare. And here they are, once again, 
trying to privatize prescription drugs for seniors, just like they 
tried to privatize Medicare.
  This is just another scheme by the Republicans to entice older 
voters. Not

[[Page H6085]]

last week, not last year, but just yesterday, the gentleman from 
California (Mr. Thomas), the Republican chairman of the Committee on 
Ways and Means, made it crystal clear when he said, ``To those who say 
that the bill would end Medicare as we know it, our answer is: We hope 
so.'' He went on to say, ``Old-fashioned Medicare is not very good.'' 
Tell my mother. Tell your mother that old-fashioned Medicare is not 
good. Tell your grandmother, tell your grandfather that old-fashioned 
Medicare was not good. It was good in 1965. It was good yesterday. It 
was good then, and it is still good right now. We do not need to 
destroy Medicare. We need to save and strengthen Medicare.
  Mr. Speaker, this bill is just another Republican scheme to deceive 
our seniors, to deceive our elderly. That is not right. That is not 
fair. I want my Republican colleagues to tell the American people the 
truth. We must tell our seniors that the Republican bill does not offer 
our seniors the basic right to affordable prescription drugs. We must 
and we will tell the American people that the Republicans want to 
privatize Medicare.
  We must tell the American people the truth. This is no time to play 
partisan politics with the lives of our seniors.
  The clock is running. Time is running out. My Republican colleagues, 
you still have time to do the right thing. Do not turn your back on our 
seniors, on the elderly. This is a matter of life and death.
  I beg, I plead with my colleagues to vote against the Republican 
bill, not just for our parents, our grandparents, our children, but 
also for generations yet unborn. Old-fashioned Medicare was like a 
bridge over troubled waters. It was reliable. It was dependable then, 
and it is still dependable.
  Ask the seniors, ask the old people who live on fixed incomes in our 
cities and rural areas. I say to my Republican colleagues, follow the 
dictates of your conscience. You have a moral obligation, a mission, 
and a mandate to uphold the legislation of 1965 when Lyndon Johnson 
signed the Medicare bill.
  I urge my colleagues to vote against this unreliable bill.
  Mr. THOMAS. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I will tell my friend from Georgia, we do not intend to 
turn our backs on seniors. Indeed, we intend to reach out our hand. If 
someone wants to stay in yesterday's Medicare, they can tomorrow. We 
want to make sure of that, because in 1965 and yesterday, there were no 
drugs, there was no preventive care, there was no disease management, 
that by passage of this legislation, tomorrow there will be.
  But Mr. Speaker, as we have carried on this debate about improving 
Medicare, and I know that to my friends on the other side of the aisle 
$400 billion does not look like much to them. I understand they are 
going to offer a substitute that proposes spending $1 trillion, rather 
than the $400 billion.
  But at some point in this debate, we ought to realize that we are in 
the middle of the greatest intergenerational transfer of wealth in the 
history of the world. Because while we strive to provide a decent and 
appropriate health program for seniors, we all know someone else is 
going to be paying for it. And so we really ought to focus on what we 
are trying to do to make sure that the young people who are going to be 
carrying this bill understand that while we are providing additional 
benefits to seniors, we want to make sure that the program stays within 
the reasonable bounds of the $400 billion that we are proposing to add 
to Medicare.
  Mr. Speaker, to insist on focusing on that, it is my real pleasure to 
yield 4 minutes to the gentleman from Louisiana (Mr. McCrery), the 
chairman of the Subcommittee on Select Revenue of the Committee on Ways 
and Means.
  Mr. McCRERY. Mr. Speaker, I rise in support of this legislation which 
reforms Medicare and adds prescription drugs to the program; but I 
arrived at this position of support haltingly, grudgingly, reluctantly. 
I will tell my colleagues why.
  I was reluctant to support this bill because I believe the current 
Medicare program as it is structured is financially unsustainable. I 
believe it is only a matter of time before, as the financial experts 
tell us, Medicare, one of the two fastest growing programs in the 
Federal Government, consumes an ever-larger and larger share of our 
national income; an ever-larger and larger share of our Federal budget, 
with the potential to crowd out spending on other government 
priorities. And, as we all know, there are numerous, very important 
priorities of government. Health care is not the only one. I believe, 
Mr. Speaker, that as that occurred and as policymakers in Congress 
realized that Medicare was crowding out other spending, causing us to 
reduce our commitment to other priorities, we would do as most other 
countries that have similar programs have done: we would start to 
ration health care for our seniors. I do not want to do that.
  So, Mr. Speaker, I was reluctant to add to the current program, which 
is going to go belly up or bust the budget, a new entitlement program, 
prescription drugs, which would exacerbate that situation, which would 
make it worse, which would get us to that point where we would have to 
start rationing health care faster. Yes, I was reluctant to do that.
  But as I studied the bill and listened to those who put together the 
components of the bill, I realized that the reforms contained in the 
bill, particularly those beginning in the year 2010, which give us a 
chance to move Medicare into a form much like the FEHBP program, the 
premium support model that the Medicare Commission recommended several 
years ago, then I realized that this is maybe our last best chance to 
save Medicare in a way that we can afford it as a society, and deliver 
quality health care for our seniors.

                              {time}  2015

  So, Mr. Speaker, I am here after much thought and consideration and 
yes, reluctantly arriving here, but I am here because I do believe this 
is our best chance to save Medicare, to make it a truly viable program 
that will not bust the budget, and if we do not take advantage of this 
opportunity and I want to speak, Mr. Speaker, through you to the 
conservatives out there on both sides of the aisle about supporting 
this bill, do not blow this opportunity. If you are a conservative, if 
you are concerned about the cost of the Medicare program, do not miss 
this opportunity to give us the best chance to reform it in a way that 
can save costs over the long term, that can keep us from rationing 
health care, not only for our seniors, but I believe eventually for all 
of our society.
  Mr. Speaker, I urge everyone to support this bill tonight and hope 
and pray that the reforms contained therein work.
  Mr. STARK. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, how short memories are. It was just an hour ago that we 
threw away $174 billion on useless medical savings accounts and over 
the last year or two we gave $800 billion in inheritance tax relief to 
an average of 10,000 people a year so we could punish a hundred million 
people a year by destroying their Medicare. They just do not remember. 
But the gentleman from Massachusetts, the distinguished member of the 
Committee on Ways and Means (Mr. Neal) remembers.
  Mr. Speaker, I yield 3 minutes to the gentleman from Massachusetts 
(Mr. Neal).
  Mr. NEAL of Massachusetts. Mr. Speaker, let me thank the gentleman 
from California (Mr. Stark) for yielding me time.
  Only in this Chamber over the last few months could we have written 
$2 trillion out of our tax system irresponsibly over the next decade 
and then say that the cost of Medicare is unsustainable. Only in this 
Chamber could we have this debate from a political party who says, let 
us not take a truncated quotation. Let us not take a scare tactic. But 
you know what? You cannot truncate history.
  When I came to this House 15 years ago, the Republican leader in the 
Senate, Bob Dole, had voted against the establishment of Medicare. The 
Republican leader in this House, Bob Michel, wonderful human being, had 
voted against the establishment of Medicare. And they say, do not use 
these quotes because they are not true. They are not for real.
  Speaker Gingrich said, in time we would let Medicare wither on the 
vine. The third ranking Republican in the United States in the other 
body down the hallway, said recently, I believe the

[[Page H6086]]

standard benefit, the traditional Medicare program, has to be phased 
out. And they say, but trust us on Medicare. Do not be skeptical of our 
intentions. We have come to love Medicare.
  There is not anybody on that side of the aisle that believes that 
tonight and there certainly is not anybody on this side of the aisle 
that believes that tonight as well. And then they argue, well, we have 
improved Medicare. Think of what we might have done without those tax 
cuts over the last 2 years.
  A predictable, carefully defined benefit would have been in place for 
Medicare recipients. It is the closest thing, Medicare, that this 
Nation has ever had to universal health care. It is an extraordinary 
achievement for those who turn 65 years old, and they refer to it as 
old-fashioned Medicare and we are to trust them. But let us talk about 
Medicare+Choice where I live in Massachusetts, the private sector's 
answer to the problems of Medicare.
  Well, they are all gone and the ones that are not gone have jacked 
premiums through the roof. They do not want to take care of the most 
vulnerable and whether we have a debate about government tonight and 
its role or not, that in the end is what government does. It takes care 
of those who are outside the mainstream of this economic life. Not the 
top 1 percent of the wage earners in this country, not those who 
benefit from the repeal of an estate tax. It is government that does 
that.
  Medicare is a legacy and an amendment to the Social Security program, 
the greatest achievement domestically in this Nation's history. And 
that amendment in Medicare is a greatchild and a success of a 
determined Congress and an enlightened President, Lyndon Johnson. 
Tonight let us stand with history, stand with Roosevelt and stand with 
Lyndon Johnson on what Medicare has done to make us a much more 
equitable society. What a great achievement it is.
  Reject the notion tonight of where they are going to take us, and 
that is down the road to privatization of Medicare.
  Mr. STARK. Mr. Speaker, may I inquire of the time remaining?
  The SPEAKER pro tempore (Mr. Hastings of Washington). The gentleman 
from California (Mr. Thomas) has 7 minutes remaining. The gentleman 
from California (Mr. Stark) has 12 minutes remaining.
  Mr. STARK. Mr. Speaker, I yield 3 minutes to the gentleman from Texas 
(Mr. Doggett), a member of the Committee on Ways and Means.
  Mr. DOGGETT. Mr. Speaker, since President Lyndon B. Johnson signed 
Medicare into law over massive Republican resistance, Republicans have 
never ceased in their determination to end Medicare. We all remember 
the partner of the gentleman from California (Mr. Thomas), former House 
Speaker Newt Gingrich, who insisted that Medicare should be allowed 
``to wither on the vine.'' He has been chattering again this month, 
that Medicare is an ``obsolete government monopoly.''
  The gentleman from California (Mr. Thomas) joined him yesterday by 
declaring, ``To those who say that [the bill] would end Medicare as we 
know it, our answer is: We certainly hope so.'' ``Old fashioned 
Medicare isn't very good,'' he added.
  The gentleman may not like reporters, especially if they report, but 
really there is nothing new or inconsistent in this statement and many 
that he has made for years. He just referred a few moments ago to 
Medicare as ``yesterday's Medicare,'' denigrating and deriding it. 
``Yesterday's Medicare,'' ``old fashioned Medicare'' has served 
millions of Americans pretty well.
  The one problem we have with it is not the result of a defective 
Medicare. Rather the failure to deal with the outrageous, predatory 
pricing of prescription drugs has resulted from the sustained collusion 
of House Republicans and pharmaceutical manufacturers. We can do 
something meaningful about that, but this bill is not it.
  What of this plan that seniors are finally offered tonight? It is 
basically a ``pay a lot and get a little'' plan. If you are a senior 
and you have been hoping and praying we would finally be able to 
overcome this Republican resistance and deal with prescription drugs, 
what do you get from this bill according to its own clear language? 
Well, this year you get nothing. Next year you get nothing. The year 
after that you get nothing. Oh, yes, you are entitled to a discount 
card. It is as valuable as one of those cards you pull out of a cereal 
box. With it and a dollar or two you can get a cup of coffee, but it 
does not guarantee you a cent of reduction in the cost of your 
medications.
  Finally, in 2006 you get all their much ballyhooed help. If you have 
$4,900 in drug bills, and that is mighty easy to get at today's 
outrageous prices, you pay $3,500, and you get $1,400 paid for you, and 
that is only if you also pay an unknown premium, already estimated at 
least $35 per month. And such incomplete coverage at such a cost tells 
us what this initiative is really all about. This is a plan to 
eliminate Medicare and force seniors out into inadequate private 
insurance plans. This is not a prescription drug. This is a 
prescription for disaster.
  I hope that our Republican colleagues continue holding up this poster 
about ``strengthening Medicare'' that they have been showing here 
because it looks like the type of solicitation scams that so many 
seniors receive weekly. Their poster shows seniors out frolicking on 
the beach because of all the benefits they will get, when in fact 
seniors will be denied the very protection they so desperately need on 
their prescription drugs. That is because those who are proposing this 
bill are the same folks, who tried to undermine Medicare from the time 
Democrats and Lyndon Johnson got it passed through Congress in 1965, 
and they have not relented until this very moment.
  Mr. THOMAS. Mr. Speaker, I ask unanimous consent to place in the 
Record an exchange of letters between myself as chairman of the 
Committee on Ways and Means and the gentleman from Virginia (Mr. 
Davis), chairman of the Committee on Government Reform.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from California?
  There was no objection.

                                         House of Representatives,


                                  Committee on Ways and Means,

                                    Washington, DC, June 25, 2003.
     Hon. Tom Davis,
     Chairman, Committee on Government Reform, House of 
         Representatives, Washington, DC.
       Dear Chairman Davis: Thank you for your letter regarding 
     H.R. 2473, the ``Medicare Prescription Drug and Modernization 
     Act of 2003.''
       As you have noted, the Committee on Ways and Means has 
     ordered favorably reported, as amended, H.R. 2473. The 
     general text of this legislation will be incorporated into 
     H.R. 1, the ``Medicare Prescription Drug and Modernization 
     Act of 2003.'' I appreciate your agreement to expedite the 
     passage of this legislation despite affecting programs within 
     the jurisdiction of Committee on Government Reform. I 
     acknowledge your decision to forego further action on the 
     bill was based on the understanding that it will not 
     prejudice the Committee on Government Reform with respect to 
     the appointment of conferees or its jurisdictional 
     prerogatives on this or similar legislation.
       Finally, I will include in the Congressional Record a copy 
     of our exchange of letters on this matter during floor 
     consideration of H.R. 1. Thank you for your assistance and 
     cooperation. We look forward to working with you in the 
     future.
           Best regards,
                                                      Bill Thomas,
     Chairman.
                                  ____

                                         House of Representatives,


                               Committee on Government Reform,

                                    Washington, DC, June 25, 2003.
     Hon. William M. Thomas,
     Chairman, Committee on Ways and Means, House of 
         Representatives, Washington, DC.
       Dear Chairman Thomas: I am writing to confirm our mutual 
     understanding with respect to the consideration of H.R. 2473, 
     the Medicare Prescription Drug and Modernization Act of 2003, 
     which was referred to the Committees on Ways and Means and 
     Energy and Commerce. I am writing specifically regarding 
     Sections 302 and 303, which waive provisions of the Federal 
     Acquisition Regulation and exempts a newly established 
     advisory committee from the Federal Advisory Committee Act 
     (FACA). As you know, the Federal Acquisition Regulation and 
     the Federal Advisory Committee Act are within the 
     jurisdiction of the Committee on Government Reform.
       I have concerns regarding the appropriateness of waiving 
     FACA, as it would pertain to the Program Advisory and 
     Oversight Commit proposed in section 302. I would welcome the 
     opportunity to work with you and Chairman Tauzin to address 
     the applicability of FACA to this proposed committee.
       In the interests of moving this important legislation 
     forward, I do not intend to ask for sequential referral of 
     this bill. However, I do so only with the understanding that 
     this procedural route should not be construed to

[[Page H6087]]

     prejudice the Committee on Government Reform's jurisdictional 
     interest and prerogatives on these provisions or any other 
     similar legislation and will not be considered as precedent 
     for consideration of matters of jurisdictional interest to my 
     Committee in the future. Furthermore, should these provisions 
     or similar provisions be considered in a conference with the 
     Senate, I would expect Members of the Committee on Government 
     Reform be appointed as outside conferees on those provisions.
       Finally, I would ask that you include a copy of our 
     exchange of letters on this matter in the Congressional 
     Record during House debate of the bill. If you have questions 
     regarding this matter, please do not hesitate to call me. I 
     thank you for your consideration.
           Sincerely,
                                                        Tom Davis,
                                                         Chairman.

  I also include for the Record a quote:

       Some of our friends on the other side of the aisle are 
     saying that if this bill becomes law, it will be the end of 
     Medicare as we know it. Our answer to that is, we certainly 
     hope so. Why should seniors be the last group that pays 
     retail prices for drugs? Old-fashioned Medicare is not very 
     good . . . You're going to hear scare tactics . . . but 
     seniors with extremely high drug costs, when this becomes 
     law, will save more than 60 percent of current costs, that's 
     real change, real progress, making Medicare a real day-to-day 
     benefit.--Bill Thomas, Chairman, Committee on Ways and Means.
  Mr. DOGGETT. Mr. Speaker, I ask unanimous consent to place in the 
Record the report from NBC news correspondent Norah O'Donnell entitled 
``Prescription Drug Benefit Imminent'' from yesterday's MSNBC.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from California?
  There was no objection.

                   Prescription Drug Benefit Imminent

                          (By Norah O'Donnell)

       After years of promising a prescription drug benefit for 
     seniors, Congress is on the verge of a breakthrough. This 
     week, the House and Senate are expected to pass bills that 
     for the first time will allow seniors to sign up for a 
     prescription drug plan in which the government helps pay 
     their drug bills. The policy and political consequences are 
     enormous.
       Congress had agreed to spend $400 billion, which in effect 
     means the biggest expansion of Medicare since its creation 
     nearly four decades ago. Critics charge that the bill's 
     passage is the largest expansion of a federal entitlement 
     since Lyndon Johnson's Great Society, with huge costs to 
     American taxpayers when the Baby Boomers enter the Medicare 
     program.
       Passions surrounding the Medicare reform bill are reaching 
     a crescendo heading into votes in both the House and the 
     Senate by the end of this week, perhaps as early as Thursday.
       ``To those who say that (the bill) would end Medicare as we 
     know it, our answer is: We certainly hope so,'' declared Ways 
     and Means Chairman Bill Thomas, R-Calif., Wednesday morning. 
     ``Old-fashioned Medicare isn't very good,'' he added.
       House Speaker Dennis Hastert, R-Ill., echoed the sense 
     around Capitol Hill that this is indeed the year that it gets 
     done. ``We are at the point now where politics and policy 
     have to be married up,'' he said.
       Health and Human Services Secretary Tommy Thompson appeared 
     with Thomas and other GOP leaders Wednesday morning to 
     release figures that purport to show what seniors would save 
     on some popular drugs. For example, Thompson said that 
     seniors are now paying $108.65 for 30 tablets of Lipitor. 
     Under the system, he projects that the cost would come down 
     to $86.92. Seniors would have to pay only 20% as co-pay 
     ($17.38). That's a savings of $91.27, according to his 
     figures.
       But House Minority Leader Nancy Pelosi and other House 
     Democrats fought back Wednesday, saying Thompson has 
     forbidden Health and Human Services actuary Rick Foster from 
     releasing his analysis of how much Part B premiums would go 
     up under the House GOP plan. Part B is the existing program 
     that insures seniors for medical services other than 
     prescriptions.
       They suspect the figures would show that the premium would 
     rise substantially. A similar bill in 2000 would have 
     resulted in a rise in Part B premiums of 47 percent. Pelosi 
     and Rep. Pete Stark, D-Calif., say that Foster is being 
     threatened with termination if he reveals the figures this 
     time.
       Once the measure passes, congressional Republicans and 
     President George W. Bush will declare victory on an issue 
     that Democrats have traditionally championed. ``This could be 
     transformational in terms of the image of the Republican 
     Party among seniors,'' Bill McInturff, a Republican pollster, 
     said.
       Seniors or older voters have historically favored Democrats 
     when it comes to the issue of Medicare and prescription 
     drugs. But a recent survey by the Kaiser Family Foundation 
     found older voters now trust Republicans and Democrats 
     equally.
       Older Americans are the nation's most reliable voters. Two-
     thirds of them go to the polls. And with a large number of 
     seniors living in big swing states that are expected to 
     decide the presidential election in 2004, the issue could be 
     pivotal.
       As a quick example, George W. Bush lost the state of 
     Pennsylvania to Al Gore by five points in the year 2000. He 
     lost among older voters by a whopping 17 points. If the 
     president improves his standing among older voters, he could 
     close the margin of victory in such a state.
       But the potential political windfall could be stymied once 
     seniors get a closer look at the details of the plan. After 
     conducting polls and focus groups, Republican strategists are 
     warning fellow party members that seniors who've done the 
     kitchen-table test are not happy.
       In fact, according to an internal Republican memo by 
     McInturff, obtained by NBC News, the pollster warns that, in 
     focus groups, seniors ere very disappointed: ``The current 
     drug coverage plan is not as generous as the private coverage 
     two-thirds of seniors already enjoy. It's clear most seniors 
     are first evaluating this plan in comparison to their 
     current, private coverage, then deciding it's not as generous 
     and certainly not a replacement for that coverage, so some 
     are reacting unfavorably.''
       McInturff is advising Republican lawmakers and the 
     president that they can overcome deficiencies with the bill, 
     stressing rhetorically that the plan provides seniors with 
     additional choices in coverage.


                            gaps in coverage

       The nation's largest lobby for seniors, the American 
     Association of Retired Persons, or AARP, has warned Congress 
     that it is deeply concerned about huge benefit gaps in the 
     plan. ``People are disappointed that there isn't more of a 
     benefit here,'' said John Rother, policy director for the 
     AARP. ``And sometimes they're mad, and sometimes they think, 
     `Well, at least it's a first step.' But everyone is 
     disappointed.''
       That's especially true for seniors like 77-year-old Pat 
     Roussous of Madison, Conn. She suffers from arthritis, 
     diabetes and high blood pressure. Her out-of-pocket drug 
     costs are as much as $6,500 a year. ``It's only a start. And 
     I'm not convinced it's going to go very far,'' she said.
       Roussous is one of an estimated 10 million seniors who will 
     fall into a benefit gap, because, under the Senate plan, the 
     government will pay for half of drug costs up to $4,500. But, 
     there's a huge gap for the next $1,300, where the beneficiary 
     must pay for all of their drug costs.
       Catastrophic coverage does not kick in until one's drug 
     costs exceed $5,800. Then the government will pay 90 percent 
     of drug cost over that amount.
       ``I think, the gap--where people are required to pay for 
     the drug themselves--I can't imagine that working,'' said 
     Roussous. ``Because those are the people who actually need to 
     have the help.''
       Still, the AARP will not use its political might to block 
     the plan. ``This year, `something' in prescription drugs is 
     better than `nothing,' '' said Rother.
       The bulk of the proposed assistance in the prescription 
     drug plan will not be enacted until 2006. Until then, seniors 
     will receive a discount card that will provide them with 10 
     to 15 percent off their drug costs. Low-income seniors will 
     get an annual $600 credit.

  Mr. THOMAS. Mr. Speaker, I yield myself 15 seconds.
  I see the gentleman from Texas (Mr. Doggett) had two quotes connected 
with a description of myself, rather than the continuation of the real 
quote, and I can understand why he would fabricate the quote in that 
way. Because what I said was, why should seniors be the last group that 
pays retail prices for drugs? That really did not fit the intention of 
the gentleman's thrust, but that is simply the truth.
  Mr. Speaker, I yield 2 minutes to the gentleman from Iowa (Mr. 
Nussle), the chairman of the Committee on Budget, but I proudly say 
also a member of Committee on Ways and Means.
  Mr. NUSSLE. Mr. Speaker, I thank the gentleman for yielding me time 
and for his partnership and hard work on this bill.
  The Democrats are living in 1965. Boy, we have heard a lot about that 
tonight. We have heard about Bob Dole and Lyndon Baines Johnson. Well, 
that is great but it is not 1965. Medicare is going bankrupt. Tax cuts 
did not cause that. Health care costs are out of control. The 
reimbursement system under Medicare is broken and it is not paying the 
bills. Hospitals are closing. Doctors are leaving rural areas or not 
taking Medicare patients at all. Cost shifting is running rampant onto 
the private pay side, and as a result, problems are running rampant 
within our health care system.
  Benefits have not improved. We do not have drugs. We do not have 
prevention. We do not have disease management. We have a sick care 
system, and the Democrats have done nothing about it for the past 30 
years since they did pass Medicare in 1965.
  Doing nothing tonight is not an option, and that is why in the budget 
we put $400 billion to improve Medicare,

[[Page H6088]]

increasing Medicare by $400 billion, hardly withering on anybody's 
vine, because doing nothing is not an option. Tonight, H.R. 1 is the 
choice. It modernizes Medicare, saves it from bankruptcy, controls 
costs, modernizes benefits, fixes the Iowa and other rural 
reimbursement problems, keeps these hospitals open and viable so that 
they can pay the bills as a result of amendments that have been passed 
in both the Committee on Ways and Means and the Committee on Energy and 
Commerce.
  Quality health care will be available in rural areas on into the 
future as a result of what we have done tonight. Inaction is not an 
option.
  But there is one other choice. The Democrats will offer a $1 trillion 
Medicare drug benefit tonight; one that CBO says costs $1 trillion. 
Guess what? That not only busts the Republican budget, but it busts the 
Democratic budget and it busts both of our budgets combined. Do not 
bankrupt Medicare. Save it by passing H.R. 1.
  Mr. STARK. Mr. Speaker, I yield 2\1/4\ minutes to the gentlewoman 
from Ohio (Mrs. Jones), a member of the Committee on Ways and Means who 
understands that the Republican bill does not extend the life of the 
Medicare Trust Fund at all. In fact, it probably reduces it some.
  Mrs. JONES of Ohio. Mr. Speaker, I will begin with a quote. ``Seniors 
face a confusing hodgepodge of co-payments and deductibles in Medicare. 
The system is irrational and difficult to navigate. Simplifying and 
modernizing cost sharing will make coverage easier to understand and 
will strengthen the Medicare program over the long term. I believe we 
can better design both Medicare and Medigap so that seniors and people 
with disabilities get the most of the health care dollars they spent.''
  That is a quote from a Republican colleague. But let me report from 
Howard Brown, 77 years old, from Cleveland, Ohio. He complained about 
the complexity of the program that will involve choosing a plan, 
tracking out-of-pocket expenses, and knowing when the coverage kicks 
in, lapses and then resumes in severe cases, all according to a sliding 
scale of benefit.
  Mr. Brown said, ``I am too old to try to figure all this out. Make it 
simple. Make it plain so I can understand it.''
  The people in the United States, the seniors who are on Medicare, 
they want a defined benefit giving them an entitlement and a guarantee. 
They want it to be affordable with reasonable premiums and deductibles. 
They want it to be designed to significantly reduce the price of their 
prescriptions, and they want a meaningful Medicare prescription drug 
bill that provides absolutely no gaps and no separate privatized 
ambulance.

                              {time}  2030

  But we have not heard any Republican get up tonight and define what 
the gap is. They have not explained to seniors across this country that 
there will be a gap in coverage, and it will not be Medicare improved 
for prescription drugs.
  Truly, 35 years ago we did not think about prescriptions as being 
part of Medicare; but it is, in fact, a part of Medicare today, and our 
seniors do not want to wait till 2006 and then find out that after 
paying premiums all year that they do not get any coverage in this gap 
of coverage. Explain the gap Mr. and Mrs. Republican on the Republican 
side.
  What about the new preventive? Every new beneficiary gets an 
opportunity, but what about the old folks? It is like Mrs. Ruby Bogus 
from Cleveland, Ohio, said. She was annoyed that the program would not 
begin until 2006, and do my colleagues know what she told her friends. 
Well, girls, I guess we will just have to live a little bit longer to 
get a prescription drug benefit.
  Mr. THOMAS. Mr. Speaker, I yield myself 15 seconds.
  If the gentlewoman would go to page 260, line 19, from the 
legislation before us now, I quote, ``Nothing in this part or the 
amendments made by this part shall be construed as changing the 
entitlement to defined benefits under part A and B of title XVIII of 
the Social Security Act.''
  Mr. STARK. Mr. Speaker, if the Chairman could explain the gap, but 
obviously he cannot. So I am happy to yield 2 minutes to the gentleman 
from Texas (Mr. Sandlin), a member of the Committee on Ways and Means.
  Mr. SANDLIN. Mr. Speaker, it is the old bait and switch. The 
Republican leadership has used smoke and mirrors to trick seniors into 
thinking they are getting a Medicare prescription drug plan when in 
reality they are forcing them to seek medication from private insurance 
companies, not Medicare.
  Mr. Speaker, this is not an entitlement Medicare plan for seniors. 
All this is is an entitlement to ask to be able to make an offer, to 
make a purchase from a reluctant, profit-seeking insurance company who 
may or may not accept that offer. Importantly, not a single insurance 
company in the United States of America has volunteered or agreed to 
take part in this program, not one, nada, zip, zilch. This plan is 
nothing more than a mere vapor.
  What has history shown us about what happens when private insurance 
companies get involved in Medicare? Medicare+Choice, the great managed 
care experiment on our Nation's seniors, should have been named 
Medicare Minus Choice. After all, it has been a total disaster for 
seniors. Between 1998 and 2003 the number of Medicare+Choice plans 
dropped by more than half. In my home State of Texas, 313,000 
Medicare+Choice seniors have been dropped by insurance companies just 
since 1999.
  Question: Who sets the price of the drugs in the Republican insurance 
company plan? The Republican insurance company plan allows HMOs and 
pharmaceutical companies to determine how much to charge and what 
coverage to offer.
  Mr. Speaker, I would like to take a vote, what do my colleagues think 
the insurance companies will choose, more coverage or less coverage? 
What will the pharmaceutical companies charge, more money or less 
money? The answer is clear.
  The other day the President said, ``When the government determines 
which drugs are covered and which illnesses are treated, patients face 
delays and inflexible limits on coverage.'' And yet the Republican 
private insurance company bill wants to turn over these decisions to an 
insurance company who has financial interest in denying coverage. The 
more insurance companies deny, the more money they keep. Now, is that 
not special?
  Mr. THOMAS. Mr. Speaker, I have one speaker to close.
  Mr. STARK. Mr. Speaker, I am delighted to yield 1 minute to the 
gentleman from Georgia (Mr. Scott).
  (Mr. SCOTT of Georgia asked and was given permission to revise and 
extend his remarks, and include extraneous material.)
  Mr. SCOTT of Georgia. Mr. Speaker, let us get right to the chase of 
it. What the Republican plan is designed to do is end Medicare as we 
know it today. Make no mistake about it. I have the quote right here 
and it says, ``To those who say that the bill would end Medicare as we 
know it, our answer is: We certainly hope so.'' Bill Thomas, chairman 
of the Committee on Ways and Means, MSNBC News, on 6/25/2003.
  It was stated, to back that up, the chairman of the Senate Republican 
conference said this, ``I believe the standard benefit, the traditional 
Medicare program, has to be phased out.''
  That is what we are faced with today, and that is what the American 
people need to understand, and that is what the Democratic Party is 
doing in here today, to pull these covers off. We are talking about 
people who cannot afford it. Medicare was designed to help people, to 
help the least of us, to help those senior citizens who cannot afford 
the medicine. Government is there for something. They do not want it 
privatized.
  Mr. Speaker, let me just say this from one of my constituents, and I 
want to read this note. He said: ``I am a 74-year-old retired senior on 
Medicare and this Medicare drug prescription plan is just a stone's 
throw away from privatization of Medicare. That should not be allowed 
to happen.'' Let us not let it happen.

                                               Snellville, GA,

                                                    June 14, 2003.
     Representative David Scott,
     Jonesboro, GA.
       Dear Representative Scott: I'm a 74 year old retired senior 
     that's on Medicare at home recovering from a massive heart 
     attack and bladder infection so I am very concerned about 
     what course of action Congress is presently taking on the 
     Medicare Drug Prescription Plan.

[[Page H6089]]

       When the news first came out that Congress was finally 
     going to add prescription drugs to Medicare in order to 
     provide financial relief for seniors that are paying way to 
     much for their medication verses their meaner yearly income 
     from Social Security and if they have one, their pension fund 
     and any life savings they may have. At that time I heard that 
     Congress would be working on such a plan Medicare 
     beneficiaries would be given a choice if they needed and 
     wanted their prescription drugs covered by Medicare. If they 
     did all they had to do is sign up for it and pay whatever the 
     cost of the plan covers. For the rest of us who are happy 
     staying with Medicare and our present secondary insurance 
     coverage that provides better prescription drug coverage at a 
     lower cost would not have to participate in any Medicare 
     prescription drug plan.
       Seniors that don't have prescription drug coverage should 
     be covered by this plan as a matter of choice, however; I 
     feel it is unfair for Congress to make it a mandatory 
     requirement for all seniors to pay for this plan which would 
     override their own secondary insurance plan for their 
     prescription drug plan. It just isn't fair. Why should we 
     have to give up our plan and end up paying far more than what 
     we are presently paying? I'm sure if all seniors were aware 
     of what really is going on they would want to make it a 
     matter of choice also.
       Representative Scott please give us Medicare beneficiaries 
     a choice to join or not to join the Medicare prescription 
     drug coverage. Even though I'm not in your district I'm 
     asking you to please support us many seniors by making sure 
     this choice provision will get covered in the final bill that 
     is sent to President Bush. If this choice does not become 
     part of this Medicare Drug Prescription plan it is just a 
     stone's throw away from the privatization of Medicare and 
     that should not be allowed to happen. Please remember when 
     you vote whatever the outcome is on this plan it will affect 
     all Americans nation wide and in some way or other I'm sure 
     it will have some sort of a bearing on the outcome of the 
     2004 elections.
       May God Bless you and may God Bless America.
           Sincerely yours,
                                                   Richard McGraw.

  Mr. STARK. Mr. Speaker, I yield 1 minute to the gentleman from 
Florida (Mr. Wexler).
  Mr. WEXLER. Mr. Speaker, I am privileged to represent the oldest 
district in this country, and I thought it was important to hear from 
some of those seniors who fought in World War II and Korea and who 
rebuilt this country after the depression.
  Mr. and Mrs. Robert Moore of Lantana, Florida: ``Why do we worry 
about tax cuts for the rich while so many older folks have to choose 
between food and medicine?''
  Speaking directly to the Republican plan, Mr. Arthur Taubman of 
Delray Beach, Florida: ``I prefer nothing instead of a botched up 
Republican plan.''
  Mrs. Elaine Schwartz from Boynton Beach: ``It is very disappointing 
to me that I live in this wonderful country and senior citizens who 
have contributed for so many years supporting this country have been 
forgotten.''
  Mrs. Schwartz has got it right, forgotten benefits. Drug benefits for 
seniors, forgotten; lower drug costs for seniors, forgotten by the 
Republican plan. American seniors by the Republican plan, forgotten.
  Mr. STARK. Mr. Speaker, I yield 1 minute to the gentleman from Texas 
(Mr. Bell).
  Mr. BELL. Mr. Speaker, the gentleman from Texas (Mr. DeLay), the 
majority leader, has stated that the Democratic strategy on his 
Medicare bill is obstruction, obstruction, obstruction; but when the 
best that the GOP can do is create a plan that destroys Medicare, we 
should all rise in opposition.
  I want to point out that the Republicans blocked every attempt at a 
Democratic substitute, sound proposals that would protect Medicare and 
provide comprehensive coverage for all seniors, regardless of the size 
of their bank accounts. The AARP, a trusted voice on this subject, says 
the Republican plan is not good public policy because it has too many 
coverage gaps.
  Why do the Republicans oppose better plans without gaps for seniors? 
Well, the gentleman from Iowa says one of the plans is too expensive. 
It was not too expensive for them to pass the largest tax cut in 
American history, only to create the largest deficit this country has 
ever seen. It is just when it comes to providing our seniors with the 
most basic ability to protect their health the cost is too high.
  It does seem to me to be a simple matter of priorities. So do we 
intend to obstruct the gentleman from Texas (Mr. DeLay) and the 
Republican's plan to destroy Medicare? Absolutely.
  Mr. STARK. Mr. Speaker, I yield 1 minute to the gentlewoman from 
Texas (Ms. Jackson-Lee).
  (Ms. JACKSON-LEE of Texas asked and was given permission to revise 
and extend her remarks.)
  Ms. JACKSON-LEE of Texas. Mr. Speaker, I did not want this historic 
debate to leave without my words in opposition to a plan that does 
nothing to serve the needs of seniors in America. The reason? Because I 
am proud that President Lyndon Baines Johnson in 1965 extended the 
lives of American senior citizens, but today we have a plan that will 
be shoved through on this floor that denies the preservation of 
Medicare, denies the real Medicare benefit. Lower prices are denied. 
Full coverage is denied. Choice of drugs is denied because when a sick 
senior citizen gets to a certain amount of their prescription drug 
benefit, then they drop through the doughnut hole; and if they survive, 
if they live through the gap between when we start paying for it, then 
they may be able to hit again when the amount of the prescriptions go 
up to $5,000.
  The doughnut and privatization are two items in this particular 
legislation that I will stand against, and again, Medicare denied, real 
Medicare benefits denied, lower prices denied, full coverage denied, 
choice of drugs denied. This is a historic debate. Vote ``no'' and 
stand on the side of saving lives of America's senior citizens.
  Mr. Speaker, when we look at the health care system for our seniors 
in the United States today, we see good news and bad news. The bad news 
is that drug costs are outrageously high. The good news is that 
Medicare is an effective and efficient program that is working well for 
our seniors, and that senior trust. I have never met a senior that 
disagree with these two facts: that drug costs are too high and need to 
be brought down, and that Medicare is a good program that needs to be 
protected.
  So it is outrageous to me that the Prescription Drugs Bill that the 
Republicans are shoving through Congress today without opportunity for 
amendment or time for debate, is preserving the bad--the high cost of 
drugs--and is dismantling the good--Medicare.
  We Democrats have been fighting for years for a Medicare prescription 
drug program that is (1) affordable; (2) available to all seniors and 
Medicare beneficiaries with disabilities; (3) offers meaningful 
benefits; and (4) is available in the Medicare program--the tried and 
true program that seniors trust.
  And now it seems that we have the political momentum to make a good 
prescription drug benefit a reality. The President says he wants it. 
Both parties, both sides of Capitol--everyone has declared their 
commitment to getting affordable prescription drugs to our nation. So 
why is it that the only Medicare prescription drug ``plan'' the 
Republicans have to offer is a terrible bill with full of holes, and 
gifts to the HMOs, and protections for pharmaceuticals companies. Every 
time we get a chance to take a closer look at the Republican drug 
scheme, it becomes more obvious that it is just another piece of the 
Republican machine that is trying to dismantle Medicare and turn our 
federal commitment to our nation's seniors, over to HMOs and the 
private insurance industry.
  The Republican plan would be run by HMOs, not Medicare. HMOs would 
design the new prescription drug plans, decide what to charge, and even 
decide which drugs seniors would get. Plus, HMOs would only have to 
promise to stay in the program for one year. That means that seniors 
might have to change plans, change doctors, change pharmacies, and even 
change the drugs they take every twelve months. Medicare expert Marilyn 
Moon told the Senate Finance Committee on Friday that ``There will be a 
lot of confused and angry consumers in line at their local pharmacies 
in the fall,'' if the Republican approach is not changed. She's right.
  The Republican plan provides poor benefits, and has a giant gap in 
coverage. Under the House Republican plan, many seniors would be 
required to pay high premiums even when they don't receive benefits. 
Reportedly, under the House GOP plan, Medicare beneficiaries have a 
high $250 deductible. After they reach that deductible, they would then 
be required to pay a portion of their first $2,000 in drug costs--that 
is a fairly normal system. But, after a senior's costs hit $2000 for a 
year--that is when it becomes obvious just how bad this plan is. Once a 
senior's drug costs hit $2000, the Republican plan cuts them off. Even 
though they must continue to pay premiums, they get no assistance in 
paying their drug costs at all until their costs reach $5,100. Let me 
say that again. It seems so crazy, it is almost unbelievable. The 
sickest of our seniors, the ones on the most medications--once their

[[Page H6090]]

costs reach the $2000 mark--they fall into the Republican gap. They are 
left to pay the next $3000 out of their own pockets, while continuing 
to pay premiums. Almost half of seniors would be affected by this gap 
in coverage. They will be outraged, and our offices will be hearing 
about it. Already we are hearing that 4 out of 5 seniors, the people we 
are trying to help, are against this plan.

  I have attended hundreds of health care briefings, and have read 
everything I can get my hands on, on the subject of improving Medicare 
and getting good health insurance to the American people. And I have 
never heard anyone say that a hallmark of a smart health insurance 
program is to have a giant gap in coverage for those who need help the 
most. Why would our Republican colleagues put in this ditch in the road 
to health for seniors? Because they wasted all of our nation's hard 
earned money, on massive tax breaks for the rich, and an unnecessary 
war.
  So now they have placed an arbitrary budget cap on vital programs, 
pushed by President Bush, in order to compensate for the irresponsible 
Republican tax cut they jammed through this Congress and last Congress. 
The way they are dealing with the mess that they have made is by 
throwing bad policy after bad policy. To remain within their own 
arbitrary budget cap, they are pitching a bill that will provide a 
confusing, insubstantial benefit to the majority of seniors.
  If the Republicans wanted to save money, they could have put in a 
provision that I and many Democrats have pushed for--and that is to 
allow the Secretary of the HHS to negotiate with the pharmaceutical to 
get fairer prices for the American people. I believe that the American 
pharmaceuticals industry is the best in the world. They make good 
products that benefit the world. But Americans are now paying double 
the cost for drugs than their counterparts in other rich nations such 
as German, Canada, Great Britain, or Japan. I am glad our companies are 
making money. But as we enact a prescription drug benefit under 
Medicare, access to drugs will rise--and drug company profits will rise 
as well. It is only fair that the Secretary should have the power to 
negotiate a good price for American consumers, to make sure we get the 
best returns possible on our federal investment.
  Not only did the Republicans not put in a provision to allow such 
negotiations, they went out of their way to forbid the Secretary from 
trying to get better prices for Americans. Why? Because they value the 
profits of their corporate sponsors at Pharma, more than they do the 
well-being of our nation's seniors. American consumers are now 
subsidizing the drug-costs of the rest of the world. The Canadians, 
British, Germans, Japanese--the rich nations of the world--still pay 
half of what we pay for drugs. We need to bring leaders in the 
Pharmaceutical companies to the table. They want to sell their products 
to more Americans, and we want more Americans to have access to their 
products. Surely, the Secretary should be able work with the industry 
to negotiate a compromise that serves all Americans well.
  Similarly, the Republican plan's design wastes billions in kickbacks 
for HMOs--instead of using that money to bring down the premiums and 
out-of-pocket costs that seniors and the disabled are forced to pay.
  The Republican plan is to privatize Medicare starting in 2010. The 
whole reason that Medicare was developed in the first place, was that 
private industry would not rise to the challenge of taking care of our 
nation's seniors the way they deserve.
  The Republican plan is a risky scheme only an HMO could love. The 
Bush Administration's Medicare Administrator has called traditional 
Medicare ``dumb'' and ``a disaster,'' highlighting Republicans' disdain 
for a program that Democrats have been fighting for since 1965. While 
Democrats have worked to modernize Medicare with prescription drugs, 
preventive care and other new benefits, Republicans are insisting on a 
riskier course even the Wall Street Journal calls a business and social 
``experiment.''
  The Republican plan destroys Employer Retiree coverage. The 
Congressional Budget Office has concluded that about one third of 
private employers will drop their retiree drug coverage under a 
proposal like the one being contemplated. In order to lower its cost, 
the House Republican plan stipulates that any dollar an employer pays 
for an employee's drug costs would not count towards the employee's 
$3,700 out-of-pocket catastrophic cap. This would therefore 
disadvantage seniors with employer retiree coverage because it would be 
almost impossible for them to ever reach the $3,700 catastrophic cap, 
over which Medicare would pay 100 percent of their drug costs. The 
practical effect of this is that employers will stop offering retiree 
coverage. That is a step in the wrong direction.
  We can do better. The House Democrats' legislation, that I am a proud 
cosponsor of, is designed to help seniors and people with disabilities, 
not HMOs and the pharmaceuticals industry. Under the Democratic 
proposal, the new Medicare prescription drug program would be 
affordable for seniors and Americans with disabilities and available to 
all no matter where they lived. It offers a meaningful benefit with a 
guaranteed low premium; and would be available as a new ``Medicare Part 
D'' within the traditional Medicare program that seniors know and 
trust.
  I am committed to getting seniors the prescription medications that 
their doctors deem they need. I want to work with our Colleagues on the 
other side of the aisle, and the Administration to make that happen. 
But unless I see a plan without a gap--with a consistent benefit--with 
some smart cost-controls--and some protections for Medicare, an 
excellent program for Americans, I cannot support this Republican drug 
scheme.
  This bill is a sham. Our seniors have been looking forward to getting 
relief from the high cost of drugs. They will be waiting with 
anticipation until after the next elections, when this bill 
conveniently kicks in. When it does, they will be furious. Let's do 
better.
  The SPEAKER pro tempore (Mr. Hastings of Washington). The Chair would 
remind the gentleman from California (Mr. Stark) that he has 30 seconds 
remaining.
  Mr. STARK. Mr. Speaker, I yield myself the remaining time and will 
use it to sum up because that is about all the time it will take to 
explain what is in the Republican bill, which is nothing. It privatizes 
Medicare, and it promises a benefit as good as we Members of Congress 
get, and it does not get a third of the way there.
  It is a hoax. It is phony. It is a fig leaf. It only gives coverage 
to the Republicans because there is nothing, absolutely nothing in this 
bill that requires anybody to provide a drug benefit to the seniors, 
and perhaps they will give the Republicans enough campaign money or 
promises and favors of other sorts to get them to change this in the 
future; but right now, sexual favors will not do it, nothing will do 
it. We are not giving the seniors anything but a hoax.
  The SPEAKER pro tempore. All time for the gentleman from California 
(Mr. Stark) has expired.
  The gentleman from California (Mr. Thomas) has 4\1/2\ minutes 
remaining.
  Mr. THOMAS. Mr. Speaker, I yield the remaining time to the 
gentlewoman from Connecticut (Mrs. Johnson), to close for our side, to 
continue to talk about the bill that for the first time in the history 
of Medicare provides low-income help, and she is the chairwoman of the 
Subcommittee on Health of the Committee on Ways and Means.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I thank the gentleman for 
yielding me the time.
  Today, is an historic day for America's seniors. Congress is about to 
fulfill the promise and the potential of Medicare, which has been one 
of our greatest success stories in our history; but when Medicare was 
created in 1965, prescription drugs were few and far between. Instead, 
painful and invasive surgeries were standard treatment; but now, with 
the health security of our seniors tied directly to medicines, 
medicines that extend life and restore hope, we must add prescription 
drugs to Medicare for all our seniors.
  A Medicare program without a drug benefit is a false promise in the 
21st century. I am proud to stand here on this House floor and bring 
prescription drugs to Medicare for all of our seniors and a benefit 
that is simple, generous, and fair.
  It is simple because it pays 80 percent of the first $2,000 of drug 
costs; and it guarantees the peace of mind of our seniors, protecting 
them against catastrophic drug costs, covering all costs above $3,500.
  It is generous because the average senior spends $1,200 on 
prescription drugs every year. Yet in this bill we cover 80 percent of 
the cost up to $2,000.
  It is fair because it helps the low-income seniors more than any 
other group. It not only helps the very poor, below 150 percent of 
poverty, but for the first time, by allowing State subsidies to help 
seniors toward that threshold of catastrophic coverage, we help the 
next income group to have that security that seniors depend on in their 
retirement.
  In addition, there is fairness at both ends of this bill. Should 
someone with a $200,000 income have the same level of catastrophic 
protection as a low-income senior? Of course not.
  But modernizing Medicare cannot be just about prescription drugs, as 
important as prescription drugs are. It

[[Page H6091]]

must also be about addressing the most crippling threat to our seniors' 
well-being and their retirement. It must address chronic illness.

                              {time}  2045

  Current Medicare is an old-fashioned illness treatment program. This 
bill will provide seniors with chronic illnesses a chance to have truly 
progressive care, whose goal it is to prevent the progression of 
chronic illness. Our goal must be to be sure that if you have diabetes, 
you do not end up on dialysis.
  Disease management is the new frontier in medicine. It will slow, 
interrupt or reverse disease. It requires more sophisticated 
technology. It requires greater patient involvement in their own care. 
But it results in higher quality health care and much improved quality 
of life and lower costs for hospital care, emergency room care, and 
doctors' visits.
  Mr. Speaker, this bill will bring the cutting edge of medical science 
and modern technology to the service of our seniors and disabled 
veterans. With over half of our seniors suffering from five or more 
chronic illnesses and using 80 percent of Medicare's resources, we must 
bring chronic disease management to the service of our seniors. And no 
bill to this point has ever done that. So I am proud to say that this 
bill brings both prescription drugs and preventive health care programs 
to Medicare and will provide unprecedented vitality to our Medicare 
program.
  In conclusion, let me remind us all that this bill will revitalize 
our Medicare Choice plans and provide that reliable high-quality care 
year after year after year that seniors depend on, a more holistic 
integrated care than fee-for-service can provide. So I ask my 
colleagues tonight to support wholeheartedly and enthusiastically H.R. 
1. It is historic. It brings prescription drugs into Medicare and it 
prepares Medicare to provide 21st century medicine to our seniors in 
the years to come.
  The SPEAKER pro tempore (Mr. Hastings of Washington). All time 
allocated to the Committee on Ways and Means has expired. The gentleman 
from Louisiana (Mr. Tauzin) is recognized for 45 minutes.
  Mr. TAUZIN. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, when the chairman of the Committee on Ways and Means, 
the gentleman from California (Mr. Thomas), opened this debate tonight 
in presenting H.R. 1 to the floor, he acknowledged the extraordinary 
cooperation and the spirit by which our two committees, the venerable 
Committee on Ways and Means and the venerable Committee on Energy and 
Commerce, of the House have worked together on this bill again this 
Congress, with the kind of harmony and dedication to accomplishing a 
good purpose for this country that is seldom seen between committees 
that often fight and juggle for jurisdiction. I want to commend him for 
that statement and acknowledge my personal gratitude for him and the 
entire membership of the Committee on Ways and Means and their great 
staff for the spirit in which they worked with the Committee on Energy 
and Commerce to accomplish this historic moment for our country.
  I also want to thank the gentlewoman from Connecticut (Mrs. Johnson) 
of the Committee on Ways and Means for the extraordinary work she has 
personally given to this effort and the way in which she has worked 
with members of the Committee on Energy and Commerce, so many long 
hours, to accomplish this bill.
  It is important also that I highlight, while not acknowledging all 
the staff who contributed so many hours, the head of our health care 
staff of the Committee on Energy and Commerce, Mr. Pat Morrisey, who 
has done Herculean work once again on behalf of this effort. And I want 
to acknowledge and thank, again, Mr. Ed Grossman, who is a legend in 
the Legislative Counsel's office, in terms of his contribution to this 
entire body and the work we do in preparing legislation for the floor.
  When we began this effort 2\1/2\ years ago to create once again an 
opportunity for this House to pass a prescription drug benefit for 
Medicare and, at the same time, to modernize a system that is in deep 
trouble, we announced that the entire effort in health care would be 
dedicated to a theme of patients first; the idea that everything we did 
should be designed to make sure that patients in America continue to 
have the best health care delivery system in our country and, 
importantly in this area, that seniors get something they desperately 
need; and that is that every senior get access to prescription drug 
coverage and that the Medicare system itself, which has long been 
absent of that important product in the arsenal of products that keep 
our seniors healthy and long living in our country, that prescription 
drugs be added to this system, this important new element of health 
care in our country that has long been missing from the program.
  At the same time, we recognize that the worst thing that can happen 
to any citizen is to be forced to go to a single store, whether it is a 
government-run store or a private-run store. We know when there is only 
one store in town, generally you get bad products and bad services and 
often bad attitudes. No matter what store it is, no matter who runs it, 
when more than one store is available, when we have choice, whether it 
is choice between a government store or a privately-run store, all of a 
sudden prices become better, products become better, attitudes become 
better, and service becomes better.
  We know that Medicare is described by so many members of the 
Committee on Ways and Means as being in deep trouble. We know it is on 
a path toward insolvency. And Medicare, a system by which so many 
citizens have depended on for years for their health care, is absent 
this vital asset of prescription drug coverage. So we began our efforts 
to make sure we could add that coverage to the bill. We have been doing 
this over several Congresses now, and every year we battle over what is 
the right number to fund this program and how best to fund it.
  I want to point out that we owe a great debt of gratitude to the 
chairman of the Committee on the Budget, the gentleman from Iowa (Mr. 
Nussle), for including this year $400 billion for us to fund this 
effort. In last year's budget, we dealt with considerably less. In 
fact, in the Democratic budget that was prepared for the year 2002, our 
friends on the other side allocated only $330 billion to their effort 
to fund prescription drugs. This year, our Committee on the Budget 
provided us with $70 billion more than even the Democrats did when they 
prepared their budget for the year 2002. And I want to thank the 
Committee on the Budget and Chairman Nussle for that great effort.
  With that amount of money available, we have been able to construct 
this year, as the gentleman from California (Mr. Thomas) and his team 
have so adequately described, a much better bill, a bill richer in 
benefits, more secure in the texture of its structure, to make sure 
that seniors would, in fact, have more choices. Those like my mother, 
who want to stay in Medicare, cannot only stay in Medicare but enjoy a 
prescription drug benefit now; and those who might enter their senior 
years knowing about choice, liking choice, preferring choice, having 
the availability of different plans offered in the private sector that 
they could choose their prescription drug benefit from.

  That is the kind of world we hope to create when we pass this bill 
tonight, a bill that historically modernizes the Medicare system and, 
at the same time, brings some more stores to town and makes sure that 
every store, the government store and the private stores, all have the 
products that seniors need so desperately, and that is prescription 
drugs.
  In this bill this year, we do a number of other things. We address 
the concerns of many of our health care providers in terms of their 
lack of proper reimbursement from the government, and we add 
reimbursements to hospitals and physicians and caregivers across 
America. We have an excellent, and I thank the Committee on Ways and 
Means again for their work on this, we have an excellent rural package 
that will provide $27.2 billion of assistance to rural health care 
givers and hospitals to beef up care in America where care is 
desperately short and, unfortunately, hospitals are closing and doctors 
are leaving their practices.
  Indeed, because this bill adds to the mix of choices that seniors 
will have in the future, there are predictions from CBO that Medicare 
will get back on its

[[Page H6092]]

feet, will not necessarily have to go insolvent. It will have a chance 
to be one of the options that seniors wish to choose for a long time in 
the future.
  These benefits are going to benefit all Americans. I know there is 
some talk about how the plan has coverage and then there is a donut 
hole and there is coverage again for catastrophic coverage. The 
discounts provided to seniors in this bill will be available at all 
stages of prescription drug coverage, at all stages of prescription 
drug use and purchase throughout the bill. Seniors will see lower drug 
expenses in this bill. CBO estimates, in many cases, by as much as 50 
to 70 percent. All seniors will benefit.
  And for the seniors who live below 135 percent of poverty, and there 
are thousands and millions of those seniors living across America, this 
bill provides a 100 percent subsidy, 100 percent coverage for the drugs 
they are going to need under this prescription drug plan. And that is a 
pretty good effort and that is a pretty good reform of our system.
  Indeed, we are also going to do some interesting things. We are 
concerned about the high prices of drugs. And like the Senate, we 
include reforms in the Hatch-Waxman laws that will speed the approval 
of generic drugs into the marketplace. And we reformed that awful, that 
awful wholesale price system that the government currently uses with 
phony wholesale prices that force seniors to pay 20 percent of phony 
prices whenever they suffer cancer and have to endure cancer therapies 
and urinary tract therapies and respiratory therapies. In short, we are 
going to lower the cost of drugs to America across the board, and we 
are going to increase the availability of drug coverage for every 
senior in this country and build new options for seniors to choose 
from. That is a pretty good package.
  I want to again congratulate all who worked on it and all in the two 
committees who contributed so much to it. In the House Committee on 
Energy and Commerce we had 65 amendments, I think 29 recorded votes, 
over 22\1/2\ hours of debate again this year. Are we ready for this 
vote tonight? You bet we are. Are seniors ready for the debate to end? 
You bet they are. Are seniors ready for us to really do it this year? 
You know it. Are seniors ready for this House, the Senate, and the 
President to come together and actually sign a law that gives them 
these benefits, instead of constantly just debating the issue? You know 
that is true.
  This is a historic moment, and this is our time to get it done.
  Mr. Speaker, I reserve the balance of my time.
  The SPEAKER pro tempore. The gentleman from Michigan (Mr. Dingell) is 
recognized for 45 minutes.
  Mr. DINGELL. Mr. Speaker, I yield myself 3 minutes.
  Mr. Speaker, three things: One, this is a bad bill. Two, it is not 
the Senate bill. And, three, it destroys Medicare as we now know it.
  And if you do not believe it, take the words of my good friend, the 
chairman of the Committee on Ways and Means, who says, ``To those who 
say this bill would end Medicare as we know it. Our answer is, we 
certainly hope so. Old-fashioned Medicare isn't very good.''
  Well, it is a safety net that has preserved and protected the health 
and the well-being of Americans for 38 years. It has been a fabulous 
system for the protection of the health and the welfare of the people.
  This thought echoes the words of Speaker Gingrich, who wanted 
Medicare to wither on the vine.
  Well, it is a fraud upon the American people. It provides very little 
for most people who are looking for the benefit of receiving 
prescription pharmaceuticals. What it does is it subsidizes the 
insurance companies. It does not control prices. It does not stimulate 
competition. It affords to the senior citizens a situation where they 
wait 2 years. And after they wait 2 years, what do they get? An 
enormous donut hole into which they fall after they have spent $2,000, 
during which period, for a period of about $2,900, they get no 
additional help from their government, but during which time they have 
to pay more money, more money, to not draw any benefits.
  And it should be noted there is no requirement whatsoever, none in 
this legislation, that requires the insurance companies, who will begin 
getting subsidized enormously in just 2 years after the enactment, to 
do a single thing to provide for prescription pharmaceuticals for the 
benefit of their subscribers. Indeed, most insurance companies have 
said they do not want to participate in the pharmaceutical-only care 
benefit that would be offered by this legislation. So they have set up 
this wonderful situation where there will be enormous boundless 
subsidies to try to induce somebody to come in and set up HMOs which 
will serve the people in the area or provide prescription 
pharmaceuticals to them.
  The Democrats have a simple, easy-to-understand piece of legislation, 
one which builds upon the practices which we have used in Medicare with 
such great success and so efficiently for so long to see to it that the 
people get the benefit on the payments of a modest sum and a modest 
deductible and then they get their benefits. No donut hole during which 
they do not gain benefits.
  And I would note that, by an interesting circumstance, many people 
under this wonderful Republican bill will pay a lot more than they will 
get out of this legislation. It is a piece of legislation which can 
best and most kindly be defined as a fraud upon a group of people who 
have high hopes that their Congress is going to take care of them.

                              {time}  2100

  Well, this Congress is going to take care of them; it is going to 
give them a deceitful piece of legislation which benefits them very 
little, if at all.
  Mr. Speaker, less than 2 weeks ago, the House Republicans divorced 
themselves from the Senate bipartisan legislation and unveiled their 
lengthy and complicated proposal to make sweeping changes in Medicare. 
After taking months to develop more than 300 pages of fine print in 
secret consultation with selected corporate allies, they rammed the 
bill through committees last week and are ramming it through the House 
today under a rule developed in the wee hours this morning. No 
hearings, no significant opportunity for public comment, no 
concessions--just the way the House Republican leadership wants things.
  But the Republican leadership is playing with fire. Not content 
merely to privatize a watered-down drug benefit, this bill, H.R. 1 
privatizes the entire program in 7 years. As Chairman Thomas said 
yesterday, ``[t]o those who say that [the bill] would end Medicare as 
we know it, our answer is: We certainly hope so. * * * Old fashioned 
Medicare isn't very good.'' And a Republican Senate leader was quoted 
last month as saying that ``I believe the standard benefit, the 
traditional Medicare program, has to be phased out,'' echoing Speaker 
Gingrich's 1995 prediction that traditional Medicare would ``wither on 
the vine.'' The list goes on. Former Majority Leader Dick Armey said, 
also in 1995, that Medicare was ``a program I would have no part of in 
a free world.'' Most recently, the Bush administration official in 
charge of Medicare, Tom Scully, 2 months ago called Medicare an 
``unbelievable disaster'' and a ``dumb system.'' And, of course, I was 
here in 1965 to witness the overwhelming majority of Republicans vote 
for the motion to recommit the legislation that created Medicare.
  How will seniors react when told they will be forced to pay more to 
see their family doctor, or accept whatever doctors and benefits a 
private plan chooses to give them? How will seniors react when 
traditional fee-for-service Medicare is no longer a trusted safety net? 
How will seniors react when given a voucher and told to fend for 
themselves in the insurance marketplace--the same marketplace that 
failed them before Medicare? They should, and will, be outraged.
  Seniors will also be angry when they learn that the Republican drug 
benefit helps insurance companies more than them. Democrats propose a 
true benefit provided under Medicare, with set premiums and benefits. 
Republicans propose payments to insurers to offer uncertain benefits, 
with uncertain premiums. The only certainty in the Republican plan is a 
huge coverage gap, when seniors will continue to pay premiums after 
substantial out-of-pocket expenses, and yet receive no benefit. And 
drug costs will continue to rise, because the Republicans prevent 
bargaining by Medicare to make prescription drugs more affordable to 
seniors.
  Other nasty surprises will hurt seniors as well. Cuts in payments to 
hospital, when many are closing down. Inadequate payments to doctors, 
when seniors' access already is jeopardized. Increasing seniors' costs 
by $8.3 billion for their Part B coverage. These are shortsighted acts 
of extraordinary callousness.
  I urge my colleagues to reject this dangerous Republican plan. Our 
senior citizens deserve better than to be guinea pigs for risky 
ideological experimentation.
  Mr. Speaker, I reserve the balance of my time.

[[Page H6093]]

  Mr. TAUZIN. Mr. Speaker, I yield 3 minutes to the gentleman from 
Florida (Mr. Bilirakis), the chairman of the Subcommittee on Health.
  Mr. BILIRAKIS. Mr. Speaker, I thank the gentleman for yielding me 
this time.
  Mr. Speaker, I rise in support of H.R. 1, and I urge my colleagues to 
lend their support to this very important bill. We have before us a 
historic opportunity to provide our constituents with a meaningful 
prescription drug benefit that our Nation can afford. While the bill 
before us certainly is not perfect, it targets the $400 billion 
available under our budget resolution towards areas where it can do the 
most good.
  Our bill provides a great deal of assistance to our lower-income 
seniors for whom we waive a deductible and coinsurance requirements. 
These seniors, those with incomes below 150 percent of the poverty 
level, which in 2002 was $13,290 for an individual and $17,910 for a 
married couple, will only be responsible for a small copayment per 
prescription.
  In addition, the bill targets the prescription drug benefit towards 
where the need is greatest. Beneficiaries are only responsible for 20 
percent of their drug costs between a $250 deductible and a $2,000 
initial coverage limit. When we consider that the 2003 median drug 
costs for Medicare beneficiaries are estimated to be $1,390, it is 
clear that our bill provides a very good, up-front benefit.
  Finally, the bill ensures that seniors will have the peace of mind of 
knowing that their annual drug costs will be capped at no more than 
$3,500 out of pocket. While that number does rise for some wealthier 
seniors, I would note that 95 percent of seniors will qualify for the 
$3,500 figure. Our bill makes other improvements to the Medicare 
program, and includes some Medicare payment modifications to ensure 
that beneficiaries will still have access to high-quality health care.
  I would like to close by noting my great disappointment with my 
colleagues on the other side of the aisle, who for 30 years when they 
controlled this House did not do a thing for Medicare. I had to sit 
through a 3-day markup where my intentions and those of my colleagues 
were constantly questioned. Republicans were often accused of not being 
willing to commit adequate resources to a Medicare prescription drug 
benefit. I find that odd since in 2001, 2 years ago, the Democratic 
substitute to the budget resolution included only $330 billion for a 
new drug benefit. Republicans added $70 billion to that number only 2 
years later, and still our colleagues accuse us of underfunding that 
benefit.
  Mr. Speaker, all this tells me is that most Democrats only care about 
engaging in a reckless bidding war with Republicans and not about 
developing a reasonable, affordable benefit. H.R. 1 is a good bill, and 
its passage today will move us one step closer to a law which will 
provide real help to tens of millions of Medicare beneficiaries.
  Mr. DINGELL. Mr. Speaker, I yield 3 minutes to the gentleman from 
Ohio (Mr. Brown), the ranking member of the Subcommittee on Health.
  Mr. BROWN of Ohio. Mr. Speaker, for years Republicans have tried to 
frighten seniors by telling them that Medicare was going broke. The 
media in this country scolded the Republicans for their Mediscare 
tactics. Well tonight, Republicans have graduated from using Mediscare 
tactics to a new level, and that is scam.
  Mediscam number one: my Republican colleagues tout H.R. 1 as the 
largest expansion of Medicare since the program's inception calling 
their plan generous. But under H.R. 1, seniors will be required to pay 
$4,000 out of pocket to receive $5,000 in benefits. That is not 
generous; that is not even insurance.
  Mediscam number two: my Republican colleagues say we should pass H.R. 
1 because seniors deserve better coverage options like those available 
to Members of Congress, yet this bill's drug coverage is less generous 
than the least generous coverage available to Members of Congress. That 
is not treating seniors like Members of Congress; that is treating 
seniors for suckers.
  Mediscam number three: my Republican colleagues say H.R. 1 gives 
seniors coverage they can trust. It is an expansion of the old, failed 
Medicare+Choice program which has dropped coverage for 2 million 
seniors outright. H.R. 1 is not coverage you can trust; H.R. 1 is 
coverage that cashes the check, then leaves seniors hanging.
  Mediscam number four: my Republican colleagues say H.R. 1 will 
enhance the security of America's retirees, but the nonpartisan 
Congressional Budget Office says about one-third of employers will drop 
their retiree benefits if H.R. 1 becomes law. In other words, H.R. 1 
will force seniors out of the drug coverage they now have. It will 
force seniors out of the drug coverage they now have.
  Mediscam number five: my Republican colleagues say H.R. 1 will bring 
prices down through the magic of competition. How could that be? The 
drug industry wrote this legislation; the insurance industry wrote this 
legislation. They do not want lower prices, they want higher prices, 
and that is why my Republican colleagues took out any ability for the 
Secretary of Health and Human Services to lower drug prices. In fact, 
the drug companies gave $85 million to my Republican friends for their 
reelection in 2002 and tens of millions of dollars to President Bush.
  Mediscam number six: my Republican colleagues say forcing seniors 
into private health insurance will reduce health care costs because 
private plans are more efficient. My Republican friends know that 
private insurance plans actually operate less efficiently than Medicare 
with administrative costs five times higher than Medicare.
  Mr. Speaker, it is irresponsible to spend tax dollars bribing HMOs. 
It is irresponsible to provoke employers into dropping retiree health 
coverage. Vote ``no'' on H.R. 1.
  Mr. TAUZIN. Mr. Speaker, I yield myself 30 seconds.
  Mr. Speaker, the Mediscam bill that the gentleman just described is 
patterned after H.R. 1495, authored by the gentleman from California 
(Mr. Stark), the gentleman from Michigan (Mr. Dingell), the gentleman 
from California (Mr. Waxman), and the gentleman from Ohio (Mr. Brown) 
just a few sessions ago in the 106th Congress.
  It provided a $220 deductible, 20 percent cost share up to $1,700, a 
doughnut hole with a $3,000 catastrophic coverage, and no defined 
premiums. Does that sound familiar? The bill we wrote today is 
patterned after a bill written by my friends on the other side of the 
aisle back then, and they complain today that it is Mediscam.
  Mr. Speaker, I yield 3 minutes to the gentleman from Florida (Mr. 
Stearns), the chairman of the Subcommittee on Commerce, Trade and 
Consumer Protection.
  (Mr. STEARNS asked and was given permission to revise and extend his 
remarks.)
  Mr. STEARNS. Mr. Speaker, we have heard from the Democrats that this 
is a plan that will not work and is a fraud. We had 2 days of hearing, 
and I never heard a plan from the gentleman from Michigan (Mr. Dingell) 
or the gentleman from Ohio (Mr. Brown). We had 64 amendments.


                         Parliamentary Inquiry

  Mr. BROWN of Ohio. Mr. Speaker, parliamentary inquiry.
  The SPEAKER pro tempore (Mr. Hastings of Washington). Will the 
gentleman yield for a parliamentary inquiry?
  Mr. STEARNS. Mr. Speaker, I do not yield.
  The SPEAKER pro tempore. The gentleman from Florida (Mr. Stearns) 
controls the time.
  Mr. STEARNS. Mr. Speaker, what we have here is a plan that the 
Republicans have been on their knees trying to come up with to try and 
solve this problem. It is voluntary. It brings choice, everything that 
the Federal employees health benefit plan has, the same program that 
all these folks have.
  Joshua Hammond wrote a book called ``The 7 Cultural Forces,'' which 
defines who we are as Americans; and one of those cultural forces is we 
are ready, fire, aim. That is, sometimes we do not get it perfect. We 
do the best we can, and that has been our history for 230 years. Is 
this bill perfect? No. In fact, the people on this side will argue back 
and forth, but all of us know this bill is not perfect. However, we 
have carefully balanced the needs and resources from home health to 
physical therapy.

[[Page H6094]]

  This bill contains the long-overdue addition of a prescription drug 
benefit. Our seniors and disabled beneficiaries have waited many years, 
particularly true in Florida; and I am pleased to be part of the 
solution and part of that markup that we did for 2 days.
  Now the folks on this side of the aisle say they have a bill. Their 
bill is for $1 trillion. Ours meets the budget demands of $400 billion. 
If we could spend all we want in the world, that would be the 
Democrat's plan.
  But at long last Medicare beneficiaries will have available the same 
options that the President of the United States has, the Senate and the 
House and the staff here in Congress, a choice to choose the plan that 
best meets their needs.
  Mr. Speaker, I am very happy that part of this plan that we have here 
has a demonstration project in consumer directed care for chronic 
conditions such as folks with diabetes. It is analogous to the 
successful consumer-directed care demonstration and evaluation 
projects, known as cash and counseling in Florida, Arkansas and New 
Jersey. It is consumer-directed, and in fact this type of plan is part 
of the American Postal Workers Union. It has a consumer-directed 
option. So what we have with Medicaid, we are going to have with 
Medicare. I am glad that is part of the solution we have.
  So I would conclude by saying to my colleagues who are wondering what 
to do on this side of the aisle, come along with us. It is a start. It 
is not perfect. We can move it to the Senate, have a conference on it, 
and improve it. In fact, the gentleman from Louisiana (Mr. Tauzin) in 
the markup amended the bill with a GAO study of the impact of this new 
cost regime. It is my hope that this will provide an objective, 
balanced approach and give us a proper understanding of how much this 
whole thing is going to cost. I commend the chairman every step of the 
way trying to be balanced, listening to the Democrats' amendments, many 
of which were accepted, many we defeated.
  Mr. Speaker, thank you for bringing this package of Medicare 
additions, updates and reforms here to the Floor today. There is much 
here to applaud. We have carefully balanced needs and resources varying 
from home health to the physical therapy cap. Most significantly, this 
bill contains the long-overdue addition of a prescription drug benefit 
to Medicare. Our seniors and disabled beneficiaries have waited for 
this for many years now, and I am pleased to be part of the solution. 
At long last, Medicare's beneficiaries will have available to them the 
same options that we, and the Senators, and all of our staff and 
employees have: a choice of selections from which to choose the plan 
that best meets their needs.
  Leading off with ``choice,'' I am pleased that my provision for a 
voluntary, small-scale, controlled demonstration project in consumer-
directed care for Medicare beneficiaries with chronic conditions, my 
particular interest is diabetes, is included in H.R. 1 as Section 736.
  This would be an analog to the successful Consumer-Directed Care 
Demonstration and Evaluation Projects, known nationally as ``Cash and 
Counseling,'' in Medicaid in Florida, Arkansas, and New Jersey. the 
Energy and Commerce Committee held a hearing June 5 on Consumer-
Directed Care, and every single Member praised that demonstration's 
progress, but many cautioned not to overreach expanding its 
application. I agree. To that end, at markup I agreed to language from 
my friend, the ranking Member of the Committee, the gentleman of 
Michigan, Mr. Dingell, tightening some boundaries for the demonstration 
project. The Consumer-Directed Care demo is working, let's expand the 
elements of Consumer-Directed Care that have been successful in a 
voluntary, incremental fashion and see how the demonstration in 
Medicare might be evaluated down the road.
  Section 736 will direct the Secretary to design a demonstration 
project allowing for participating Medicare beneficiaries to cash out 
the value of certain services. They then, with the assistance of a 
designated ``counselor'' of their choosing, and government-provided 
fiscal intermediary, would have some flexibility in making decisions 
directing care for their condition.
  Furthermore, Consumer-Directed Care type models are now offered in 
major health plans in the private sector: in 2003, the American Postal 
Workers Union (APWU-AFL-CIO) are the very first Federal employee group 
with a Consumer-Directed Care plan available to them. Do our Medicare 
beneficiaries deserve any less choice?
  At the June 5 hearing, the National Director of Cash and Counseling, 
Dr. Kevin Mahoney, outlined that there are generally three 
characteristics of a condition that make it a good fit for the 
consumer-directed care model. Disabilities fit these three, and I 
believe diabetes does, too: (1) It is chronic, and one of the most 
self-managed diseases; (2) it follows a relatively predictable course 
of treatment; and (3) there is room for choice, in tailoring a 
treatment plan to the individual.
  I remind my colleagues that under the Medicaid demonstration, 
satisfaction has been in the high 90 percentage, no adverse health 
outcomes have occurred (in some measures it has improved), and fraud 
has been virtually zero.
  From that, I must turn to other provisions of the bill. I do not 
stand here without some reservations. For example, the reform of 
reimbursement for oncologists. No one, no Member, no oncologist, and no 
patient wishes for the accounting mismatch of Average Wholesale Price 
(AWP), to perpetuate, and we should never let dialogue about AWP 
degrade into accusations about gaming the system. It is true that H.R. 
1 eliminates the current overpayment on Medicare-covered drugs, while 
concurrently increasing the practice expense reimbursement to 
appropriate levels that reflect their costs. But my understanding is 
that this is still a net decrease for the practice. I ask that the 
negotiations continue in good faith. In Energy and Commerce, Chairman 
Tauzin amended the bill with a GAO study of the impact of this new cost 
regime, and it is my hope that this will provide an objective, accepted 
arbiter on true proper costs of administering total community-based 
cancer care.
  Further, I harbor concerns that this bill not become a runaway money 
train. We have budgeted $400 billion over 10 years: is that a ceiling, 
or a floor? It is a logical modernization to add prescription drug 
coverage to the Medicare program; none of us would choose a health plan 
in FEHBP (Federal Employee Health Benefits Program) that lacked drug 
coverage. And, through economies of scale, both the traditional fee-
for-service program and the participating private sector plans will 
have the purchasing power to contain costs. However, there always runs 
the risk of this exploding beyond our control. We have a responsibility 
for the fiscal health of this nation, and it is essential that proper 
cost containment be addressed in conference, as I understand the 
Speaker has assured.
  Mr. TAUZIN. Mr. Speaker, I yield myself 15 seconds.
  Mr. Speaker, just to correct the record, the Democrats did offer a 
substitute plan in our committee which was defeated, and I think it is 
pretty close to the substitute plan we will see later tonight.
  Mr. Speaker, I yield 10 seconds to the gentleman from Florida (Mr. 
Stearns).
  Mr. STEARNS. Mr. Speaker, if the Democrats' plan is for $1 trillion 
and our is for $400 billion, we cannot say they offered a plan that met 
the budget requirements. I would like to ask the Democrats tonight: Do 
you have a plan that is under $400 billion like the Republicans?
  Mr. DINGELL. Mr. Speaker, I yield 2 minutes to the gentleman from 
Florida (Mr. Deutsch).
  Mr. DEUTSCH. Mr. Speaker, the House bill in front of us, as the 
ranking Democrat of our full committee has ably quoted the chairman of 
the Committee on Ways and Means in his own words, ``To those who say 
the bill would end Medicare as we know it, the answer is we certainly 
hope so.''
  This bill is a nonstarter. The Republicans in the Senate oppose it. 
It will not happen. It destroys Medicare. I am going to take my 2 
minutes and even talk about that.
  Mr. Speaker, I am going to talk about the disingenuous nature of the 
proposal that the Republicans are fostering at this point as a final 
product. And I say disingenuous because both this bill and that 
proposal does absolutely nothing about cost containment. How can they 
have a prescription drug bill that does nothing on cost containment? It 
is totally disingenuous.
  For real seniors, and I would encourage all of my colleagues to talk 
to seniors because one of the things that is going on in America today 
is we do not know the number. We just had the FDA in our committee 
again several times. We do not know the number of how many seniors are 
availing themselves of purchases through Canada by the Internet, but it 
is easily 10 million seniors. We have 10 million seniors who are 
purchasing drugs in Canada where the benefits of purchasing drugs in 
Canada far exceed any proposal the Republicans have made. Just because 
people are old, just because they are sick does not mean they are 
stupid. They are going to continue to purchase them. So this bill for 
most seniors, for probably over 95 percent of the seniors in America, 
does absolutely nothing.

[[Page H6095]]

                              {time}  2115

  What it does is even worse, though. In a Congress, in a country, in a 
society that is facing the largest budget deficits in the history of 
the world, we take $400 billion out of working Americans, give it to 
seniors, but effectively take that $400 billion and flush it down the 
toilet and we get absolutely nothing from my Republican colleagues' 
proposal.
  Mr. TAUZIN. Mr. Speaker, I first want to take 15 seconds, if I may, 
to point out that the bill before us does now contain the drug 
reimportation provisions similar to the Senate provisions and adds 
language directing the FDA to conduct rulemaking to make sure that 
there is safe packaging, to make sure when we do get drugs under any 
such program, that they are safe and effective.
  Mr. Speaker, I yield 4 minutes to the gentleman from Pennsylvania 
(Mr. Greenwood), distinguished chairman of the Subcommittee on 
Oversight and Investigations of the Committee on Energy and Commerce, 
our grand inquisitor.
  (Mr. GREENWOOD asked and was given permission to revise and extend 
his remarks.)
  Mr. GREENWOOD. I thank the gentleman for yielding me this time.
  Mr. Speaker, my parents, my mother and father, are 81 years of age, 
alive and well, and I would like to dedicate all the work that I have 
put into this bill to them and I know it will benefit them immensely. 
My father used to say when I was a young lad, ``Jim, there are three 
kinds of people in this world. There are shirkers, there are workers 
and there are jerkers. The shirkers are the people who just don't do 
anything. They don't contribute. They don't help. The workers are the 
people who roll up their sleeves and get the job done. The jerkers are 
the ones that all the time the workers are working they keep tugging at 
them, pulling at them, jerking them around trying to interfere with the 
work.''
  I would submit that the Democratic Party, in all due respect, between 
1965 and 1994, when they lost control of the House, were shirkers when 
it came to the issue of a prescription drug benefit, for they did 
nothing. They did not provide a big plan, a little plan, a medium-sized 
plan, they did not provide a plan with a doughnut, without a doughnut. 
They did not provide a plan of any kind. They did nothing. We have been 
the worker party. We have passed a prescription drug bill in this House 
year after year since we have had control. That is hard to do. That is 
hard to do because mature legislators have to figure out how to strike 
a balance.
  We have people in this House who do not want to vote for this bill. 
They do not want to vote for this bill because they think it is too 
liberal. They think it is a big new entitlement program that will 
bankrupt the country. They are against it because it is too liberal. 
There are a whole lot of people in this House who cannot vote for this 
and will not vote for it because it is too conservative; it does not 
spend enough money; it is not big government enough; it uses private 
sector factors, influences to curb prices. If you want to get 218 votes 
for a bill to provide a prescription drug benefit to the elderly and 
the disabled in this country, you have to work very hard with very 
complex issues and strike a political balance down the center through 
the eye of the needle to get the job done, and that is what this bill 
before the House of Representatives stands for. That is what it results 
from.
  Now we have got the jerkers. We are trying to get this carefully 
balanced, incredibly complicated piece of work that our staff on both 
sides of the aisle have labored over for years to get done, want to try 
to move it through the House today, get it over to Senate, we have got 
some bipartisan support here, we have got some bipartisan support in 
the Senate, and we are going to get it done. And at the end of the day 
when the little old ladies and the little old men in my district and 
your districts who have been writing us letters and saying, with tears 
rolling down their cheeks, I have got a prescription for cholesterol 
drugs, I have got a prescription for antidepressants, I have got a 
prescription for my arthritis, I have got a prescription for this and 
for that and I can't afford them, what am I going to do. We have all 
been getting those letters for years and years. And when this year is 
over and when we stand with the President of the United States and he 
signs these bills, we will say to the little old men and the little old 
ladies and the disabled people of all ages in our district, we got the 
job done, when nobody else could or nobody else would. Whether the 
shirkers did not do their job or the jerkers tried to get in the way, 
the workers will get the job done and this will be an historic year for 
the Medicare program of this United States.
  I am proud of everyone on either side of the aisle who actually 
rolled up their sleeves and contributed to the product.
  Mr. DINGELL. Mr. Speaker, I yield 2 minutes to the distinguished 
gentlewoman from California (Ms. Eshoo).
  Ms. ESHOO. I thank the distinguished ranking member of the committee 
for yielding me this time.
  Mr. Speaker, for those that are listening in this evening, besides 
the vote that some Members of Congress have had to take on going to 
war, I consider this the most important vote in the House of 
Representatives. Tonight we debate a bill where there is only one thing 
that the two parties agree on, and that is that our seniors deserve 
prescription drug coverage.
  For 38 years, there has been a gold standard for those that are 65 
years and older and it was named Medicare. How dare my colleagues on 
this side of the aisle say that the Democrats have not done a damn 
thing. I regret those words in the Record. We love Medicare. We put it 
on the books, and we have defended it ever since then. And we want a 
policy in Medicare that is ennobling and recognizes what senior 
citizens are.
  The advertisers are very busy, but beware. Beware of the advertising. 
Read the bill. If your insurance salesman comes to you, the first thing 
you say is, how much is this going to cost a month? Read the bill. 
There is no premium cost in the bill. It says choice. Yes, there will 
be choice of insurance companies but not choices of doctors.
  By 2010, every senior citizen that is listening in, you will be 
forced, you will be mandated to go into a private insurance program. 
That is what our friends have written.
  Mr. TAUZIN. Mr. Speaker, I am pleased to yield 2 minutes to the 
distinguished gentleman from the great State of Nebraska (Mr. Osborne).
  Mr. OSBORNE. Mr. Speaker, rural health care is struggling. The 
hospitals are closing and many doctors are leaving. If you are in a 
small community and the doctor leaves or the hospital closes, the whole 
community begins to unravel. H.R. 1 addresses the troubles that we see 
currently in rural health care. Number one, it lowers the labor share 
of the wage index for rural hospitals. This allows them to be more 
competitive with urban areas in terms of salary scale.
  Number two, H.R. 1 increases Medicare reimbursement for rural 
doctors. Sixty percent of the patient load in my district and many 
other rural districts are Medicare patients. Doctors simply cannot 
afford to treat Medicare patient loads of this size because on many 
Medicare patients they lose money. As a result, they cut back Medicare 
patients or sometimes leave the area.
  Thirdly, H.R. 1 provides a full and permanent equalization of 
Medicare payments to rural hospitals. An appendectomy is not cheaper in 
a small hospital than in a large urban hospital. In some cases it is 
actually more expensive. Also, H.R. 1 provides additional home health 
care payments and provides provision for rural ambulance.
  Mr. Speaker, the reason I want to come to the floor tonight is simply 
to thank the gentleman from Louisiana for all that he has done for 
rural health care. This is probably, as far as I am concerned, the most 
important part of the bill. I would also like to say I represent a 
rural area. Many retirees in my area live on fixed incomes. Most of 
these people are making 15, $20,000 a year. Most of them are spending 
30, 40, 50 percent of their income on prescription drugs. And so the 
number one concern that I see in rural America is the prescription drug 
bill. This bill offers considerable help to these people.
  Again, I would like to thank the gentleman from Louisiana, the 
gentleman from California (Mr. Thomas) and also the gentleman from Iowa 
(Mr. Nussle). I urge the passage of H.R. 1.

[[Page H6096]]

  Mr. DINGELL. Mr. Speaker, I yield 2 minutes to the distinguished 
gentleman from New York (Mr. Engel).
  Mr. ENGEL. I thank my friend for yielding me this time.
  Mr. Speaker, I rise in strong opposition to this bill. This bill is a 
cruel hoax perpetrated on America's seniors. This bill is not about 
helping seniors. It is all about privatizing Medicare. This is not the 
Senate bill. This bill is a wolf in sheep's clothing. It purports to 
help seniors. All it does is create a goal that many people on the 
other side of the aisle have wanted for years, the privatization of 
Medicare. This bill drains the lifeblood out of the Medicare program 
and breaks the promise we made to seniors 38 years ago when Medicare 
was created.
  I wish this Congress could have come together for an historic moment 
that would finally provide seniors with the type of prescription drug 
coverage they need and deserve. Unfortunately, we are doing a 
disservice to our seniors by shortchanging them with a woefully 
inadequate drug benefit. Why is it inadequate? Let us face it, there is 
not enough money in this bill because my friends on the other side of 
the aisle have bankrupted this government with huge tax cuts, huge tax 
cuts to benefit the rich, huge tax cuts which make it impossible to 
help entitlement programs like Medicare. When the leaders over there 
said they wanted Medicare to wither on the vine, they were speaking the 
truth and that is what is happening today. With the enactment of this 
bill, Medicare is withering on the vine.
  When I came to Congress 15 years ago, my goal was to provide 
meaningful prescription drug benefits. My bill and others, 1045, would 
keep the promise of Medicare, which was created to prevent seniors from 
having their life savings ravaged by health care costs. Today we are 
considering no such thing. The legislation before us is not a promise 
kept to seniors, it is a promise kept to HMOs and insurance companies. 
This is not the Senate bill. The Senate bill was a starting point to 
improve upon. This bill bankrupts Medicare, privatizes it by the year 
2010. American seniors will not have Medicare as they know it by 2010. 
Again, when you have tax cuts for the rich and you do it to help your 
rich friends and you want to strangle social programs and entitlement 
programs, you do not have an adequate bill.
  This bill should be rejected.
  Mr. DINGELL. Mr. Speaker, I yield 2 minutes to the distinguished 
gentleman from Maryland (Mr. Wynn).
  Mr. WYNN. Mr. Speaker, I thank the gentleman for yielding me this 
time. I rise in strong opposition to the Republican plan. This Medicare 
reform plan is woefully inadequate. Everyone agrees that a real 
prescription drug plan would cost between $600 and $800 billion. This 
plan only provides $400 billion. Why? My Republican colleagues will 
say, well, this is because that's all we can afford. The truth of the 
matter is that is all we can afford because of their big tax cuts. But 
keep in mind, you did not get a big tax cut. The wealthy got a big tax 
cut. Mr. and Mrs. Average American got cuts in service, cuts in 
benefits and cuts in quality. What we have here this evening is an 
attempt by the Republicans to do prescription drug coverage on the 
cheap.
  There are three problems with this. First, in their plan, there are 
no guaranteed drug benefits. The private insurers determine what drugs 
are going to be available to you, not your needs. So that if your drugs 
are not covered, then you have to pay the full price. This is no 
prescription drug benefit. Second, there are no fixed premiums. You 
hear the Republicans tell you, well, it's going to be $35 a month. Wait 
a minute. $35 a month is nowhere in their bill. These premiums could 
rise to as much as $85 a month. You will drive seniors into bankruptcy 
with that.
  The third problem with this plan is the hole in the doughnut, the 
gap. Under the Republican plan, this plan they are talking about 
tonight, after the first $2,000 of prescription drug costs, you have to 
pay the rest up to $5,000. That is a gap of $3,000. Again, that would 
drive seniors into bankruptcy. The neediest, sickest seniors do not get 
the benefits when they need it, the consequence of doing prescription 
drug coverage on the cheap. Forty-eight percent of Medicare 
beneficiaries will fall into this gap. This is not a true prescription 
drug plan.
  Second, this bill contains something called Medicare reform. That is 
another name for privatizing and destroying Medicare as we know it. 
Plans will have to compete. Medicare will compete against private plans 
and our seniors will be forced out of a plan that they have come to 
trust. This plan will not work, will not provide the benefits as a 
safety net for our seniors. I urge its rejection.
  Mr. TAUZIN. Mr. Speaker, I yield myself 10 seconds to ask a question. 
If this plan funded at $400 billion is prescription drugs on the cheap, 
what do you call the $330 billion that was allotted by the Democratic 
budget for the year 2002?

                              {time}  2130

  Mr. Speaker, I yield 3 minutes to the gentleman from North Carolina 
(Mr. Burr), the distinguished vice chairman of the Committee on Energy 
and Commerce.
  (Mr. BURR asked and was given permission to revise and extend his 
remarks.)
  Mr. BURR. Mr. Speaker, I am here tonight to thank the chairman of the 
Committee on Energy and Commerce and the gentleman from Michigan (Mr. 
Dingell), ranking member, our colleagues on the House Committee on Ways 
and Means, the leadership of the House for having the foresight to move 
forward with legislation to recognize that there is a problem in 
America, a problem that we have ignored for a decade, the need to add a 
prescription drug plan. I did not come here to argue with anybody. I 
came here because I believe we can do better. I believe we can do 
better than the bill we have proposed. I believe we can do better than 
the substitute that is offered.
  America understands why we have not solved this because all they need 
to do is listen to us. We talk about each other's bills in a way that 
we point out things that we think are bad. We forget that we are 
talking about a population that has nothing. I wish we could have 
started with something smaller, but something that was targeted to 
people who are faced with the decision every day of do I buy drugs or 
do I buy food? But we have been convinced by this town that our only 
action has to be something comprehensive, something that includes 
everybody, something that includes those who have a minimal income and 
those who have an income of $1 million a year. We have not excluded 
anybody. We will not exclude them over here and we will not exclude 
them over here, because there are associations and groups that 
represent seniors, and they have never met those seniors, but we have.
  Mr. Speaker, we owe our constituents more than to sit on this floor 
and tear up each other's legislation. We have to be for something. To 
get up here and debate that we are against this and we are against that 
and it is bad, it is inadequate is only a suggestion that we are not 
good enough to serve here, that they ought to look for replacements. I 
would challenge all of us.
  I do not know what the outcome of tonight would be. I will vote no on 
both proposals that come up. I do not suggest on either side of the 
aisle that Members do that. That is what I am going to do. I have come 
to the conclusion, but never forget if we want a real solution to this, 
a real solution that affects real people, then we have got to put our 
heads together and work together and remember who it is that we are 
trying to provide for in this bill. I reluctantly say that I will vote 
against this.
  Mr. DINGELL. Mr. Speaker, I yield 2 minutes to the distinguished 
gentleman from Texas (Mr. Green).
  (Mr. GREEN of Texas asked and was given permission to revise and 
extend his remarks.)
  Mr. GREEN of Texas. Mr. Speaker, following the gentleman from North 
Carolina, my good friend, it is frustrating because I feel the same 
thing, that we were given a plan and even though we spent 3 days and a 
long night debating it in committee we did not really get to legislate 
because we really had a plan given to us and it was either take it or 
leave it. But this is the most important issue that we will consider 
this year not only for our seniors but for everyone. I know a lot of my 
colleagues feel that we should support any legislation because it is a 
step in the right direction or maybe it is like the Senate bill.

[[Page H6097]]

  This is not the Senate bill. The Senate has a better idea. It is not 
as good as I would like, but it is better than what we have on the 
floor today.
  This legislation would require Medicare to move to a competitive 
program by 2010. A lot of different terms are used to describe the 
model in this bill, whether it is called defined contribution, voucher, 
premium support, or something else, but it abolishes Medicare as we 
know it. The bottom line is it is privatization of Medicare. It will 
take the responsibility of providing meaningful, affordable, quality 
health insurance away from the government, like 1965, and shift the 
burden onto the shoulders of our seniors. The legislation relies 
entirely on private insurance plans to provide drug benefits for 
seniors. No government fall-back plan, no safety nets for seniors 
living in areas where drug plans do not offer coverage. It places blind 
faith in private drug plans that they will sign people up. That is the 
ultimate in faith-based policy making. There is a huge gap in this 
coverage that will disproportionately hurt individuals who need drug 
coverage. Those with the highest drug costs, they will fall into this 
doughnut hole. Once one has a little over $3,000 a year up to a little 
over $5,000, they fall in this hole.
  I talked to a senior this evening who has a little over $300 a month 
in prescription drug cost. They will still pay their $35 plus a month, 
but they will not get one dime of benefits because they will be in this 
doughnut hole.
  The ultimate anti-competitive part is that this bill prohibits the 
Secretary from negotiating lower drug costs. The VA does it, Medicare 
does it, private insurance does it, but we are prohibiting in this bill 
the Secretary of Health and Human Services to reduce costs for our 
seniors. That is why it is outrageous.
  The substitute, on the other hand, is the kind of benefit that 
seniors support. It is affordable, comprehensive, and will actually 
help drive down the costs of prescription drugs.
  Yes, it's more expensive than the base bill, but you cannot provide a 
prescription drug benefit on the cheap.
  Finally, there's one issue that I'd like to raise about a provision 
that would limit the ability of physicians to refer patients to 
specialty hospitals in which they have a financial interest.
  There is language in the Senate bill which could hurt some innovative 
practices that are occurring in specialty hospitals.
  Patients need access to a broad range of facilities, and should be 
able to choose a hospital that has expertise in their specific health 
needs.
  I know that some have suggested limiting the percentage profit that 
physicians can enjoy under these arrangements, or to limit the 
percentage of physician ownership and I hope that both sides can sit 
down and reach a solution to this problem.
  Mr. TAUZIN. Mr. Speaker, I reserve the balance of my time.
  Mr. DINGELL. Mr. Speaker, I yield 2 minutes to the distinguished 
gentlewoman from Missouri (Ms. McCarthy).
  (Ms. McCARTHY of Missouri asked and was given permission to revise 
and extend her remarks.)
  Ms. McCARTHY of Missouri. Mr. Speaker, the Republican Medicare bill 
fails to provide seniors with meaningful prescription drug coverage and 
is an attempt to end Medicare as we know it. With their plan seniors 
will have no assurance from 1 year to the next on what plan will be 
available to them, what drugs will cost them nor what doctors will 
serve them. Under their plan many seniors will have to pay a premium 
without receiving any assistance with their drug costs.
  Seniors deserve affordable prescription drugs without gaps in 
coverage. Our seniors should not be forced to pay more to keep their 
choice of doctors. Not only would the plan before us limit or charge 
extra for choice, it would force seniors to go to a primary care 
physician before seeing a specialist.
  The Republicans have produced a plan that fails to make prescription 
drugs more affordable and, disturbingly, ends the Medicare system that 
has been an irreplaceable safety net to millions of people for the past 
four decades. Instead they are creating a plan that costs seniors a lot 
and gives them very little.
  Mr. Speaker, I urge my colleagues to oppose H.R. 1, the so-called 
Medicare Prescription Drug and Modernization Act of 2003, and to 
support the Democratic motion to recommit which will preserve Medicare 
and provide our seniors with the affordable prescription drugs they 
need.
  Mr. TAUZIN. Mr. Speaker, I yield 2 minutes to the distinguished 
gentleman from New Jersey (Mr. Ferguson), one of our newer members on 
the Committee on Energy and Commerce.
  Mr. FERGUSON. Mr. Speaker, I thank the chairman and ranking member 
and members of the committee who have worked so hard on this bill.
  I rise in strong support of H.R. 1. It includes an amendment that I 
offered in the Committee on Energy and Commerce which will assist our 
most vulnerable seniors by allowing State drug spending to count 
towards a senior's catastrophic limit. Especially in States like New 
Jersey, this provision is going to dramatically reduce seniors' out-of-
pocket spending while saving our States $5 billion.
  About a year ago I stood in the well of this House when we debated 
the drug bill last year and I told the Members about my mom who has 
been battling cancer and who is only alive today by the grace of God 
and because she has had access to great medical care and the 
prescription drugs which have quite literally saved her life. I am 
proud that my State of New Jersey is home to thousands of researchers 
and scientists and companies which have spent their entire lives and 
billions of dollars on research to find the cures of tomorrow. This 
very day, today, they are working on finding the cures to cancers and 
diabetes and AIDS and Alzheimer's.
  What are we here to do tonight? We are here to make these great 
products more affordable and more available to more people.
  As much as I love my mom, her situation is not unique. She is like 
millions of other Americans who depends on prescription drugs for their 
quality of life. Our responsibility today is to pass this generous and 
responsible bill, to make the miracle cures of tomorrow available to 
people like my mom. Just as importantly, though, we have to do so in a 
way which values and encourages the incredible research and innovation 
which will create the cures of tomorrow because I do not only love my 
mom, but my wife and I love and treasure our three young children and 
it is they who will benefit as well because the lives of our children 
and our children's children will be better and stronger and more 
fulfilling because of the new cures that will be found and the fact 
that they will be affordable because of this plan. That is our charge. 
That is our responsibility. Let us pass this plan tonight.
  Mr. DINGELL. Mr. Speaker, I yield 2\1/2\ minutes to the distinguished 
gentleman from Maryland (Mr. Hoyer), the very able and respected 
minority whip.
  Mr. HOYER. Mr. Speaker, I thank the gentleman for yielding me this 
time.
  Mr. Speaker, if truth in advertising applies to legislation, we would 
have a duty to warn America's seniors, beware, the Republicans' 
prescription drug bill could be hazardous to your health. This bill is 
nothing less than an historic betrayal of America's seniors. The GOP 
pretends that it is merely extending Medicare, but in fact the bill is 
the most dangerous attempt yet to dismantle the most popular health 
care program in history.
  The Republicans fought the adoption of Medicare in 1965. Their 
majority leader said that Medicare should not exist in a free society. 
Yesterday the chairman of the Committee on Ways and Means, the 
architect of this bill, said on television, and the Members can read it 
here, ``To those who say that [the bill] would end Medicare as we know 
it, our answer is we certainly hope so.''
  This bill would drive seniors out of Medicare and into the arms of 
private insurers. There is no guaranteed monthly premium. There is no 
defined benefit for seniors. There is no guaranteed access to drugs 
seniors must have. The only guarantee in this bill is that it would 
leave a huge gap in coverage. Seniors would pay a $250 deductible, $420 
a year in premiums, and all costs between $2,000 and $5,100 in drug 
expenses. That is $3,100 left to seniors to pay. This bill even 
prohibits the government from negotiating lower drug prices for 
seniors.
  In contrast, the Democratic substitute offered by the gentleman from

[[Page H6098]]

Michigan (Mr. Dingell) and the gentleman from New York (Mr. Rangel) 
would provide a prescription drug benefit that guarantees affordable, 
universal and voluntary Medicare coverage for prescription drugs. There 
are no gaps in coverage. Seniors would pay $25 a month, $100 
deductible, and then 20 percent coinsurance. Their out-of-pocket 
expenses would be limited to $2,000 a year. That is 1,100 under the gap 
that exists in the Republican bill.
  The Republican plan also does not give the Secretary of Health and 
Human Services the authority to negotiate prices. Our bill does. I 
would ask the Members to vote for this substitute which guarantees 
prescription drug coverage for seniors.
  Mr. TAUZIN. Mr. Speaker, I reserve the balance of my time.
  Mr. DINGELL. Mr. Speaker, I am always happy to accommodate the 
gentleman from Louisiana (Mr. Tauzin), my dear friend, even when he is 
pushing an outrageous piece of legislation under an appallingly 
constrictive rule.
  Mr. Speaker, I yield 2\1/2\ minutes to the distinguished gentleman 
from Massachusetts (Mr. Markey), and I ask the chairman from the 
Committee on Energy and Commerce to listen closely.
  Mr. MARKEY. Watch out, Grandma. Watch out, Grandpa. The GOP is 
selling snake oil off the back of a wagon, and, boy, do they have a 
prescription for you.
  Mr. Speaker, every senior citizen gets a bottle with three bitter 
pills. Bitter pill number one is a lethal dose of privatization poison. 
The Republicans are diverting Medicare funds into private drug plans 
with no maximum premiums, no guaranteed coverage, and a cynical drive 
to destroy the Medicare program.
  Bitter pill number two is a dose of crushing costs. Incredibly the 
Republican bill injects $400 billion into Medicare but spends it in 
such a tangled, convoluted, copay-riddled, incomprehensible, doughnut-
hole-hollowed maze of bureaucracy and lacks any effective effort to 
keep prescription drug prices from continuing to soar, that Grandma is 
actually going to spend more under this proposal than if we had just 
left well enough alone.

                              {time}  2145

  Bitter pill number three is a privacy piracy pill in the form of 
income tax forms. The Republicans require senior citizens to hand over 
to corporations sensitive personal information from income tax returns 
and the most intimate details of their medical care as a condition of 
qualifying for any catastrophic coverage. This information will then be 
turned against seniors in marketing schemes intended to cherry-pick the 
most desirable recruits into private plans, further weakening the 
foundation of Medicare for the seniors who need it most.
  This is a black day for Medicare. Mr. Speaker, GOP used to stand for 
Grand Old Party. Now it stands for Forget Old People.
  Mr. TAUZIN. Mr. Speaker, now that we have heard from the doctor of 
showmanship, we are going to hear from a real OB-GYN doctor.
  Mr. Speaker, I yield 2\1/2\ minutes to the gentleman from Georgia 
(Mr. Gingrey).
  (Mr. GINGREY asked and was given permission to revise and extend his 
remarks.)
  Mr. GINGREY. Mr. Speaker, I thank the gentleman from Louisiana for 
yielding me this time.
  Mr. Speaker, as a physician Member of this body, I rise in strong 
support of H.R. 1, the Medicare Prescription Drug and Modernization Act 
of 2003.
  I do not take lightly voting for a Federal program that expends $400 
billion of the taxpayers' money. Being responsible with that money is a 
burden that I take very seriously. As appropriators of the people's 
revenue, we must assure that each dollar is spent wisely. That is a 
high hurdle, but I believe the Medicare Modernization Act clears that 
hurdle.
  This act is an investment that brings Medicare into the 21st century. 
We will save money as we expand the focus of Medicare spending to 
include preventive care. Seniors who take the right drugs at the right 
time are more likely to stay healthy; and they are less likely to need 
expensive, prolonged hospitalizations, painful and complicated surgical 
procedures and, sometimes, yes, extended nursing home stays. For that 
reason, I do not think that this program will really cost $400 billion 
over 10 years. It will only cost that much if it does not work.
  My experience as a physician for more than 28 years teaches that a 
prescription drug program for preventive care will pay dividends and 
increase health and a better quality of life. It is true what they say: 
an ounce of prevention is worth a pound of cure. And it is a lot less 
expensive.
  This Congress has a great opportunity to expand the coverage for 
seniors, particularly our needy seniors, while, at the same time, 
strengthening the system so that it will be around to serve the baby 
boom generation as it moves into retirement. We will serve tomorrow's 
seniors as we are serving today's.
  Some of our friends on the other side of the aisle insisted today 
that this bill could be the death of Medicare. They were even 
grandstanding around with black arm bands. That is interesting, Mr. 
Speaker, because their Democratic alternative would cost nearly $1 
trillion, threatening to slam the entire Medicare system onto the rocks 
of financial insolvency long before 2030.
  The plan that we will vote on tonight provides a good, strong benefit 
for our seniors; but just as important, it provides a sustainable 
benefit that will be there for future generations of seniors.
  I encourage my colleagues on both sides of the aisle to bring 
Medicare into the 21st century. Vote for the Medicare Prescription Drug 
and Modernization Act tonight and deliver on your promise to our 
beloved seniors.
  Mr. DINGELL. Mr. Speaker, I yield 2 minutes to the distinguished 
gentleman from Ohio (Mr. Strickland).
  Mr. STRICKLAND. Mr. Speaker, I would just like to point out to my 
friend, the gentleman who just spoke, my understanding is that he voted 
recently to give $800 billion to about 200,000 people. Surely to God we 
can do a little better than that for our 40 million senior citizens.
  Make no mistake about it. This bill will provide no stable, 
affordable prescription drug benefit for our seniors, but I will tell 
my colleagues what it will do. It will ultimately destroy Medicare's 
social insurance structure, a structure that has provided successful 
services to our seniors since 1965.
  Let me give a clear example of how this bill will fail. The 
Republicans claim that premiums offered by the private plans will be 
about $35 a month. But there is no provision in this bill that will 
guarantee a $35 monthly premium or even a range of premiums near $35. 
Despite what we have heard, despite what we have heard, understand 
this: there is nothing in this bill to keep the private plans from 
charging any premium they choose to charge.
  Now, in fact, Nevada is the only place this model has been tried; and 
in Nevada, the premiums were $85 a month. Furthermore, premiums will be 
different from State to State, from county to county, even from ZIP 
code to ZIP code.
  Finally, private plans will be able to increase their premiums each 
year without any regulation, leaving seniors subject to the possibility 
of wildly fluctuating premiums.
  Now, I offered a simple amendment in the Committee on Energy and 
Commerce last week that would have corrected this problem and 
guaranteed seniors a $35 monthly premium, regardless of which drug plan 
they chose to enroll in or where they lived. Every single Republican 
voted against that amendment. Last night, I asked the Committee on 
Rules. On a party line vote, they denied me the right to offer this 
amendment.
  Republicans continue to say their bill will cost $35 a month. It is 
not true. They ought to stop saying it.
  Mr. TAUZIN. Mr. Speaker, what is absolutely true is that 529,000 
citizens of Ohio are given free coverage under this bill because they 
live under 135 percent of poverty.
  Mr. Speaker, I yield 3 minutes to the gentleman from Rockwall, Texas 
(Mr. Hall), a Democrat and my dear friend.
  (Mr. HALL asked and was given permission to revise and extend his 
remarks.)
  Mr. HALL. Mr. Speaker, I rise in support of this bill because I am 
for a bill. I want to see a bill passed. I want a bill that can pass 
this House. I want a bill that can get to the conference committee. I 
want a bill that we can consider along with the Senate bill and get

[[Page H6099]]

the best of both bills for the best people of this country.
  Almost 40 years ago when I was in the Texas senate, Members of this 
Congress came to Texas, came to the Texas house and the senate, touting 
two great programs that they were going to introduce and pass. They 
named them Medicare and Medicaid. And they said by 1990, Medicare could 
cost $9 billion a year. And as I remember, they said Medicaid could 
cost almost $1 billion a year. They told us that we really needed to 
monitor the program closely or the costs could double.
  Well, my colleagues know what has happened to the cost, what has 
happened to Medicaid and Medicare. There is an awful lot to do, and we 
need to be doing it.
  There is no doubt that Medicare has helped millions of seniors escape 
dire poverty and live fuller lives. There is also no doubt that medical 
costs have far outstripped inflation due to a number of factors, 
including expansion of benefits, increased use, and coverage of the 
disabled population. Our seniors are staring into their pocketbooks to 
find the money they need for their care. We desperately need to do 
something to save a great program for people in their golden years.
  Mr. Speaker, Medicare needs to be modernized to include a meaningful 
provision for drug coverage. In my lifetime, we have seen how 
prescription drugs have greatly improved and extended the lives of 
Americans. We have also seen how the cost of those life-providing drugs 
can trouble families every day. Unfortunately, Congress has almost been 
timid in seeking parity between the prices drug companies have charged 
domestic dispensers compared to the nondomestic dispensers just across 
our borders.
  While American drug companies need added alliance for research and 
development, and I am willing to give them that, for 10 key drugs for 
seniors, Americans pay an average of 150 percent more for the drugs 
than Canadians. This is unacceptable. I do not like price controls. The 
marketplace provides the competition necessary to deliver the best 
price for the people in need. We have to lower the cost of prescription 
drugs, and my hope is that we can all work together, including drug 
companies, to come up with new, better, and more creative ways to 
achieve affordable prescription drugs.
  As we look at introducing new competition among providers for 
services, we should consider provisions that respect the choices 
available to current Medicare beneficiaries. These seniors and the 
disabled have paid for and have come to expect a traditional Medicare 
system and the safety net that it provides them, and they should be 
able to retain their current plans if they continue to be pleased with 
them. The Senate improved upon this provision, and I hope that is 
included in the final bill.
  The Senate and the House bills have good provisions to achieve our 
goal. Like many people, I am not completely satisfied with this bill, 
but I am very hopeful that we can pass a bill.
  I am particularly pleased that we are introducing long-overdue 
Medicare reforms that will bring health care into the 21st century; 
namely--regulatory reforms and provider reimbursement issues. We are 
all aware that providers nationwide, including our rural providers, 
have been diminishing in the face of increasing costs and decreasing 
reimbursement. We simply must confront this issue because without 
access, the rest of the program is meaningless.
  Like many people,I am not completely satisfied with this bill, but I 
am also not satisfied to see this program collapse. We are closer than 
we have ever been to making some meaningful reforms and providing a 
prescription drug benefit to seniors. I am hopeful that we will improve 
this bill in the conference committee as we seek to find a bipartisan 
solution to our common problem. This is just a first step in an ongoing 
process of reform to ensure that our seniors get the care that they 
deserve. Congress, through its oversight and yearly appropriations 
process, will continue to monitor the program--making necessary changes 
and improvements to guarantee healthy years for our Medicare 
population.
  Mr. DINGELL. Mr. Speaker, I yield 2 minutes to the distinguished 
gentlewoman from California (Mrs. Capps).
  Mrs. CAPPS. Mr. Speaker, I thank my distinguished ranking member for 
yielding me this time.
  Mr. Speaker, the Medicare bill before us is not a good bill. The 
coverage it provides is unreliable and insufficient. After a senior has 
used $2,000 in medications, they get no more help until they have spent 
another $2,900 out of pocket without help and while continuing to pay 
premiums. And that is only if a private plan chooses to come into their 
area. This bill turns Medicare into a voucher, handing it over to the 
insurance companies and forcing seniors to pay more. It reneges on a 
promise that we have made to America's seniors by ending Medicare as 
they know it.
  In addition, the bill before us cuts cancer care by hundreds of 
millions of dollars, jeopardizing access to cancer care for seniors who 
face this dreaded diagnosis. If this bill passes, many cancer centers 
will close. Others will curtail their services, admit fewer patients, 
and lay off oncology nurses and critical support staff. This bill is 
supposed to make it easier for patients to get health care, but it will 
actually make it harder for cancer patients to get the care they need.
  It is true that Medicare beneficiaries are paying too much for their 
oncology medications. We all agree we must fix this. But Medicare also 
pays way too little for essential oncology services, and so the 
overpayment for oncology drugs has been used to pay for treatments 
oncologists provide to cancer patients. We must fix both parts of this 
problem, but this bill still cuts hundreds of millions of dollars from 
cancer care. And it still risks the lives of cancer patients.
  We will all go home after passing a Medicare bill, and we will face 
our constituents. I, for one, do not want to tell the cancer patients 
in my district that Congress has decided to curtail their treatment and 
endanger their care.
  We can do better. We must. I urge my colleagues to vote against this 
bill.
  Mr. TAUZIN. Mr. Speaker, I yield myself 10 seconds. I want to point 
out our bill provides 430 million new dollars to oncologists in 
America, twice that provided to any other specialist for nonpractice 
expenses, twice as much as any other specialist.
  Mr. Speaker, I am pleased to yield 3 minutes to the distinguished 
gentleman from Texas (Mr. Barton), the chairman of the Subcommittee on 
Energy of the Committee on Energy and Commerce.
  (Mr. BARTON of Texas asked and was given permission to revise and 
extend his remarks.)
  Mr. BARTON of Texas. Mr. Speaker, first, I want to commend my 
chairman, the gentleman from Louisiana (Mr. Tauzin), for his work in 
this noble effort, and I want to thank him for allowing the reform 
group that I have been a part of in his committee the opportunity to 
present an alternative and to try to make that a part of the package. I 
really appreciate that.
  I would say to my friends on the Democratic side of the aisle, as 
they have talked about privatizing Medicare, that the first thing that 
we need to do is preserve Medicare. I would point out that if we do 
nothing to the existing Medicare program, the projections are that 
within the next 5 to 10 years, there will be no Medicare, because 
doctors and hospitals will opt out of the system because they are not 
able to be reimbursed adequately for the services they are providing.
  So the first thing that we need to do is to preserve the current 
Medicare system, and the bill before us does that with such things as 
competitive bidding for durable medical equipment and other reforms.
  The second thing I would like to point out is that we understand that 
seniors need a prescription drug benefit.

                              {time}  2200

  And my reform group was able to get into this bill a transition 
program that if this bill becomes law within 90 days of enactment, 17 
million seniors in this country will begin to get a prescription drug 
benefit immediately. They will get a prescription drug card, and if 
they are low income those drug cards will have $800 of benefits on 
them; and if they are moderate income, they will have $500; and if they 
are upper income, they will have $100. Their families and employers can 
add money to those cards, up to $5,000, and within 90 days of enactment 
there will be a prescription drug benefit. Not 3 years from now, not 4 
years from now but within 90 days. And that drug benefit will not 
require a deductible, and it will not require any paperwork. It will 
not have any doughnuts.

[[Page H6100]]

  It will require a modest co-pay, but then you get your prescription 
drugs plus any discounts that the prescription drug benefit card allows 
you. And I think that is important that we as a country say to our 
senior citizens, not that we want to get old people but that we want to 
give our parents and our grandparents a break. We want to give them a 
benefit and we want to do it sooner rather than later.
  I think the most important thing about this bill is that there is an 
acknowledgment and a guarantee that there will be a benefit, there will 
be a prescription drug benefit.
  Now, we can debate and we will debate whether it is adequate or it 
needs to be more generous or whether it needs to be more universal or 
whether it needs to be more targeted to the people that need it the 
most, but the important step is we are giving the benefit, we are 
adding the benefit and we are doing it now. And our transition program 
will kick in within 90 days of enactment, no later than September of 
2004. So I will vote for this bill and hope we can perfect it as we go 
through the process.
  Mr. DINGELL. Mr. Speaker, I yield 2 minutes to the distinguished 
gentleman from Pennsylvania (Mr. Doyle).
  Mr. DOYLE. Mr. Speaker, I represent Allegheny County, Pennsylvania, 
the second oldest county in the country. And this is indeed a sad day 
for seniors in Allegheny County because instead of providing our 
seniors with an affordable prescription drug plan under Medicare, 
instead, tonight we will give seniors a Medicare+Choice style drug 
plan.
  Now, we all remember in Pennsylvania what Medicare+Choice is. That is 
the HMOs trying to provide Medicare, the same companies that left 
hundreds of thousands of Pennsylvanians high and dry, not only in my 
State but all across this country, when they pulled out of their plans.
  This plan is nothing more than a huge subsidy to drug companies and 
will eventually lead to the privatization of Medicare. Do not just take 
our work for it. The AARP, which represents more senior citizens than 
any other organization in this country, says, The provisions that would 
establish a premium support structure beginning in 2010 could 
destabilize the traditional Medicare program and lead to much higher 
costs for beneficiaries. Rather than expand choice, this provision 
could limit choice by leading to a substantially higher cost for 
beneficiaries who want to stay in the traditional Medicare program. 
Those who choose not to enroll in private plans should not be put at a 
financial disadvantage.
  The other part of this plan that I just find unbelievable right here 
in title VIII, section 801 is we prohibit the administrator of the 
program from negotiating better prices from the drug companies on 
behalf of taxpayers. We are going to spend $400 billion of taxpayers' 
money, and we always hear from our friends, let us run government like 
a business. Well, what business does not negotiate for more favorable 
prices? But not this plan.
  Our government is prohibited from negotiating lower prices on behalf 
of senior citizens. I watch seniors in Pittsburg get on buses every 
month and drive to Canada to buy their drugs, because they cannot 
afford them in this country, for half the price of what they have to 
pay for in the United States. And now when we finally have an 
opportunity to take the buying power of all these senior citizens and 
negotiate more favorable prices from the drug companies, this bill 
specifically prohibits us from doing that.
  Mr. Speaker, this is a bad bill. We should vote it down.
  Mr. TAUZIN. Mr. Speaker, I yield 2 minutes to the gentleman from 
Georgia (Mr. Burns).
  Mr. BURNS. Mr. Speaker, I appreciate the chairman for yielding me 
time.
  Mr. Speaker, we have a bill before us tonight that will improve and 
it will preserve Medicare. This bill will continue to provide seniors 
with fundamental health care they so desperately need but provide 
something more. It provides something that my constituents want and 
need in affordable prescription drug plan for all Americans and 
seniors.
  Mr. Speaker, I am a co-sponsor of H.R. 1 for one simple reason: 
Because seniors in my home State of Georgia must have an improved 
Medicare system. They must have prescription drug coverage. They do not 
want excuses. They want action. They want it now. The time for stale 
ideas and old systems and gimmickry are over.
  H.R. 1 is legislation we can support because it preserves a system 
our seniors know and love, while it addresses the issues of increased 
coverage and solvency of a program for baby boom generations. Make no 
mistake, we are far from finished in our efforts to fix our Nation's 
health care challenges, but this is the first step into a new world of 
advanced health care. Through H.R. 1, seniors in Georgia can decide the 
coverage plan that best fits their needs. Seniors in Georgia will be 
able to decide which prescription drug plan through Medicare is the 
best option. For those who have no coverage and pay exorbitant prices 
for their drugs out of their own pocket, these benefits are real. We 
are providing them with real savings and real choices.
  Mr. Speaker, it is time for Congress to step up to the plate and 
ensure Medicare's future for all Americans.
  Mr. DINGELL. Mr. Speaker, I yield 2 minutes to the distinguished 
gentleman from Maine (Mr. Allen).
  Mr. ALLEN. Mr. Speaker, I thank the gentleman for yielding me time.
  Mr. Speaker, the Republican prescription drug bill transforms 
Medicare into Maybe care. Depending on where you live, maybe you get 
your traditional Medicare and maybe you do not. Depending on what plan 
you have, maybe you keep your doctor or maybe you do not. Depending on 
what year it is, maybe you keep a good package of benefits or maybe you 
pay very high prices for a low, low package of benefits.
  And the Republicans are here tonight saying choices, choices, 
choices. We are giving America's seniors choice. Well, what kind of 
choice are they giving America's seniors? Well, not a choice of doctors 
and not a choice of hospitals. What they are saying is we are going to 
give you a choice of insurance plans. Well, no one in my State of Maine 
has ever come up to me and said, You know what I really want is not a 
choice of doctors or hospitals, I want to see different brochures, 
different insurance brochures. Please have some insurance agents call 
me and talk about their different plans.
  What is happening in Maine, in the private sector with this wonderful 
competition for the employed market is every year 20 percent increases, 
30 percent increases, higher payments, lower benefits. That is 
competition and choice and what the Republicans are saying is that is 
what America's seniors need. It is unbelievable. Every senior I talk to 
says we want lower prices. Please give us lower prices. We are buying 
from Canada. We are taking buses to Canada, and this bill prevents the 
administrator from negotiating lower prices for America's seniors.
  This bill is never likely to work in my opinion, but if it did, you 
ought to follow the money. Who gains from this bill? The insurance 
companies will make millions, hundreds of millions of dollars. The 
pharmaceutical industry will be able to keep charging the highest 
prices in the world. America's seniors lose. You follow the money to 
the insurance companies and the pharmaceutical industry and you can 
tell who wins under this bill.
  This bill is a nightmare for America's seniors. Reject this bill and 
support the Democratic substitute.
  Mr. TAUZIN. Mr. Speaker, how much time remains on each side?
  The SPEAKER pro tempore (Mr. Hastings of Washington). The gentleman 
from Louisiana (Mr. Tauzin) has 8 minutes remaining. The gentleman from 
Michigan (Mr. Dingell) has 14\1/2\ minutes remaining.
  Mr. TAUZIN. Mr. Speaker, I reserve the balance of my time.
  Mr. DINGELL. Mr. Speaker, I yield 2 minutes to the distinguished 
gentleman from Louisiana (Mr. John).
  (Mr. JOHN asked and was given permission to revise and extend his 
remarks.)
  Mr. JOHN. Mr. Speaker, I thank the gentleman for yielding me time.
  Mr. Speaker, I strongly support a drug benefit in Medicare. And in 
some aspects, the Democrats have won because it has not been that long 
ago, just a few short years, that the Republicans wanted to take a 
privatized outside-of-Medicare, a drug benefit. But

[[Page H6101]]

now all of the debate is about it being a part of Medicare. So in that 
aspect, I think that we have won as Democrats. But I do believe that 
what they have done with this bill is continue to try to privatize 
Medicare and the benefits that are in it.
  An entire generation of baby boomers are upon us, Mr. Speaker, and in 
just a few years away we are going to have to deal with this. 
Unfortunately, this bill falls short of what our seniors deserve as it 
has holes in it that the Republicans refuse to plug.
  Perhaps the $174 billion bill that we passed just previous to this 
debate could have been used for the doughnut to be plugged. Efforts to 
fix this problem were denied us through the amendment process in this 
body on this debate. I offered amendments to try to bring some 
certainty with 2 years for our seniors to try to provide our rural 
ambulance services, our rural home health care and our rural doctors a 
fair reimbursement. In particular, I believe this bill falls short in 
addressing the needs of rural seniors and rural Americans. In fact, our 
previous experience should tell us that it has not worked. It is not 
profitable to offer plans to seniors in rural areas. In southwest 
Louisiana we have no Medicare+Choice plans.
  I urge Members to vote against this, and I urge the other side to 
work, as the Senate did, in a bipartisan fashion to fashion a bill that 
our seniors can use.
  Mr. TAUZIN. Mr. Speaker, I reserve the balance of my time.
  Mr. DINGELL. Mr. Speaker, I yield 2 minutes to the distinguished 
gentleman from Florida (Mr. Davis).
  Mr. DAVIS of Florida. Mr. Speaker, one of the things that Democrats 
and Republicans ought to be able to agree upon tonight is that we owe 
our seniors truthfulness. We should be very clear and honest with them 
and ourselves as to exactly what is happening. Our failure to do so is 
a cardinal sin because it is ultimately to disrespect our seniors.
  This bill offered by the House Republicans is based on a remarkable 
fixation with private insurance companies. Private insurance companies 
throughout the country in Washington have said once again they do not 
want the money that is being offered under this bill to write these 
private insurance plans.
  The distinguished chairman of the committee's response to that is we 
will subsidize 99 percent of this cost as necessary to get private 
insurance companies to sell this benefit. How often in Washington, D.C. 
do you hear somebody turn down that type of money the government is 
offering them? Something is wrong with this plan.
  I salute the Republicans on the committee who acknowledge they were 
concerned about whether private insurance companies would offer this 
benefit to seniors. Some of them are going to vote against the bill 
tonight based on that concern. A number of Democrats have said to those 
Republicans and others, we will work with you on a bill that fits 
within our budget constraints but let us have a traditional Medicare 
benefit that provides drug coverage.
  What does this bill do? It does not set any maximum premium. It does 
not set any maximum deductible. It has a doughnut that almost 50 
percent of seniors will experience after they have spent $2,000 on drug 
costs. During that time period they will be forced to pay a premium for 
basically nothing.
  I would like to bring a chart up here to also show you just how 
complicated this plan will be that is being foisted on seniors. This 
represents a relatively detailed description of what this bill attempts 
to do.
  Would somebody on the majority please explain to me how this bill 
works and how any senior at home, Democrat, Republican or Independent, 
is expected to understand how to use this drug benefit?
  Mr. Speaker, I ask unanimous consent for 2 additional hours to 
explain the chart.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Florida?
  Mr. TAUZIN. Mr. Speaker, I object.
  The SPEAKER pro tempore. Objection is heard.
  Mr. TAUZIN. Mr. Speaker, I yield 2 minutes to the gentleman from 
Kentucky (Mr. Whitfield), a distinguished member of the Committee on 
Energy and Commerce.
  Mr. WHITFIELD. Mr. Speaker, I thank the gentleman for yielding me 
time.
  Mr. Speaker, tonight is the culmination of 4 or 5 years of debate of 
a prescription drug benefit for our senior citizens here in America. I 
hear a lot of the criticism and I have heard it all day today about 
private insurance companies being involved in this program that we are 
submitting tonight. Yet, I would remind those on the other side of the 
aisle that private insurance companies are involved in Medicare as it 
exists today and has been for some time because it is the private 
companies that are responsible for the reimbursement of our health 
care.

                              {time}  2215

  So private companies are already very much involved in our Medicare 
system today.
  I would also say, what benefit are seniors going to get from this 
program? First of all, if they are 135 percent of the poverty level and 
below, and I can tell my colleagues, in my district that is about 60 
percent of them, they are not going to have to pay anything. The 
government's going to pay their premium for them. The only thing that 
they will have to pay is a $2 small copay for a generic drug and a $5 
copay for a name-brand drug. What is wrong with a program that provides 
free medicines for seniors who today cannot get them?
  I would also say that in addition to that tremendous benefit, and we 
provide catastrophic coverage for them as well, but in addition to that 
tremendous benefit, we have a rural health package in this bill that is 
going to help rural America, rural health providers. It is going to 
provide $27 billion over 10 years for our rural areas, and the 
disproportionate share payment for our rural hospitals, children's 
hospitals around the country, urban hospitals that treat our citizens 
on Medicaid, our hospitals over the next 10 years are going to get $3.8 
billion for those who treat the neediest in our society.
  This is a program that we should all be supporting, and certainly we 
should not support the Democratic substitute.
  Mr. DINGELL. Mr. Speaker, I yield 2 minutes to the distinguished 
gentlewoman from California (Ms. Solis).
  (Ms. SOLIS asked and was given permission to revise and extend her 
remarks.)
  Ms. SOLIS. Mr. Speaker, I thank our ranking member for yielding me 
the time.
  I rise tonight in opposition to this bill. We have heard a lot 
tonight about how this bill is going to help our seniors from the other 
side of the aisle. Well, I want to talk about the seniors that I 
represent in my hometown in the San Gabriel Valley in East Los Angeles, 
California.
  In my congressional district, I represent nearly 6,000, 6,000 seniors 
in poverty, making less than $11,000 a year. For them the cost of 
prescription drugs is so overwhelming that they often have to forgo 
between paying their medicine or having a meal or paying a phone bill. 
That is what it means to seniors in my district.
  This is a choice that no senior citizen should have to make. Yet the 
Republican bill does nothing to reduce the cost of prescription drugs. 
It does not allow us to use the purchasing power of Medicare 
beneficiaries to negotiate lower drug prices. How ironic, just like we 
do for the Veterans Administration.
  So what do we tell Grandma, living alone on a fixed income who cannot 
afford her medicine? Sorry, but Medicare has a new drug benefit, but it 
is not for you? Sorry, but Medicare is raising part B deductibles by 
eight times as much as our Social Security cost-of-living increase?
  Only the Democratic alternative that we will debate later on tonight 
will do what I think my senior citizens want to hear, and it will 
provide them with the guaranteed, affordable, easy-to-use drug benefit 
that is part of Medicare.
  Let us be clear tonight. For our seniors, for our grandmothers, our 
uncles, our fathers and our mothers, there is only one thing to talk 
about tonight and it is about medicine. This should not be about 
privatization or insurance companies or anything else. Let us give our 
senior citizens the help they need to pay for that medicine.
  Let us oppose this proposal being put forward tonight by the 
Republicans and support the Democratic prescription drug bill.

[[Page H6102]]

  Mr. TAUZIN. Mr. Speaker, how much time remains on each side?
  The SPEAKER pro tempore (Mr. Hastings of Washington). The gentleman 
from Louisiana (Mr. Tauzin) has 6 minutes remaining. The gentleman from 
Michigan (Mr. Dingell) has 8\1/2\ minutes remaining.
  Mr. TAUZIN. Mr. Speaker, I reserve the balance of my time.
  Mr. DINGELL. Mr. Speaker, I yield 2 minutes to the distinguished 
gentleman from Arkansas (Mr. Berry).
  Mr. BERRY. Mr. Speaker, I thank the distinguished gentleman from 
Michigan for yielding me the time, and I appreciate his leadership on 
this and all other matters before this House.
  Mr. Speaker, one thing we understand is the Republicans are in the 
majority. They are in charge. You can do whatever you want to do. You 
have got the Senate. You have got the White House. Now, you may talk 
more trash than a $3 radio, but you are in charge.
  The difference in these two plans is very simple. The Democrats would 
offer you the best plan, the best price, and we will pay 80 percent and 
let the patient, the Medicare beneficiary, pay 20 percent. The 
Republicans only, on the other hand, will allow the pharmaceutical 
companies, by law, statutorily, to continue to rob our senior citizens, 
charge them the highest price and let them pay 80 percent; and they 
will pay 20 percent of the bill, if you are lucky enough to live long 
enough.
  They come to the floor repeatedly this evening and talk about this 
bill is not perfect. Boy, you have got that right. I will agree with 
you on that one.
  They say it is historic, and they are right. Never before in the 
history of this Republic has there been such an outrageous attempt to 
provide the ability to insurance companies, as if they needed any help, 
to rob and deceive and cheat our senior citizens. Never before have 
they been presented with an opportunity, the pharmaceutical companies, 
to cheat and continue to rob our senior citizens.
  It is indeed historic by their own admission. The chairman of the 
Committee on Ways and Means says we want to end Medicare as you know 
it. I suggest you all get you a buckeye. It will bring you good luck 
and keep rheumatism away. That is all you are going to get through this 
Medicare program.
  Mr. TAUZIN. Mr. Speaker, I yield 2 minutes to the distinguished 
gentleman from Texas (Mr. Burgess).
  (Mr. BURGESS asked and was given permission to revise and extend his 
remarks.)
  Mr. BURGESS. Mr. Speaker, I thank the chairman for yielding me the 
time, and certainly I want to acknowledge the great leadership of our 
chairman and the gentleman from Texas (Mr. Barton), as well, who 
proposed the prescription drug card.
  I rise tonight to support H.R. 1, the Medicare Prescription Drug and 
Modernization Act of 2003.
  Mr. Speaker, this debate is about taking care of America. This debate 
is about making a guarantee to senior citizens that they will have 
access to quality medical care which includes prescription drugs. This 
debate is about ensuring the future of Medicare. This debate is about 
delivering better outcomes at lower cost.
  H.R. 1 is a strong solution to these serious problems. Providing 
prescription drugs for America's seniors is the right thing to do. I 
cannot picture what medicine would look like today if pharmaceuticals 
were not an available treatment option. Physicians and other providers 
would have no option but to resort to seriously invasive treatments 
when confronted with acute medical conditions.
  There is no doubt that Americans have benefited from the development 
of new and innovative medicines. New drugs can improve and extend 
lives. New drugs exist that can dramatically reduce cholesterol, fight 
cancer, alleviate debilitating arthritis.
  An entirely new class of medicines, collectively known as selective 
estrogen receptor modulators, are available for reducing breast cancer 
mortality rates, and one day may see an expanded role in preventing 
this disease.
  Unfortunately, Medicare has been deeply rooted in the medicine of 
1965, not the medicine of today; and this has negatively impacted the 
health of our senior citizens.
  Tonight, the House of Representatives will take a bold step to 
improve the lives of senior citizens. Not only will seniors have 
greater access to prescription drugs, but built-in reforms will hold 
down the cost of these medications.
  In a report released today by Secretary Tommy Thompson, seniors will 
save substantially through upfront drug discounts under the House plan. 
The Medicare actuary estimates seniors will see an immediate savings of 
25 percent off their current prescription drug costs.
  On the other side of the aisle, those who were wearing the arm bands 
earlier today, where were those arm bands in 1998 and 1999? Where were 
those arm bands when that administration refused to even open the book 
and look at the Medicare commission, bipartisan commission?
  Mr. DINGELL. Mr. Speaker, I yield 1 minute to the distinguished 
gentlewoman from Michigan (Ms. Kilpatrick).
  (Ms. KILPATRICK asked and was given permission to revise and extend 
her remarks.)
  Ms. KILPATRICK. Mr. Speaker, I thank the ranking member for yielding 
me the time in this most difficult discussion, but what a sham we have 
today for our seniors of America who built this country. Not only do 
you not have a prescription drug benefit, but this one you will not get 
till 2006, if you get it at all. It will privatize Medicare by the year 
2010.
  What most people want in America, including seniors, is to contain 
the high costs of prescription drugs. This bill prohibits the Secretary 
of Health and Human Services from negotiating lower prices for 
prescription drugs. That in itself is enough to say vote ``no'' on this 
bill. What a sham for the seniors who built this country.
  This plan will destroy the retirement benefits that companies in my 
district like General Motors, like Daimler Chrysler already are giving 
to their retirees. This plan is a disincentive for them to keep giving 
that. Vote ``no'' on this plan. It is unfortunate I do not have any 
more time. Vote ``no.''
  Mr. Speaker, I rise today to express my disappointment and opposition 
to H.R. 1. We, in Congress, over the last few years, have repeatedly 
pledged to provide seniors with the prescription drug coverage they so 
desperately need--and deserve. My Republican colleagues have touted 
this day as a ``historical day.'' Unfortunately, for Democrats, who 
support a meaningful, universal, and comprehensive drug plan under 
Medicare, this day is not a ``historical day'' in the positive sense 
but a day when we failed on our promise to come through for our 
seniors. What this bill does do is afford the Republicans the ability 
to say to seniors, ``We came through on our pledge.'' Unfortunately, 
their rhetoric does not match up to the emptiness that will be felt in 
our seniors' pocketbooks. Nor does it match up in providing seniors 
with real choice and a meaningful, comprehensive prescription drug 
program.
  The GOP Prescription Drug Plan is a flawed plan, period. It would put 
the power in the hands of private insurers--those same insurers who 
have abandoned seniors in providing essential health care services in 
the past. Why our Republican colleagues want to give even more power to 
HMOs and private insurers is a question I cannot answer. However, the 
consequences of such actions will be felt by the most vulnerable in our 
society.
  The majority of seniors across our nation live on fixed monthly 
incomes. With so many seniors today living longer, this also means that 
they need to save as much money as they can to ensure their survival 
over the years. They cannot afford to pay exorbitant costs for their 
drugs. Moreover, seniors need security. What they do not need is to be 
forced into private managed care plans that are able to opt-out of 
coverage for seniors at their free will. Seniors deserve better--they 
deserve a universal, comprehensive, affordable, and meaningful drug 
plan under Medicare.
  The House Republican prescription drug bill is even worse than the 
one considered by Congress last year and goes much further in 
privatizing Medicare. Seniors would need to use private insurance 
companies for drug coverage and these private insurance companies and 
managed care plans would design the new prescription drug plans. These 
insurance plans would also need to commit to the program for only one 
year. What does this mean? It means that seniors can be dropped from 
their plan year-to-year. They would have to change their plan, their 
doctor, and the drugs they take every 12 months. This puts seniors at 
the mercy of private insurance companies, rather than giving them an 
option that provides

[[Page H6103]]

them with the security and stability they need. Seniors do not want to 
be forced into an HMO. In fact, 72 percent of seniors polled say they 
do not want to be forced into getting coverage through an HMO. We need 
to listen to those we are trying to serve.
  The GOP plan also receives an ``F'' on the affordability scale. Under 
their plan, seniors would be required to pay high premiums even if they 
are not receiving coverage. The Republican plan would deny assistance 
to those seniors with drug costs between $2,000 and $4,900. Nearly half 
of Medicare beneficiaries would fall into this ``coverage gap'' every 
year; however, they would still be expected to pay the monthly premium. 
Seniors would be asked to continue paying for a service they are not 
receiving--a service that does not honor seniors with meaningful 
support in the first place.
  Another glitch in the Republican bill is its inability to deal with 
the underlying problem--the rising costs of prescription drugs. Seniors 
want help in curbing the increasing costs of prescription drugs. In 
fact, seniors prefer cost control measures by a vote of two to one. 
While seniors want help in purchasing their medicines, they also want 
solutions in curbing the rising costs. The Republican bill does not do 
this. It neglects to include an important provision supported by 
Democrats to provide the Secretary of Health and Human Services with 
the authority to negotiate for lower prices like the Veterans' 
Administration has done. Including cost-control provisions is the right 
and responsible thing to do; however, our Republican friends do not see 
the benefit of this. How unfortunate.
  The Democratic Substitute, which I proudly support, is the coverage 
that will fulfill our pledge to seniors. It provides them with real 
assistance within Medicare and includes provisions to curb the high 
cost of prescription drugs. Seniors do not need to worry about paying 
more in the future if they decide to stay in the traditional Medicare 
program. They do need to worry about this with the Republican bill, 
since the ``competitive bidding'' provision would force seniors to pay 
more for their prescription drugs than they do now. Seniors want a plan 
that is straight up, no-nonsense, and significant. That is what 
Democrats have provided in the substitute measure.
  I want to do right by the seniors in my district and for seniors all 
across the nation who are struggling to pay for the prescription drugs 
they need to live fulfilling and healthy lives. H.R. 1 was constructed 
with the interests of pharmaceutical companies and private insurance 
companies at heart. The voice of seniors was nothing but a faint echo 
in the rooms where this bill was constructed and their best interests 
have been left in the dust. For these reasons, I vote against passage 
of H.R. 1. We need to safeguard our nation's seniors, not private 
insurance companies.
  Mr. DINGELL. Mr. Speaker, I yield 1 minute to the distinguished 
gentleman from New Jersey (Mr. Pascrell).
  (Mr. PASCRELL asked and was given permission to revise and extend his 
remarks.)
  Mr. PASCRELL. Mr. Speaker, I really suggest that the other side go to 
see the movie, it is an old movie, ``Thelma and Louise.'' Thelma turns 
to Louise and says, ``Do not settle, Louise.''
  You have settled. You blew it. In fact, the seniors already are 
angry. The plan does not even go into effect until 2006. Why are they 
angry? They are angry because this is a question of values. Just when 
you need it most, the plan ends.
  The second reason why they are angry is you are going to force them 
into HMOs. Look what happened in New Jersey on Medicare+Choice. Now you 
are going to call it Medicare plus advantage. Bill Safire would have a 
picnic on this.
  This is a joke and a sham, and you know it. Look at that record that 
you have provided, that we provided, all of us in the State of New 
Jersey, where they lost 100,000 people. What we are going to do, as the 
gentleman from Pennsylvania said just a few moments ago, is subsidize 
insurance plans. That is what we are going to do.
  The third reason why they are ticked off is that there is no control 
over prices. Boy, are they angry. You blew it.
  Mr. DINGELL. Mr. Speaker, I yield 1 minute to the distinguished 
gentlewoman from California (Ms. Waters).
  Ms. WATERS. Mr. Speaker, last night we debated the Homeland Security 
appropriations bill. The Republicans made excuses about not spending 
enough money to truly secure our homeland. Tonight, the Republicans are 
crying broke and claiming we do not have enough money to fund credible 
prescription drug coverage for our seniors.
  This bill provides no coverage when a senior's prescription drug 
costs are between $2,000 and $4,900 per year. This huge coverage gap 
affects 47 percent of Medicare beneficiaries.
  This bill is also a giveaway to pharmaceutical companies, as it 
prohibits the Secretary of Health and Human Services from negotiating 
lower drug prices. The primary beneficiaries of this bill are not the 
beneficiaries of Medicare. They are the wealthy special interests and 
the pharmaceutical industry and the insurance industry that give huge 
campaign contributions to the Republicans.
  Mr. Speaker, the Republicans have given huge tax cuts to the wealthy, 
promised the Iraqis a universal health care plan. They are spending 
millions attempting to buy the loyalty of warlords in Afghanistan, and 
the President just gave Musharraf $3 billion.
  Seniors, call your Republican Members and ask them why they do not 
take care of the seniors of this country.
  Mr. DINGELL. Mr. Speaker, I yield 1 minute to the gentleman from 
Arkansas (Mr. Ross).
  Mr. ROSS. Mr. Speaker, I thank the gentleman from Michigan (Mr. 
Dingell), the ranking member, for yielding me the time.
  As the owner of a small-town family pharmacy, I got sick and tired of 
seeing seniors who could not afford their medicine or could not afford 
to take it properly. That is why back in 2000 I decided to run for the 
United States House of Representatives.

                              {time}  2230

  But tonight, what we are debating is nothing more than a false 
promise for our seniors. Seniors need an accountant to figure out this 
plan.
  I put a calculator to it, and here is what the Republican national 
leadership plan offers our seniors. Seniors will pay the first $2,520 
of the first $3,500 worth of medicine they need every year. Now, let us 
contrast that a moment to a health care plan provided for Members of 
Congress, those who wrote this plan. Guess what they pay? Seven hundred 
dollars of the first $3,500 worth of medicine.
  They want to provide seniors with little help while continuing to 
take care of Members of Congress. It is simply wrong. This is not a 
seniors bill, this is a bill written by the big drug manufacturers for 
one reason only. To privatize Medicare. To privatize Medicare so that 
Medicare cannot command discounts.
  Mr. DINGELL. Mr. Speaker, I would inform the gentleman from Louisiana 
at this time that I have one speaker remaining.
  Mr. TAUZIN. Mr. Speaker, who has the right to close?
  The SPEAKER pro tempore (Mr. Hastings of Washington). The gentleman 
from Louisiana has the right to close.
  Mr. TAUZIN. Mr. Speaker, I reserve the balance of my time and the 
right to close.
  Mr. DINGELL. Mr. Speaker, I yield the balance of my time to the 
distinguished gentlewoman from California (Ms. Pelosi), the minority 
leader, to close.
  Ms. PELOSI. Mr. Speaker, I thank the distinguished gentleman from 
Michigan for yielding me this time and for his tremendous leadership. 
He has been fighting this fight for America's seniors for access to 
quality health care for all Americans and an affordable prescription 
drug benefit for America's seniors. We are all in your debt.
  Mr. Speaker, today is a sad day for America's seniors. Another sad 
day, late at night in the Chamber of the House of Representatives, 
where the budget priorities of our country should be debated to their 
fullest extent, but where the limitation on time is placed so that the 
American people can never really get the full story. This prescription 
drug benefit bill discussion is an historic occasion for our country 
because it does indeed, it does indeed give us the opportunity to 
expand Medicare to provide a guaranteed affordable defined benefit for 
our seniors. The Senate has taken up the bill for the past 2 weeks. 
They have considered 30 amendments to the bill. Thirty amendments. The 
House is considering the bill this evening with no opportunity for 
amendment.
  I do want to commend the gentleman from Michigan (Mr. Dingell) and 
the

[[Page H6104]]

gentleman from New York (Mr. Rangel), the ranking member on the 
Committee on Ways and Means, for the proposal that they will be putting 
forth tonight, which is a real prescription drug benefit for seniors. I 
commend the gentleman from California (Mr. Dooley) for his limited 
opportunity but great product that he put forth on the previous 
question on the rule earlier. Another excellent proposal. And I commend 
the Blue Dogs, the gentleman from California (Mr. Thompson) and the 
gentleman from Arkansas (Mr. Berry), for their hard work on our motion 
to recommit, which we hope will be allowed on the floor tonight.
  Any one of these would be far superior to the proposal that is being 
put forth by the Republicans today. Why it is so sad is because we are 
supposed to honor our parents. Our senior citizens built our country. 
They raised our families, the backbone of America. They fought our 
wars. Some of them are part of the greatest generation. Some of them 
lived through the New Deal, many of them the Fair Deal, and tonight 
they are getting a raw deal. What makes it so sad is that we had the 
opportunity to do it right, and one of those opportunities we will hear 
about next, the Dingell-Rangel/Rangel-Dingell Democratic proposal, of 
which we are very proud.
  Nearly 40 years ago, when Medicare came into existence, it came at a 
time when many, many seniors had no access to health care, and now 
almost every senior in America has access to quality health care. At 
the time, there was no prescription drug benefit included in the 
package. That was unfortunate. Today, it is imperative that we have a 
prescription drug benefit in the package. The advances to science have 
been so miraculous. Seniors today, if they have a prescription drug 
benefit, would be able to self-administer drugs, which would not only 
be an adjunct to physician or hospital care but be a supplement for it. 
It would be a substitute for it.
  So think of what it means to the quality of life for our seniors in 
order for them to have that independence and to be able to know that it 
is guaranteed, defined, and dependable. Think of what it means to the 
taxpayer in the reduction of cost in medical services to seniors 
because they can have access to prescription drug benefits. That is 
what makes this such a tragedy. It makes it such a tragedy.
  So tonight, instead of honoring our parents and our seniors, we are 
foisting a hoax upon them, at least the Republicans are. And a cruel 
hoax it is indeed. In doing so, the Republicans insult the 
intelligence, they insult the intelligence of America's seniors. Many 
of you are blessed to still have your parents with you, and some of us 
are even bordering on being seniors ourselves, but any of you who have 
your parents or dear relatives who are older know that they are into 
stats. They know their statistics. They know their blood count, they 
know their blood pressure, they know their bank account balance, they 
know the cost of everything, many of them, because many of them are on 
fixed incomes and the slightest change has an impact on their economic 
security.
  So I want those seniors who are so sensitive to changes in cost to 
take a look at this chart, which was in the New York Times this 
morning, and it says, ``Under House GOP Bill Seniors' Out-of-pocket 
Drug Costs Remain Staggering.'' Remain staggering. The average cost 
that seniors will pay in drug costs in 2006 is reported to be $3,155. 
So let us take the $3,000 line for the Republican hoax on seniors. If 
the beneficiary's annual drug costs are $3,000, seniors out there, if 
you are paying about $3,000, under the House bill your deductible will 
be $250. Your premium will be $420. The share of initial coverage is 
$350. Gap in coverage, here is where you fall into the gap, $1,000.
  So of that $3,000 worth of drug cost, you, America's seniors, will be 
paying $2,020 out-of-pocket. Where is the benefit? And this is the best 
case scenario. These prices that you see here are suggestions to the 
HMOs. The prices could be much more, and your out-of-pocket cost could 
be much more.
  I do not know how many of you think the hole is the most delicious 
part of the donut, but seniors, when they fall into this donut hole 
where they get no coverage, they still pay the premium. They are paying 
a premium for something that is not there. It is not there. And of 
course, if they pay $4,500 in drug costs, they are paying $3,520 out-
of-pocket. A cruel hoax on America's seniors. And they call that 
modernization. I call it humiliation. I call that insulting the 
intelligence of America's seniors.
  It was interesting, in this same article today one senior who was 
quoted on the subject said, ``Do you think anybody in Washington, D.C. 
has any idea what people on a limited income have to do to live?'' 
Clearly, the Republicans do not. They are just too busy giving the 
biggest tax breaks to the highest-end people in our country. They are 
just too busy giving those tax breaks that they cannot write a decent 
prescription drug benefit for seniors.
  In fact, I might add seniors and children. Where, oh where did the 
child tax credit go in all of this, as we adjourn tomorrow? Tax cuts 
instead of child tax credits. Tax cuts instead of prescription drug 
benefits. At the beginning of life; toward the end of life. It is a 
cruel hoax.
  And so, my colleagues, no matter what the Republicans tell you about 
their bill, the euphemism that it is a modernization of Medicare is 
really a laugh. It is an elimination of Medicare. Because no matter 
what they tell you, the facts are these: The Republicans do not provide 
a guaranteed defined benefit for seniors. The Republican bill does not 
reduce the high cost of prescription drugs.
  Indeed, the hardest to explain to anyone is that the bill prohibits 
the Secretary of Health and Human Services from negotiating for best 
prices. I repeat: Not only does the bill not bring down the cost of 
drugs, it prohibits the Secretary of HHS from negotiating for the best 
prices. Every business in America, indeed the VA, does that. Volume 
gives you leverage; gives you opportunity. Except in this bill it is 
prohibited.
  And at this point I want to say that the proposal put forth by the 
gentleman from Michigan (Mr. Dingell) and the gentleman from New York 
(Mr. Rangel), the cost of it would be cut in half, cut in half, if the 
Secretary had the authority, which our bill calls for, and indeed took 
that responsibility to negotiate for best prices.
  What the bill does also, instead of modernizing Medicare, is to 
unravel not only Medicare, and I hope seniors are listening, not only 
the prescription drug benefit, but part A and part B along with the 
prescription drug benefit, forcing seniors to compete and pay more to 
stay in Medicare, the Medicare they know and trust. I repeat: When this 
bill, in 2010, comes to fruition, seniors will have to pay more to stay 
in Medicare for part A, part B, and prescription drug benefits.
  And this is really a sad one in their bill. The employer piece. The 
employer piece. There are many businesses in America who honor their 
responsibility to their retirees. The CBO, the Congressional Budget 
Office, estimates that under the Republican bill one-third of all 
retirees who get their benefits from their employers will lose their 
coverage. Millions of seniors will be worse off.

[[Page H6105]]

  So that is why I say this is really a tragedy. It is a missed 
opportunity. It could be so good. It could be bipartisan. It could be 
what seniors expect and deserve. Democrats have a better idea. The 
Rangel-Dingell/Dingell-Rangel proposal, the two distinguished gentlemen 
who have spent a lifetime in public policy promoting access to quality 
health care, whose credentials are impeccable in this regard, they 
support Medicare. They have promoted a bill that is worthy of the 
seniors whom we respect. It is a guaranteed defined benefit under 
Medicare. It does give the authority to the Secretary to negotiate for 
best prices. It protects seniors' options in terms of their employers 
giving them benefits; not making millions of seniors be worse off.
  America's seniors deserve a benefit that is affordable, with 
reasonable premiums and deductibles. America's seniors deserve a 
benefit that is available to all seniors and disabled Americans, 
including Americans in rural areas.