[Congressional Record Volume 149, Number 96 (Thursday, June 26, 2003)]
[House]
[Pages H6107-H6178]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                              {time}  2245
  MEDICARE PRESCRIPTION DRUG AND MODERNIZATION ACT OF 2003--Continued

  Ms. PELOSI. Mr. Speaker, the Democratic plan does just that. This 
Republican bill, I repeat, is not guaranteed. It is not affordable. It 
is not a defined prescription drug benefit under Medicare that our 
seniors want and deserve. The Republican plan is a plan to end 
Medicare. I urge my colleagues to reject this raw deal for America's 
seniors and vote no on the Republican bill and yes on the very 
excellent Democratic proposal.
  Mr. TAUZIN. Mr. Speaker, I yield myself the balance of my time.
  Mr. Speaker, when we test the arguments made on the floor of the 
House on a major piece of legislation such as this, it is important to 
test the credibility of those arguments. The best way to test that 
credibility is to first of all tell Members a fairy tale.
  Once upon a time Bill Clinton proposed Medicare prescription drug 
coverage for America. Once upon a time my Democratic friends, the 
gentleman from California (Mr. Stark), the gentleman from Michigan (Mr. 
Dingell), the gentleman from California (Mr. Waxman), the gentleman 
from New York (Mr. Rangel), the gentleman from Ohio (Mr. Brown), and 
many others introduced a bill, H.R. 1495.
  Once upon a time Democrats recommended a bill with a $200 deductible, 
80 percent cost sharing by the government up to $1,700 of drug 
expenses, a doughnut hole, and then $3,000 out-of-pocket catastrophic 
coverage with no defined premium. And guess what, once upon a time 
their bill provided that the benefits would be provided through a PBM. 
Members might ask how would the PBM be selected: By competitive 
bidding.
  Members might further ask how would the contracts be awarded under 
this privatization of Medicare, and the answer in a fairy tale world 
would be shared risk capitation of performance. But the truth is this 
is not a fairy tale. It happens to be the truth. That was the 
Democratic proposal on Medicare prescription drugs, but tonight 
Democrats have come to the floor one after the other and criticized 
this plan because it contained many of those same features. Different, 
however, in some respects because this plan provides better coverage 
for seniors on the bottom. In fact, while some of my friends came to 
the floor and called this a sad day and said how sorry they were for 
the citizens of California, this bill we proposed would put 1.4 million 
California senior citizens in plans that would cost them no premiums, 
no deductibles, free entry for drugs in California for 1.4 million 
senior citizens, half a million in Indiana, half a million in Ohio, 
half a million in Pennsylvania, almost a million in Texas, and so on 
and so forth, free drug coverage under this plan, and yet the fantasy 
plan offered by the Clinton administration just a few years ago 
containing many of the same elements is somehow forgotten. It is 
somehow put away in a closet. It is somehow not to be remembered, and 
this plan is to be attacked. When we test credibility of arguments on 
the floor of the House, test them against the reality of the plan 
offered by the Democrats and the reality of the plan offered today.
  I want to thank the gentleman from Michigan (Mr. Dingell) for the 
courtesies and the respect and the statesmanship he has always shown me 
in debates in committee and on the floor of House. The gentleman is a 
dear friend. I wish I could say that about all Members all the time. 
But let me say something, I am offended that anyone would come to this 
floor and accuse anyone in this House of wanting to get old people. Do 
Members think for a second they love their moms and dads any more than 
we love ours?
  I ask the gentleman from California (Mr. Stark), do you really 
believe that? God bless them. That is the sort of unstatesmanship that 
should never enter the halls of this House.
  There is nobody in this House that loves their mother more than I 
love my mother. I challenge Members on that. She is a three-time cancer 
survivor, she is 84 years old, and she won first place at the Senior 
Olympics this year in shotput, and if you give her trouble, I will sic 
her on you.
  There are Members who have come to the floor and said seniors cannot 
understand choice. Let me tell Members something, I grew up in a 
poverty family. My mom and dad never earned above poverty. They made 
hard choices all their life for us. They sent three out of their four 
children to college. They fed and clothed us and gave us a great 
education and a chance for me to come to Congress. I love that woman 
and I loved my dad as long as I had him. How dare anyone suggest 
otherwise. We love our parents and grandparents the same.
  We differ on how to structure this program today. Apparently we did 
not a few years ago, but we do now. That is a legitimate debate and 
that is worthy of this House, but to suggest that any of us care less 
about old people, to suggest that any of us love those citizens who 
gave so much and made those hard choices for us any less than we do is 
a shame. My parents made hard choices. My mother knows how to make hard 
choices. If we give her choices, she will make the right ones, just 
like she did all her life. I trust her and I trust seniors in America. 
We are going to give them drug coverage in Medicare and we are going to 
give them other choices, too, if they want to make those choices. And 
if Members do not want to help us do it today, I suggest in a month 
from now when the conference

[[Page H6108]]

committee report is back after a compromise with the Senate, you might 
want to join us then.
  Mr. ISTOOK. Mr. Speaker, this bill will hasten the day when Medicare 
will go bankrupt, and it also threatens to unravel our children's 
future.
  Medicare is already on shaky financial legs, and this will add 
enormous extra expenses that will make it worse. Do we expect our 
children to pay a lifetime of higher taxes, and still find there's 
nothing left for them when they retire? That is what we face.
  I would like to add prescription drug benefits, but it's wrong to 
promise something we cannot pay for.
  I want to preserve what's good about Medicare, not destroy it by 
making extravagant promises for political gain.
  The enormous extra spending under this bill will be far more than 
projected. Because today's Medicare is a huge price control system, 
many doctors already refuse to see Medicare patients. In just a few 
years this will make it worse, including price controls that will 
destroy the incentives for companies to create new medicines.
  What should we be doing?
  Since 76 percent of seniors already have drug coverage, we could 
focus on helping those who don't. But this bill undoes the coverage for 
those 76 percent, and puts them in a confusing new medical experiment.
  We should be stabilizing Medicare, so it can keep the promises 
already made, not making new promises that we don't have the money to 
keep.
  We should address the reasons why drug prices and healthcare costs 
are so high. By banning re-imported drugs, we're forcing Americans to 
subsidize far-lower drug prices in other countries. We should change 
our policies so Americans only pay the lower world price, not a higher 
price.
  We should end the 130,000 pages of federal regulations that have 
driven the costs of medicine and healthcare through the roof. On 
average, for every hour they spend with a patient, doctors and nurses 
spend another half-hour doing government paperwork.
  We should stress personal responsibility in healthcare, just as we 
did in welfare reform, so government resources are focused on those who 
cannot care for themselves, not on those who can.
  Bit-by-bit, Congress is undoing the principles of welfare reform, and 
undercutting basic American principles in the process. Both political 
parties are making extravagant promises today, trying to outbid each 
other to win votes. Unfortunately, they are bidding with taxpayers' own 
money, and our children's hopes will be crushed by the bills they will 
inherit.
  Mr. UDALL of New Mexico. Mr. Speaker, for far too long, as I traveled 
around the state of New Mexico, seniors have told me their 
heartbreaking stories of being forced to choose between purchasing 
their medicine and purchasing groceries as a result of the exploding 
costs of prescription drugs. Today we have an excellent opportunity to 
address this tragic situation by providing a prescription drug benefit 
for Medicare beneficiaries and put an end to the outrageous dilemma 
facing our seniors throughout the country. In addition, we have an 
historic opportunity to modernize the incredibly important Medicare 
program, including updating formulas for our health care providers in 
rural areas--an issue that is of particular importance to my 
constituents and me.
  Thankfully, H.R. 1 does address the latter concern, but unfortunately 
falls far short on the critically important issue of prescription drug 
coverage. The prescription drug benefit provided under H.R. 1 would be 
the first step toward privatizing one of the most successful government 
programs in history, leaves seniors at the mercy of insurance 
companies, forces seniors into HMOs, has an incredible gap in coverage, 
and does nothing to control the exploding costs of prescription drugs. 
As such, I am forced to vote against H.R. 1.
  Under this bill, seniors and disabled Medicare beneficiaries can 
obtain their prescription drug coverage only from HMOs and private 
insurance companies. Given the history of HMOs and other private health 
plans in rural areas, I have serious concerns about this approach. In 
fact, in 1997 in the state of New Mexico, HMOs dropped approximately 
18,000 individuals because of rising costs. These individuals were left 
with nowhere to turn.
  H.R. 1 would put beneficiaries at a similar risk by relying on 
untested private drug-only plans, which can decide whether or not to 
serve rural areas, and they can decide to leave every 12 months. 
Further contributing to the risk of this provision is the fact that 
there is no fallback option to allow traditional Medicare to provide 
prescription drug coverage if private plans decline to provide coverage 
in rural areas. Because much of my district is rural, this legislation 
would put the seniors in my district at particular risk. I cannot 
support this.
  This is greatly disappointing to me given the several major rural 
healthcare provisions that are including in this legislation. The labor 
share revision, the geographic physician payment adjustment, equalizing 
the Medicare disproportionate share payments, increasing home health 
services furnished in rural areas, critical access hospital 
improvements--these are all incredibly important provisions that I 
strongly support in order to help strengthen the health care system in 
rural areas. I cannot, however, vote in support of H.R. 1 with the 
extremely flawed prescription drug benefit included with these strong 
rural health provisions.

  Mr. Speaker, I strongly support adding a voluntary prescription drug 
benefit to Medicare. I strongly believe that we must take action to 
provide relief for our nation's seniors. I simply do not believe, 
however, that H.R. 1 is the most effective way to do so. Tonight I will 
be voting in support of the substitute being offered by Mr. Rangel and 
Mr. Dingell.
  In addition to including stronger rural provisions than those 
included in the Majority's bill, the substitute includes a guaranteed 
benefit of a $25 premium, a $100 deductible, 20% co-insurance, and a 
$2,000 catastrophic protection. The substitute also allows for lower 
drug prices by granting the Secretary of Health and Human Services the 
authority to use the collective purchasing power of Medicare's 40 
million beneficiaries to negotiate lower drug prices. Also, the 
substitute grants access to generic drugs, and allows the safe re-
importation of pharmaceuticals, providing further tools to seniors for 
gaining access to cheaper prescription drugs.
  Perhaps most importantly, the substitute will not force seniors to 
leave traditional Medicare to get drug coverage. Nor will they be 
forced to join a private insurance plan that will restrict access to 
needed drugs, deny coverage for the medicine their doctor prescribes, 
or force them to change pharmacies.
  Mr. Speaker, our seniors deserve a real prescription drug benefit, 
not the flawed benefit included in H.R. 1. I urge my colleagues to vote 
against H.R. 1 and support the substitute. Our seniors should not be 
forced into the unconscionable position of being forced to choose 
between medications and groceries any longer, and, unfortunately, H.R. 
1 will not adequately address this situation.
  Mr. SHAYS. Mr. Speaker, I rise in support of H.R. 1, the Medicare 
Modernization and Prescription Drug Act. I want to begin by 
appreciating the incredible time and energy that my colleague, Nancy 
Johnson, has put into crafting what I consider to be a good product, 
and thank her for her efforts.
  When Medicare was created in 1965, the program's principal purpose 
was to help seniors pay for their hospital costs. Since that time, 
Medicare has not kept pace with how health care is delivered. Today, we 
are bringing this program into the 21st Century by including coverage 
for prescription drugs.
  Our seniors need and deserve prescription drug coverage under 
Medicare. This legislation will give them tremendous assistance. After 
a $250 deductible, seniors will get 80 percent of their first $2,000 
paid for by the program, catastrophic protection from any cost over 
$3,700, and discount on all their pharmaceutical costs from an Rx Drug 
Discount Card. The card will save beneficiaries between 10 and 25 
percent on every purchase.
  I believe this bill takes a positive step towards injecting 
competition into Medicare, but I regret we did not go further in 
reforming the program to ensure its solvency for future generations.
  I also believe anything free, even health care, is over-utilized. I 
support the House proposal to add a small co-payment to home health 
care and to index Part B deductibles to inflation, and I support the 
Senate proposal to have seniors pay a portion of their catastrophic 
costs. This way, seniors have a greater incentive to get care because 
they need it, not just because it is offered.
  Finally, we must be concerned with what this program will ultimately 
cost. It could go well over the $400 billion we budgeted and accelerate 
the program's financial demise if we are not vigilant.
  There is a lot to like in the bill we hope to pass tonight, and the 
Senate has already passed a plan I can support. My hope is the House 
and Senate conferees will draft a final bill that takes the best 
approaches from each chamber and that we can ultimately send the 
President a Medicare prescription drug bill supported by both sides of 
the aisle. I urge my colleagues to support H.R. 1.
  Mr. DAVIS of Illinois. Mr. Speaker, late last night, the House Rules 
Committee sent a terrible message to our Nation's seniors and 
hospitals. Two amendments I proposed were not allowed to pass onto the 
House floor. The first amendment would have stricken the language 
regarding the ``market basket'' index. Under the current bill hospitals 
would lose $12 billion over the next ten years. My amendment would have 
kept the funding streams toward hospitals level so that hospitals would 
not be forced to make difficult cuts in services and jeopardize patient 
care.

[[Page H6109]]

  My second amendment would have assured that the prescription drug 
benefits we members of Congress enjoy would be comparable to those of 
Medicare beneficiaries. My colleagues in the Senate passed such an 
amendment, but the Members of the House Rules Committee seem reluctant 
to subject themselves to the very same benefits they would give our 
Nation's seniors. They have sent the clear message that these benefits 
are not good enough for them, the relatively young and healthy, but are 
adequate for our Nation's seniors and disabled persons.
  Once again this Congress has proven that the Democratic process is 
not working. Not only are the voices of America's seniors not being 
heard, but neither are those of Members of Congress. As we go home to 
celebrate our Nation's independence, we will have to explain to our 
seniors that yes, a prescription drug bill passed, but it will not 
benefit them. It will not benefit middle America, it will not benefit 
the poor, it will not benefit those who are already struggling to buy 
their prescription drugs. It will only benefit those who can currently 
afford their drugs, afford to pay more for hospital services, and 
afford to pass this bill. Mr. Speaker, I oppose this rule and I oppose 
the underlying bill.
  Mr. HOLT. Mr. Speaker, for forty years, the federal government has 
kept a promise to our nation's seniors. That promise is called 
Medicare, and it means that every senior will receive affordable, 
reliable health care in their later years.
  Four years ago, I came to this Congress having made a promise to the 
seniors in my Congressional district--that I would work to bring 
Medicare into the twenty-first century by including coverage for 
prescription drugs. Coverage that, like the original Medicare program, 
is comprehensive, voluntary, universal, and reliable--without hampering 
the innovation that has brought us so many miraculous drugs over the 
past few decades.
  Today I am voting to keep that promise by opposing a bill that would 
undermine the Medicare program itself. H.R. 1 purports to offer seniors 
coverage for the prescription drugs they rely on every day. 
Unfortunately, it falls far short when held up to the spirit and 
practice of Medicare.
  The most distressing aspect of this bill, to me, to my constituents, 
and to the AARP, is that it takes the entire Medicare program down a 
short road to privatization. By the year 2010, Medicare would be 
converted to a voucher program with competition between managed care 
plans and traditional fee-for-service--only the deck would be stacked 
against the traditional plans. Seniors would find themselves have 
forced to enroll in managed care programs like the Medicare+Choice 
programs that have failed so miserably in central New Jersey.
  Rather than giving seniors what they want and deserve--a reliable, 
affordable drug benefit under Medicare, this provision, glibly called 
``premium support,'' will destabilize the program and lead to 
substantially higher costs for seniors who want to stay in traditional 
Medicare.
  Yet another element of confusion comes from the bizarre ``donut 
hole'' in coverage under this bill. Seniors would find themselves 
paying 20 percent of drug costs up to $2000 in drug costs--then having 
no coverage until they reach $4900 in drug costs, when a catastrophic 
cap finally kicks in. Not only is this extremely convoluted, it ends up 
leaving seniors with a very paltry benefit. A beneficiary with $5000 in 
annual drug costs would pay nearly $4000 out of their own pocket!
  This may be alarming to seniors who currently have no drug coverage. 
There are millions out there, however, who may think this debate won't 
really affect them because they already have coverage under their 
company's retiree benefit packages. I want them to know that the 
Republicans have quite a surprise in store for them.
  If this bill passes, nearly one-third of employers currently offering 
retiree drug benefits--covering 11 million seniors--would drop that 
coverage. Retiree benefits would not count towards the beneficiary's 
out-of-pocket limit, making it almost impossible for seniors with 
retiree coverage to ever reach the catastrophic cap. So the bill 
actually discriminates against seniors with existing coverage and will 
have the practical effect of employers ending their benefits. This 
provision makes no sense--why on earth do we want to have less private 
sector drug coverage?
  While I am disappointed with the underlying bill, I am pleased to see 
that the Rules Committee made the Dingell-Rangel substitute bill in 
order. This legislation would go a long way to fulfilling the promise I 
mentioned--it would provide a reliable, stable benefit under Medicare. 
Beneficiaries know exactly what they would pay--20 percent of drug 
costs up to $2000 in out-of-pocket costs with a defined premium of $25 
per month and a defined deductible of $100.
  Tonight, in this body, by passing H.R. 1 we could be bringing about 
the end of a program that served seniors so well. Instead, we should 
pass the Dingell-Rangel substitute. That is what seniors need and 
deserve.
  Ms. CHRISTENSEN. Mr. Speaker, I rise in strong opposition to the 
Republican prescription drug bill, and in favor of the Dingell/Rangel 
Substitute.
  We have been talking about a Medicare drug benefit for at least as 
long as I have been here--seven years. It is time to deliver. We owe it 
to our seniors who need it because their lives depend on it.
  I have longed for the day when all people living in this country have 
reliable, comprehensive insurance coverage. Today we can bring this 
within the reach of every person on Medicare.
  About 25 percent of my patients when I was in practice were on 
Medicare. Many could not get a full month's supply of medication 
because they could not afford it on their fixed income. We would try to 
make it up with samples, with medication that might not have been as 
effective but was within their price range, and better than nothing, 
and with a lot of prayer. It is probably the latter which got them 
through.
  The bill, H.R. 1, as usual comes with a good sounding name, but true 
to form it does nothing good at all. Instead, it misleads the older 
Americans who have been looking to us for help.
  We need a benefit that is truly a benefit--one that is affordable and 
fair--through a program they know, have used all along and trust;
  It needs to be available to all benies without having to navigate 
through the maze of managed care.
  And we need to make it reliable--no holes to fall through when they 
might need it most;
  No dropping them like hot potatoes like happened with Medicare + 
choice.
  Finally tonight, we have such a bill in the Democratic, Rangel/
Dingell substitute.
  In this bill, there are no slight of hands. What you see is what you 
get.
  And our plan strengthens Medicare, while the Republican plan would 
slowly kill it.
  No tricky numbers, no fancy words, just a simple, Medicare 
prescription drug plan. That is what the senior and disabled citizens 
have been asking for and that is what they deserve. It is what God-
willing; I hope I would have when I am on Medicare.
  I want for Medicare beneficiaries, who have played an important role 
in making this country what it is, and paved the way for all of us, and 
those who have special needs, what I want for my family and myself.
  The Democratic substitute, developed under the leadership of John 
Dingell and Charles Ringell, is the only bill before either body, which 
honors our seniors' gift to all of us.
  Let us do the right thing. Reject the Republican bill and pass the 
Democratic substitute.
  Mr. HINOJOSA. Mr. Speaker, I rise today in opposition to the 
Republican prescription drug bill. For years, our seniors have been 
begging for help to obtain affordable prescription drugs. 
Unfortunately, however, the bill before us today gives relief not to 
our vulnerable seniors, but to the large drug companies.
  It forces Medicare patients into multiple private drug plans and out 
of Medicare. It undercuts seniors' collective purchasing power and 
enables the drug industry to maintain its unjustifiably high prices.
  Seniors who live in rural and undeserved areas will find themselves 
without any coverage because insurance companies will not be required 
to serve them and are given no incentives to provide coverage. Because 
of a large coverage gap, over half of all seniors will still be 
required to pay thousands of dollars a year for prescription drugs as 
well as the program premiums.
  Hidden in this bill is also another provision that will change the 
way cancer patients are treated and subject them to delays and reduced 
access to care.
  By contrast, the Democratic plan offered by Mr. Rangel would provide 
voluntary prescription drug coverage for all Medicare beneficiaries. 
The plan curbs drug costs by allowing this Secretary to use the 
collective bargaining power of Medicare's 40 million beneficiaries to 
negotiate lower drug prices.
  I urge my colleagues to oppose the sham Republican proposal and 
support the Rangel substitute that provides real benefit to our 
Nation's seniors.
  Ms. MILLENDER-McDONALD. Mr. Speaker, I stand here with my colleagues 
tonight to talk about the need for affordable prescription drug 
coverage for women. Because women suffer more from chronic illnesses 
requiring medication than men do, they pay more out of pockets for 
medicine though their financial resources are often limited.
  The proposed House bill would fail to offer meaningful prescription 
drug coverage to the millions of low-income women with incomes below 
the 135 percent poverty level who do not meet the requirements of asset 
tests. Also, the House bill would raise the amount of co-payments that 
our country's poorest women Medicare beneficiaries are forced to pay.

[[Page H6110]]

  Unlike the House bill, the Senate proposal, while not perfect, would 
be far more helpful to elderly women who range from 74 to 160 percent 
of the poverty level. Under the House bill, the out-of-pocket costs 
paid by elderly women will still make it difficult for them to get 
their much-needed prescriptions filled. If the House bill is enacted, 
our struggling women seniors who are in greatest need of assistance 
will receive up to 40 percent fewer prescriptions than those seniors 
who are able to afford private insurance. Our elderly women, who are 
among our most vulnerable citizens, deserve far better treatment than 
this. It is critical that as Members of Congress, we help women and all 
seniors by expanding Medicare to offer a prescription drug benefit that 
is universal, affordable, dependable, and voluntary. We can do no less 
than to offer elderly women access to adequate healthcare that they can 
afford and easily access.
  Our Republican colleagues are offering a plan that gives no real 
guarantees or assistance to those who need quality prescription drug 
coverage the most.
  Furthermore, the House plan would force seniors to purchase their own 
private insurance, a tactic that will benefit insurance companies, and 
not seniors. This is a catastrophe we can avoid if we craft the right 
policy to benefit our elderly now. When it come to our elderly women, 
we know that:
  Women make up 58 percent of the Medicare population at age 65, and 71 
percent of the Medicare population at age 85.
  Overall, elderly women have more chronic health problems than elderly 
men do.
  On average, women live another 19 years after retirement, while men 
typically live another 15 years after retiring.
  Due to the obstacles they face in enrolling, almost half of elderly 
women with incomes under the poverty limit are not enrolled in 
Medicare.
  As compared to married women, widows are four times as likely, and 
divorced or single women are five times as likely to live in poverty 
upon retiring.
  Many elderly women survive on fixed incomes. Over half of the older 
women age 65 and above earn less than $10,000 annually, and three out 
of four earn under $15,000 yearly. In contrast to elderly men, older 
women age 65 and above earned $14,820 as compared to $26,543 for men in 
the same age group.
  Once retired, women earn less than men because:
  Women tend to save less than men do throughout their lives which 
decreases their lifetime earnings.
  Elderly women usually have smaller Social Security benefits and 
pension incomes than men do.
  Minority women are much more likely to earn less and live in poverty 
than are White women. Even when they have similar educational 
backgrounds, minority women tend to earn less money and own fewer 
assets.
  The sad fact is, the older and poorer a woman is, the higher her out-
of-pocket health care costs will be, and the more help an elderly woman 
requires, the less likely she is to receive assistance. As a nation, 
though we are facing a great economic crisis, we are still obligated to 
provide assistance to our most needy citizens. Let us take good care of 
our elderly women and men by not enacting a prescription drug policy 
that will force them to choose between either buying food or paying for 
necessary medication.
  Mr. COSTELLO. Mr. Speaker, I rise in strong opposition to H.R. 1, the 
Medicare Prescription Drug and Modernization Act of 2003. I recently 
informed over 70,000 seniors in my district that I would not support 
legislation that would fundamentally change the nature of Medicare and 
provide a prescription drug benefit that relies solely on insurance 
companies. I am opposing the bill because it does just that.
  Medicare has been a success because it provides guaranteed coverage 
for all elderly and disabled Americans. H.R. 1 would end Medicare as we 
know it and may particularly harm rural areas that depend on the 
traditional Medicare program. Beginning in 2010, H.R. 1 would force the 
Medicare fee-for-service program for doctors and hospitals visits to 
compete with private insurance plans. People who wanted to remain in 
traditional Medicare would find their premiums going up as other 
beneficiaries opted for bargain private insurance coverage. Seniors and 
the disabled would essentially be forced out of the traditional fee-
for-service program and into some form of managed care.
  In addition, the Republican approach does not guarantee the same 
benefits for all seniors. Seniors who live where hospitals and doctors 
negotiate lucrative contracts with managed care plans would have to pay 
more; seniors with higher incomes would have to pay more; seniors in 
rural areas would have fewer choices of doctors and pharmacies; and 
seniors with low incomes but with assets such as a savings account 
might get nothing at all. These provisions violate the central promise 
of Medicare: to provide a consistent, guaranteed benefit that allows 
everyone, no matter where they live, how much they have, or how sick 
they are, access to quality medical care.
  Finally, H.R. 1 is flawed because it offers seniors an inadequate 
prescription drug benefit. I support a voluntary prescription drug 
benefit paid for by Medicare. I am committee to providing a 
comprehensive benefit that is affordable and dependable for all 
beneficiaries with no gaps or gimmicks in its coverage. The Senate is 
currently working on a prescription drug bill that provides a 
government fallback provision, providing Americans with more of a 
reliable, consistent benefit. The Senate is moving in the right 
direction and I am hopeful, progress will continue to be made when this 
legislation goes to conference.
  H.R. 1 relies too heavily on the insurance industry to bring drug 
costs down and does not guarantee seniors access to the medicine 
prescribed by their doctor or that they can get prescriptions filled at 
their local pharmacy. Seniors deserve fair drug prices and a real, 
affordable prescription drug plan.
  Mr. Speaker, for these reasons, I oppose H.R. 1. I urge my colleagues 
to do the same.
  Mr. FILNER. Mr. Speaker, I rise today to discuss the prescription 
drug benefit proposal that my colleagues on the other side of the aisle 
have rammed through the legislative process. I rise to decry this bill 
because it does not give seniors what they deserve. It seems pretty 
simple to me: a prescription drug benefit under Medicare ought to work 
the same way that Medicare has always worked. That is, it is a 
guaranteed benefit for all seniors, no matter where they live, how ill 
they are, or what kind of illness they have.
  This bill proposes to turn the prescription drug benefit over to HMOs 
and the private insurance industry. That means, for one thing, that 
premium prices are not guaranteed--the insurance industry would be able 
to charge what ever they wanted for the premium. In addition, it would 
be the insurance companies that get to decide which drugs would be 
covered. What this means for seniors is that there will not be a 
consistent, reliable program for all seniors is that there will not be 
a consistent, reliable program for all seniors across the country. 
Seniors in my district might pay higher premiums and get less coverage 
than their counterparts in other areas of the country. Or, they may get 
better coverage for lower premiums. We just don't know because it will 
be left up to the private insurance companies and the HMOs.
  This bill also raises out-of-pocket costs for those who need the 
protection that Medicare had traditionally provided: the sickest and 
the poorest beneficiaries. In addition to the ``mystery'' premium, 
seniors will have to pay for the first $250 worth of drugs without any 
help from the Federal Government. After they have paid $250, they must 
pay 20 percent of all their drug costs. Once they reach $2,000 worth of 
medications, they must pay all of their drug costs until they reach 
$4,900 worth of drug costs. So, once they get to $2,000, in addition to 
the premium, the $250, the 20 percent copay, they must cover all of 
their prescription costs until they get to $4,900. That is quite a lot 
of money.
  Allowing HMOs and private insurance companies to take over the 
Medicare Prescription Drug benefit also presents a problem for rural 
areas. A very large portion of my district is rural. Everyone knows 
that for private companies, the bottom line rules. Rural areas aren't 
as profitable for insurance companies, so there is less incentive for 
them to offer benefits in those area. This means that there will be 
fewer choices--if any choices at all--for seniors in rural areas.
  In one fell swoop, this bill takes the great success story that is 
Medicare: Universal healthcare for all beneficiaries, and crushes it. 
Under this Republican bill, your benefits and your costs depend on your 
income, where you live and the whim of the insurance company or HMO 
that is running the program in your area.
  Mr. Speaker, I have received many letters and calls from my 
constituents who are worried about this proposal. They know that this 
proposal will cost them more money, may not even be available to them 
if they live in rural areas, and will not cover all their medication 
needs--especially for those with diabetes or even cancer. I will read 
one example from my constituent, Edna Monk:


[[Page H6111]]


       Dear Sir, I am writing my Senators and Representatives to 
     plead our case regarding Medicare proposals that could 
     endanger patent access to chemotherapy. I am a lung cancer 
     survivor, age 71, and my husband, age 78, is now undergoing 
     chemo, for liver cancer. Chemo drugs are required for my 
     husband's quality of life now and MRI's have shown the tumors 
     have diminished in size, so ``it's working!''

  She goes on to say, ``We in the cancer community want one thing: for 
all critical cancer services, including chemotherapy and patient care 
services to be covered fully and fairly by Medicare.''
  Mrs. Monk makes a good point. Services must be covered fully and 
fairly by Medicare. It does seniors no good to have unequal coverage of 
medications! That is why I cannot support the Republican bill and I 
urge my colleagues to vote against this poison pill for Medicare!
  Mr. PASTOR. Mr. Speaker, I rise today in opposition to the Medicare 
Prescription Drug and Modernization Act. This bill, long heralded by 
the Republicans and the Administration as a comprehensive overhaul of 
the Medicare system, will do nothing to alleviate the harsh effect on 
our seniors of the high cost of prescription drugs. It only will 
continue to aggravate the cause of health care inflation.
  Depsite all Republican claims to the contrary, the bill, which calls 
for private drug-only plans, would not make drugs affordable. It has no 
mechanism for keeping prices down, no negotiation for acceptable terms, 
no guarantee of defined and stable costs. Seniors would be at the mercy 
of private plans. They would lose their choice of doctors. They would 
be at risk of continuous coverage.
  Private plans would only have to promise to stay in the program for 
one year. We've had these problems before with the Medicare Plus Choice 
program which failed to deliver its expanded benefits, leaving millions 
of seniors out on a limb.
  Seniors have voiced their concerns. They fear the absence of 
provisions to limit drug prices and the lack of certainty about the 
future cost and coverage provided. Many seniors in rural areas are 
worried because they have no access to private plans and would have no 
``fallback'' to offer coverage. Seniors are particularly concerned with 
the ``gap-in-coverage'' that means no coverage at all for drug spending 
between $2,000 and $5,100.
  Instead of passing this plan which would privatize Medicare, we 
should support a plan that would establish a real Medicare prescription 
drug benefit within the Medicare program. The plan should be available 
to everyone regardless of income or place of residence. It should be 
voluntary and comprehensive. And, most importantly, it should be 
affordable.
  The Medicare Prescription Drug and Modernization Act fills none of 
these requirements. Therefore, Mr. Speaker, I vote ``no'' on H.R. 1.
  Ms. WOOLSEY. Mr. Speaker, this debate is a question of priorities, 
and it's a question of values. Under the Republican plan, after seniors 
have incurred $2,000 in prescription drug benefits, they will still pay 
a premium, but they better not expect anything in return. And why is 
that?
  It's because just last week, the Republican leadership decided that 
they would rather eliminate estate taxes for millionaires than help 
seniors afford prescription drugs. They insisted on spending a total of 
$820 billion to help 8,000 millionaires. For almost the same cost, we 
could give millions of seniors a real prescription drug benefit.
  Millionaires or millions of seniors? The Republicans give new meaning 
to the phrase ``better off dead.'' If you're rich and dead, Republicans 
don't want you to lose a dime. But if you're alive and can't afford the 
high cost of prescription drugs--well, good luck.
  You might want to be dead. I dare my Republican colleagues to tell 
their mothers what they're doing to Medicare.
  My priority is giving every American senior a real prescription drug 
benefit, like the one in the Democratic alternative. Oppose the 
Republican bill, support the Democratic alternative.
  Mr. OBERSTAR. Mr. Speaker, Medicare, the most successful social 
service program since Social Security, will be dramatically transformed 
and, in the long run, unraveled by this Republican bill we are debating 
tonight.
  Their plan will convert Medicare from a defined benefit plan to a 
defined contribution voucher plan. In plain English, it means that 
seniors will lose the guaranteed coverage and the security of knowing 
which benefits are covered. Instead of having predictability about 
Medicare premiums and copayments, seniors will essentially receive a 
voucher for services to cover the lowest-cost private insurance plan. 
If this plan does not pay for the services they need, seniors will have 
to cover the difference--which could be a big figure--out of their own 
meager income.
  As a result, this untested, speculative health care experiment 
threatens to abandon all seniors, especially rural seniors. The 
Republican bill replaces Medicare with an illusory promise that private 
health insurance companies will offer health insurance polices in rural 
America. Under current law, health insurance companies have found it 
unprofitable to offer policies in rural America; worse, the Republican 
plan does not guarantee that rural seniors will have access to the same 
benefits as seniors in metropolitan areas enjoy.
  Not only does this bill undermine Medicare, it fails to provide an 
affordable prescription drug benefit. I don't understand how the 
majority, on the one hand can justify trillion dollar tax cuts, and in 
the other hand, impose an arbitrary limit on Medicare and prescription 
drug benefits. To comply with this artificial limitation, the 
Republican plan offers a complicated and untested prescription drug 
benefit, with an enormous gap in coverage.
  The Republican plan is difficult to explain, but let me try: it 
begins with uncertain private health insurance premiums; then, seniors 
must pay a $250 deductible before they receive any assistance, and 
there is a large coverage gap, the ``hole'' in the doughnut, where 
seniors will be paying premiums but receiving no assistance at all. 
Seniors first have to spend $250 a year, then they will pay 20 percent 
co-insurance for up to $2,000 in drug costs. However, no assistance 
would be provided between $2,000 and $5,100 in drug spending, forcing 
seniors to pay $3,100 out-of-pocket in drug costs. This plan is as 
unfair as it is complicated and costly to older Americans living on 
fixed incomes.
  In contrast, the Democratic plan is guaranteed, defined, dependable, 
and understandable. It sets a premium of $25 a month; a $100 per year 
deductible; a 20 percent co-insurance payment for beneficiaries, with 
Medicare paying 80 percent; and a limit of $2,000 in out-of-pocket 
costs per beneficiary per year.
  Health care is essential in greater Minnesota. The hospitals in many 
small communities throughout northern and northeastern Minnesota are 
the major employer in town, and the health care they offer is critical 
for economic development and tourism. The Rangel/Dingell bill offers a 
substantial improvement in payments to the hospitals and doctors in 
rural Minnesota who provide those critical health care services.
  In particular, I am please that the Democratic Substitute includes 
numerous provisions to improve reimbursement for rural providers. The 
increased funding for low-volume, ``critical access'' and ``sole 
community'' hospitals, rural home health and ambulance providers, and 
rural physicians adds up to very significant improvements for hospitals 
in my district, and will assure their continued viability for years to 
come.
  To be specific, the Democratic bill eliminates the 35-mile rule 
presently in place for Critical Access Hospital ambulance services. 
That improvement would save the hospital in Ely, Minnesota, and would 
strengthen ambulance services at nine other Critical Access Hospitals 
in my district.
  The Democratic plan would provide an additional $6 billion for all 
rural ambulance providers by increasing payments for ambulance 
services. The increases we propose would ensure the financial solvency 
of St. Mary's Life Flight, enabling it to continue assisting, for 
example, people who are injured while vacationing in the Boundary 
Waters Canoe Area Wilderness.
  On the whole, rural health care providers plan are better served, 
better funded, and treated more fairly under the Democratic plan, which 
also has the advantage of preserving Medicare. For that reason, I will 
be supporting the Rangel/Dingell bill.
  Mr. BURR. Mr. Speaker, as vice chairman of the Energy and Commerce 
Committee and a member of the Health Subcommittee, I have worked on 
Medicare prescription drug legislation for more than four years. The 
House has passed Medicare prescription drug legislation twice and I 
voted for both bills.
  Mr. Speaker, I will not vote for this bill.
  The $400 billion allocated for the Medicare drug benefit is not being 
spent widely under this legislation. High-income Medicare beneficiaries 
like Warren Buffett are subsidized 73 percent by the Federal government 
for their drug-only insurance plans. Low-income seniors who are not 
dually eligible have no cost-sharing assistance for their drug spending 
between $2,000 and $3,500. The Secretary is commanded to negotiate with 
insurance companies who will game the system to receive a 99.99-percent 
subsidy when 73 percent would have been fine. Mr. Speaker, that's not a 
negotiation--the insurance company will hold all of the cards. No money 
is being spent on a fallback plan. Seniors in rural areas of North 
Carolina will not have drug coverage if insurance companies refuse to 
offer a plan, even when the companies are bribed with an almost no-risk 
contract. This bill would benefit insurance companies, not extend a 
benefit to our Nation's seniors.
  Yet insurance companies do not want any part of this legislation. For 
four years insurance companies have been telling Congress

[[Page H6112]]

that they do not want to insure Medicare beneficiaries' drug 
expenditures, but we keep throwing money at them in the hope that they 
will finally say yes. The premium subsidy used to be 67 percent, now it 
is 73 percent and Congress demands that it grow to 99.99 percent if 
need be. At the end of the day, who are we kidding? Of course it will 
be 99.99 percent.
  Our problem is that the Congressional Budget Office has written this 
bill. The last time I checked, Mr. Speaker, it was not the job of the 
Congressional Budget Office to write highly technical and important 
health care legislation. But policymakers are so convinced that a 
purely insurance-based product will work that they are willing to 
follow CBO's instructions and tweak the product one thousand different 
ways--and cut provider payments at the same time--to fit it under some 
magical budget ceiling. If CBO is wrong in its estimate, and this drug 
benefit costs more than $400 billion, our entire health care system 
will be at risk. This is not wise health care policy.
  Where do my colleagues think the extra money is going to come from? 
When CBO realizes that their estimated insurance penetration rate was 
off by 10 percent that money will come out of future physician, 
hospital, nursing home, and home health care reimbursement rates. If 
only 85 percent of seniors sign up for drug coverage and plans' 
subsidies skyrocket, that money will come out of Food and Drug 
Administration modernization efforts, National Institutes of Health 
research, and bioterrorism preparedness. Congress is working with a 
limited pot of money, but we are promising a defined benefit. 
Obviously, the experiences of the private sector have taught us 
nothing.
  If Congress listened to the private sector, we would mirror the 
success of defined contribution plans and individual empowerment by 
offering choice. Seniors could choose between twenty different discount 
drug cards based on the cards' formularies, pharmacy networks, and drug 
discounts. The government would set up accounts and contribute money to 
those accounts based on the seniors' needs. Seniors, their family 
members, friends, and former employers could put money into the 
accounts and receive a tax deduction. And insurance companies would 
offer catastrophic coverage that is subsidized by the federal 
government for low-income seniors. Unfortunately, that plan is not on 
the floor today.
  Mr. Speaker, I wanted to be able to come to the floor today and vote 
for a good Medicare prescription drug benefit because of the bills 
passed by the House in the last 3 years this one has the greatest 
chance of actually becoming law. But not only does this bill contain a 
bad drug benefit, it also contains a cut in the overall hospital market 
basket update, a new home health copayment, multiple reimportantion 
provisions that will harm our Nation's drug supply, and a reduction in 
the overall reimbursement rate for physicians such as oncologists and 
rheumatologists who administer Part B drugs. It also constitutes a 
threat to the very future of our health care system.
  I can only compare my feelings today to my experience in 1997, when I 
voted against the Balanced Budget Act. I was one of only 32 Republicans 
who opposed that bill. I came to Congress to balance the federal 
budget, but in the end I could not vote for the legislation because of 
the drastic and thoughtless cuts in Medicare reimbursements. Since 
1997, Congress has done nothing substantive in Medicare except try to 
fix the damage done under the BBA. I cannot support this legislation 
that builds on and magnifies those 6-year-old mistakes.
  I regret that I cannot and will not vote for this legislation.
  Mr. UDALL of Colorado. Mr. Speaker, I want to support a Medicare 
prescription drug bill, but I can't support the one we are considering 
today. It is inadequate, unreliable, will force seniors into HMOs, and 
will endanger drug benefits that many seniors get through their 
retirement plans. In fact, instead of drafting a Medicare drug benefit 
bill, the Republican Majority has used this opportunity to try to end 
Medicare as we know it.
  I have long believed that Congress should act to help seniors with 
their prescription drug expenses. Nearly everyone agrees that Medicare 
should be updated with a drug benefit; it is the right and sensible 
thing to do. How we design that benefit is where the rub is. I had 
hoped that we would vote on a bill similar to the one in the Senate 
because I think it's a good start toward building a workable, 
financially sound prescription drug benefit. But the House bill is not 
the same as the Senate bill.
  First, I think Congress should give seniors greater choice in 
coverage, however, it should provide an equal prescription drug benefit 
to all beneficiaries, regardless of whether they enroll in a private 
health plan or traditional fee-for-service Medicare. We shouldn't force 
seniors into managed care, which I believe this bill will do by opening 
the traditional Medicare program up to competitive bidding against 
private insurers in 2010.
  Second, the House bill does not include an important ``fallback'' 
provision that requires that traditional Medicare would step in as a 
backup if private insurers show no interest in selling drug plans in a 
particular area. Currently, private plans don't exist in many parts of 
the country, including many smaller cities, rural and mountain areas in 
Colorado. I've heard from many seniors in my district who have been 
dropped from their Medicare HMO and are now having trouble finding a 
doctor. In addition, 88 percent of all Medicare beneficiaries are 
enrolled in traditional Medicare. So, without this ``fallback'' safety 
net provision, seniors would have no coverage in regions where insurers 
say it's unprofitable to provide it, especially rural areas.
  Taken together, I think these provisions undermine the traditional 
Medicare program. By opening traditional Medicare to competitive 
bidding and with no fallback mechanism, I fear that our country will 
revert to the time before Medicare was established in 1965 when private 
insurers wouldn't provide affordable coverage to seniors. That's a step 
backward, not a step forward, in fixing Medicare.
  I also have problems with the home health copayment provision in the 
bill, which I believe will discourage seniors from accessing home 
health care, which is more cost effective than accessing treatment an 
emergency room or a skilled nursing facility. And I am concerned that 
opening durable medical equipment to competitive bidding will give 
seniors less choice and put many small businesses out of business.
  On top of everything, this 692-page bill was introduced at midnight 
last night. How can anyone know what's in it, except the people who 
wrote it? Our seniors deserve greater respect.
  Mr. Speaker, it is misguided at best that Medicare will pay for a 
senior's care following a stroke but will not pay for the anti-
hypertension drugs that prevent them. The time is ripe to pass a 
Medicare prescription drug benefit, but not this one. I regret I can't 
support it. I hope that a bill can be worked out in conference that I 
can support. We need to put ideological and partisan politics aside and 
get it done this year.
  Mr. CROWLEY. Mr. Speaker, I rise in support of the Democratic 
substitute because this bill meets the 4 basic tenets that any 
prescription drug plan under Medicare should absolutely provide for.
  First, it means lower drug prices. The House Democratic bill allows 
HHS to negotiate lower drug prices. The Republican bill, unfortunately, 
does not.
  Second, this bill guarantees coverage under Medicare.
  Because of this, a senior knows what his premium, cost-sharing level, 
and catastrophic coverage is. The Republican bill has no such 
guarantees.
  Third, this bill provides coverage for all drugs prescribed by a 
doctor. Under the Republican bill, a payer could deny coverage for a 
drug if the payer decides to not include it in its formulary.
  Fourth, this bill has no gaps in coverage. Under the Democratic plan, 
when a senior has spent $2,000 on drugs, the government picks up the 
remaining costs.
  When a senior has spent $2,000 under the Republican plan, they're 
dropped. They get zero coverage until they've spent $4,900.
  The Republican bill does not simply have one big problem. It has 
several huge problems.
  Only the Democratic substitute provides seniors in my district 
guaranteed, quality coverage. I urge an ``aye'' vote.
  Mr. BUYER. Mr. Speaker, I rise in opposition to the bill, H.R. 1, the 
Medicare Prescription Drug and Modernization Act.
  I fully support the effort to provide prescription drug coverage to 
Medicare beneficiaries. The successes in modern medicine that we see 
today can be partly attributed to the advent of safer and more 
effective pharmaceutical drug therapy. Illnesses and serious diseases 
that often required hospitalization 40 years ago, when Medicare was 
created, can now be treated with outpatient care and pharmaceuticals. 
This is a testament to the many scientists in numerous companies that 
toil daily to find compounds to treat and manage disease. The 
pharmaceutical industry is a testament to the free market system of the 
United States that rewards hard work, initiative, and enterprise. As 
the great minds of the world push the bounds of modern science, new 
discoveries in pharmacology lead to the betterment of mankind.
  While H.R. 1 has some positive features, including addressing medical 
doctor and dentist provider reimbursement concerns and regulatory 
impediments, an insurance product built and guaranteed by the 
government is not the approach to provide a drug benefit under 
Medicare.
  And, make no mistake, we MUST get it right. I have serious levels of 
concern.
  First, the legislation before us has the government assuming 73 
percent of the risk of offering the insurance, 43 percent of the 
initial

[[Page H6113]]

benefit and 30 percent of reinsurance retrospectively. This is the 
floor! We must all understand that the taxpayer's exposure to risk can 
only increase. The bill permits the government to assume more risk, up 
to 99.9 percent if it is necessary to entice an insurance product into 
a region. And this is an unknown factor. We simply do not, nor cannot, 
know what this provision will cost the taxpayers.
  Today, Medicare already consumes nearly 12 percent of the federal 
budget. It is expected to be 30 percent or 35 percent of the federal 
budget in 2030 without the addition of prescription drugs, or any other 
benefit. It is irresponsible of this Congress to simply add a 
prescription drug benefit without also addressing the budgetary impact 
of this benefit. H.R. 1 leaves the federal budget and the taxpayers 
exposed to unknown expenditure levels in the future. I do not believe 
that this drug bill will remain within the proposed budget of $400 
billion over the next 10 years.
  Second, there is no provision in the House bill on how to provide a 
benefit to seniors in areas where two insurance products are not 
available in January 2006. It is simply neither realistic, nor fair, 
for seniors in one region to have products available and seniors in 
another region to not have choice because two plans have not been 
forthcoming.
  Furthermore, I am adamantly opposed to the proposal by some, 
especially in the other body, that the government provide this 
coverage. This will only lead to the government determining what 
prescription drugs a senior can have and ultimately the imposition of 
price controls that will have a chilling effect upon research and 
development of pharmaceutical therapies.
  Third, the premium charged to seniors for the drug-only insurance 
plan is estimated to be $35 per year initially. This premium number is 
not found in the bill--it is an estimate by the Congressional Budget 
Office. What if it is more? Will seniors decide that this premium is 
worth the benefit they will receive under a drug insurance plan? There 
will be a great deal of kitchen table math being done by seniors in 
2005 to decide whether this new benefit meets their drug needs and 
their wallet realities.
  I am also concerned about a number of modifications made under the 
bill to reimbursement for providers and to the last minute inclusion of 
language regarding the Patent Term Restoration Act, the so-called 
Hatch-Waxman legislation. Although some very necessary provider 
reimbursement changes were made in the bill, particurlary regarding 
doctors and rural areas, nonetheless, I am concerned about the changes 
to the market basket update for hospitals, as well as the changes to 
skilled nursing facilities and home health care providers. In addition, 
I share the concern of others regarding the sufficiency of the 
reimbursement to oncologists. It is very true that the Congress needed 
to address the use of the ``average wholesale price,'' which was 
neither average nor wholesale, and left Medicare beneficiaries paying 
20 percent of an inflated drug price, but oncologists need to be 
reasonably compensated for the level of care they provide to Medicare 
patients. I am not convinced that this has been sufficiently addressed.
  I also have grave reservations over the inclusion of provisions 
regarding patent term and generic drugs, the changes to the Hatch-
Waxman law. Initiating more litigation of patent rights is not 
conducive to encouraging innovation in pharmaceuticals. Unfortunately, 
this is exactly what this provision will do.
  The vast majority of seniors have drug coverage today through either 
an existing government program or through the private sector. However, 
27 percent of seniors have nothing. These seniors pay the highest 
prices when they go to the pharmacy because they have no means to 
bargain for lower costs. These seniors also tend to be those between 
100 percent and 175 percent of the federal poverty level (FPL). A 
Medicare drug benefit should not displace existing coverage and should 
address the needs of those seniors who do not have coverage.
  The government should encourage employers, families and others to 
help seniors with the purchase of expensive prescription drugs. It is 
time that we admit that no proposal that comes to the House floor that 
meets the budget requirements will fully address all the prescription 
drug requirements of seniors. Every plan will have a ``so-called donut 
hole.'' There should be a way to tackle this without putting our heads 
in the sand and expecting it to simply ``work out.''
  We live by a system of checks and balances. We run into the 
limitations with everything that we do. How can we then create a system 
that is dependent upon the unknown? The government's assistance to 
beneficiaries should be a defined contribution. This type of benefit 
would be manageable and known.

  I am committed to providing a prescription drug benefit for seniors. 
Seniors should have access to the same mechanisms that are available in 
the private sector to drive down costs and improve health care 
services.
  Along with four of my colleagues on the Energy and Commerce 
Committee, we submitted legislation, that would address these issues 
and provide a prescription drug benefit under Medicare. I testified 
before the Rules Committee to request a vote on our bill. The request 
was denied. This benefit would have been delivered through a 
prescription drug discount, or value, card that would be available to 
all seniors on a voluntary basis for an annual $30 fee. This is an 
approach that has been recommended by the President.
  Any entity qualified by the Centers for Medicare and Medicaid 
Services could offer a drug value card to seniors. Card issuers would 
negotiate with pharmaceutical manufacturers for discounts on drug 
utilizing the same techniques that are found in the marketplace today. 
These discounts would range from 15 percent to 35 percent of current 
retail prices. The competition among these card issuers would result in 
attractive offerings to beneficiaries.
  Recognizing that some beneficiaries need financial assistance to pay 
for prescription drugs, this legislation would tie the drug value card 
to an account to which the federal government would provide assistance 
related to the income of the beneficiary. Others could add 
contributions on a tax preferred basis up to $5,000 for a beneficiary 
and family; and $5,000 for an employer. Non-profit organizations, like 
local churches, and State pharmaceutical assistance programs could add 
contributions to the accounts. Contributions on the accounts would roll 
over from year to year.
  Protection from catastrophic drug expenses would also be offered at 
$10,000 through the private sector, with federal subsidies on the 
premium for those with low incomes.
  In my opinion, this delivery mechanism for a prescription drug 
benefit works best for the beneficiary, and best for the taxpayers. 
Beneficiaries would have access to negotiated discounts and some 
financial assistance to buy drugs. The taxpayers would have a defined 
contribution that could be planned from year to year in the federal 
budget.
  My colleagues, this has been a long road for us all. But, it is 
nothing compared to what could happen if Congress gets this wrong. 
Please be mindful of our obligations to our nation, not just to 
seniors.
  It is my opinion that Congress needs to grasp this opportunity to 
provide a prescription drug benefit with a full appreciation of the 
duty and responsibility this nation has to our seniors, taxpayers, and 
future generations. To do anything less, we break the trust of all 
Americans.
  Because the margin for error is so thin, my hope is that the majority 
is right. However, my intellect and instincts tell me that this bill 
will not fulfill the desired result. I must vote against final passage 
of this measure.
  Mr. PAUL. Mr. Speaker, while there is little debate about the need to 
update and modernize the Medicare system to allow seniors to use 
Medicare funds for prescription drugs, there is much debate about the 
proper means to achieve this end. However, much of that debate is 
phony, since neither H.R. 1 nor the alternative allows seniors the 
ability to control their own health care. Both plans give a large 
bureaucracy the power to determine which prescription drugs senior 
citizens can receive. Under both plans, federal spending and control 
over health care will rise dramatically. The only difference is that 
the alternative puts seniors under the total control of the federal 
bureaucracy, while H.R. 1 shares this power with ``private'' health 
maintenance organizations and insurance companies. No wonder supporters 
of nationalized health care are celebrating the greatest expansion of 
federal control over health care since the Great Society.
  I am pleased that the drafters of H.R. 1 incorporate regulatory 
relief legislation, which I have supported in the past, into the bill. 
This will help relieve some of the tremendous regulatory burden imposed 
on health care providers by the Federal Government. I am also pleased 
that H.R. 1 contains several good provisions addressing the 
congressionally-created crisis in rural health and attempts to ensure 
that physicians are fairly reimbursed by the Medicare system.
  However, Mr. Speaker, at the heart of this legislation is a fatally 
flawed plan that will fail to provide seniors access to the 
pharmaceuticals of their choice. H.R. 1 provides seniors a choice 
between staying in traditionally Medicare or joining an HMO or a 
Preferred Provider Organization (PPO). No matter which option the 
senior selects, choices about which pharmaceuticals are available to 
seniors will be made by a public or private sector bureaucrat. 
Furthermore, the bureaucrats will have poor to determine the aggregate 
prices charged to the plans. Being forced to choose between types of 
bureaucrats is not choice.
  Thus, in order to get any help with their prescription drug costs, 
seniors have to relinquish their ability to choose the type of 
prescriptions that meet their own individual needs! The inevitable 
result of this process will be rationing,

[[Page H6114]]

as Medicare and/or HMO bureaucrats attempt to control costs by reducing 
the reimbursements paid to pharmacists to below-market levels (thus 
causing pharmacists to refuse to participate in Medicare), and 
restricting the type of pharmacies seniors may use in the name of 
``cost effectiveness.'' Bureaucrats may even go so far as to forbid 
seniors from using their own money to purchase Medicare-covered 
pharmaceuticals. I remind may colleagues that today the federal 
government prohibits seniors from using their own money to obtain 
health care services that differ from those ``approved'' of by the 
Medicare bureaucracy!
  This bill is even more pernicious when one realizes that this plan 
provides a perverse incentive for private plans to dump seniors into 
the government plans. In what is likely to be a futile effort to 
prevent this from happening, H.R. 1 extends federal subsidies to 
private insurers to bribe them to keep providing private drug coverage 
to senior citizens. However, the Joint Economic Committee has estimated 
that nearly 40 percent of private plans that currently provide 
prescription drug coverage to seniors will stop providing such coverage 
if this plan is enacted. This number is certain to skyrocket once the 
pharmaceutical companies begin passing on any losses caused by Medicare 
price controls to private plans.
  Furthermore, these private plans will be subject to government 
regulations. Thus, even seniors who are able to maintain their private 
coverage will fall under federal control. Thus, H.R. 1 will reduce the 
access of many seniors to the prescription drugs of their choice!
  Setting up a system where by many of those currently receiving 
private coverage are hired into the government program exacerbates one 
of the major problems with this bill: it hastens the bankruptcy of the 
Medicare program and the federal government. According to Medicare 
Trustee, and professor of economics at Texas A&M University, Tom 
Saving, the costs of this bill could eventually amount to two-thirds of 
the current public-held debt of $3.8 trillion! Of course, estimates 
such as this often widely underestimate the costs of government 
programs. For example, in 1965, the government estimate that the 
Medicare Part B hospitalization program would cost $9 billion in 1990, 
but Medicare Part B costs $66 billion in 1990!

  This new spending comes on top of recent increases in spending for 
``homeland security,'' foreign aid, federal education programs, and new 
welfare initiatives, such as those transforming churches into agents of 
the welfare state. In addition we have launched a seemingly endless 
program of global reconstruction to spread ``democratic capitalism.'' 
The need to limit spending is never seriously discussed: it is simply 
assumed that Congress can spend whatever it wants and rely on the 
Federal Reserve to bail us out of trouble. This is a prescription for 
disaster.
  At the least, we should be debating whether to spend on warfare or 
welfare and choosing between corporate welfare and welfare for the poor 
instead of simply increasing spending on every program. While I would 
much rather spend federal monies on prescription drugs then another 
unconstitutional war, increasing spending on any program without 
corresponding spending reductions endangers our nation's economic 
future.
  Congress further exacerbates the fiscal problems created by this bill 
by failing to take any steps to reform the government policies 
responsible for the skyrocketing costs of prescription drugs. Congress 
should help all Americans by reforming federal patent laws and FDA 
policies, which provide certain large pharmaceutical companies a 
government-granted monopoly over pharmaceutical products. Perhaps the 
most important thing Congress can do to reduce pharmaceutical policies 
is liberalize the regulations surrounding the reimportation of FDA-
Approved pharmaceuticals.
  As a representative of an area near the Texas-Mexico border, I often 
hear from angry constituents who cannot purchase inexpensive quality 
imported pharmaceuticals in their local drug store. Some of these 
constituents regularly travel to Mexico on their own to purchase 
pharmaceuticals. It is an outrage that my constituents are being denied 
the opportunity to benefit from a true free market in pharmaceuticals 
by their own government.
  Supporters of H.R. 1 claim that this bill does liberalize the rules 
governing the importation of prescription drugs. However, H.R. 1's 
importation provision allows the Secretary of Health and Human Services 
to arbitrarily restrict the ability of American consumers to import 
prescription drugs--and HHS Secretary Thompson has already gone on 
record as determined to do all he can to block a free trade in 
pharmaceuticals! Thus, the importation language in H.R. 1 is a 
smokescreen designed to fool the gullible into thinking Congress is 
acting to create a free market in pharmaceuticals.
  The alternative suffers from the same flaws, and will have the same 
(if not worse) negative consequences for seniors as will H.R. 1. There 
are only two differences between the two: First, under the alternative, 
seniors will not be able to choice to have a federally subsidized HMO 
bureaucrat deny them their choice of prescription drugs; instead, 
seniors will have to accept the control of bureaucrats at the Center 
for Medicare and Medicaid Services (CMS). Second, the alternative is 
even more fiscally irresponsible than H.R. 1.
  Mr. Speaker, our seniors deserve better than a ``choice'' between 
whether a private or a public sector bureaucrat will control their 
health care. Meaningful prescription drug legislation should be based 
on the principles of maximum choice and flexibility for senior 
citizens. For example, my H.R. 1617 provides seniors the ability to use 
Medicare dollars to cover the costs of prescription drugs in a manner 
that increases seniors' control over their own health care.
  H.R. 1617 removes the numerical limitations and sunset provisions in 
the Medicare Medical Savings Accounts (MSA) program. Medicare MSAs 
consist of a special saving account containing Medicare funds for 
seniors to use for their routine medical expenses, including 
prescription drug costs. Unlike the plans contained in H.R. 4504, and 
the Democratic alternative, Medicare MSAs allow seniors to use Medicare 
funds to obtain the prescription drugs that fit their unique needs. 
Medicare MSAs also allow seniors to use Medicare funds for other 
services not available under traditional Medicare, such as mammograms.
  Medicare MSAs will also ensure that seniors have access to a wide 
variety of health care services by minimizing the role of the federal 
bureaucracy. As many of my colleagues know, an increasing number of 
health care providers have withdrawn from the Medicare program because 
of the paperwork burden and constant interference with their practice 
by bureaucrats from the Center for Medicare and Medicaid Services. The 
MSA program frees seniors and providers from this burden, thus making 
it more likely that quality providers will remain in the Medicare 
program!
  There are claims that this bill provides seniors access to MSAs. It 
is true that this bill lifts the numerical caps on Medicare MSAs; 
however, it also imposes price controls and bureaucratic requirements 
on MSA programs. Thus, the MSAs contained in this bill do nothing to 
free seniors and health care providers from third party control of 
health care decisions!
  Mr. Speaker, seniors should not be treated like children by the 
federal government and told what health care services they can and 
cannot have. We in Congress have a duty to preserve and protect the 
Medicare trust fund. We must keep the promise to America's seniors and 
working Americans, whose taxes finance Medicare, that they will have 
quality health care in their golden years. However, we also have a duty 
to make sure that seniors can get the health care that suits their 
needs, instead of being forced into a cookie cutter program designed by 
Washington, DC-based bureaucrats! Medicare MSAs are a good first step 
toward allowing seniors the freedom to control their own health care.
  Finally, Mr. Speaker, I would like to comment on the procedure under 
which this will was brought before the House. Last week, the committees 
with jurisdiction passed two separate, but similar Medicare 
prescription drug bills. In the middle of last night, the two bills 
were merged to produce H.R. 1. The bills reported out of Committee were 
each less than 400 pages, yet the bill we are voting on today is 692 
pages. So in the middle of the night, the bill mysteriously doubled in 
size! Once again, members are asked to vote on a significant piece of 
legislation with far reaching effects on the American people without 
having had the chance to read, study, or even see major portions of the 
bill.
  In conclusion, Mr. Speaker, both H.R. 1 and the alternative force 
seniors to cede control over which prescription medicines they may 
receive. The only difference between them is that H.R. 1 gives 
federally funded HMO bureaucrats control over seniors' prescription 
drugs, whereas the alternative gives government functionaries the power 
to tell seniors which prescription drug they can (and can't) have. 
Congress can, and must, do better for our Nation's seniors, by 
rejecting this command-and-control approach. Instead, Congress should 
give seniors the ability to use Medicare funds to pay for the 
prescription drugs of their choice by passing my legislation that gives 
all seniors access to Medicare Medical Savings Accounts.
  Mr. THORNBERRY. Mr. Speaker, health care is an important but complex 
issue for Congress and for America's seniors. Two facts, however, seem 
clear:
  One fact is that Medicare is currently headed toward financial 
collapse. The last report of the Medicare trustees shows that in nine 
years the income of the Medicare trust fund will not be enough to cover 
its expenses. After that, the problem gets much worse with the 
retirement of the baby boom generation.
  A second clear fact is that Medicare was enacted in 1965 and has been 
largely unchanged since then. It does not reflect modern

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medical practices, including our reliance upon prescription drugs. If 
we were designing a new federal health care program for seniors today--
rather than in 1965 when Medicare was created--we would unquestionably 
include some form of prescription drug coverage.
  Our objective then should be to update and strengthen Medicare so 
that it does a better job of providing health care for seniors and at 
the same time put Medicare on a sound financial footing so that it can 
be sustained through the baby boom generation retirement.
  This bill takes some steps in that direction. It contains some 
reforms that improve Medicare and give beneficiaries more control over 
their health care. It also adds prescription drug coverage, and there 
are too many seniors in my district who are not able to afford the 
prescription medicines they need, forcing them either to do without and 
become sick or to sacrifice other necessities of life.
  I am gravely concerned, however, that the reforms take too long to 
implement and that the new drug benefit will cost far more than 
expected. Without changes, this bill may add a major new benefit to 
Medicare but, at the same time, hasten the day of its financial 
collapse.
  At the same time if we do nothing, we are guaranteeing that Medicare 
will not survive for long. The alternative proposals are far more 
expensive and are fiscally irresponsible.
  I have other concerns with this bill, such as the reductions in 
payments for cancer treatments. Today, however, I will vote to send the 
House bill to conference with the Senate. I strongly urge that 
improvements be made to ensure Medicare solvency and to improve the 
quality of health care for America's seniors. We can do better. If 
improvements are not made, I will not be able to support the final 
conference report.
  Mr. KIND. Mr. Speaker, providing affordable Medicare prescription 
drug coverage for our nation's seniors is one of the most pressing 
issues facing our country today. Even though the elderly use the most 
prescriptions, more than 75 percent of seniors on Medicare lack 
reliable drug coverage. It is time to modernize Medicare to reflect our 
current health care delivery system. The use of prescription 
medications is as important today as the use of hospital beds was in 
1965 when Medicare was created.
  I have heard from a number of seniors in western Wisconsin regarding 
the problems they have paying for prescription drugs. One woman from 
Deer Park, Wisconsin, a small town in my district, wrote to me and 
said:
  My medication is $135.00 per month. Fortunately my husband is not on 
any medication. If we both were not working part-time, I guess that we 
would have to make a choice between food and Medication--does one eat 
to survive or take the medication for a ``long and happy life''?
  What is to happen to this couple if the husband falls ill and has 
high drug costs too?
  The cost of prescription medicines should not place financial strains 
on seniors that would force them to choose between buying drugs and 
buying food. We need to make prescription medicines affordable and 
accessible to all of our seniors.
  I came to Congress to work toward a real solution to this problem. 
Unfortunately, today's debate is a sham. We will not have the 
opportunity to discuss this issue in a fair and open process. There 
were several alternatives presented at the Rules Committee late last 
night and they should be debated on the floor today. The majority, 
however, chose to dedicate only one day to this debate and allowed only 
one alternative and no amendments to be made in order. Our Nation's 
seniors deserve better. They deserve an open process, but the 
Republican leadership has failed to deliver this.
  The Leadership has also failed seniors with their prescription drug 
proposal. The Republican plan is doomed to fail because the plan relies 
on health insurance companies to offer drug only policies which they 
have said they won't offer. Further, there is no fall back option. So, 
if insurance companies won't offer these policies, how will seniors 
actually obtain prescription drug coverage under the leadership plan?
  Providing a drug benefit through private plans could be problematic, 
specifically for folks living in rural and small communities. There are 
no requirements as to what has to be covered and the coverage may vary 
from area to area depending on the plan. Because is there is no 
guaranteed benefit, Wisconsin may end up on the short end of the stick 
like we have in the past under Medicare.
  The biggest problem with the leadership bill is the fact that it will 
fully privatize Medicare in 2010. This is a radical provision that will 
be the demise of the traditional Medicare program on which our seniors 
have depended for nearly 40 years. In 2010, seniors will be given a 
lump sum to purchase health isuruance, including traditional Medicare. 
There is concern that the healthy seniors will leave traditional 
Medicare and the premiums will increase dramatically, up to 47 percent. 
In addition, under the leadership bill, each local area will have a 
different premium for fee-for-service Medicare. For example, seniors in 
Wisconsin might have to pay more to enroll in fee-for-service Medicare 
than seniors in Florida. This is a drastic departure from Medicare's 
fundamental principle that seniors across the country pay the same 
premium for the fee-for-service benefit.
  We must provide a real solution to the problem of prescription drug 
coverage for our seniors. The Republican plan falls woefully short.
  All of the Democratic alternatives offered at the Rules Committee 
would be better than the leadership bill. One proposal, the Medicare Rx 
NOW Act, is a simple straightforward plan that provides assistance to 
the seniors most in need, those with low incomes and seniors with high 
drug costs. This proposal builds on the Medicare program seniors know 
and provides them with a guaranteed benefit for no additional premium.
  Another proposal put forward by the Blue Dogs is based on the 
bipartisan Senate bill. Unlike the House bill, this proposal includes a 
fall back provision to ensure that all seniors would have access to a 
prescription drug plan. In addition, this bill does not include the 
privatization components of the leadership plan.
  In addition, both of these alternatives provide substantial 
improvements to Medicare payments for rural providers. Both pieces of 
legislation include equalizing the disproportionate share hospital 
payments for rural hospitals, an increase in the bed limit for critical 
access hospitals, and a geographic adjustment for rural physicians. 
None of these provisions are included in the leadership's bill.
  It is unfortunate that the Republican leadership has squandered an 
excellent opportunity to try and solve the problem of prescription drug 
coverage in a bipartisan fashion. Instead they have steamrolled ahead 
and present our nation's seniors with an unworkable solution to a grave 
problem. I urge my colleagues to reject this flawed proposal.
  Mr. RAMSTAD. Mr. Speaker, I rise in strong support of the Medicare 
Prescription Drug and Modernization Act.
  Today is an historic day. Congress is finally delivering on our 
promise to create a meaningful and long overdue prescription drug 
benefit for Medicare seniors and people with disabilities.
  This bill means seniors will no longer have to choose between 
purchasing life-savings drugs or the basic necessities of food and 
housing.
  In addition to this important new prescription drug benefit, the bill 
modernizes and improves Medicare to give seniors better choices and 
greater access to state-of-the-art health care.
  I am grateful for the many important provisions in this package from 
my Medicare Innovation Responsiveness Act (H.R. 941), which will 
increase seniors' access to lifesaving medical technology.
  As founder and co-chair of the Medical Technology Caucus, I have seen 
first-hand the incredible advances that medical technology and 
prescription drugs have made to treat and cure debilitating conditions. 
The current Medicare system is crying out for reform with its failure 
to incorporate these critical improvements.
  Currently, seniors and people with disabilities face unconscionable 
delays of up to five years before Medicare provides access to 
technology that can literally be a matter of life or death.
  The bill before us incorporates many of the reforms I have proposed 
in Medicare's coverage, coding and payment process that will speed 
access to lifesaving technology.
  Thanks to this legislation, we are finally tearing down barriers that 
discourage innovation and deny America's seniors the medical 
technologies they desperately need. Seniors have waited too long for 
access to the same treatment options as other Americans.
  In addition to the excellent work and leadership of Chairman Thomas 
and Chairman Johnson, I want to thank two unsung staff heroes--John 
McManus and Deb Williams--who have worked so tirelessly on these 
provisions.
  I am also pleased the bill includes H.R. 841, legislation I 
introduced with Mr. Cardin to break down regulatory barriers facing 
specialized Medicare+Choice plans that serve the frail elderly.
  Mr. Speaker, this package of reforms will improve the lives of our 
seniors and generations to come who count on Medicare. I urge my 
colleagues to support this landmark legislation and deliver on our 
promise to modernize and strengthen Medicare.
  Mr. BACA. Mr. Speaker, I rise in opposition to H.R. 1, the Medicare 
Prescription Drug & Modernization Act of 2003.
  This Republican plan is bad for seniors! It's bad for Hispanics! And 
it's simply bad for the American people!
  For millions of Americans, this plan will replace traditional 
Medicare with vouchers that won't guarantee benefits.
  It forces seniors into risky HMO plans and new private fee-for-
service plans that will not cover all of seniors' costs!

[[Page H6116]]

  Forty-seven percent of seniors in Medicare will have a $1,900 gap in 
their drug coverage. How are our seniors supposed to make up for that 
gap?
  How are our parents and grandparents going to afford that! Most 
seniors are on fixed incomes with nothing to spare!
  Forty percent of poor and disabled seniors won't get the additional 
help they need to pay deductibles and premiums. 40 percent.
  This plan will not give taxpaying pregnant women and children 
benefits!
  It will not help the twenty million Hispanics without Health 
insurance!
  And it will not help our parents and grandparents pay for their 
medicines!
  We must take care of our seniors! We must not gamble with their 
health and well-being. Seniors deserve to be protected in a safe and 
fair healthcare plan.
  In my district, San Bernardino, California, seniors are boarding 
buses to Tijuana so they can afford to buy prescription drugs.
  Our seniors have to go all the way to Mexico to get the life-saving 
medicine they need. Mexico!
  This is not safe and it is not fair.
  I am angered when I think about all of the people that the 
Republicans are leaving behind in this plan!
  Why are we letting this happen to our abuelos? Our parents and 
grandparents? How can we be so heartless?
  When I think about this plan, I think about all of the seniors who 
can't afford life saving prescription drugs.
  I think about the senior who has glaucoma and prostate cancer and 
makes only $8,000 a year.
  Like 750,000 other Hispanics, he won't get help paying for his 
prescription drugs, because he is lucky enough to have assets and owns 
a car.
  According to Republicans, that is wealthy!
  They will give tax breaks to millionaires, but under their plan, a 
man who makes $8,000 a year and is lucky enough to own a car, is too 
wealthy to get medicines that will ease his pain and save his life!
  This is an outrage!
  Under the Republican plan he would have to sell his car and pass an 
assets test to be poor enough to receive aide for low-income seniors.
  When I think about this plan, I think about the senior who might make 
$10,000 a year.
  That senior will pay one-fifth of his or her income to cover the 
Republican coverage gap.
  One-fifth! This won't get him off the bus to Tijuana!
  Like 63 percent of Americans, seniors in my district want and need 
the security of Medicare.
  Under the Republican plan they may start in Medicare.
  But after a couple of years, Medicare will only be a voucher program 
and where will seniors be?
  In an HMO plan and still in a pharmacy in Tijuana buying medicine.
  My constituents deserve better than the Republican plan!
  They deserve more!
  They deserve the Democratic plan that we have been fighting for for 
years!
  A plan that cares about the health and safety of America's seniors!
  A plan that actually works for America's seniors!
  A plan that offers coverage to all seniors--even Hispanics!
  It's time to take seniors off the bus to Tijuana!
  Mr. MICHAUD. Mr. Speaker, tonight the House of Representatives 
considered a plan that would supposedly create a Medicare prescription 
drug benefit. While some touted the plan as an innovative approach, the 
fact is that when you look past the smoke and mirrors, it turns out to 
be a very bad deal for Maine's seniors. In fact, the House plan could 
make the current situation for seniors a lot worse: it will do nothing 
to control rising prescription costs, it will jeopardize the 
traditional Medicare fee-for-service plan that seniors enjoy right now, 
it has a large gap in coverage that will force seniors to pay thousands 
of dollars out of their pockets, and it may cause employers to drop 
their health coverage.
  We all know that drug prices are spiraling out of control. Maine 
seniors are forced to take bus trips to Canada to buy affordable 
prescription drugs. Our best hope for getting affordable medicines to 
people is to lower prices--that is why Maine passed the innovative 
Maine Rx law, and that's why I introduced a national version of the 
bill called America Rx. Yet, the House legislation does nothing to 
control rising costs. In fact, this plan expressly prohibits the 
Secretary of Health and Human Services from ever negotiating with drug 
companies for better prices. Pharmaceutical companies are reaping huge 
profits while seniors are often forced to choose between medicine and 
food.
  Furthermore, this plan doesn't guarantee a prescription benefit for 
seniors and it actually jeopardizes current Medicare coverage. The 
proposed benefit is entirely run by the private insurance industry and 
has no fallback provision of areas with no private plan. Without a 
fallback provision, there is no guarantee that private plans will be 
established in largely rural areas like Maine--so our seniors will be 
left in the cold. This has happened before with Medicare Plus Choice, 
and it is very likely to happen again, meaning that Maine's seniors 
would get nothing from this bill.
  In addition, this bill also contains a ``premium assistance'' 
provision that aims to phase out traditional fee-for-service Medicare 
and replace it with a voucher program. This is just another step toward 
total privatization of Medicare and the elimination of the only plan 
available to seniors in areas such as Maine--the traditional Medicare 
plan. Forcing seniors into private plans, and making them give up 
Medicare, is not the right approach--but that's what this bill would 
do.
  This bill also has a very large gap in coverage seniors would have to 
continue to pay a monthly premium, but would receive absolute no 
benefit fro drug costs between $2,000-$4,900. Having this kind of a gap 
in coverage is like telling people that their auto insurance doesn't 
cover accidents in June, July and August.
  Finally, and perhaps worst of all, there is a provision in this bill 
that does not allow for retiree coverage to count toward the out-of-
pocket spending cap. It has been estimated that the bill passed by the 
House would result in up to \1/3\ of employers dropping their retiree 
coverage, the seniors who enjoy these plans would be forced into a 
Medicare plan with fewer benefits. The House should not pass a plan 
that forces seniors to lose what benefits they have.
  For all these reasons, groups from AARP to the National Committee to 
Preserve Social Security and Medicare have sharply criticized this 
plan. I supported a number of alternative bills that would address the 
problems with this plan and vastly improve the benefit available to 
seniors. Unfortunately, the leadership of the House was more concerned 
about pushing any bill through as quickly as possible than with 
providing a quality benefit for seniors, and they weren't willing to 
fix the serious flaws in the bill that could hurt seniors. In fact, the 
House leadership refused to allow even one real amendment to the 
legislation.
  I want to pass a real prescription drug benefit--but I would not vote 
for a plan that hurts Maine's seniors. I am disappointed with the 
legislation that was passed by the House, however the fight for a real 
Medicare benefit is not over. It is my hope that this legislation will 
be improved in the upcoming conference with the Senate. I will continue 
to fight to make sure that all Maine seniors receive an affordable and 
real Medicare prescription benefit.
  Mr. LANGEVIN. Mr. Speaker, I rise in opposition to H.R. 1, the 
Medicare Prescription Drug & Modernization Act. Like many of my 
colleagues, I held sincere hope that the 108th Congress would overcome 
the inaction that has plagued this issue, at the expense of America's 
senior citizens, for many years. I am extremely disappointed that the 
bill before the House this week not only fails to offer a structurally 
sound prescription drug benefit for Medicare beneficiaries, but also 
contains provisions that threatens the stability of the program that 
has provided health benefits for millions of elderly people and younger 
adults with disabilities for the past 38 years.
  In particular, I want to call attention to the fact that this bill 
does nothing to address the rapidly rising costs of prescription drugs. 
It not only fails to address this crisis, it contains a 
``noninterference'' clause prohibiting the agents of the Department of 
Health & Human Services from using the bulk purchasing power of 
Medicare beneficiaries to negotiate for lower prices for senior 
citizens. Without taking measures to curb the escalating prices of the 
medications our seniors need to stay alive, the benefit is rendered 
meaningless. Seniors will pay more out of pocket in 2007 with the 
prescription drug benefit than they are paying in 2003 without it.
  I urge my colleagues to pay careful attention to the details of the 
Medicare Prescription Drug & Modernization Act and to think critically 
about the effect--or lack thereof--it will have on the seniors in their 
districts.
  Mr. ISRAEL. Mr. Speaker, I am proud to be a Democratic Member of this 
body. I have always been proud to be a Democrat. And always will be.
  But I came to Congress 2\1/2\ years ago with a promise to my 
constituents that I would work hard to break through partisan gridlock. 
I promised that when I agreed with the Republicans I would vote with 
them; and when I disagreed I would vote against them. But that I would 
always work to develop consensus and move our country forward.
  That is what brings me here today, Mr. Speaker.
  In those 2\1/2\ years, I have focused on a health care crisis for 
seniors on Long Island. We used to have 12 Medicare HMOs in my 
communities. Now we have two

[[Page H6117]]

left. Eighty-five thousand seniors have been tossed out of their 
Medicare HMOs. One out of five is skipping their medication because 
they can't afford them.
  And in those 2\1/2\ years, I have listened to Republicans blame 
Democrats for this crisis; Democrats blame Republicans; the House blame 
the Senate; the Senate blame the House; Congress blame the White House; 
the White House blame Congress; and everyone blame the insurance 
companies.
  There is plenty of blame to go around. But all the blame in the world 
isn't going to help a single senior citizen get their prescription 
drugs at a more affordable price.
  It's time to stop blaming. It's time to stop finger pointing. It's 
time for conservatives to stop railing against a $400 billion 
prescription drug plan because it's too liberal. It's time for liberals 
to stop railing against a $400 billion prescription drug plan because 
it's too conservative. It's time for everyone to stop rejecting the 
imperfect because we can't get the perfect. It's time to move this 
process forward.
  Mr. Speaker, I believe the Democrats are right. It will take at least 
$800 billion to provide America's seniors with a truly comprehensive, 
voluntary prescription drug plan.
  Is an $800 billion prescription drugs program better than a $400 
billion program that's before us today? Of course. $400 billion is only 
half as good as $800 billion . . . but it is $400 billion better than 
nothing. And nothing is exactly what we will leave our seniors if we 
reject this proposal today.
  To reject the largest expansion of Medicare in its 38-year history 
because it's $400 billion instead of $800 billion just doesn't make 
sense to me.
  Mr. Speaker, only a short time ago, President Bush argued for a $190 
billion prescription drug plan. My side of the aisle proposed an $800 
billion plan. Some say we have ended up at a $400 billion plan.
  I disagree. I think we are beginning with a $400 billion plan. It is 
the largest expansion of Medicare in its 38-year history. It is, in my 
view, a down payment. An investment.
  Is this plan flawed? I believe it is. I believe the Senate plan, 
supported by Ted Kennedy, is much better. But we can't get near that 
plan unless we go to a House-Senate conference. And we can't go to a 
House-Senate conference unless we pass this bill today.
  Yesterday at the White House, I listened carefully to President Bush. 
He said clearly we must move this process forward and pledged to work 
on a bipartisan basis to develop a final bill that represents 
consensus.
  But there's no hope for consensus, no hope for a penny of 
prescription drug spending, if we slam the brakes on the process today 
by killing this bill today.
  Mr. Speaker, of particular importance to me and the constituents I 
represent is that this bill contains the Greenwood-Israel-Fossella 
amendment, which ends the economic discrimination in federal 
reimbursement formulas to suburban Medicare HMOs that have forced 
85,000 of my constituents out of their prescription drug plans.
  Those seniors are watching us today. They are tired of blame, tired 
of gridlock, tired of excuses. They don't care whether it's a 
Democratic solution or a Republican solution, as long as it's a good 
solution.
  This is not a perfect solution. But it is a good start. It is the 
largest expansion of Medicare in its 38-year history. It ends the price 
discrimination on Long Island and other suburbs around the nation.
  Mr. Speaker, let me close by repeating this: $400 billion is only 
half as good as $800 billion . . . but it is $400 billion better than 
nothing. And nothing is exactly what we will leave our seniors if we 
reject this proposal today. In the spirit of advancing the process, I 
will support this bill. I reserve the right, however, to vote against a 
bill that emerges from Conference that does not address the significant 
flaws in the legislation before us tonight.
  Mr. EVANS. Mr. Speaker, this Republican Medicare bill falls well 
short of what our country's retirees deserve. And I believe, that if 
this Congress and this President had not squandered the budget surplus 
we could afford to give our seniors a benefit they deserve.
  It is well past time to assist with our seniors prescription drug 
costs. The Democratic substitute provides a reliable and affordable 
benefit to America's seniors. This voluntary prescription drug coverage 
costs only $25 a month with a $100 deductible and provides a $2000 
stop-loss protection with no gaps in coverage. There are also special 
provisions to help the poorest seniors with either full payment or 
assistance on a sliding fee scale.
  The Democratic substitute I support also allows the Secretary of 
Health and Human Services to wield the collective bargaining power of 
the 40 million Medicare beneficiaries to negotiate lower drug prices. 
And as the ranking member on the Veterans' Affairs Committee, I was 
proud to help craft a similar plan which has helped our nation's 
veterans lower their out of pocket drug costs.
  As a member representing a rural district, I also want to highlight 
the rural health care provisions included in the Democratic substitute. 
These provisions are essential to create equity in the reimbursement 
system between urban and rural hospital. They allow fair payments to 
hospitals that have a disproportionate share of low-income patients, 
increases payments to rural home health providers without requiring a 
co-pay, and adjusts low-volume payments for small hospitals. It also 
takes into account the physician shortage crisis in rural areas by 
finally correcting the huge disparity between urban rural hospitals, 
that drives providers from our small towns.
  All of these reasons make the Democratic alternative to H.R. 1 the 
right answer to the spiraling costs for prescription drugs for seniors. 
Medicare works for America's seniors but, I oppose the GOP's efforts to 
privatize this system and provide a second-rate prescription drug 
benefit. I proudly support the Democratic substitute and I urge my 
colleagues to vote down H.R. 1 and vote Yes on the substitute.
  Mr. CUMMINGS. Mr. Speaker, I rise today to speak against the 
inadequate Medicare prescription drug bill being considered today, H.R. 
2473 and in support of the Rangel/Dingell Substitute.
  With over 40 million elderly and disabled persons covered under the 
38-year-old Medicare entitlement, Congress' chief objective should be 
to ensure that these Americans have access to quality health care 
coverage. However, today we consider legislation that will do more harm 
than good because it is the first step in privatizing the Medicare 
program and as former Speaker Gingrich predicted, causing it to 
``wither on the vine''. Passage of this legislation will cause many of 
our seniors to wither right along with the Medicare program--which will 
no longer be seen as the social compact with our seniors that this 
nation embraces.
  Medicare is the nation's second largest social welfare program. As an 
entitlement program, it is imperative to realize that with the 
implementation of H.R. 2473, fee-for-service Medicare payments would 
naturally increase. This will result in many seniors facing the 
horrible prospect of being unable to afford the increasing payments. I 
think many of my colleagues would agree that this is a very troubling 
proposition and a totally unnecessary result.
  Additionally, with the establishment of the Voluntary Prescription 
Drug Benefit Program, seniors again would lose because of the lack of 
negotiated prices for the prescription drugs. Also, although federal 
subsidies would be provided to encourage participation, the bill would 
increase the annual out-of-pocket threshold for many beneficiaries. 
Once again a pseudo-solution of adding a prescription drug benefit 
while increasing the cost for persons who need the benefit but will not 
be able to afford its costs.
  Furthermore, the use of health maintenance organizations (HMOs) and 
other private organizations to obtain prescription drugs would deter 
many seniors from getting the benefit. As Rep. Charles B. Rangel, 
Ranking Democrat on the Committee on Ways and Means stated, ``to get 
prescription drug coverage, seniors would have to go to an HMO by 
another name. Then, all the choices would belong to the private 
insurance provider--which drugs are covered, which pharmacies you can 
choose, who your doctor is, etc.'' Mr. Speaker, this bill is an empty 
pillbox--it is a paltry solution to the problem of providing adequate 
prescription drug coverage to our seniors; rather, it is creating an 
inadequate system--based on a provider concept that does not currently 
exist and will not likely work in practice.
  A better alternative to H.R. 2473 is The Medicare RX Drug Benefit an 
Discount Act (H.R. 1199) offered by my friend Charlie Rangel of New 
York. This prescription drug plan would guarantee that every Medicare 
beneficiary, no matter where they live, could have a benefit with a $25 
monthly premium, $100 annual deductible, 20 percent co-insurance and 
$2000 out-of-pocket limit. The bill would also:
  Lower prescription drug cost for all Americans, regardless of whether 
they are covered by Medicare;
  Give all Medicare beneficiaries the option of a reasonably priced 
guaranteed prescription benefit under Medicare;
  Ensure that senior citizens and people with disabilities receive 
coverage for the drug that their doctor prescribes; and
  Provide additional assistance for low-income beneficiaries such that 
many seniors would pay nothing for their prescription drugs.
  Unlike the proposal put forth by the Bush Administration and endorsed 
and worsened by the House GOP Leadership, H.R. 1199 would not require 
seniors to join an HMO or similar private plan in order to get a 
prescription drug benefit. In fact, Medicare beneficiaries would be 
guaranteed a prescription drug benefit rather than offered a marginal, 
voluntary plan under H.R. 2473. This plan would ensure that we keep our 
social compact with our seniors. The Republic plan fails to do that.

[[Page H6118]]

  Since its inception 1965, Medicare has provided important protection 
for millions of aged and disabled persons. H.R. 2473 would be a 
detriment to improving and securing this system. I lend my voice in 
opposition and urge my colleagues to vote against H.R. 4273 and to 
support H.R. 1199.
  Ms. WATERS. Mr. Speaker, I rise to oppose this Medicare privatization 
plan, which is masquerading as a prescription drug bill.
  This bill would force seniors who want prescription drug coverage to 
get it from private insurance companies. It provides no guarantee that 
insurance plans will be available, and when they are, premiums and 
benefits will vary widely. The bill also 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 give-away 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 in 
the pharmaceutical industry and the insurance industry that give 
campaign contributions to Republicans.
  However, the most outrageous aspect of this bill is what it does to 
traditional Medicare. The bill would increase seniors' cost for visits 
to the doctor's office by raising the Medicare Part B deductible and 
indexing it for inflation. This could cost American seniors an 
estimated $8 billion. While this may seem like a tiny fraction of the 
Republicans' $350 billion tax-cut-for-the-rich, it is a huge expense 
for senior citizens, many of whom live on limited incomes.
  This bill also divides Medicare into 10 or more regional plans in 
2006 and then converts the entire Medicare program into a voucher 
program depending upon private insurance companies in 2010. If the 
Republicans really want to privatize Medicare, they should be honest 
with the American people and call this plan what it is, the Medicare 
Privatization Act.
  The Democrats alternative prescription drug plan on the other hand 
provides prescription drug coverage under Medicare with guaranteed and 
affordable premiums and benefits for all American seniors and no gaps 
in coverage. It is time for Congress to make prescription drugs 
available to all seniors who need them.
  I urge my colleagues to oppose the Republican Medicare Privatization 
Act and support the Democratic alternative.
  Mr. ISTOOK. Mr. Speaker, this bill will hasten the day when Medicare 
will go bankrupt, and it also threatens to unravel our children's 
future.
  Medicare is already on shaky financial legs, and this will add 
enormous extra expenses that will make it worse. Do we expect our 
children to pay a lifetime of higher taxes, and still find there's 
nothing left for them when they retire? That is what we face.
  I would like to add prescription drug benefits, but it's wrong to 
promise something we cannot pay for.
  I want to preserve what's good about Medicare, not destroy it by 
making extravagant promises for political gain.
  The enormous extra spending under this bill will be far more than 
projected. Because today's Medicare is a huge price control system, 
many doctors already refuse to see Medicare patients. In just a few 
years this will make it worse, including price controls that will 
destroy the incentives for companies to create new medicines.
  What should we be doing?
  Since 76 percent of seniors already have drug coverage, we could 
focus on helping those who don't. But this bill undoes the coverage for 
those 76 percent, and puts them in a confusing new medical experiment.
  We should be stabilizing Medicare, so it can keep the promises 
already made, not making new promises that we don't have the money to 
keep.
  We should address the reasons why drug prices and healthcare costs 
are so high. By banning re-imported drugs, we're forcing Americans to 
subsidize far-lower drug prices in other countries. We should change 
our policies so Americans only pay the lower world price, not a higher 
price.
  We should end the 130,000 pages of federal regulations that have 
driven the costs of medicine and healthcare through the roof. On 
average, for every hour they spend with a patient, doctors and nurses 
spend another half-hour to a full hour doing government paperwork.
  We should stress personal responsibility in healthcare, just as we 
did in welfare reform, so government resources are focused on those who 
cannot care for themselves, not on those who can.
  Bit-by-bit, Congress is undoing the principles of welfare reform, and 
undercutting basic American principles in the process. Both political 
parties are making extravagant promises today, trying to outbid each 
other to win votes. Unfortunately, they are bidding with taxpayers' own 
money, and our children's hopes will be crushed by the bills they 
inherit.
  Mr. PORTMAN. Mr. Speaker, I rise to speak in supper of provisions in 
H.R. 1, The Medicare Prescription Drug and Modernization Act, that are 
designed to address the special pharmacy needs of beneficiaries 
residing in nursing homes.
  Nursing home residents are not in a position to fill prescriptions 
like everyone else. They cannot simply walk into a pharmacy and have 
their prescription filled. Many nursing home residents, because of 
their physical or mental condition, are not able to take their 
prescription drugs on their own, especially if they have to take 
multiple medications throughout the day. Their unique circumstances 
require specialized pharmacy care that retail and mail order pharmacies 
do not provide. Long-term care pharmacies meet these special needs. 
They contract with nursing homes to provide specialized packaging, 24-
hour delivery, infusion therapy services, geriatric-specific 
formularies, clinical consultation and other services that are critical 
to a nursing home. Importantly, long-term pharmacies play a critical 
role in preventing medication errors that add to the cost of care and 
suffering of Medicare patients. In fact, one study estimates $3.6 
billion in medication errors have been avoided as a result of long term 
pharmacy care. I believe it makes sense to preserve specialty 
pharmacies' ability to perform these vital services for nursing home 
residents, and I want to point out how H.R. 1 does this.
  First, the bill requires the Secretary of Health and Human Services 
to review the current standards of practice for pharmacy services 
provide to patients in nursing facilities. Prior to implementation of 
the prescription drug benefit, the Secretary will submit its findings 
to Congress on how long-term pharmacy services will be available to 
nursing home residents, including appropriate reimbursement levels for 
the specialty pharmacies that currently serve these nursing home 
residents. The Secretary's report is to include a detailed description 
of its plans to implement the provisions of this legislation in a 
manner consistent with state and federal laws designed to protect the 
safety and quality of care of nursing facility patients.
  Second, H.R. 1 directs plan sponsors to implement medication therapy 
management programs as a tool to reduce medication errors and improve 
patient outcomes. Long-term care pharmacies currently employ such 
initiatives to meet the complex medication needs of nursing facility 
patients, and the bill appropriately allows plan sponsors' programs to 
distinguish between services provided in ambulatory and institutional 
settings.
  Finally, the bill includes provisions to ensure that beneficiaries 
are guaranteed access to pharmacy services, including emergency 
services. These provisions are vitally important to maintain the high 
standard of care for all beneficiaries, but particularly for patients 
in nursing facilities, who receive specialized pharmacy services 25 
hours-a-day, seven days-a-week, through networks of long-term care 
pharmacies that contract with nursing facilities to meet their 
patients' needs.
  Mr. Speaker, I believe these long-term pharmacy provisions take a 
significant step toward ensuring that our nation's most frail and 
elderly citizens will have affordable, appropriate prescription drugs 
and delivery services.
  Mr. BASS. Mr. Speaker, as a member of the Energy and Commerce 
Committee, I am extremely pleased to have had the opportunity to 
develop a strong Medicare modernization package that will significantly 
improve this critical government program.
  The seniors of New Hampshire have long clamored for a prescription 
drug benefit under Medicare, as is the case in the rest of the nation. 
I am pleased to represent those same seniors today as we pass this bill 
and take one giant step closer toward our goal of creating a new and 
voluntary prescription drug benefit that makes lifesaving medications 
more accessible.
  This benefit is the product of years of research, study, testimony, 
and compromise. I have no doubt whatsoever that each of us might wish 
for a slightly different version of this bill. We represent different 
regions with different demographics.
  And, I am sure we all wish lifesaving drugs were more affordable for 
our families, friends, and constituents. The goal is formulating a 
fiscally responsible plan that will remain solvent in years to come, is 
easily accessible, and increasingly beneficial to seniors of all 
regions and means, was a daunting one.
  Yet, the bill makes a number of Medicare improvements for care 
providers in New Hampshire. This proposal represents one of the most 
generous rural packages ever contemplated by the House. Notably, after 
several years of efforts on the part of the rural medical community, 
uniform standards for Medicare reimbursements will be established for 
rural and small urban facilities.
  Beginning October 1, Medicare reimbursements to rural areas would 
finally mirror those for large urban ones. Having lamented for a

[[Page H6119]]

number of years over the inequity of this provision within the Medicare 
reimbursement system, I am particularly pleased that this is being 
addressed in the bill.
  A drug benefit for seniors and a rejuvenation of the Medicare system 
are essential to seniors and their caretakers. The delivery of medical 
care has changed enormously since this program was first conceived, and 
the program ought to be modernized to reflect the increases in medical 
technology and the utilization of a wide range of care options.
  As I have noted many times, no plan can be as all-encompassing and 
immediately satisfying as we might prefer. However, this bill puts the 
framework in place for a system that can be adjusted and improved upon 
over time and will directly and immediately help the population most in 
need.
  I applaud all Members of the Energy and Commerce Committee and the 
Members of the Ways and Means Committee for the joint work on this 
essential legislation. It is my hope that upon completion of our floor 
vote today, we will see this measure moved forward immediately to 
conference with the Senate.
  Mr. KNOLLENBERG. Mr. Speaker, today we have an opportunity to provide 
our seniors with a new prescription drug benefit and improved access to 
health care. It is a long overdue step in updating and improving 
Medicare.
  Today's legislation will provide help for those who need it most. Our 
6.5 million low-income seniors will receive a fully covered premium and 
a cost sharing benefit when their drug benefit switches from Medicaid 
to Medicare, paying no more than $2 per generic prescription, and no 
more than $5 for name brand drugs. This will also save states about 
$6.8 billion a year in Medicaid costs.
  It is imperative that Medicare advance with technology. Prescription 
drugs are an increasingly important part of modern medicine, helping to 
relieve pain, cure disease, and enhance the lives of millions of 
Americans. Adding a drug benefit and updating how existing benefits are 
provided will be a very significant accomplishment.
  Mr. Speaker, I encourage my colleagues to vote for this legislation 
that helps our seniors by providing a prescription drug benefit that 
they deserve.
  Mr. MOORE. Mr. Speaker, I rise today to express my opposition to this 
legislation and my support for the Blue Dog substitute, offered by Rep. 
Thompson, which we have not been allowed to debate on the House floor 
today, despite support on both sides of the Capitol.
  We in Congress have been talking for years now about the necessity of 
adding a prescription drug benefit to Medicare. We know, as seniors 
know, that this talk has been cheap and it is imperative that a 
compromise be reached this year. The Senate has been proceeding in a 
bipartisan way toward a compromise that adds a substantial, but not 
perfect, benefit to Medicare and protects the long-term integrity of 
this social insurance program.
  Instead of following the Senate's lead and working toward a 
compromise that will improve Medicare, a wildly popular and successful 
program, the House Republican leadership has chosen instead of add 
provisions to this legislation that attack the foundation of the 
Medicare program. The bill does not include a federal fallback if 
private plans choose not to offer a benefit. The experience that my 
constituents have had with Medicare+Choice show that private health 
care plans are at best an unstable partner for Medicare, and financial 
analysts have consistently publicly questioned whether ``drug only'' 
plans will ever be offered. For these reasons, it is absolutely vital 
that Medicare provide a viable and guaranteed fallback for all Medicare 
beneficiaries.
  Additionally, H.R. 1 would transform Medicare, beginning in 2010, 
from a defined-benefit program to a defined-contribution program. This 
provision would gradually shift enormous costs onto people when they 
are sick and most in need of care, and destroy the fabric of this 
program that has served seniors well for nearly 50 years.
  The Senate has crafted legislation that has broad support among 
Senators across the ideological spectrum. This legislation has won the 
support of both President Bush and Senator Ted Kennedy. Together with 
Representative Thompson and the Blue Dog Caucus, I am supporting 
legislation that uses the framework of the Senate compromise and 
improves on it, making it a much stronger bill. The Thompson plan 
includes a provision phasing in employer contributions to they will 
count toward the out-of-pocket limit for catastrophic coverage, thus 
giving employers an incentive to keep offering retiree benefits. The 
substitute guarantees a Medicare fall-back plan for all areas that do 
not have two private plans available. It also gives relief to state 
Medicaid plans by making Medicare the primary payer for all individuals 
eligible for Medicare and Medicaid. Finally, the Blue Dog substitute 
includes language that will reduce the high cost of prescription drugs 
by allowing Americans to reimport drugs from Canada and speeding 
approval of generic drugs.
  The House bill falls short on several other fronts as well. It 
ignores the needs of community and teaching hospitals, meaning that 
hospitals in my district stand to lose over $11 million in denied 
inflation updates. Kansas teaching hospitals, like KU Med, would 
additionally lose out to the tune of $3.9 million in 2003 and $21 
million over five years due to the Federal Government's failure to help 
pay for the excess costs of medical education. The Thompson substitute 
provides an adequate inflation update for all hospitals. Finally, H.R. 
1 would cut $16 billion over 10 years from oncology services. Cancer 
patients all over the country will have to pay for provisions in this 
bill that sharply cut funding for cancer-fighting drugs and allow 
Medicare to continue to underpay for costs associated with providing 
chemotherapy services.
  I cannot support the Democratic substitute because I believe that it 
is simply too expensive. I voted against the most recent tax cut 
because I believe that it is irresponsible for Congress to run up bills 
for our children to pay, and the Democratic substitute, although a much 
more robust benefit for our seniors, is simply more than our country 
can afford at this time. The Senate bill and the Blue Dog substitute 
both hew to the budget agreed to by the House and Senate. Neither bill 
is perfect, but I believe that the Thompson substitute builds a strong 
foundation for a prescription drug benefit on which we can build in 
future years.
  Mr. CAPUANO. Mr. Speaker, today we have the opportunity to provide 
our seniors with a real prescription drug benefit, but instead of 
giving seniors the plan they deserve, we are taking steps to dismantle 
a program that older Americans have known and trusted for 38 years.
  The Republican plan before us today fails to offer the types of 
guarantees that our seniors need and deserve. There is no defined 
benefit and no standard premium. So when my seniors ask now much their 
premiums will be or how much their drugs will cost, I cannot answer 
them. This is unacceptable.
  This bill allows private insurance companies to decide premiums, 
prescription drug coverage benefits and even where coverage will be 
offered. This proposal threatens to dismantle Medicare and replace it 
with private health insurance coverage for all seniors. This is 
precisely the problem many seniors face--they cannot afford private 
insurance, and depend on Medicare.
  This bill also provides additional funding for rural hospitals, but 
not urban teaching hospitals. This is a serious oversight. Urban 
teaching hospitals are facing incredible budget shortfalls. They play a 
critical role in training tomorrow's physicians, and their needs must 
also be addressed. If the Federal Government is going to offer 
additional funding to some hospitals, it must offer additional funding 
to urban teaching hospitals.
  The Federal Government has a responsibility to ensure that Americans 
who contribute to the Medicare program during their working years will 
have access to dependable, equitable, and affordable health coverage. 
The Democratic substitute does just that--it lowers drug prices, 
guarantees coverage and enables seniors to get their medicines at the 
pharmacy of their choice. The Rangel/Dingell substitute addresses my 
concerns more effectively and I will strongly support it.
  Mr. LEACH. Mr. Speaker, seldom has there been a more important bill 
for the State of Iowa.
  On the one hand, this legislation provides for greater equity in 
Medicare reimbursement which will bring millions of additional dollars 
to the state and help prevent an exodus of healthcare providers from 
rural counties.
  In addition, the brunt of the bill is about providing voluntary 
prescription drug coverage to Medicare eligible individuals. There is a 
conservative critique that the program is far too expensive, and a 
liberal critique that it is not generous enough. Both philosophical 
perspectives have a degree of validity, but the big picture is that 
Congress is moving in a direction of providing health security for 
millions of citizens. Low income individuals will, for the most part, 
be provided full comprehensive prescription drug coverage. Higher 
income citizens on a sliding scale will be provided partial coverage 
and all citizens will be provided coverage for catastrophic expenses.
  There will be a cost to society in providing these benefits but the 
benefits far outweigh the costs. There may be better approaches that 
can be envisioned now or developed later, but this is the only 
framework approach that has a chance of receiving majority support in 
both bodies without a Presidential veto. It may not be enough and it 
may be too deferred in implementation but it nevertheless marks an 
important first step to meeting the most challenging need of many 
senior citizens.
  Ms. DeGETTE. Mr. Speaker, I want to highlight a piece of the Dingell/
Rangel substitute that pertains to Disproportionate Share Hospitals.

[[Page H6120]]

  This was an amendment I offered in the Energy & Commerce Committee 
and I understand that since our mark-up the DSH allocation has been 
increased and I want to commend this action. I know there is real 
bipartisan support on this issue and I want to just reiterate how 
important it is that we get funding to our DSH hospitals right away.
  The provision in the substitute would give DSH hospitals a large 
portion of the funding that has been cut in the past year. It would 
expend a billion dollars in FY '03 and then adjust payments in future 
years to ensure that our vital DSH hospitals do not go bankrupt.
  The reason it is so important that this money is available next year 
is that our DSH hospitals have already suffered a cut of a billion 
dollars in the past year and now are in such bad shape financially, if 
we help them in dribs and drabs then many of them won't be around ten 
years from now.
  There are public hospitals who are currently planning to make cuts of 
25 percent next year in order to try to stay afloat.
  Mr. Speaker, our public hospitals cannot afford these cuts. We are in 
real danger of losing numerous DSH hospitals over the next few years if 
we do not assist them right now.
  This provision also helps the low-DSH hospitals which are the most 
strapped of all. Eighteen states have low DSH hospitals due to 
historical expenditures that were basically frozen in place at a 
certain point.
  These low-DSH states have been struggling for years with their 
Medicaid payments and they are currently held to only 1 percent of 
their Medicaid expenditures. My amendment, which accomplishes the same 
thing that a bill Rep. Heather Wilson introduced, would raise this to 3 
percent which would help these states considerably.
  While low-DSH states have been dealing with this situation for years, 
recently it has gotten much worse. The pressure on these hospitals has 
increased due to numerous factors such as increasing numbers of the 
uninsured, increasing numbers of Medicaid patients, the extreme 
situation so many states are in in terms of budget crises.
  The fact of the matter is that DSH hospitals need help and need help 
now. They can't wait and we need to rectify this situation while the 
DSH hospitals are still around to help our most vulnerable citizens.
  Mr. DeLAURO. Mr. Speaker, in my 13 years in Congress, this House has 
sometimes risen to the occasion on matters of great national 
importance. My very first vote on the first Gulf War followed days of 
debate in which Members stated their heartfelt views on the prospect of 
war. After September 11th, we came together--Democrats and 
Republicans--to bind the nation's wounds and provide for the national 
security of the nation's victims of that terrorist act.
  I wish I could say that this is one of those eoccsions--I wish I 
could say that, as we consider the very future of Medicare, we could 
rise above partisan politics and ideological viewpoint and do the right 
thing by our senior citizens. Medicare is one of the most important and 
successful government programs ever enacted, a program that has 
provided quality health care and a measure of economic security to 
hundreds of millions of senior citizens over the past four decades. 
Together, Medicare and Social Security represent the twin pillars of a 
social safety net and constitute what is in effect a social contract 
between the generations--that if you work hard all your life you may 
look forward to a dignified retirement and economic security in your 
old age.
  I understand that we bear the responsibility of meeting the newest 
challenges that face our seniors--of finding new ways to care for our 
aging population and that changes to Medicare need to be made. Central 
to that process is dealing with the cost of prescription drugs and 
helping seniors afford them.
  Unfortunately, the legislation before the House this week fails on 
both counts. It does not deliver an acceptable or adequate prescription 
drug benefit and it will not hold down the cost of drugs.
  What it does do is open the door to privatization of Medicare--in 
other words, a return to the way things were before, when 1 out of 
every 3 seniors lived in poverty, largely due to the cost of medical 
expenses. Today, thanks to Medicare, that rate is closer to 1 in 10.
  This bill sets in motion the privatization of Medicare by converting 
the program into a voucher system--essentially turning it over to the 
HMOs, the very organizations that have dropped 52 percent of the 
Medicare enrollees in my state over the last four years.
  And it does nothing to contain costs. It prohibits the Secretary of 
Health and Human Services from even engaging in negotiations with the 
drug companies to lower prices. As a result, many seniors will pay more 
than they do now and their premiums will rise as the cost of drugs 
rises.
  But the most inexplicable aspect of this bill is the huge gap in 
coverage. Once a senior receives drug benefits totaling $2,000, he or 
she is cut off until her bills total $4,900, necessitating that they 
pay $2,900 out of her own pocket--at the same time that they pay 
premiums for this supposed drug benefit.
  It makes no sense. Throughout my time in Congress, the single most 
common concern I have heard from seniors at the local Stop N' Shop 
every weekend is how expensive their prescription drug bills are. 
Seniors know they are being taken advantage of. They know they can get 
drugs cheaper in Canada and overseas.
  And I assure you when they find out we are doing nothing to hold down 
the excessive profiteering of the pharmaceutical companies, they are 
going to be angry. When seniors find out that their coverage 
essentially stops during mid-summer while they still have to pay 
premiums, they are not only going to be confused, they are going to 
feel utterly betrayed.

  Mr. Speaker, we must provide a meaningful drug plan with guaranteed, 
defined benefits--with no gaps and no doughnut holes. We should act to 
contain costs by giving the Secretary of HHS the authority to negotiate 
lower prices so that seniors will not have to pay more than seniors in 
other countries for the same drug.
  And perhaps most importantly we should honor our social contract with 
America's seniors by not privatizing Medicare and subjecting seniors to 
the uncertainties of the private health care market. We should not be 
penalizing seniors who live in rural communities, where pharmacies and 
private plans are scarce at best. We should be giving them a plan fully 
contained within the Medicare system, where seniors will not be forced 
to shop around for a plan only to be unceremoniously dropped soon 
thereafter. Giving them a plan that seniors have come to rely on and 
feel safe with is what we should be doing. That is real economic 
security. Medicare--the same plan my 89 year-old mother relies on 
today.
  This debate is as important and historic as any I have been a part of 
in this body. If we allow this bill to become law, we are essentially 
tearing that social contract up--a contract my friend from Michigan, 
Mr. Dingell, fought to pass 38 years ago. And by doing so, we would be 
saying that guaranteed health care for our seniors is no longer an 
obligation or responsibility of this government.
  I did not come to Congress to preside over the dismantling of 
Medicare. That contract must be honored. I urge my colleagues to 
support a plan that does that.
  Ms. LINDA T. SANCHEZ of California. Mr. Speaker, I rise in strong 
opposition to H.R. 1, the Medicare Prescription Drug and Modernization 
Act. I want to thank Congresswoman Lynn Woolsey for her hard work in 
bringing Democratic women together to speak against the Republican's 
shameful Prescription Drug bill.
  As a freshman Member of Congress, I came here with a tremendous sense 
of optimism. By nature, I am an eternal optimist. But I am no fool, and 
the American people shouldn't be fooled either. Unfortunately, that is 
exactly what the Republicans are trying to do with their sham 
Prescription drug bill.
  If you believe the Republican bill solves the prescription drug 
crisis facing our seniors . . . If you think that seniors will get the 
medications they need, at a price they can afford . . . If you believe 
private insurance companies--the same people who brought you HMOs--will 
provide better coverage for seniors than a reformed Medicare system . . 
. or if you think you can get all the drugs your doctor prescribed, 
including the most expensive, at your local pharmacy. . . . Then you 
should be listening to that old country song by George Strait called 
``Ocean Front Property.'' It goes something like this:

     I've got some ocean front property in Arizona from my front 
           porch you can see the sea.
     I've got some ocean front property in Arizona and if you'll 
           buy that I'll throw the Golden Gate in free.

  Republicans are just like scam artists trying to sell you an ocean 
front property in the desert. But now they are trying to sell you a 
phony prescription drug package. We must not fall for it, especially 
when this is not what seniors want.
  I say to my Republican colleagues, it is time to stop this heinous 
scam on seniors! It is time to show the greatest generation in our 
country the respect they deserve. After all, they are the people who 
served us in times of war, got us through the Great Depression, raised 
their children and made countless contributions to this country.
  Worst of all, the Republican bill ignores the reality of older women, 
the face of Medicare. Women constitute 58 percent of the Medicare 
population at 65 and 71 percent at the age of 85. Since women normally 
outlive their male counterparts and many women spend time out of the 
workforce, caring for their children and sometimes, their own parents, 
Medicare beneficiaries are disproportionately female.
  We need to make sure that every prescription is covered without a 
gap. Seniors, particularly women, must retain their right to see their

[[Page H6121]]

doctor of choice. We must empower seniors to make the right choices, 
not insurance companies. This is exactly what the democratic plan does 
and exactly what seniors want. In fact, according to a survey conducted 
by AARP: 4 out of 5 seniors don't want the GOP proposal.
  Today, Mr. Speaker, I urge my colleagues not to support H.R. 1. Let's 
tell the Republicans don't try to sell seniors something they don't 
want.
  Mr. JANKLOW. Mr. Speaker, I would like to submit the following letter 
into the Congressional Record.

                             Business for Affordable Medicine,

                                    Washington, DC, June 24, 2003.
     Hon. Dennis Hastert,
     Speaker, U.S. House of Representatives,
     Washington, DC.
       Dear Speaker Hastert: We urge you to pass legislation as 
     part of Medicare reform that will improve the Drug Price 
     Competition and Patent Term Restoration Act, and the patent 
     listing requirements under the Federal Food Drug, and 
     Cosmetic Act (FFDCA).
       States spend billions of dollars annually and provide 
     prescription medicine to residents, state employees, and 
     retirees. Tax payers are forced to pay hundreds of millions 
     of dollars in excess costs for the medicine because of 
     loopholes in the Hatch-Waxman Act that restrict timely access 
     to lower-cost generic pharmaceuticals. As a result, BAM 
     members, including states, companies, and labor groups, 
     support changes to the Hatch-Waxman Act that will provide 
     greater pharmaceutical competition and more timely access to 
     generic.
       Bipartisan legislation passed by the Senate last week will 
     provide all purchasers with greater access to generics, and 
     will produce hundreds of millions of dollars in savings for 
     federal and state programs. We urge the House to adopt 
     similar legislation as part of the effort by Congress to add 
     a prescription drug benefit to Medicare, and urge you to 
     resist changes or amendments that would weaken the most 
     important cost-savings provisions in the Senate bill.
       Specifically, BAM supports the proposed limit of one 30-
     month stay against FDA approval of generic products, as well 
     as provisions to prevent the use of ``late-listed'' patents--
     those filed after generic applications are submitted--to 
     obtain additional stays. Litigation under the Hatch-Waxman 
     Act is increasingly tied to patents that have been listed 
     after the filing of generic applications, resulting in the 
     need for legislation to restrict the use of 30-month stays to 
     only those patents listed in the Orange Book prior to the 
     filing of related generic applications. We also support 
     changes to provisions in the law that allow drug 
     manufacturers to intentionally delay litigation on certain 
     drug patents until the end of any 30-month stay.
       In addition we are concerned that consumers, taxpayers and 
     institutional purchasers have no standing under current law 
     to challenge abusive listing. As a result, all purchasers 
     have been forced at times to pay millions of dollars more 
     than necessary for products that should have faced more 
     timely competition from generics. We support efforts to 
     ensure generic manufacturers will be provided with the most 
     effective avenues possible for relief from unlawful listings.
       BAM is committed to working with all members of Congress to 
     restore balance to the Hatch-Waxman Act and improve 
     pharmaceutical competition. We look forward to assisting your 
     efforts.
           Sincerely,
     Governor M.J. ``Mike'' Foster, Jr.,
       Louisiana,
     Governor Bob Wise,
       West Virginia.
     Governor Brad Henry,
       Oklahoma.
     Governor Bob Holden,
       Missouri.
     Governor Ronnie Musgrove,
       Mississippi.
     Governor Thomas Vilsack,
       Iowa.

  Mr. ROGERS of Alabama. Mr. Speaker, one of the promises I made when I 
came to Washington was to improve the lives of East Alabama seniors. 
Unlike retirees in our country's metropolitan areas, the seniors of the 
Third District face far greater challenges.
  For starters, most Third District seniors lives in rural areas with 
few choices in health care providers. This undoubtedly means higher 
health costs and fewer costs when it comes to doctors, and higher out-
of-pocket expenses for covering the same level of basic medical needs.
  Part of the problem, Mr. Speaker, is Medicare does not fairly and 
adequately reimburse doctors for their services. This is not fair, 
especially when retirees just across the Georgia border have far better 
access to doctors who are reimbursed by Medicare at higher rates. 
Seniors should not be penalized just because they live in rural areas.
  But assuming we fix the reimbursement problem, this still leaves 
Medicare as a program designed for the 1960s, yet providing care in 
2003. That's why I'm pleased to be in the House today to offer my full 
support for adding a prescription drug benefit under Medicare.
  Earlier this year, Speaker Hastert appointed me to his Prescription 
Drug Action Team to help craft a prescription drug benefit for 
Medicare. I've taken this responsibility around the Third District to 
listen to seniors describe what they think this benefit should do, and 
how it should be designed.
  First and foremost, we must reduce the costs of prescription drugs. 
Modern medicine relies on these life-saving drugs more than ever, and 
doctors shown no signs of slowing the expected growth in prescriptions. 
But with Alabama seniors now paying an average of $1,200 per year for 
prescriptions, these costs are getting out of hand.
  Consider seniors on fixed incomes, Mr. Speaker. These Alabamians, 
already strapped with highly monthly bills, now face the costs of 
prescriptions rising beyond their means. We've already seen 
prescription drugs double or even triple in cost over the years. What 
will these seniors do when these drugs are priced out of reach? Will 
they be faced with filling their medicine cabinet or their pantry?
  Mr. Speaker, this simply cannot continue. The U.S. House of 
Representatives has drafted a bill, the Medicare Prescription Drug 
Modernization Act of 2003, which includes a prescription drug benefit 
for seniors in both the traditional fee-for-service and in the new 
integrated health plans. The bill is not limited to adding prescription 
drug coverage for our state's seniors, but also includes much-needed 
modernizations to Medicare and improvements for health care providers, 
such as an increase in Medicare payments to doctors to ensure that 
seniors continue to have access to physician services. Most 
importantly, the bill includes improvements and increased funding for 
rural hospitals in the Third District.
  This is hardly a perfect bill, but it is a good bill. The legislation 
helps Alabama's seniors receive better health care under Medicare and 
provides immediate relief from high prescription drug costs. President 
Bush supports it, and is ready to sign this bill should the House and 
Senate pass it.
  Mr. Speaker, I'm proud to be in this House today and have the chance 
to improve the lives of Alabama's seniors. I will continue to work with 
my colleagues on both sides of the aisle, as well as those in the 
Senate, to help pass this important legislation now, and send it to the 
White House for President Bush to sign into law.
  Mr. TAUZIN. Mr. Speaker, I yield back the balance of my time.
  The SPEAKER pro tempore (Mr. Hastings of Washington). All time for 
general debate has expired.


                             General Leave

  Mr. TAUZIN. Mr. Speaker, I ask unanimous consent that all Members may 
have 5 legislative days within which to revise and extend their remarks 
on H.R. 1.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Louisiana?
  There was no objection.


     Amendment in the Nature of a Substitute Offered by Mr. Rangel

  Mr. RANGEL. Mr. Chairman, I offer an amendment in the nature of a 
substitute.
  The SPEAKER pro tempore. The Clerk will designate the amendment in 
the nature of a substitute.
  The text of the amendment in the nature of a substitute is as 
follows:

       Amendment in the nature of a substitute offered by Mr. 
     Rangel:
       Strike all after the enacting clause and insert the 
     following:

     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 MEDICINE BENEFIT

Sec. 101. Voluntary medicare outpatient prescription medicine program.

  ``Part D--Voluntary Prescription Medicine Benefit for the Aged and 
                                Disabled

``Sec. 1859. Medicare outpatient prescription medicine benefit.

[[Page H6122]]

``Sec. 1859A. Negotiating fair prices with pharmaceutical 
              manufacturers.
``Sec. 1859B. Contract authority.
``Sec. 1859C. Eligibility; voluntary enrollment; coverage.
``Sec. 1859D. Provision of, and entitlement to, benefits.
``Sec. 1859E. Administration; quality assurance.
``Sec. 1859F. Federal Medicare Prescription Medicine Trust Fund.
``Sec. 1859G. Compensation for employers covering retiree medicine 
              costs.
``Sec. 1859H. Medicare Prescription Medicine Advisory Committee.
Sec. 102. Provision of medicare outpatient prescription medicine 
              coverage under the Medicare+Choice program.
Sec. 103. Medigap revisions.
Sec. 104. Transitional assistance for low income beneficiaries.
Sec. 105. Expansion of membership and duties of Medicare Payment 
              Advisory Commission (MedPAC).
Sec. 106. State Pharmaceutical Assistance Transition Commission.

                       TITLE II--MEDICARE+CHOICE

Sec. 201. Medicare+choice improvements.
Sec. 202. Making permanent change in Medicare+Choice reporting 
              deadlines and annual, coordinated election period.
Sec. 203. Specialized Medicare+Choice plans for special needs 
              beneficiaries.
Sec. 204. Medicare MSAs.
Sec. 205. Extension of reasonable cost contracts.
Sec. 206. Extension of municipal health service demonstration projects.

             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. Reform of payment for drugs and biologicals under the 
              medicare program.
Sec. 304. Demonstration project for use of recovery audit contractors.

                TITLE IV--RURAL HEALTH CARE IMPROVEMENTS

Sec. 401. Fairness in the medicare disproportionate share hospital 
              (DSH) adjustment for rural hospitals.
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. Medicare inpatient hospital payment adjustment for low-volume 
              hospitals.
Sec. 419. Treatment of certain clinical diagnostic laboratory tests 
              furnished by a sole community hospital.
Sec. 420. Establishment of floor on geographic adjustments of payments 
              for physicians' services.
Sec. 421. Ambulance payment rates.

                 TITLE V--PROVISIONS RELATING TO PART A

                Subtitle A--Inpatient Hospital Services

Sec. 501. Adjustment for indirect costs of medical education (IME).
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. Clarifications to certain exceptions to medicare limits on 
              physician referrals.

                      Subtitle B--Other Provisions

Sec. 511. Payment for covered skilled nursing facility services.
Sec. 512. Coverage of hospice consultation services.

                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.

                    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. Extension of coverage of intravenous immune globulin (IVIG) 
              for the treatment of primary immune deficiency diseases 
              in the home.
Sec. 629. Medicare coverage of diabetes laboratory diagnostic tests.

            TITLE VII--PROVISIONS RELATING TO PARTS A AND B

                    Subtitle A--Home Health Services

Sec. 701. Update in home health services.
Sec. 702. MedPAC study on medicare margins of home health agencies.
Sec. 703. Demonstration project to clarify the definition of homebound.

                  Subtitle B--Chronic Care Improvement

Sec. 721. Voluntary chronic care improvement under traditional fee-for-
              service.
Sec. 722. Chronic care improvement under Medicare+Choice plans.
Sec. 723. Institute of Medicine report.
Sec. 724. MedPAC report.

                      Subtitle C--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. Medicare pancreatic islet cell transplant demonstration 
              project.

                          TITLE VIII--MEDICAID

Sec. 801. Continuation of medicaid DSH allotment adjustments under BIPA 
              2000.
Sec. 802. Increase in floor for treatment as an extremely low DSH State 
              to 3 percent in fiscal year 2003.
Sec. 803. Clarification of inclusion of inpatient drug prices charged 
              to certain public hospitals in the best price exemptions 
              for the medicaid drug rebate program.

         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.
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.

[[Page H6123]]

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.

               TITLE X--IMPORTATION OF PRESCRIPTION DRUGS

Sec. 1001. Importation of prescription drugs.

             TITLE XI--ACCESS TO AFFORDABLE PHARMACEUTICALS

Sec. 1101. Short title.
Sec. 1102. 30-month stay-of-effectiveness period.
Sec. 1103. Forfeiture of 180-day exclusivity period.
Sec. 1104. Bioavailability and bioequivalence.
Sec. 1105. Remedies for infringement.
Sec. 1106. Conforming amendments.

            TITLE I--MEDICARE PRESCRIPTION MEDICINE BENEFIT

     SEC. 101. VOLUNTARY MEDICARE OUTPATIENT PRESCRIPTION MEDICINE 
                   PROGRAM.

       (a) In General.--Title XVIII (42 U.S.C. 1395 et seq.) is 
     amended--
       (1) by redesignating section 1859 and part D as section 
     1858 and part E, respectively; and
       (2) by inserting after part C the following new part:

  ``Part D--Voluntary Prescription Medicine Benefit for the Aged and 
                                Disabled


          ``medicare outpatient prescription medicine benefit

       ``Sec. 1859. Subject to the succeeding provisions of this 
     part, the voluntary prescription medicine benefit program 
     under this part provides the following:
       ``(1) Premium.--The monthly premium is $25.
       ``(2) Deductible.--The annual deductible is $100.
       ``(3) Coinsurance.--The coinsurance is 20 percent.
       ``(4) Out-of-pocket limit.--The annual limit on out-of-
     pocket spending on covered medicines is $2,000.


      ``negotiating fair prices with pharmaceutical manufacturers

       ``Sec. 1859A. (a) Authority to Negotiate Prices with 
     Manufacturers.--The Secretary shall, consistent with the 
     requirements of this part and the goals of providing quality 
     care and containing costs under this part, negotiate 
     contracts with manufacturers of covered outpatient 
     prescription medicines that provide for the maximum prices 
     that may be charged to individuals enrolled under this part 
     by participating pharmacies for dispensing such medicines to 
     such individuals.
       ``(b) Promotion of Breakthrough Medicines.--In conducting 
     negotiations with manufacturers under this part, the 
     Secretary shall take into account the goal of promoting the 
     development of breakthrough medicines (as defined in section 
     1859H(b)).


                          ``contract authority

       ``Sec. 1859B. (a) Contract Authority.--
       ``(1) In general.--The Secretary is responsible for the 
     administration of this part and shall enter into contracts 
     with appropriate pharmacy contractors on a national or 
     regional basis to administer the benefits under this part.
       ``(2) Procedures.--The Secretary shall establish procedures 
     under which the Secretary--
       ``(A) accepts bids submitted by entities to serve as 
     pharmacy contractors under this part in a region or on a 
     national basis;
       ``(B) awards contracts to such contractors to administer 
     benefits under this part to eligible beneficiaries in the 
     region or on a national basis; and
       ``(C) provides for the termination (and nonrenewal) of a 
     contract in the case of a contractor's failure to meet the 
     requirements of the contract and this part.
       ``(3) Competitive procedures.--Competitive procedures (as 
     defined in section 4(5) of the Office of Federal Procurement 
     Policy Act (41 U.S.C. 403(5))) shall be used to enter into 
     contracts under this part.
       ``(4) Terms and conditions.--Such contracts shall have such 
     terms and conditions as the Secretary shall specify and shall 
     be for such terms (of at least 2 years, but not to exceed 5 
     years) as the Secretary shall specify consistent with this 
     part.
       ``(5) Use of pharmacy contractors in price negotiations.--
     Such contracts shall require the contractor involved to 
     negotiate contracts with manufacturers that provide for 
     maximum prices for covered outpatient prescription medicines 
     that are lower than the maximum prices negotiated under 
     section 1859A(a), if applicable. The price reductions shall 
     be passed on to eligible beneficiaries and the Secretary 
     shall hold the contractor accountable for meeting performance 
     requirements with respect to price reductions and limiting 
     price increases.
       ``(6) Area for contracts.--
       ``(A) Regional basis.--
       ``(i) In general.--Except as provided in clause (ii) and 
     subject to subparagraph (B), the contract entered into 
     between the Secretary and a pharmacy contractor shall require 
     the contractor to administer the benefits under this part in 
     a region determined by the Secretary under subparagraph (B) 
     or on a national basis.
       ``(ii) Partial regional basis.--

       ``(I) In general.--If determined appropriate by the 
     Secretary, the Secretary may permit the benefits to be 
     administered in a partial region determined appropriate by 
     the Secretary.
       ``(II) Requirements.--If the Secretary permits 
     administration pursuant to subclause (I), the Secretary shall 
     ensure that the partial region in which administration is 
     effected is no smaller than a State and is at least the size 
     of the commercial service area of the contractor for that 
     area.

       ``(B) Determination.--
       ``(i) In general.--In determining regions for contracts 
     under this part, the Secretary shall--

       ``(I) take into account the number of individuals enrolled 
     under this part in an area in order to encourage 
     participation by pharmacy contractors; and
       ``(II) ensure that there are at least 10 different regions 
     in the United States.

       ``(ii) No administrative or judicial review.--The 
     determination of administrative areas under this paragraph 
     shall not be subject to administrative or judicial review.
       ``(7) Submission of bids.--
       ``(A) Submission.--
       ``(i) In general.--Subject to subparagraph (B), each entity 
     desiring to serve as a pharmacy contractor under this part in 
     an area shall submit a bid with respect to such area to the 
     Secretary at such time, in such manner, and accompanied by 
     such information as the Secretary may reasonably require.
       ``(ii) Bid that covers multiple areas.--The Secretary shall 
     permit an entity to submit a single bid for multiple areas if 
     the bid is applicable to all such areas.
       ``(B) Required information.--The bids described in 
     subparagraph (A) shall include--
       ``(i) a proposal for the estimated prices of covered 
     outpatient prescription medicines and the projected annual 
     increases in such prices, including the additional reduction 
     in price negotiated below the Secretary's maximum price and 
     differentials between preferred and nonpreferred prices, if 
     applicable;
       ``(ii) a statement regarding the amount that the entity 
     will charge the Secretary for administering the benefits 
     under the contract;
       ``(iii) a statement regarding whether the entity will 
     reduce the applicable coinsurance percentage pursuant to 
     section 1859E(a)(1)(A)(ii) and if so, the amount of such 
     reduction and how such reduction is tied to the performance 
     requirements described in subsection (c)(4)(A)(ii);
       ``(iv) a detailed description of the performance 
     requirements for which the administrative fee of the entity 
     will be subject to risk pursuant to subsection (c)(4)(A)(ii);
       ``(v) a detailed description of access to pharmacy services 
     provided by the entity, including information regarding 
     whether the pharmacy contractor will use a preferred pharmacy 
     network, and, if so, how the pharmacy contractor will ensure 
     access to pharmacies that choose to be outside of that 
     network, and whether there will be increased cost-sharing for 
     beneficiaries if they obtain medicines at such pharmacies;
       ``(vi) a detailed description of the procedures and 
     standards the entity will use for--

       ``(I) selecting preferred prescription medicines; and
       ``(II) determining when and how often the list of preferred 
     prescription medicines should be modified;

       ``(vii) a detailed description of any ownership or shared 
     financial interests with pharmaceutical manufacturers, 
     pharmacies, and other entities involved in the administration 
     or delivery of benefits under this part as proposed in the 
     bid;
       ``(viii) a detailed description of the entity's estimated 
     marketing and advertising expenditures related to enrolling 
     and retaining eligible beneficiaries; and
       ``(ix) such other information that the Secretary determines 
     is necessary in order to carry out this part, including 
     information relating to the bidding process under this part.


[[Page H6124]]


     The procedures under clause (vi) shall include the use of a 
     pharmaceutical and therapeutics committee the members of 
     which include practicing pharmacists.
       ``(8) Awarding of contracts.--
       ``(A) Number of contracts.--The Secretary shall, consistent 
     with the requirements of this part and the goals of providing 
     quality care and of containing costs under this part, award 
     in a competitive manner at least 2 contracts to administer 
     benefits under this part in each area specified under 
     paragraph (6), unless only 1 pharmacy contractor submitting a 
     bid meets the minimum standards specified under this part and 
     by the Secretary.
       ``(B) Determination.--In determining which of the pharmacy 
     contractors that submitted bids that meet the minimum 
     standards specified under this part and by the Secretary to 
     award a contract, the Secretary shall consider the 
     comparative merits of each bid, as determined on the basis of 
     relevant factors, with respect to--
       ``(i) how well the contractor meets such minimum standards;
       ``(ii) the amount that the contractor will charge the 
     Secretary for administering the benefits under the contract;
       ``(iii) the performance standards established under 
     subsection (c)(2) and performance requirements for which the 
     administrative fee of the entity will be subject to risk 
     pursuant to subsection (c)(4)(A)(ii);
       ``(iv) the proposed negotiated prices of covered outpatient 
     medicines and annual increases in such prices;
       ``(v) factors relating to benefits, quality and 
     performance, beneficiary cost-sharing, and consumer 
     satisfaction;
       ``(vi) past performance and prior experience of the 
     contractor in administering a prescription medicine benefit 
     program;
       ``(vii) effectiveness of the contractor in containing costs 
     through pricing incentives and utilization management; and
       ``(viii) such other factors as the Secretary deems 
     necessary to evaluate the merits of each bid.
       ``(C) Exception to conflict of interest rules.--In awarding 
     contracts with pharmacy contractors under this part, the 
     Secretary may waive conflict of interest laws generally 
     applicable to Federal acquisitions (subject to such 
     safeguards as the Secretary may find necessary to impose) in 
     circumstances where the Secretary finds that such waiver--
       ``(i) is not inconsistent with the--

       ``(I) purposes of the programs under this part; or
       ``(II) best interests of beneficiaries enrolled under this 
     part; and

       ``(ii) permits a sufficient level of competition for such 
     contracts, promotes efficiency of benefits administration, or 
     otherwise serves the objectives of the program under this 
     part.
       ``(D) No administrative or judicial review.--The 
     determination of the Secretary to award or not award a 
     contract to a pharmacy contractor under this part shall not 
     be subject to administrative or judicial review.
       ``(9) Access to benefits in certain areas.--
       ``(A) Areas not covered by contracts.--The Secretary shall 
     develop procedures for the provision of covered outpatient 
     prescription medicines under this part to each eligible 
     beneficiary enrolled under this part that resides in an area 
     that is not covered by any contract under this part.
       ``(B) Beneficiaries residing in different locations.--The 
     Secretary shall develop procedures to ensure that each 
     eligible beneficiary enrolled under this part that resides in 
     different areas in a year is provided the benefits under this 
     part throughout the entire year.
       ``(b) Quality, Financial, and Other Standards and 
     Programs.--In consultation with appropriate pharmacy 
     contractors, pharmacists, and health care professionals with 
     expertise in prescribing, dispensing, and the appropriate use 
     of prescription medicines, the Secretary shall establish 
     standards and programs for the administration of this part to 
     ensure appropriate prescribing, dispensing, and utilization 
     of outpatient medicines under this part, to avoid adverse 
     medicine reactions, and to continually reduce errors in the 
     delivery of medically appropriate covered benefits. The 
     Secretary shall not award a contract to a pharmacy contractor 
     under this part unless the Secretary finds that the 
     contractor agrees to comply with such standards and programs 
     and other terms and conditions as the Secretary shall 
     specify. The standards and programs under this subsection 
     shall be applied to any administrative agreements described 
     in subsection (a) the Secretary enters into. Such standards 
     and programs shall include the following:
       ``(1) Access.--
       ``(A) In general.--The pharmacy contractor shall ensure 
     that covered outpatient prescription medicines are accessible 
     and convenient to eligible beneficiaries enrolled under this 
     part for whom benefits are administered by the pharmacy 
     contractor, including by offering the services 24 hours a day 
     and 7 days a week for emergencies.
       ``(B) On-line review.--The pharmacy contractor shall 
     provide for on-line prospective review available 24 hours a 
     day and 7 days a week in order to evaluate each prescription 
     for medicine therapy problems due to duplication, 
     interaction, or incorrect dosage or duration of therapy.
       ``(C) Guaranteed access to medicines in rural and hard-to-
     serve areas.--The Secretary shall ensure that all 
     beneficiaries have guaranteed access to the full range of 
     pharmaceuticals under this part, and shall give special 
     attention to access, pharmacist counseling, and delivery in 
     rural and hard-to-serve areas, including through the use of 
     incentives such as bonus payments to retail pharmacists in 
     rural areas and extra payments to the pharmacy contractor for 
     the cost of rapid delivery of pharmaceuticals and any other 
     actions necessary.
       ``(D) Preferred pharmacy networks.--
       ``(i) In general.--If a pharmacy contractor uses a 
     preferred pharmacy network to deliver benefits under this 
     part, such network shall meet minimum access standards 
     established by the Secretary.
       ``(ii) Standards.--In establishing standards under clause 
     (i), the Secretary shall take into account reasonable 
     distances to pharmacy services in both urban and rural areas.
       ``(E) Adherence to negotiated prices.--The pharmacy 
     contractor shall have in place procedures to assure 
     compliance of pharmacies with the requirements of subsection 
     (d)(3)(C) (relating to adherence to negotiated prices).
       ``(F) Continuity of care.--
       ``(i) In general.--The pharmacy contractor shall ensure 
     that, in the case of an eligible beneficiary who loses 
     coverage under this part with such entity under circumstances 
     that would permit a special election period (as established 
     by the Secretary under section 1859C(b)(3)), the contractor 
     will continue to provide coverage under this part to such 
     beneficiary until the beneficiary enrolls and receives such 
     coverage with another pharmacy contractor under this part or, 
     if eligible, with a Medicare+Choice organization.
       ``(ii) Limited period.--In no event shall a pharmacy 
     contractor be required to provide the extended coverage 
     required under clause (i) beyond the date which is 30 days 
     after the coverage with such contractor would have terminated 
     but for this subparagraph.
       ``(2) Enrollee guidelines.--The pharmacy contractor shall, 
     consistent with State law, apply guidelines for counseling 
     enrollees regarding--
       ``(A) the proper use of covered outpatient prescription 
     medicine: and
       ``(B) interactions and contra-indications.
       ``(3) Education.--The pharmacy contractor shall apply 
     methods to identify and educate providers, pharmacists, and 
     enrollees regarding--
       ``(A) instances or patterns concerning the unnecessary or 
     inappropriate prescribing or dispensing of covered outpatient 
     prescription medicines;
       ``(B) instances or patterns of substandard care;
       ``(C) potential adverse reactions to covered outpatient 
     prescription medicines;
       ``(D) inappropriate use of antibiotics;
       ``(E) appropriate use of generic products; and
       ``(F) the importance of using covered outpatient 
     prescription medicines in accordance with the instruction of 
     prescribing providers.
       ``(4) Coordination.--The pharmacy contractor shall 
     coordinate with State prescription medicine programs, other 
     pharmacy contractors, pharmacies, and other relevant entities 
     as necessary to ensure appropriate coordination of benefits 
     with respect to enrolled individuals when such individual is 
     traveling outside the home service area, and under such other 
     circumstances as the Secretary may specify.
       ``(5) Cost data.--
       ``(A) The pharmacy contractor shall make data on 
     prescription medicine negotiated prices (including data on 
     discounts) available to the Secretary.
       ``(B) The Secretary shall require, either directly or 
     through a pharmacy contractor, that participating 
     pharmacists, physicians, and manufacturers--
       ``(i) maintain their prescription medicine cost data 
     (including data on discounts) in a form and manner specified 
     by the Secretary;
       ``(ii) make such prescription medicine cost data available 
     for review and audit by the Secretary; and
       ``(iii) certify that the prescription medicine cost data 
     are current, accurate, and complete, and reflect all 
     discounts obtained by the pharmacist or physician in the 
     purchasing of covered outpatient prescription medicines.

     Discounts referred to in subparagraphs (A) and (B) shall 
     include all volume discounts, manufacturer rebates, prompt 
     payment discounts, free goods, in-kind services, or any other 
     thing of financial value provided explicitly or implicitly in 
     exchange for the purchase of a covered outpatient 
     prescription medicine.
       ``(6) Reporting.--The pharmacy contractor shall provide the 
     Secretary with periodic reports on--
       ``(A) the contractor's costs of administering this part;
       ``(B) utilization of benefits under this part;
       ``(C) marketing and advertising expenditures related to 
     enrolling and retaining individuals under this part; and
       ``(D) grievances and appeals.
       ``(7) Records and audits.--The pharmacy contractor shall 
     maintain adequate records related to the administration of 
     benefits under this part and afford the Secretary access to 
     such records for auditing purposes.
       ``(8) Approval of marketing material and application 
     forms.--The pharmacy contractor shall comply with 
     requirements of

[[Page H6125]]

     section 1851(h) (relating to marketing material and 
     application forms) with respect to this part in the same 
     manner as such requirements apply under part C, except that 
     the provisions of paragraph (4)(A) of such section shall not 
     apply with respect to discounts or rebates provided in 
     accordance with this part.
       ``(c) Incentives for Cost and Utilization Management and 
     Quality Improvement.--
       ``(1) In general.--The Secretary shall include in a 
     contract awarded under subsection (b) with a pharmacy 
     contractor such incentives for cost and utilization 
     management and quality improvement as the Secretary may deem 
     appropriate. The contract may provide financial or other 
     incentives to encourage greater savings to the program under 
     this part.
       ``(2) Performance standards.--The Secretary shall provide 
     for performance standards (which may include monetary bonuses 
     if the standards are met and penalties if the standards are 
     not met), including standards relating to the time taken to 
     answer member and pharmacy inquiries (written or by 
     telephone), the accuracy of responses, claims processing 
     accuracy, online system availability, appeal procedure 
     turnaround time, system availability, the accuracy and 
     timeliness of reports, and level of beneficiary satisfaction.
       ``(3) Other incentives.--Such incentives under this 
     subsection may also include--
       ``(A) financial incentives under which savings derived from 
     the substitution of generic and other preferred multi-source 
     medicines in lieu of nongeneric and nonpreferred medicines 
     are made available to pharmacy contractors, pharmacies, 
     beneficiaries, and the Federal Medicare Prescription Medicine 
     Trust Fund; and
       ``(B) any other incentive that the Secretary deems 
     appropriate and likely to be effective in managing costs or 
     utilization or improving quality that does not reduce the 
     access of beneficiaries to medically necessary covered 
     outpatient medicines.
       ``(4) Requirements for procedures.--
       ``(A) In general.--The Secretary shall establish procedures 
     for making payments to each pharmacy contractor with a 
     contract under this part for the administration of the 
     benefits under this part. The procedures shall provide for 
     the following:
       ``(i) Administrative payment.--Payment of administrative 
     fees for such administration.
       ``(ii) Risk requirement.--An adjustment of a percentage 
     (determined under subparagraph (B)) of the administrative fee 
     payments made to a pharmacy contractor to ensure that the 
     contractor, in administering the benefits under this part, 
     pursues performance requirements established by the 
     Secretary, including the following:

       ``(I) Quality service.--The contractor provides eligible 
     beneficiaries for whom it administers benefits with quality 
     services, as measured by such factors as sustained pharmacy 
     network access, timeliness and accuracy of service delivery 
     in claims processing and card production, pharmacy and member 
     service support access, and timely action with regard to 
     appeals and current beneficiary service surveys.
       ``(II) Quality clinical care.--The contractor provides such 
     beneficiaries with quality clinical care, as measured by such 
     factors as providing notification to such beneficiaries and 
     to providers in order to prevent adverse drug reactions and 
     reduce medication errors and specific clinical suggestions to 
     improve health and patient and prescriber education as 
     appropriate.
       ``(III) Control of medicare costs.--The contractor contains 
     costs under this part to the Federal Medicare Prescription 
     Medicine Trust Fund and enrollees, as measured by generic 
     substitution rates, price discounts, and other factors 
     determined appropriate by the Secretary that do not reduce 
     the access of beneficiaries to medically necessary covered 
     outpatient prescription medicines.

       ``(B) Percentage of payment tied to risk.--
       ``(i) In general.--Subject to clause (ii), the Secretary 
     shall determine the percentage of the administrative payments 
     to a pharmacy contractor that will be tied to the performance 
     requirements described in subparagraph (A)(ii).
       ``(ii) Limitation on risk to ensure program stability.--In 
     order to provide for program stability, the Secretary may not 
     establish a percentage to be adjusted under this paragraph at 
     a level that jeopardizes the ability of a pharmacy contractor 
     to administer the benefits under this part or administer such 
     benefits in a quality manner.
       ``(C) Risk adjustment of payments based on enrollees in 
     plan.--To the extent that a pharmacy contractor is at risk 
     under this paragraph, the procedures established under this 
     paragraph may include a methodology for risk adjusting the 
     payments made to such contractor based on the differences in 
     actuarial risk of different enrollees being served if the 
     Secretary determines such adjustments to be necessary and 
     appropriate.
       ``(d) Authority Relating to Pharmacy Participation.--
       ``(1) In general.--Subject to the succeeding provisions of 
     this subsection, a pharmacy contractor may establish 
     consistent with this part conditions for the participation of 
     pharmacies, including conditions relating to quality 
     (including reduction of medical errors) and technology.
       ``(2) Agreements with pharmacies.--Each pharmacy contractor 
     shall enter into a participation agreement with any pharmacy 
     that meets the requirements of this subsection and section 
     1859E to furnish covered outpatient prescription medicines to 
     individuals enrolled under this part.
       ``(3) Terms of agreement.--An agreement under this 
     subsection shall include the following terms and conditions:
       ``(A) Applicable requirements.--The pharmacy shall meet 
     (and throughout the contract period continue to meet) all 
     applicable Federal requirements and State and local licensing 
     requirements.
       ``(B) Access and quality standards.--The pharmacy shall 
     comply with such standards as the Secretary (and such a 
     pharmacy contractor) shall establish concerning the quality 
     of, and enrolled individuals' access to, pharmacy services 
     under this part. Such standards shall require the pharmacy--
       ``(i) not to refuse to dispense covered outpatient 
     prescription medicines to any individual enrolled under this 
     part;
       ``(ii) to keep patient records (including records on 
     expenses) for all covered outpatient prescription medicines 
     dispensed to such enrolled individuals;
       ``(iii) to submit information (in a manner specified by the 
     Secretary to be necessary to administer this part) on all 
     purchases of such medicines dispensed to such enrolled 
     individuals; and
       ``(iv) to comply with periodic audits to assure compliance 
     with the requirements of this part and the accuracy of 
     information submitted.
       ``(C) Adherence to negotiated prices.--(i) The total charge 
     for each medicine dispensed by the pharmacy to an enrolled 
     individual under this part, without regard to whether the 
     individual is financially responsible for any or all of such 
     charge, shall not exceed the price negotiated under section 
     1859A(a) or, if lower, negotiated under subsection (a)(5) 
     (or, if less, the retail price for the medicine involved) 
     with respect to such medicine plus a reasonable dispensing 
     fee determined contractually with the pharmacy contractor.
       ``(ii) The pharmacy does not charge (or collect from) an 
     enrolled individual an amount that exceeds the individual's 
     obligation (as determined in accordance with the provisions 
     of this part) of the applicable price described in clause 
     (i).
       ``(D) Additional requirements.--The pharmacy shall meet 
     such additional contract requirements as the applicable 
     pharmacy contractor specifies under this section.
       ``(4) Applicability of fraud and abuse provisions.--The 
     provisions of section 1128 through 1128C (relating to fraud 
     and abuse) apply to pharmacies participating in the program 
     under this part.


             ``eligibility; voluntary enrollment; coverage

       ``Sec. 1859C. (a) Eligibility.--Each individual who is 
     entitled to hospital insurance benefits under part A or is 
     eligible to be enrolled in the medical insurance program 
     under part B is eligible to enroll in accordance with this 
     section for outpatient prescription medicine benefits under 
     this part.
       ``(b) Voluntary Enrollment.--
       ``(1) In general.--An individual may enroll under this part 
     only in such manner and form as may be prescribed by 
     regulations, and only during an enrollment period prescribed 
     in or under this subsection.
       ``(2) Initial enrollment period.--
       ``(A) Individuals currently covered.--In the case of an 
     individual who satisfies subsection (a) as of November 1, 
     2005, the initial general enrollment period shall begin on 
     August 1, 2005, and shall end on March 1, 2006.
       ``(B) Individual covered in future.--In the case of an 
     individual who first satisfies subsection (a) on or after 
     November 1, 2005, the individual's initial enrollment period 
     shall begin on the first day of the third month before the 
     month in which such individual first satisfies such paragraph 
     and shall end seven months later. The Secretary shall apply 
     rules similar to the rule described in the second sentence of 
     section 1837(d).
       ``(3) Special enrollment periods (without premium 
     penalty).--
       ``(A) Employer coverage at time of initial general 
     enrollment period.--In the case of an individual who--
       ``(i) at the time the individual first satisfies subsection 
     (a) is enrolled in a group health plan (including 
     continuation coverage) that provides outpatient prescription 
     medicine coverage by reason of the individual's (or the 
     individual's spouse's) current (or, in the case of 
     continuation coverage, former) employment status, and
       ``(ii) has elected not to enroll (or to be deemed enrolled) 
     under this subsection during the individual's initial 
     enrollment period,

     there shall be a special enrollment period of 6 months 
     beginning with the first month that includes the date of the 
     individual's (or individual's spouse's) retirement from or 
     termination of current employment status with the employer 
     that sponsors the plan, or, in the case of continuation 
     coverage, that includes the date of termination of such 
     coverage, or that includes the date the plan substantially 
     terminates outpatient prescription medicine coverage.
       ``(B) Dropping of retiree prescription medicine coverage.--
     In the case of an individual who--
       ``(i) at the time the individual first satisfies subsection 
     (a) is enrolled in a group health plan that provides 
     outpatient prescription medicine coverage other than by 
     reason of the individual's (or the individual's spouse's) 
     current employment; and

[[Page H6126]]

       ``(ii) has elected not to enroll (or to be deemed enrolled) 
     under this subsection during the individual's initial 
     enrollment period,

     there shall be a special enrollment period of 6 months 
     beginning with the first month that includes the date that 
     the plan substantially terminates outpatient prescription 
     medicine coverage and ending 6 months later.
       ``(C) Loss of medicare+choice prescription medicine 
     coverage.--In the case of an individual who is enrolled under 
     part C in a Medicare+Choice plan that provides prescription 
     medicine benefits, if such enrollment is terminated because 
     of the termination or reduction in service area of the plan, 
     there shall be a special enrollment period of 6 months 
     beginning with the first month that includes the date that 
     such plan is terminated or such reduction occurs and ending 6 
     months later.
       ``(D) Loss of medicaid prescription medicine coverage.--In 
     the case of an individual who--
       ``(i) satisfies subsection (a);
       ``(ii) loses eligibility for benefits (that include 
     benefits for prescription medicine) under a State plan after 
     having been enrolled (or determined to be eligible) for such 
     benefits under such plan; and
       ``(iii) is not otherwise enrolled under this subsection at 
     the time of such loss of eligibility,
     there shall be a special enrollment period specified by the 
     Secretary of not less than 6 months beginning with the first 
     month that includes the date that the individual loses such 
     eligibility.
       ``(4) Late enrollment with premium penalty.--The Secretary 
     shall permit an individual who satisfies subsection (a) to 
     enroll other than during the initial enrollment period under 
     paragraph (2) or a special enrollment period under paragraph 
     (3). But, in the case of such an enrollment, the amount of 
     the monthly premium of the individual is subject to an 
     increase under section 1859C(e)(1).
       ``(5) Information.--
       ``(A) In general.--The Secretary shall broadly distribute 
     information to individuals who satisfy subsection (a) on the 
     benefits provided under this part. The Secretary shall 
     periodically make available information on the cost 
     differentials to enrollees for the use of generic medicines 
     and other medicines.
       ``(B) Toll-free hotline.--The Secretary shall maintain a 
     toll-free telephone hotline (which may be a hotline already 
     used by the Secretary under this title) for purposes of 
     providing assistance to beneficiaries in the program under 
     this part, including responding to questions concerning 
     coverage, enrollment, benefits, grievances and appeals 
     procedures, and other aspects of such program.
       ``(6) Enrollee defined.--For purposes of this part, the 
     term `enrollee' means an individual enrolled for benefits 
     under this part.
       ``(c) Coverage Period.--
       ``(1) In general.--The period during which an individual is 
     entitled to benefits under this part (in this subsection 
     referred to as the individual's `coverage period') shall 
     begin on such a date as the Secretary shall establish 
     consistent with the type of coverage rules described in 
     subsections (a) and (e) of section 1838, except that in no 
     case shall a coverage period begin before January 1, 2006. No 
     payments may be made under this part with respect to the 
     expenses of an individual unless such expenses were incurred 
     by such individual during a period which, with respect to the 
     individual, is a coverage period.
       ``(2) Termination.--The Secretary shall provide for the 
     application of provisions under this subsection similar to 
     the provisions in section 1838(b).
       ``(d) Provision of Benefits to Medicare+Choice Enrollees.--
     In the case of an individual who is enrolled under this part 
     and is enrolled in a Medicare+Choice plan under part C, the 
     individual shall be provided the benefits under this part 
     through such plan and not through payment under this part.
       ``(e) Late Enrollment Penalties; Payment of Premiums.--
       ``(1) Late enrollment penalty.--
       ``(A) In general.--In the case of a late enrollment 
     described in subsection (b)(4), subject to the succeeding 
     provisions of this paragraph, the Secretary shall establish 
     procedures for increasing the amount of the monthly premium 
     under this part applicable to such enrollee by an amount that 
     the Secretary determines is actuarially sound for each such 
     period.
       ``(B) Periods taken into account.--For purposes of 
     calculating any 12-month period under subparagraph (A), there 
     shall be taken into account months of lapsed coverage in a 
     manner comparable to that applicable under the second 
     sentence of section 1839(b).
       ``(C) Periods not taken into account.--
       ``(i) In general.--For purposes of calculating any 12-month 
     period under subparagraph (A), subject to clause (ii), there 
     shall not be taken into account months for which the enrollee 
     can demonstrate that the enrollee was covered under a group 
     health plan that provides coverage of the cost of 
     prescription medicines whose actuarial value (as defined by 
     the Secretary) to the enrollee equals or exceeds the 
     actuarial value of the benefits provided to an individual 
     enrolled in the outpatient prescription medicine benefit 
     program under this part.
       ``(ii) Application.--This subparagraph shall only apply 
     with respect to a coverage period the enrollment for which 
     occurs before the end of the 60-day period that begins on the 
     first day of the month which includes the date on which the 
     plan terminates or reduces its service area (in a manner that 
     results in termination of enrollment), ceases to provide, or 
     reduces the value of the prescription medicine coverage under 
     such plan to below the value of the coverage provided under 
     the program under this part.
       ``(2) Incorporation of premium payment and government 
     contributions provisions.--The provisions of sections 1840 
     and 1844(a)(1) shall apply to enrollees under this part in 
     the same manner as they apply to individuals 65 years of age 
     or older enrolled under part B. For purposes of this 
     subsection, any reference in a section referred to in a 
     previous subsection to the Federal Supplementary Medical 
     Insurance Trust Fund is deemed a reference to the Federal 
     Medicare Prescription Medicine Trust Fund.
       ``(f) Election of Pharmacy Contractor To Administer 
     Benefits.--The Secretary shall establish a process whereby 
     each individual enrolled under this part and residing in a 
     region may elect the pharmacy contractor that will administer 
     the benefits under this part with respect to the individual. 
     Such process shall permit the individual to make an initial 
     election and to change such an election on at least an annual 
     basis and under such other circumstances as the Secretary 
     shall specify.


              ``provision of, and entitlement to, benefits

       ``Sec. 1859D. (a) Benefits.--Subject to the succeeding 
     provisions of this section, the benefits provided to an 
     enrollee by the program under this part shall consist of the 
     following:
       ``(1) Covered outpatient prescription medicine benefits.--
     Entitlement to have payment made on the individual's behalf 
     for covered outpatient prescription medicines.
       ``(2) Limitation on cost-sharing for part b outpatient 
     prescription medicines.--
       ``(A) In general.--Once an enrollee has incurred aggregate 
     countable cost-sharing (as defined in subparagraph (B)) equal 
     to the stop-loss limit specified in subsection (c)(4) for 
     expenses in a year, entitlement to the elimination of cost-
     sharing otherwise applicable under part B for additional 
     expenses incurred in the year for outpatient prescription 
     medicines or biologicals for which payment is made under part 
     B.
       ``(B) Countable cost-sharing defined.--For purposes of this 
     part, the term `countable cost-sharing' means--
       ``(i) out-of-pocket expenses for outpatient prescription 
     medicines with respect to which benefits are payable under 
     part B, and
       ``(ii) cost-sharing under subsections (c)(3)(B) and 
     (c)(3)(C)(i).
       ``(b) Covered Outpatient Prescription Medicine Defined.--
       ``(1) In general.--Except as provided in paragraph (2), for 
     purposes of this part the term `covered outpatient 
     prescription medicine' means any of the following products:
       ``(A) A medicine which may be dispensed only upon 
     prescription, and--
       ``(i) which is approved for safety and effectiveness as a 
     prescription medicine under section 505 of the Federal Food, 
     Drug, and Cosmetic Act;
       ``(ii)(I) which was commercially used or sold in the United 
     States before the date of enactment of the Drug Amendments of 
     1962 or which is identical, similar, or related (within the 
     meaning of section 310.6(b)(1) of title 21 of the Code of 
     Federal Regulations) to such a medicine, and (II) which has 
     not been the subject of a final determination by the 
     Secretary that it is a `new drug' (within the meaning of 
     section 201(p) of the Federal Food, Drug, and Cosmetic Act) 
     or an action brought by the Secretary under section 301, 
     302(a), or 304(a) of such Act to enforce section 502(f) or 
     505(a) of such Act; or
       ``(iii)(I) which is described in section 107(c)(3) of the 
     Drug Amendments of 1962 and for which the Secretary has 
     determined there is a compelling justification for its 
     medical need, or is identical, similar, or related (within 
     the meaning of section 310.6(b)(1) of title 21 of the Code of 
     Federal Regulations) to such a medicine, and (II) for which 
     the Secretary has not issued a notice of an opportunity for a 
     hearing under section 505(e) of the Federal Food, Drug, and 
     Cosmetic Act on a proposed order of the Secretary to withdraw 
     approval of an application for such medicine under such 
     section because the Secretary has determined that the 
     medicine is less than effective for all conditions of use 
     prescribed, recommended, or suggested in its labeling.
       ``(B) A biological product which--
       ``(i) may only be dispensed upon prescription;
       ``(ii) is licensed under section 351 of the Public Health 
     Service Act; and
       ``(iii) is produced at an establishment licensed under such 
     section to produce such product.
       ``(C) Insulin approved under appropriate Federal law, and 
     needles, syringes, and disposable pumps for the 
     administration of such insulin.
       ``(D) A prescribed medicine or biological product that 
     would meet the requirements of subparagraph (A) or (B) but 
     that is available over-the-counter in addition to being 
     available upon prescription, but only if the particular 
     dosage form or strength prescribed and required for the 
     individual is not available over-the-counter.
       ``(E) Smoking cessation agents (as specified by the 
     Secretary).

[[Page H6127]]

       ``(2) Exclusion.--The term `covered outpatient prescription 
     medicine' does not include--
       ``(A) medicines or classes of medicines, 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), as the 
     Secretary may specify and does not include such other 
     medicines, classes, and uses as the Secretary may specify 
     consistent with the goals of providing quality care and 
     containing costs under this part;
       ``(B) except as provided in paragraphs (1)(D) and (1)(E), 
     any product which may be distributed to individuals without a 
     prescription;
       ``(C) any product when furnished as part of, or as incident 
     to, a diagnostic service or any other item or service for 
     which payment may be made under this title; or
       ``(D) any product that is covered under part B of this 
     title.
       ``(c) Payment of Benefits.--
       ``(1) Covered outpatient prescription medicines.--There 
     shall be paid from the Federal Medicare Prescription Medicine 
     Trust Fund, in the case of each enrollee who incurs expenses 
     for medicines with respect to which benefits are payable 
     under this part under subsection (a)(1), amounts equal to the 
     sum of--
       ``(A) the price for which the medicine is made available 
     under this part (consistent with sections 1859A and 1859B), 
     reduced by any applicable cost-sharing under paragraphs (2) 
     and (3); and
       ``(B) a reasonable dispensing fee.
     The price under subparagraph (A) shall in no case exceed the 
     retail price for the medicine involved.
       ``(2) Deductible.--The amount of payment under paragraph 
     (1) for expenses incurred in a year, beginning with 2006, 
     shall be reduced by an annual deductible equal to the amount 
     specified in section 1859(2) (subject to adjustment under 
     paragraph (8)). Only expenses for countable cost-sharing (as 
     defined in subsection (a)(2)(B)) shall be taken into account 
     in applying this paragraph.
       ``(3) Coinsurance.--
       ``(A) In general.--The amount of payment under paragraph 
     (1) for expenses incurred in a year shall be further reduced 
     (subject to the stop-loss limit under paragraph (4)) by 
     coinsurance as provided under this paragraph.
       ``(B) Preferred medicines.--The coinsurance under this 
     paragraph in the case of a preferred medicine (including a 
     medicine treated as a preferred medicine under paragraph 
     (5)), is equal to 20 percent of the price applicable under 
     paragraph (1)(A) (or such lower percentage as may be provided 
     for under section 1859E(a)(1)(A)(ii)). In this part, the term 
     `preferred medicine' means, with respect to medicines 
     classified within a therapeutic class, those medicines which 
     have been designated as a preferred medicine by the Secretary 
     or the pharmacy contractor involved with respect to that 
     class and (in the case of a nongeneric medicine) with respect 
     to which a contract has been negotiated under this part.
       ``(C) Nonpreferred medicines.--The coinsurance under this 
     paragraph in the case of a nonpreferred medicine that is not 
     treated as a preferred medicine under paragraph (5) is equal 
     to the sum of--
       ``(i) 20 percent of the price for lowest price preferred 
     medicine that is within the same therapeutic class; and
       ``(ii) the amount by which--

       ``(I) the price at which the nonpreferred medicine is made 
     available to the enrollee; exceeds
       ``(II) the price of such lowest price preferred medicine.

       ``(4) No coinsurance once out-of-pocket expenditures equal 
     stop-loss limit.--Once an enrollee has incurred aggregate 
     countable cost-sharing under paragraph (3) (including cost-
     sharing under part B attributable to outpatient prescription 
     drugs or biologicals) equal to the amount specified in 
     section 1859(4) (subject to adjustment under paragraph (8)) 
     for expenses in a year--
       ``(A) there shall be no coinsurance under paragraph (3) for 
     additional expenses incurred in the year involved; and
       ``(B) there shall be no coinsurance under part B for 
     additional expenses incurred in the year involved for 
     outpatient prescription drugs and biologicals.
       ``(5) Appeals rights relating to coverage of nonpreferred 
     medicines.--
       ``(A) Procedures regarding the determination of medicines 
     that are medically necessary.--Each pharmacy contractor shall 
     have in place procedures on a case-by-case basis to treat a 
     nonpreferred medicine as a preferred medicine under this part 
     if the preferred medicine is determined to be not as 
     effective for the enrollee or to have significant adverse 
     effect on the enrollee. Such procedures shall require that 
     such determinations are based on professional medical 
     judgment, the medical condition of the enrollee, and other 
     medical evidence.
       ``(B) Procedures regarding denials of care.--Such 
     contractor shall have in place procedures to ensure--
       ``(i) a timely internal review for resolution of denials of 
     coverage (in whole or in part and including those regarding 
     the coverage of nonpreferred medicines) in accordance with 
     the medical exigencies of the case and a timely resolution of 
     complaints, by enrollees in the plan, or by providers, 
     pharmacists, and other individuals acting on behalf of each 
     such enrollee (with the enrollee's consent) in accordance 
     with requirements (as established by the Secretary) that are 
     comparable to such requirements for Medicare+Choice 
     organizations under part C;
       ``(ii) that the entity complies in a timely manner with 
     requirements established by the Secretary that (I) provide 
     for an external review by an independent entity selected by 
     the Secretary of denials of coverage described in clause (i) 
     not resolved in the favor of the beneficiary (or other 
     complainant) under the process described in such clause and 
     (II) are comparable to the external review requirements 
     established for Medicare+Choice organizations under part C; 
     and
       ``(iii) that enrollees are provided with information 
     regarding the appeals procedures under this part at the time 
     of enrollment with a pharmacy contractor under this part and 
     upon request thereafter.
       ``(6) Transfer of funds to cover costs of part b 
     prescription medicine catastrophic benefit.--With respect to 
     benefits described in subsection (a)(2), there shall 
     transferred from the Federal Medicare Prescription Medicine 
     Trust Fund to the Federal Supplementary Medical Insurance 
     Trust Fund amounts equivalent to the elimination of cost-
     sharing described in such subsection.
       ``(7) Permitting application under part b of negotiated 
     prices.--For purposes of making payment under part B for 
     medicines that would be covered outpatient prescription 
     medicines but for the exclusion under subparagraph (B) or (C) 
     of subsection (b)(2), the Secretary may elect to apply the 
     payment basis used for payment of covered outpatient 
     prescription medicines under this part instead of the payment 
     basis otherwise used under such part, if it results in a 
     lower cost to the program.
       ``(8) Inflation adjustment.--
       ``(A) In general.--With respect to expenses incurred in a 
     year after 2006--
       ``(i) the deductible under paragraph (2) is equal to the 
     deductible determined under such paragraph (or this 
     subparagraph) for the previous year increased by the 
     percentage increase in per capita program expenditures (as 
     estimated in advance for the year involved under subparagraph 
     (B)); and
       ``(ii) the stop-loss limit under paragraph (3) is equal to 
     the stop-loss limit determined under such paragraph (or this 
     subparagraph) for the previous year increased by such 
     percentage increase.

     The Secretary shall adjust such percentage increase in 
     subsequent years to take into account misestimations made of 
     the per capita program expenditures under clauses (i) and 
     (ii) in previous years. Any increase under this subparagraph 
     that is not a multiple of $10 shall be rounded to the nearest 
     multiple of $10.
       ``(B) Estimation of increase in per capita program 
     expenditures.--The Secretary shall before the beginning of 
     each year (beginning with 2007) estimate the percentage 
     increase in average per capita aggregate expenditures from 
     the Federal Medicare Prescription Medicine Trust Fund for the 
     year involved compared to the previous year.
       ``(C) Reconciliation.--The Secretary shall also compute 
     (beginning with 2008) the actual percentage increase in such 
     aggregate expenditures in order to provide for reconciliation 
     of deductibles, stop-loss limits, and premiums under the 
     second sentence of subparagraph (A) and under section 
     1859D(d)(2).
       ``(d) Amount of Premiums.--
       ``(1) Monthly premium rate in 2006.--The monthly premium 
     rate in 2006 for prescription medicine benefits under this 
     part is the amount specified in section 1859(1).
       ``(2) Inflation adjustment for subsequent years.--The 
     monthly premium rate for a year after 2006 for prescription 
     medicine benefits under this part is equal to the monthly 
     premium rate for the previous year under this subsection 
     increased by the percentage increase in per capita program 
     expenditures (as estimated in advance for the year involved 
     under subsection (c)(8)(B)). The Secretary shall adjust such 
     percentage in subsequent years to take into account 
     misestimations made of the per capita program expenditures 
     under the previous sentence in previous years. Any increase 
     under this paragraph that is not a multiple of $1 shall be 
     rounded to the nearest multiple of $1.


                  ``administration; quality assurance

       ``Sec. 1859E. (a) Rules Relating to Provision of 
     Benefits.--
       ``(1) Provision of benefits.--
       ``(A) In general.--In providing benefits under this part, 
     the Secretary (directly or through the contracts with 
     pharmacy contractors) shall employ mechanisms to provide 
     benefits appropriately and efficiently, and those mechanisms 
     may include--
       ``(i) the use of--

       ``(I) price negotiations (consistent with subsection (b));
       ``(II) reduced coinsurance (below 20 percent) to encourage 
     the utilization of appropriate preferred medicines; and
       ``(III) methods to reduce medication errors and encourage 
     appropriate use of medications; and

       ``(ii) permitting pharmacy contractors, as approved by the 
     Secretary, to make exceptions to section 1859D(c)(3)(C) 
     (relating to cost-sharing for non-preferred medicines) to 
     secure best prices for enrollees so long as the payment 
     amount under section 1859D(c)(1) does not equal zero.

[[Page H6128]]

       ``(B) Construction.--Nothing in this subsection shall be 
     construed to prevent the Secretary (directly or through the 
     contracts with pharmacy contractors) from using incentives to 
     encourage enrollees to select generic or other cost-effective 
     medicines, so long as--
       ``(i) such incentives are designed not to result in any 
     increase in the aggregate expenditures under the Federal 
     Medicare Prescription Medicine Trust Fund; and
       ``(ii) a beneficiary's coinsurance shall be no greater than 
     20 percent in the case of a preferred medicine (including a 
     nonpreferred medicine treated as a preferred medicine under 
     section 1859D(c)(5)).
       ``(2) Construction.--Nothing in this part shall preclude 
     the Secretary or a pharmacy contractor from--
       ``(A) educating prescribing providers, pharmacists, and 
     enrollees about medical and cost benefits of preferred 
     medicines;
       ``(B) requesting prescribing providers to consider a 
     preferred medicine prior to dispensing of a nonpreferred 
     medicine, as long as such request does not unduly delay the 
     provision of the medicine;
       ``(C) using mechanisms to encourage enrollees under this 
     part to select cost-effective medicines or less costly means 
     of receiving or administering medicines, including the use of 
     therapeutic interchange programs, disease management 
     programs, and notification to the beneficiary that a more 
     affordable generic medicine equivalent was not selected by 
     the prescribing provider and a statement of the lost cost 
     savings to the beneficiary;
       ``(D) using price negotiations to achieve reduced prices on 
     covered outpatient prescription medicines, including new 
     medicines, medicines for which there are few therapeutic 
     alternatives, and medicines of particular clinical importance 
     to individuals enrolled under this part; and
       ``(E) utilizing information on medicine prices of OECD 
     countries and of other payors in the United States in the 
     negotiation of prices under this part.
       ``(b) Price Negotiations Process.--
       ``(1) Requirements with respect to preferred medicines.--
     Negotiations of contracts with manufacturers with respect to 
     covered outpatient prescription medicines under this part 
     shall be conducted in a manner so that--
       ``(A) there is at least a contract for a medicine within 
     each therapeutic class (as defined by the Secretary in 
     consultation with such Medicare Prescription Medicine 
     Advisory Committee);
       ``(B) if there is more than 1 medicine available in a 
     therapeutic class, there are contracts for at least 2 
     medicines within such class unless determined clinically 
     inappropriate in accordance with standards established by the 
     Secretary; and
       ``(C) if there are more than 2 medicines available in a 
     therapeutic class, there is a contract for at least 2 
     medicines within such class and a contract for generic 
     medicine substitute if available unless determined clinically 
     inappropriate in accordance with standards established by the 
     Secretary.
       ``(2) Establishment of therapeutic classes.--The Secretary, 
     in consultation with the Medicare Prescription Medicine 
     Advisory Committee (established under section 1859H), shall 
     establish for purposes of this part therapeutic classes and 
     assign to such classes covered outpatient prescription 
     medicines.
       ``(3) Disclosure concerning preferred medicines.--The 
     Secretary shall provide, through pharmacy contractors or 
     otherwise, for--
       ``(A) disclosure to current and prospective enrollees and 
     to participating providers and pharmacies in each service 
     area a list of the preferred medicines and differences in 
     applicable cost-sharing between such medicines and 
     nonpreferred medicines; and
       ``(B) advance disclosure to current enrollees and to 
     participating providers and pharmacies in each service area 
     of changes to any such list of preferred medicines and 
     differences in applicable cost-sharing.
       ``(4) No review.--The Secretary's establishment of 
     therapeutic classes and the assignment of medicines to such 
     classes and the Secretary's determination of what is a 
     breakthrough medicine are not subject to administrative or 
     judicial review.
       ``(c) Confidentiality.--The Secretary shall ensure that the 
     confidentiality of individually identifiable health 
     information relating to the provision of benefits under this 
     part is protected, consistent with the standards for the 
     privacy of such information promulgated by the Secretary 
     under the Health Insurance Portability and Accountability Act 
     of 1996, or any subsequent comprehensive and more protective 
     set of confidentiality standards enacted into law or 
     promulgated by the Secretary. Nothing in this subsection 
     shall be construed as preventing the coordination of data 
     with a State prescription medicine program so long as such 
     program has in place confidentiality standards that are equal 
     to or exceed the standards used by the Secretary.
       ``(d) Fraud and Abuse Safeguards.--The Secretary, through 
     the Office of the Inspector General, is authorized and 
     directed to issue regulations establishing appropriate 
     safeguards to prevent fraud and abuse under this part. Such 
     safeguards, at a minimum, should include compliance programs, 
     certification data, audits, and recordkeeping practices. In 
     developing such regulations, the Secretary shall consult with 
     the Attorney General and other law enforcement and regulatory 
     agencies.


          ``federal medicare prescription medicine trust fund

       ``Sec. 1859F. (a) Establishment.--There is hereby created 
     on the books of the Treasury of the United States a trust 
     fund to be known as the `Federal Medicare Prescription 
     Medicine 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.
       ``(b) Application of SMI Trust Fund Provisions.--The 
     provisions of subsections (b) through (i) of section 1841 
     shall apply to this part and the Trust Fund in the same 
     manner as they apply to part B and the Federal Supplementary 
     Medical Insurance Trust Fund, respectively.


      ``compensation for employers covering retiree medicine costs

       ``Sec. 1859G. (a) In General.--In the case of an individual 
     who is eligible to be enrolled under this part and is a 
     participant or beneficiary under a group health plan that 
     provides outpatient prescription medicine coverage to 
     retirees the actuarial value of which is not less than the 
     actuarial value of the coverage provided under this part, the 
     Secretary shall make payments to such plan subject to the 
     provisions of this section. Such payments shall be treated as 
     payments under this part for purposes of sections 1859F and 
     1859C(e)(2). In applying the previous sentence with respect 
     to section 1859C(e)(2), the amount of the Government 
     contribution referred to in section 1844(a)(1)(A) is deemed 
     to be equal to the aggregate amount of the payments made 
     under this section.
       ``(b) Requirements.--To receive payment under this section, 
     a group health plan shall comply with the following 
     requirements:
       ``(1) Compliance with requirements.--The group health plan 
     shall comply with the requirements of this Act and other 
     reasonable, necessary, and related requirements that are 
     needed to administer this section, as determined by the 
     Secretary.
       ``(2) Annual assurances and notice before termination.--The 
     sponsor of the plan shall--
       ``(A) annually attest, and provide such assurances as the 
     Secretary may require, that the coverage offered under the 
     group health plan meets the requirements of this section and 
     will continue to meet such requirements for the duration of 
     the sponsor's participation in the program under this 
     section; and
       ``(B) guarantee that it will give notice to the Secretary 
     and covered enrollees--
       ``(i) at least 120 days before terminating its plan, and
       ``(ii) immediately upon determining that the actuarial 
     value of the prescription medicine benefit under the plan 
     falls below the actuarial value required under subsection 
     (a).
       ``(3) Beneficiary information.--The sponsor of the plan 
     shall report to the Secretary, for each calendar quarter for 
     which it seeks a payment under this section, the names and 
     social security numbers of all enrollees described in 
     subsection (a) covered under such plan during such quarter 
     and the dates (if less than the full quarter) during which 
     each such individual was covered.
       ``(4) Audits.--The sponsor or plan seeking payment under 
     this section shall agree to maintain, and to afford the 
     Secretary access to, such records as the Secretary may 
     require for purposes of audits and other oversight activities 
     necessary to ensure the adequacy of prescription medicine 
     coverage, the accuracy of payments made, and such other 
     matters as may be appropriate.
       ``(c) Payment.--
       ``(1) In general.--The sponsor of a group health plan that 
     meets the requirements of subsection (b) with respect to a 
     quarter in a calendar year shall be entitled to have payment 
     made on a quarterly basis of the amount specified in 
     paragraph (2) for each individual described in subsection (a) 
     who during the quarter is covered under the plan and was not 
     enrolled in the insurance program under this part.
       ``(2) Amount of payment.--
       ``(A) In general.--The amount of the payment for a quarter 
     shall approximate, for each such covered individual, \2/3\ of 
     the sum of the monthly Government contribution amounts 
     (computed under subparagraph (B)) for each of the 3 months in 
     the quarter.
       ``(B) Computation of monthly government contribution 
     amount.--For purposes of subparagraph (A), the monthly 
     Government contribution amount for a month in a year is equal 
     to the amount by which--
       ``(i) \1/12\ of the average per capita aggregate 
     expenditures, as estimated under section 1859D(c)(8) for the 
     year involved; exceeds
       ``(ii) the monthly premium rate under section 1859D(d) for 
     the month involved.


          ``medicare prescription medicine advisory committee

       ``Sec. 1859H. (a) Establishment of Committee.--There is 
     established a Medicare Prescription Medicine Advisory 
     Committee (in this section referred to as the `Committee').
       ``(b) Functions of Committee.--The Committee shall advise 
     the Secretary on policies related to--
       ``(1) the development of guidelines for the implementation 
     and administration of the outpatient prescription medicine 
     benefit program under this part; and
       ``(2) the development of--

[[Page H6129]]

       ``(A) standards required of pharmacy contractors under 
     section 1859D(c)(5) for determining if a medicine is as 
     effective for an enrollee or has a significant adverse effect 
     on an enrollee under this part;
       ``(B) standards for--
       ``(i) defining therapeutic classes;
       ``(ii) adding new therapeutic classes;
       ``(iii) assigning to such classes covered outpatient 
     prescription medicines; and
       ``(iv) identifying breakthrough medicines;
       ``(C) procedures to evaluate the bids submitted by pharmacy 
     contractors under this part;
       ``(D) procedures for negotiations, and standards for 
     entering into contracts, with manufacturers, including 
     identifying medicines or classes of medicines where 
     Secretarial negotiation is most likely to yield savings under 
     this part significantly above those that which could be 
     achieved by a pharmacy contractor; and
       ``(E) procedures to ensure that pharmacy contractors with a 
     contract under this part are in compliance with the 
     requirements under this part.

     For purposes of this part, a medicine is a `breakthrough 
     medicine' if the Secretary, in consultation with the 
     Committee, determines it is a new product that will make a 
     significant and major improvement by reducing physical or 
     mental illness, reducing mortality, or reducing disability, 
     and that no other product is available to beneficiaries that 
     achieves similar results for the same condition. The 
     Committee may consider cost-effectiveness in establishing 
     standards for defining therapeutic classes and assigning 
     drugs to such classes under subparagraph (B).
       ``(c) Structure and Membership of the Committee.--
       ``(1) Structure.--The Committee shall be composed of 19 
     members who shall be appointed by the Secretary.
       ``(2) Membership.--
       ``(A) In general.--The members of the Committee shall be 
     chosen on the basis of their integrity, impartiality, and 
     good judgment, and shall be individuals who are, by reason of 
     their education, experience, and attainments, exceptionally 
     qualified to perform the duties of members of the Committee.
       ``(B) Specific members.--Of the members appointed under 
     paragraph (1)--
       ``(i) 5 shall be chosen to represent practicing physicians, 
     2 of whom shall be gerontologists;
       ``(ii) 2 shall be chosen to represent practicing nurse 
     practitioners;
       ``(iii) 4 shall be chosen to represent practicing 
     pharmacists;
       ``(iv) 1 shall be chosen to represent the Centers for 
     Medicare & Medicaid Services;
       ``(v) 4 shall be chosen to represent actuaries, 
     pharmacoeconomists, researchers, and other appropriate 
     experts;
       ``(vi) 1 shall be chosen to represent emerging medicine 
     technologies;
       ``(vii) 1 shall be chosen to represent the Food and Drug 
     Administration; and
       ``(viii) 1 shall be chosen to represent individuals 
     enrolled under this part.
       ``(d) Terms of Appointment.--Each member of the Committee 
     shall serve for a term determined appropriate by the 
     Secretary. The terms of service of the members initially 
     appointed shall begin on January 1, 2005.
       ``(e) Chairperson.--The Secretary shall designate a member 
     of the Committee as Chairperson. The term as Chairperson 
     shall be for a 1-year period.
       ``(f) Committee Personnel Matters.--
       ``(1) Members.--
       ``(A) Compensation.--Each member of the Committee who is 
     not an officer or employee of the Federal Government shall be 
     compensated at a rate equal to the daily equivalent of the 
     annual rate of basic pay prescribed for level IV of the 
     Executive Schedule under section 5315 of title 5, United 
     States Code, for each day (including travel time) during 
     which such member is engaged in the performance of the duties 
     of the Committee. All members of the Committee who are 
     officers or employees of the United States shall serve 
     without compensation in addition to that received for their 
     services as officers or employees of the United States.
       ``(B) Travel expenses.--The members of the Committee shall 
     be allowed travel expenses, including per diem in lieu of 
     subsistence, at rates authorized for employees of agencies 
     under subchapter I of chapter 57 of title 5, United States 
     Code, while away from their homes or regular places of 
     business in the performance of services for the Committee.
       ``(2) Staff.--The Committee may appoint such personnel as 
     the Committee considers appropriate.
       ``(g) Operation of the Committee.--
       ``(1) Meetings.--The Committee shall meet at the call of 
     the Chairperson (after consultation with the other members of 
     the Committee) not less often than quarterly to consider a 
     specific agenda of issues, as determined by the Chairperson 
     after such consultation.
       ``(2) Quorum.--Ten members of the Committee shall 
     constitute a quorum for purposes of conducting business.
       ``(h) Federal Advisory Committee Act.--Section 14 of the 
     Federal Advisory Committee Act (5 U.S.C. App.) shall not 
     apply to the Committee.
       ``(i) Transfer of Personnel, Resources, and Assets.--For 
     purposes of carrying out its duties, the Secretary and the 
     Committee may provide for the transfer to the Committee of 
     such civil service personnel in the employ of the Department 
     of Health and Human Services (including the Centers for 
     Medicare & Medicaid Services), and such resources and assets 
     of the Department used in carrying out this title, as the 
     Committee requires.
       ``(j) Authorization of Appropriations.--There are 
     authorized to be appropriated such sums as may be necessary 
     to carry out the purposes of this section.''.
       (b) Application of General Exclusions from Coverage.--
       (1) Application to part d.--Section 1862(a) (42 U.S.C. 
     1395y(a)) is amended in the matter preceding paragraph (1) by 
     striking ``part A or part B'' and inserting ``part A, B, or 
     D''.
       (2) Prescription medicines not excluded from coverage if 
     appropriately prescribed.--Section 1862(a)(1) (42 U.S.C. 
     1395y(a)(1)) is amended--
       (A) in subparagraph (H), by striking ``and'' at the end;
       (B) in subparagraph (I), by striking the semicolon at the 
     end and inserting ``, and''; and
       (C) by adding at the end the following new subparagraph:
       ``(J) in the case of prescription medicines covered under 
     part D, which are not prescribed in accordance with such 
     part;''.
       (c) Conforming Amendments.--(1) Part C of title XVIII is 
     amended--
       (A) in section 1851(a)(2)(B) (42 U.S.C. 1395w-21(a)(2)(B)), 
     by striking ``1859(b)(3)'' and inserting ``1858(b)(3)'';
       (B) in section 1851(a)(2)(C) (42 U.S.C. 1395w-21(a)(2)(C)), 
     by striking ``1859(b)(2)'' and inserting ``1858(b)(2)'';
       (C) in section 1852(a)(1) (42 U.S.C. 1395w-22(a)(1)), by 
     striking ``1859(b)(3)'' and inserting ``1858(b)(3)'';
       (D) in section 1852(a)(3)(B)(ii) (42 U.S.C. 1395w-
     22(a)(3)(B)(ii)), by striking ``1859(b)(2)(B)'' and inserting 
     ``1858(b)(2)(B)'';
       (E) in section 1853(a)(1)(A) (42 U.S.C. 1395w-23(a)(1)(A)), 
     by striking ``1859(e)(4)'' and inserting ``1858(e)(4)''; and
       (F) in section 1853(a)(3)(D) (42 U.S.C. 1395w-23(a)(3)(D)), 
     by striking ``1859(e)(4)'' and inserting ``1858(e)(4)''.
       (2) Section 1171(a)(5)(D) (42 U.S.C. 1320d(a)(5)(D)) is 
     amended by striking ``or (C)'' and inserting ``(C), or (D)''.

     SEC. 102. PROVISION OF MEDICARE OUTPATIENT PRESCRIPTION 
                   MEDICINE COVERAGE UNDER THE MEDICARE+CHOICE 
                   PROGRAM.

       (a) Requiring Availability of an Actuarially Equivalent 
     Prescription Medicine Benefit.--Section 1851 (42 U.S.C. 
     1395w-21) is amended by adding at the end the following new 
     subsection:
       ``(j) Availability of Prescription Medicine Benefits.--
       ``(1) In general.--Notwithstanding any other provision of 
     this part, each Medicare+Choice organization that makes 
     available a Medicare+Choice plan described in section 
     1851(a)(2)(A) shall make available such a plan that offers 
     coverage of covered outpatient prescription medicines that is 
     at least actuarially equivalent to the benefits provided 
     under part D. Information respecting such benefits shall be 
     made available in the same manner as information on other 
     benefits provided under this part is made available. Nothing 
     in this paragraph shall be construed as requiring the 
     offering of such coverage separate from coverage that 
     includes benefits under parts A and B.
       ``(2) Treatment of prescription medicine enrollees.--In the 
     case of a Medicare+Choice eligible individual who is enrolled 
     under part D, the benefits described in paragraph (1) shall 
     be treated in the same manner as benefits described in part B 
     for purposes of coverage and payment and any reference in 
     this part to the Federal Supplementary Medical Insurance 
     Trust Fund shall be deemed, with respect to such benefits, to 
     be a reference to the Federal Medicare Prescription Medicine 
     Trust Fund.''.
       (b) Application of Quality Standards.--Section 
     1852(e)(2)(A) (42 U.S.C. 1395w-22(e)(2)(A)) is amended--
       (1) by striking ``and'' at the end of clause (xi);
       (2) by striking the period at the end of clause (xii) and 
     inserting ``, and''; and
       (3) by adding at the end the following new clause:
       ``(xiii) comply with the standards, and apply the programs, 
     under section 1859B(b) for covered outpatient prescription 
     medicines under the plan.''.
       (c) Payment Separate From Payment for Part A and B 
     Benefits.--Section 1853 (42 U.S.C. 1395w-23) is amended--
       (1) in subsection (a)(1)(A), by striking ``and (i)'' and 
     inserting ``(i), and (j)''; and
       (2) by adding at the end the following new subsection:
       ``(j) Payment for Prescription Medicine Coverage Option.--
       ``(1) In general.--In the case of a Medicare+Choice plan 
     that provides prescription medicine benefits described in 
     section 1851(j)(1), the amount of payment otherwise made to 
     the Medicare+Choice organization offering the plan shall be 
     increased by the amount described in paragraph (2). Such 
     payments shall be made in the same manner and time as the 
     amount otherwise paid, but such amount shall be payable from 
     the Federal Medicare Prescription Medicine Trust Fund.
       ``(2) Amount.--The amount described in this paragraph is 
     the monthly Government contribution amount computed under 
     section 1859G(c)(2)(B), but subject to adjustment under 
     paragraph (3). Such amount shall be uniform geographically 
     and shall not vary based on the Medicare+Choice payment area 
     involved.

[[Page H6130]]

       ``(3) Risk adjustment.--The Secretary shall establish a 
     methodology for the adjustment of the payment amount under 
     this subsection in a manner that takes into account the 
     relative risks for use of outpatient prescription medicines 
     by Medicare+Choice enrollees. Such methodology shall be 
     designed in a manner so that the total payments under this 
     title (including part D) are not changed as a result of the 
     application of such methodology.''.
       (d) Separate Application of Adjusted Community Rate 
     (ACR).--Section 1854 (42 U.S.C. 1395w-24) is amended by 
     adding at the end the following:
       ``(i) Application to Prescription Medicine Coverage.--The 
     Secretary shall apply the previous provisions of this section 
     (including the computation of the adjusted community rate) 
     separately with respect to prescription medicine benefits 
     described in section 1851(j)(1).''.
       (f) Conforming Amendments.--
       (1) Section 1851 (42 U.S.C. 1395w-21) is amended--
       (A) in subsection (a)(1)(A), by striking ``parts A and B'' 
     and inserting ``parts A, B, and D''; and
       (B) in subsection (i) by inserting ``(and, if applicable, 
     part D)'' after ``parts A and B''.
       (2) Section 1852(a)(1)(A) (42 U.S.C. 1395w-22(a)(1)(A)) is 
     amended by inserting ``(and under part D to individuals also 
     enrolled under such part)'' after ``parts A and B''.
       (3) Section 1852(d)(1) (42 U.S.C. 1395w-22(d)(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:
       ``(F) the plan for part D benefits guarantees coverage of 
     any specifically named prescription medicine for an enrollee 
     to the extent that it would be required to be covered under 
     part D.

     In carrying out subparagraph (F), a Medicare+Choice 
     organization has the same authority to enter into contracts 
     with respect to coverage of preferred medicines as the 
     Secretary has under part D, but subject to an independent 
     contractor appeal or other appeal process that would be 
     applicable to determinations by such a pharmacy contractor 
     consistent with section 1859D(c)(5).''.
       (e) Limitation on Cost-Sharing.--Section 1854(e) (42 U.S.C. 
     1395w-24(e)) is amended by adding at the end the following 
     new paragraph:
        ``(5) Limitation on cost-sharing.--In no event may a 
     Medicare+Choice organization include a requirement that an 
     enrollee pay cost-sharing in excess of the cost-sharing 
     otherwise permitted under part D.''.

     SEC. 103. MEDIGAP REVISIONS.

       (a) Required Coverage of Covered Outpatient Prescription 
     Medicines.--Section 1882(p)(2)(B) (42 U.S.C. 1395ss(p)(2)(B)) 
     is amended by inserting before ``and'' at the end the 
     following: ``including a requirement that an appropriate 
     number of policies provide coverage of medicines which 
     complements but does not duplicate the medicine benefits that 
     beneficiaries are otherwise eligible for benefits under part 
     D of this title (with the Secretary and the National 
     Association of Insurance Commissioners determining the 
     appropriate level of medicine benefits that each benefit 
     package must provide and ensuring that policies providing 
     such coverage are affordable for beneficiaries;''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect on January 1, 2006.
       (c) Transition Provisions.--
       (1) In general.--If the Secretary of Health and Human 
     Services identifies a State as requiring a change to its 
     statutes or regulations to conform its regulatory program to 
     the amendments made by this section, the State regulatory 
     program shall not be considered to be out of compliance with 
     the requirements of section 1882 of the Social Security Act 
     due solely to failure to make such change until the date 
     specified in paragraph (4).
       (2) NAIC standards.--If, within 9 months after the date of 
     enactment of this Act, the National Association of Insurance 
     Commissioners (in this subsection referred to as the 
     ``NAIC'') modifies its NAIC Model Regulation relating to 
     section 1882 of the Social Security Act (referred to in such 
     section as the 1991 NAIC Model Regulation, as subsequently 
     modified) to conform to the amendments made by this section, 
     such revised regulation incorporating the modifications shall 
     be considered to be the applicable NAIC model regulation 
     (including the revised NAIC model regulation and the 1991 
     NAIC Model Regulation) for the purposes of such section.
       (3) Secretary standards.--If the NAIC does not make the 
     modifications described in paragraph (2) within the period 
     specified in such paragraph, the Secretary of Health and 
     Human Services shall make the modifications described in such 
     paragraph and such revised regulation incorporating the 
     modifications shall be considered to be the appropriate 
     regulation for the purposes of such section.
       (4) Date specified.--
       (A) In general.--Subject to subparagraph (B), the date 
     specified in this paragraph for a State is the earlier of--
       (i) the date the State changes its statutes or regulations 
     to conform its regulatory program to the changes made by this 
     section; or
       (ii) 1 year after the date the NAIC or the Secretary first 
     makes the modifications under paragraph (2) or (3), 
     respectively.
       (B) Additional legislative action required.--In the case of 
     a State which the Secretary identifies as--
       (i) requiring State legislation (other than legislation 
     appropriating funds) to conform its regulatory program to the 
     changes made in this section; but
       (ii) having a legislature which is not scheduled to meet in 
     2004 in a legislative session in which such legislation may 
     be considered;

     the date specified in this paragraph is the first day of the 
     first calendar quarter beginning after the close of the first 
     legislative session of the State legislature that begins on 
     or after January 1, 2004. For purposes of the previous 
     sentence, in the case of a State that has a 2-year 
     legislative session, each year of such session shall be 
     deemed to be a separate regular session of the State 
     legislature.

     SEC. 104. TRANSITIONAL ASSISTANCE FOR LOW INCOME 
                   BENEFICIARIES.

       (a) QMB Coverage of Premiums and Cost-Sharing.--Section 
     1905(p)(3) (42 U.S.C. 1396d(p)(3)) is amended--
       (1) in subparagraph (A)--
       (A) by striking ``and'' at the end of clause (i),
       (B) by adding ``and'' at the end of clause (ii), and
       (C) by adding at the end the following new clause:
       ``(iii) premiums under section 1859D(d).'';
       (2) in subparagraph (B), by inserting ``and section 
     1859D(c)(3)(B) and 1859D(c)(3)(C)(i)'' after ``1813''; and
       (3) in subparagraph (C), by striking ``and section 
     1833(b)'' and inserting ``, section 1833(b), and section 
     1859D(c)(2)''.
       (b) Expanded SLMB Eligibility.--Section 1902(a)(10)(E) (42 
     U.S.C. 1396a(a)(10)(E)) is amended--
       (1) by striking ``and'' at the end of clause (iii);
       (2) by adding ``and'' at the end of clause (iv); and
       (3) by adding at the end the following new clause:
       ``(v)(I) for making medical assistance available for 
     medicare cost-sharing described in section 1905(p)(3)(A)(iii) 
     and medicare cost-sharing described in section 1905(p)(3)(B) 
     and section 1905(p)(3)(C) but only insofar as it relates to 
     benefits provided under part D of title XVIII, subject to 
     section 1905(p)(4), for individuals (other than qualified 
     medicare beneficiaries) who are enrolled under part D of 
     title XVIII and are described in section 1905(p)(1)(B) or 
     would be so described but for the fact that their income 
     exceeds 100 percent, but is less than 150 percent, of the 
     official poverty line (referred to in such section) for a 
     family of the size involved;
       ``(II) subject to section 1905(p)(4), for individuals 
     (other than qualified medicare beneficiaries and individuals 
     described in subclause (I)) who are enrolled under part D of 
     title XVIII and would be described in section 1905(p)(1)(B) 
     but for the fact that their income exceeds 150 percent, but 
     is less than 175 percent, of the official poverty line 
     (referred to in such section) for a family of the size 
     involved, for making medical assistance available for 
     medicare cost-sharing described in section 1905(p)(3)(A)(iii) 
     and medicare cost-sharing described in section 1905(p)(3)(B) 
     and section 1905(p)(3)(C) but only insofar as it relates to 
     benefits provided under part D of title XVIII, and the 
     assistance for medicare cost-sharing described in section 
     1905(p)(3)(A)(iii) is reduced (on a sliding scale based on 
     income) from 100 percent to 0 percent as the income increases 
     from 150 percent to 175 percent of such poverty line;''.
       (c) Federal Financing.--The third sentence of section 
     1905(b) (42 U.S.C. 1396d(b)) is amended by inserting before 
     the period at the end the following: ``and with respect to 
     amounts expended that are attributable to section 
     1902(a)(10)(E)(v) (other than for individuals described in 
     section 1905(p)(1)(B))''.
       (d) Treatment of Territories.--
       (1) In general.--Section 1905(p) (42 U.S.C. 1396d(p)) is 
     amended--
       (A) by redesignating paragraphs (5) and (6) as paragraphs 
     (6) and (7), respectively; and
       (B) by inserting after paragraph (4) the following new 
     paragraph:
       ``(5)(A) In the case of a State, other than the 50 States 
     and the District of Columbia--
       ``(i) the provisions of paragraph (3) insofar as they 
     relate to section 1859D and the provisions of section 
     1902(a)(10)(E)(v) shall not apply to residents of such State; 
     and
       ``(ii) if the State establishes a plan described in 
     subparagraph (B) (for providing medical assistance with 
     respect to the provision of prescription medicines 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 
     subparagraph (C).
       ``(B) The plan described in this subparagraph is a plan 
     that--
       ``(i) provides medical assistance with respect to the 
     provision of covered outpatient medicines (as defined in 
     section 1859D(b)) to low-income medicare beneficiaries; and
       ``(ii) assures that additional amounts received by the 
     State that are attributable to the operation of this 
     paragraph are used only for such assistance.
       ``(C)(i) The amount specified in this subparagraph for a 
     State for a year is equal to the product of--
       ``(I) the aggregate amount specified in clause (ii); and
       ``(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.

[[Page H6131]]

       ``(ii) The aggregate amount specified in this clause for--
       ``(I) 2006, is equal to $25,000,000; or
       ``(II) a subsequent year, is equal to the aggregate amount 
     specified in this clause for the previous year increased by 
     annual percentage increase specified in section 
     1859D(c)(8)(B) for the year involved.
       ``(D) The Secretary shall submit to Congress a report on 
     the application of this paragraph and may include in the 
     report such recommendations as the Secretary deems 
     appropriate.''.
       (2) Conforming amendment.--Section 1108(f) (42 U.S.C. 
     1308(f)) is amended by inserting ``and section 
     1905(p)(5)(A)(ii)'' after ``Subject to subsection (g)''.
       (e) Application of Cost-Sharing.--Section 1902(n)(2) (42 
     U.S.C. 1396a(n)(2)) is amended by adding at the end the 
     following: ``The previous sentence shall not apply to 
     medicare cost-sharing relating to benefits under part D of 
     title XVIII.''.
       (f) Effective Date.--The amendments made by this section 
     apply to medical assistance for premiums and cost-sharing 
     incurred on or after January 1, 2006, with regard to whether 
     regulations to implement such amendments are promulgated by 
     such date.

     SEC. 105. EXPANSION OF MEMBERSHIP AND DUTIES OF MEDICARE 
                   PAYMENT ADVISORY COMMISSION (MEDPAC).

       (a) Expansion of Membership.--
       (1) In general.--Section 1805(c) (42 U.S.C. 1395b-6(c)) is 
     amended--
       (A) in paragraph (1), by striking ``17'' and inserting 
     ``19''; and
       (B) in paragraph (2)(B), by inserting ``experts in the area 
     of pharmacology and prescription medicine benefit programs,'' 
     after ``other health professionals,''.
       (2) Initial terms of additional members.--
       (A) In general.--For purposes of staggering the initial 
     terms of members of the Medicare Payment Advisory Commission 
     under section 1805(c)(3) of the Social Security Act (42 
     U.S.C. 1395b-6(c)(3)), the initial terms of the 2 additional 
     members of the Commission provided for by the amendment under 
     paragraph (1)(A) are as follows:
       (i) One member shall be appointed for 1 year.
       (ii) One member shall be appointed for 2 years.
       (B) Commencement of terms.--Such terms shall begin on 
     January 1, 2004.
       (b) Expansion of Duties.--Section 1805(b)(2) (42 U.S.C. 
     1395b-6(b)(2)) is amended by adding at the end the following 
     new subparagraph:
       ``(D) Prescription medicine benefit program.--Specifically, 
     the Commission shall review, with respect to the prescription 
     medicine benefit program under part D, the following:
       ``(i) The methodologies used for the management of costs 
     and utilization of prescription medicines.
       ``(ii) The prices negotiated and paid, including trends in 
     such prices and applicable discounts and comparisons with 
     prices under section 1859E(a)(2)(E).
       ``(iii) The relationship of pharmacy acquisition costs to 
     the prices so negotiated and paid.
       ``(iv) The methodologies used to ensure access to covered 
     outpatient prescription medicines and to ensure quality in 
     the appropriate dispensing and utilization of such medicines.
       ``(v) The impact of the program on promoting the 
     development of breakthrough medicines.''.

     SEC. 106. STATE PHARMACEUTICAL ASSISTANCE TRANSITION 
                   COMMISSION.

       (a) Establishment.--
       (1) In general.--There is established, as of the first day 
     of the third month beginning after the date of the enactment 
     of this Act, a State Pharmaceutical Assistance Transition 
     Commission (in this section referred to as the 
     ``Commission'') to develop a proposal for addressing the 
     unique transitional issues facing State pharmaceutical 
     assistance programs, and program participants, due to the 
     implementation of the 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+Choice 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).

                       TITLE II--MEDICARE+CHOICE

     SEC. 201. MEDICARE+CHOICE 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+Choice 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+Choice 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) Revision of Blend.--
       (1) Revision of national average used in calculation of 
     blend.--Section 1853(c)(4)(B)(i)(II) (42 U.S.C. 1395w-
     23(c)(4)(B)(i)(II)) is amended by inserting ``who (with 
     respect to determinations for 2004) are enrolled in a 
     Medicare+Choice plan'' after ``the average number of medicare 
     beneficiaries''.
       (2) Change in budget neutrality.--Section 1853(c) (42 
     U.S.C. 1395w-23(c)) is amended--
       (A) in paragraph (1)(A), by inserting ``(for a year before 
     2004)'' after ``multiplied''; and
       (B) in paragraph (5), by inserting ``(before 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 (B)(iv), by striking ``and each 
     succeeding year'' and inserting ``, 2003, and 2004'';
       (B) in subparagraph (C)(iv), by striking ``and each 
     succeeding year'' and inserting ``and 2003''; and
       (C) 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+Choice capitation 
     rate under this paragraph for the area for the previous year; 
     or
       ``(II) the annual Medicare+Choice capitation rate under 
     this paragraph for the area for the previous year increased 
     by the national per capita Medicare+Choice 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-

[[Page H6132]]

     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+Choice 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+Choice 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+Choice 
     plans in different areas and its impact on lowering premiums 
     and increasing benefits under such plans.
       (h) Limitation on Application to 2004 and 2005.--
     Notwithstanding any other provision of law, the amendments 
     made by this section shall only apply to payment rates for 
     2004 and 2005 and for subsequent years the payment shall be 
     made on the basis of law as in effect before the date of the 
     enactment of this Act.

     SEC. 202. MAKING PERMANENT CHANGE IN MEDICARE+CHOICE 
                   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''.

     SEC. 203. SPECIALIZED MEDICARE+CHOICE 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+Choice plans for special needs beneficiaries (as 
     defined in section 1859(b)(4)) may be any type of coordinated 
     care plan.''.
       (b) Specialized Medicare+Choice 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+choice plans for special needs 
     beneficiaries.--
       ``(A) In general.--The term `specialized Medicare+Choice 
     plan for special needs beneficiaries' means a Medicare+Choice 
     plan that exclusively serves special needs beneficiaries (as 
     defined in subparagraph (B)).
       ``(B) Special needs beneficiary.--The term `special needs 
     beneficiary' means a Medicare+Choice 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+Choice 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+Choice Plans for Special Needs Beneficiaries.--In 
     the case of a specialized Medicare+Choice 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) 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+Choice 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).
       (e) Effective Dates.--
       (1) In general.--The amendments made by subsections (a), 
     (b), and (c) shall take effect upon the date of the enactment 
     of this Act.
       (2) Deadline for issuance of requirements for special needs 
     beneficiaries; transition.--No later than 6 months after the 
     date of the enactment of this Act, the Secretary of Health 
     and Human Services shall issue 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. 204. MEDICARE MSAS.

       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)''.

     SEC. 205. 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+Choice 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. 206. EXTENSION OF MUNICIPAL HEALTH SERVICE DEMONSTRATION 
                   PROJECTS.

       The last sentence of section 9215(a) of the Consolidated 
     Omnibus Budget Reconciliation Act of 1985 (42 U.S.C. 1395b-1 
     note), as previously amended, is amended by striking 
     ``December 31, 2004, but only with respect to'' and all that 
     follows and inserting ``December 31, 2009, but only with 
     respect to individuals who reside in the city in which the 
     project is operated and so long as the total number of 
     individuals participating in the project does not exceed the 
     number of such individuals participating as of January 1, 
     1996.''.

             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

[[Page H6133]]

     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 2009; and
       ``(II) at least \2/3\ of such areas in 2010; 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).
       ``(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, 2007, 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).
       ``(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.

[[Page H6134]]

       ``(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, 2008; 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 
     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.

     SEC. 303. REFORM OF PAYMENT FOR DRUGS AND BIOLOGICALS UNDER 
                   THE MEDICARE PROGRAM.

       (a) Payment Reform.--
       (1) In general.--Section 1842(o) (42 U.S.C. 1395u(o)) is 
     amended to read as follows:
       ``(o) Payment for Drugs and Biologicals.--
       ``(1) General rule.--If a physician's, supplier's, or any 
     other person's bill or request for payment for services 
     includes a charge for a drug or biological for which payment 
     may be made under this part and the drug or biological is not 
     paid on a cost or prospective payment basis as otherwise 
     provided in this part, the amount payable for the drug or 
     biological shall be based on the following:
       ``(A) Multi-source (generic) drugs.--In the case of a drug 
     or biological that meets the requirements for a multi-source 
     drug under subclauses (I) and (II) of section 
     1927(k)(7)(A)(i), 105 percent of the volume-weighted median 
     average acquisition price for any drug or biological covered 
     under the same medicare HCPCS code.
       ``(B) Single source (brand) drugs and biologicals.--In the 
     case of a drug or biological that meets the requirements for 
     a single source drug under section 1927(k)(7)(A)(iv), 105 
     percent of the average acquisition price for the drug or 
     biological.
       ``(C) Access exception.--The Secretary may modify the rate 
     otherwise applicable in order to assure access to necessary 
     drugs and biologicals in the case of sole community providers 
     in rural and other areas where the providers are not 
     reasonably able to obtain the drugs and biologicals at the 
     payment rates otherwise applicable. Such modification shall 
     not result in a change of more than 15 percent of the rate 
     otherwise applicable.
       ``(D) Data-related exception.--If the Secretary determines 
     that there is insufficient data available with respect to 
     compute an average acquisition price for a drug or biological 
     for a quarter or that, because of a significant change in 
     price from quarter-to-quarter, the available data on the 
     average acquisition price does not accurately reflect the 
     actual, current acquisition cost for the drug or biological, 
     the Secretary may substitute for the quarters involved an 
     appropriate payment for the drug or biological for such 
     average acquisition price.
       ``(E) Application of ndc codes.--If the Secretary 
     determines that it is appropriate to provide for payment 
     under this subsection using national drug code (NDC) instead 
     of HCPCS codes, in applying subparagraph (A) the reference to 
     the same HCPCS code shall be deemed a reference to the 
     appropriate national drug codes for those drugs or 
     biologicals that are therapeutically and pharmaceutically 
     equivalent and bioequivalent (as defined for purposes of 
     section 1927(k)(7)(A)).
       ``(2) Definition of average acquisition price.--
       ``(A) In general.--For purposes of this subsection, the 
     term `average acquisition price' means, with respect to a 
     drug or biological and with respect to each dosage form and 
     strength of the drug or biological product (without regard to 
     any special packaging, labeling, or identifiers on the dosage 
     form or

[[Page H6135]]

     product or package), the average of all final sales prices 
     charged by the manufacturer of the drug or biological product 
     in the United States, excluding sales exempt from inclusion 
     in the calculation of best price under section 1927(c)(1)(C) 
     (other than under clause (ii)(III) of such section) and 
     excluding sales subject to a rebate under section 1927, as 
     reported under paragraph (3).
       ``(B) Net price.--Such average acquisition price shall be 
     calculated net of all of the following (as estimated by the 
     Secretary):
       ``(i) Volume discounts.
       ``(ii) Prompt pay discounts and cash discounts.
       ``(iii) Charge-backs.
       ``(iv) Short-dated product discounts (for spoilage and 
     other factors).
       ``(v) Free goods and services.
       ``(vi) Rebates.
       ``(vii) All other price concessions provided by the drug 
     manufacturer.

     The Secretary may make subsequent adjustments in such average 
     acquisition price to take into account updated information 
     and differences between the price previously estimated and 
     the actual average acquisition price.
       ``(C) Weighting.--The average of all final sales prices 
     described in subparagraph (A) shall be determined by 
     dividing--
       ``(i) the sum of all final prices charged by the 
     manufacturer (net of the adjustments made under subparagraph 
     (B)) for sales in the period involved that are included in 
     subparagraph (A) for the drug or biological, by
       ``(ii) the total number of units of such sales in the 
     period.
       ``(D) Distribution of reports.--The Secretary shall 
     promptly distribute applicable payment rates under this 
     subsection to carriers and fiscal intermediaries and other 
     contractors that make payment for drugs and biologicals under 
     this section in order to apply a uniform reimbursement rate 
     under this section.
       ``(3) Price reporting requirement.--
       ``(A) In general.--As a condition for payment for any drug 
     or biological of a manufacturer under this subsection, the 
     manufacturer of the drug or biological shall--
       ``(i) report, on a quarterly basis, to the Secretary (or 
     the Secretary's designee) the manufacturer's average 
     acquisition price and the information required under 
     subparagraph (C) for all drugs and biologicals of the 
     manufacturer by national drug code (NDC);
       ``(ii) maintain such records (in written or electronic 
     form) regarding such sales and prices for all such drugs and 
     biologicals as may be necessary to audit the information so 
     reported or required to be reported; and
       ``(iii) provide the Secretary with access to such records 
     in order to permit the Secretary to audit information so 
     reported or required to be reported.
       ``(B) Penalties.--The provisions of section 1927(b)(3)(C) 
     shall apply with respect to the reporting of information 
     under subparagraph (A) in the same manner as it applies to 
     the reporting of information under section 1927(b)(3)(A), 
     except that the reference in clause (i) of such section to 
     $10,000 is deemed a reference to $100,000 and any reference 
     to a suspension of an agreement is deemed a reference to a 
     suspension of payment for the drug or biological involved 
     under this part. The Secretary shall promptly refer to the 
     Inspector General of the Department of Health and Human 
     Services and, if appropriate, to appropriate officials in the 
     Department of Justice cases in which the Secretary becomes 
     aware of a false price representation made in the information 
     submitted under this paragraph.
       ``(C) Form of reporting.--Information required to be 
     reported under subparagraph (A)(i) shall be reported in a 
     form and manner specified by the Secretary. The information 
     required to be reported shall include the identification of 
     the generic name of the drug or biological and its brand name 
     (if any), the national drug code (NDC) and the HCPCS code 
     assigned to the drug or biological, the dosage form, 
     strength, volume, and package size involved. The information 
     for a quarter shall be submitted not later than 30 days after 
     the end of the quarter. The information shall be accompanied 
     by a written and signed certification by an officer of the 
     manufacturer attesting to the accuracy of the information 
     reported. Such information shall include updated information 
     on the net price realized (taking into account rebates and 
     other amounts affecting net price), regardless of the period 
     for which such a rebate or other adjustment in net price 
     might have been earned.
       ``(D) Auditing.--The Secretary shall audit on a periodic 
     basis information reported or required to be reported under 
     this paragraph. The Secretary may conduct such independent 
     price gathering activities, such as surveys and review of 
     published catalog information or other transactional 
     information, as may be appropriate to verify the accuracy of 
     the information reported.
       ``(4) Dispensing fee.--If payment for a drug or biological 
     is made to a licensed pharmacy approved to dispense drugs or 
     biologicals under this part, the Secretary shall pay a 
     dispensing fee (less the applicable deductible and 
     coinsurance amounts) to the pharmacy. Such a dispensing fee 
     shall be subject to adjustment from year to year based upon 
     changes in the consumer price index over time and may be 
     adjusted as the Secretary determines to be appropriate to 
     reflect differences in the costs of dispensing different 
     drugs and biologicals.
       ``(5) Payment required on an assignment-related basis.--
       ``(A) In general.--Payment for a charge for any drug or 
     biological for which payment may be made under this part may 
     be made only on an assignment-related basis.
       ``(B) Application of enforcement provisions.--The 
     provisions of subsection (b)(18)(B) shall apply to charges 
     for such drugs or biologicals in the same manner as they 
     apply to services furnished by a practitioner described in 
     subsection (b)(18)(C).''.
       (2) Effective date.--Subject to subsection (i)(2), the 
     amendment made by paragraph (1) shall apply to drugs and 
     biologicals furnished on or after January 1, 2004.
       (b) Medicare Payment For Drug Administration Services.--
       (1) In general.--The Secretary shall revise the practice 
     expense relative value units for drug administration services 
     for years beginning with the year 2005 in accordance with 
     this subsection. For purposes of this subsection, the term 
     ``drug administration services'' includes chemotherapy 
     administration services, therapeutic and diagnostic infusions 
     and injections, and such other services as the Secretary 
     specifies.
       (2) Direct costs equal to 100 percent of cpep estimates.--
     Using the information, including estimates of clinical staff 
     time, developed in the clinical practice expert panel 
     process, including refinements by American Medical 
     Association committees, the Secretary shall estimate the 
     costs of the nursing and other clinical staff, supplies, and 
     procedure-specific equipment (exceeding a cost specified by 
     the Secretary) used in furnishing each type of drug 
     administration service. The Secretary shall utilize without 
     revision the minutes of clinical staff time determined in 
     such process. The Secretary shall convert the information 
     from such process to estimated costs by applying the most 
     current available data on staff salary, supply, and equipment 
     costs, and such costs shall be updated to 2005 based on 
     estimated changes in prices since the date of such data.
       (3) Total practice expenses.--The Secretary shall estimate 
     the total practice expenses of each drug administration 
     service by assuming that the direct costs for the service 
     determined under paragraph (3) are 33.2 percent of such total 
     practice expenses.
       (4) Conversion to relative value units.--The Secretary 
     shall convert the total practice expenses determined under 
     paragraph (3) to practice expense relative value units for 
     each drug administration service by dividing such expenses by 
     the conversion factor that will be in effect for the 
     physician fee schedule for 2005. The relative value units as 
     so determined shall be used in determining the fee schedule 
     amounts paid for drug administration services under section 
     1848 of the Social Security Act (42 U.S.C. 1395w-4).
       (5) Updates.--For years after 2005, the relative values 
     determined under paragraph (4) shall continue in effect 
     except that the Secretary shall revise them as necessary to 
     maintain their accuracy, provided that such revisions are 
     consistent with the methodology set forth in this subsection.
       (6) Multiple pushes.--In establishing the payment amounts 
     under this subsection, the Secretary shall establish the 
     payment amount for intravenous chemotherapy administration by 
     push technique based on the administration of a single drug. 
     The Secretary shall make the same payment for each additional 
     drug administered by push technique during the same 
     encounter, except to the extent that the Secretary finds that 
     the cost of administering additional drugs is less than the 
     cost of administering the first drug.
       (c) Payments for Chemotherapy Support Services.--
       (1) General.--Beginning in 2005, the Secretary shall 
     recognize and make payments under section 1848 of the Social 
     Security Act (42 U.S.C. 1395w-4) for chemotherapy support 
     services furnished incident to physicians' services. For the 
     purposes of this section, the term ``chemotherapy support 
     services'' are services furnished by the staff of physicians 
     to patients undergoing treatment for cancer that were not 
     included in the computation of clinical staff costs under 
     subsection b(2). Such services include social worker 
     services, nutrition counseling, psychosocial services, and 
     similar services.
       (2) Direct costs.--The Secretary shall estimate the cost of 
     the salary and benefits of staff furnishing chemotherapy 
     support services as they are provided in oncology practices 
     that furnish these services to cancer patients in a manner 
     that is considered to be high quality care. The estimate 
     shall be based on the weekly cost of such services per 
     patient receiving chemotherapy.
       (3) Total costs.--The Secretary shall estimate the total 
     practice expenses of chemotherapy support services by 
     assuming that the direct costs for the service determined 
     under paragraph (2) are 33.2 percent of such total practice 
     expenses.
       (4) Conversion to relative value units.--The Secretary 
     shall convert the total practice expenses determined under 
     paragraph (3) to practice expense relative value units for 
     chemotherapy support services by dividing such expenses by 
     the conversion factor that will be in effect for the 
     physician fee schedule for 2005. The relative value units as 
     so determined shall be used in determining the fee schedule 
     amounts paid for chemotherapy support services under such 
     section 1848.
       (5) Updates.--For years after 2005, the relative values 
     determined under paragraph (4) shall continue in effect 
     except that the Secretary shall revise them as necessary to 
     maintain their accuracy, provided that such

[[Page H6136]]

     revisions are consistent with the methodology set forth in 
     this subsection.
       (d) Cancer Therapy Management Services.--Beginning in 2005, 
     the Secretary shall recognize and establish a payment amount 
     for the service of cancer therapy management to account for 
     the greater pre-service and post-service work associated with 
     visits and consultations conducted by physicians treating 
     cancer patients compared to typical visits and consultations. 
     The payment amount may vary by the level and type of the 
     related visit or consultation.
       (e) Other Services Without Physician Work Relative Value 
     Units.--Beginning in 2005, the Secretary shall develop a 
     revised methodology for determining the payment amounts for 
     services that are paid under the fee schedule established by 
     section 1848 of the Social Security Act (42 U.S.C. 1395w-4) 
     and that do not have physician work relative value units, 
     including radiation oncology services. Such methodology shall 
     result in payment amounts that fully cover the costs of 
     furnishing such services. Until such time as the methodology 
     for such services is revised and implemented, all such 
     services shall be protected from further payment cuts due to 
     factors such as shifts in utilization or removal of any one 
     specialty's services that are paid under the fee schedule 
     established by such section 1848 and that do not have 
     physician work relative value units.
       (f) Report to Congress.--Not later than April 1, 2004, the 
     Secretary shall submit to Congress a report on the payment 
     amounts that are projected to be adopted under subsections 
     (b), (c), (d), and (e) of this section.
       (g) Institute of Medicine Study.--
       (1) General.--The Secretary shall request the Institute of 
     Medicine to conduct the study described in this subsection.
       (2) Baseline study.--The first phase of the study shall 
     include the following objectives:
       (A) An assessment of the extent to which the current 
     medicare payment system, prior to implementation of the 
     amendments made by this section, facilitates appropriate 
     access to care by cancer patients in the various treatment 
     settings.
       (B) The identification of the comprehensive range of 
     services furnished to cancer patients in the outpatient 
     setting, including support services such as psychosocial 
     services and counseling, and recommendations regarding the 
     types of services that ought to be furnished to medicare 
     patients with cancer.
       (C) A discussion of the practice standards necessary to 
     assure the safe provision of services to cancer patients.
       (D) An analysis of the extent to which the current medicare 
     payment system supports the role of nurses in the provision 
     of oncology services and recommendations for any necessary 
     improvements in the payment system in that respect.
       (E) The development of a framework for assessing how the 
     amendments made by this act affect the provision of care to 
     medicare patients with cancer in the various treatment 
     settings.
       (3) Second phase of study.--After the implementation of the 
     amendments made by this section, the study shall determine 
     whether and how those amendments affected the provision of 
     care to medicare patients with cancer.
       (4) Consultation.--The Institute of Medicine shall consult 
     with the National Cancer Policy Board and organizations 
     representing cancer patients and survivors, oncologists, 
     oncology nurses, social workers, cancer centers, and other 
     healthcare professionals who treat cancer patients in 
     planning and carrying out this study.
       (5) Due dates.--
       (A) The study required by paragraph (2) shall be submitted 
     to the Congress and the Secretary of Health and Human 
     Services no later than June 30, 2004.
       (B) The study required by paragraph (3) shall be submitted 
     to the Congress and the Secretary of Health and Human 
     Services no later than December 31, 2006.
       (i) Study of Payments for Blood Clotting Factors and Other 
     Biologicals.--
       (1) In general.--The Secretary of Health and Human Services 
     shall provide for a study of the appropriateness of the 
     medicare payment methodology for blood clotting factors and 
     other biologicals under part B of title XVIII of the Social 
     Security Act. Not later than 9 months after the date of the 
     enactment of this Act, the Secretary shall submit to Congress 
     a report on such study and shall include in such report 
     recommendations regarding whether to apply the payment 
     methodology provided under the amendment made by subsection 
     (a)(1) and alternative recommendations for appropriate 
     dispensing fees.
       (2) Delay in effective date.--The amendment made by 
     subsection (a)(1) shall not apply to blood clotting factors 
     furnished before the first day of the first calendar year 
     that begins at least 6 months after the date the report under 
     paragraph (1) has been submitted to the Congress.

     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 
     with private insurers.--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 in recovery audits 
     with private insurers or under the medicaid program under 
     title XIX of such 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. FAIRNESS IN THE MEDICARE DISPROPORTIONATE SHARE 
                   HOSPITAL (DSH) ADJUSTMENT FOR RURAL HOSPITALS.

       (a) Equalizing DSH Payment Amounts.--
       (1) In general.--Section 1886(d)(5)(F)(vii) (42 U.S.C. 
     1395ww(d)(5)(F)(vii)) is amended by inserting ``, and, after 
     October 1, 2004, for any other hospital described in clause 
     (iv),'' after ``clause (iv)(I)'' in the matter preceding 
     subclause (I).
       (2) Conforming amendments.--Section 1886(d)(5)(F) (42 
     U.S.C. 1395ww(d)(5)(F)) is amended--
       (A) in clause (iv)--
       (i) in subclause (II)--

       (I) by inserting ``and before October 1, 2004,'' after 
     ``April 1, 2001,''; and
       (II) by inserting ``or, for discharges occurring on or 
     after October 1, 2004, is equal to the percent determined in 
     accordance with the applicable formula described in clause 
     (vii)'' after ``clause (xiii)'';

       (ii) in subclause (III)--

       (I) by inserting ``and before October 1, 2004,'' after 
     ``April 1, 2001,''; and
       (II) by inserting ``or, for discharges occurring on or 
     after October 1, 2004, is equal to the percent determined in 
     accordance with the applicable formula described in clause 
     (vii)'' after ``clause (xii)'';

       (iii) in subclause (IV)--

       (I) by inserting ``and before October 1, 2004,'' after 
     ``April 1, 2001,''; and
       (II) by inserting ``or, for discharges occurring on or 
     after October 1, 2004, is equal to the percent determined in 
     accordance with the applicable formula described in clause 
     (vii)'' after ``clause (x) or (xi)'';

       (iv) in subclause (V)--

       (I) by inserting ``and before October 1, 2004,'' after 
     ``April 1, 2001,''; and
       (II) by inserting ``or, for discharges occurring on or 
     after October 1, 2004, is equal to the percent determined in 
     accordance with the applicable formula described in clause 
     (vii)'' after ``clause (xi)''; and

       (v) in subclause (VI)--

       (I) by inserting ``and before October 1, 2004,'' after 
     ``April 1, 2001,''; and
       (II) by inserting ``or, for discharges occurring on or 
     after October 1, 2004, is equal to the percent determined in 
     accordance with the applicable formula described in clause 
     (vii)'' after ``clause (x)'';

[[Page H6137]]

       (B) in clause (viii), by striking ``The formula'' and 
     inserting ``For discharges occurring before October 1, 2004, 
     the formula''; and
       (C) in each of clauses (x), (xi), (xii), and (xiii), by 
     striking ``For purposes'' and inserting ``With respect to 
     discharges occurring before October 1, 2004, for purposes''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to discharges occurring on or after October 1, 
     2004.

     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.
       ``(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.
       ``(C) Quality care.--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.

     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) Permitting CAHs To Allocate Swing Beds and Acute Care 
     Inpatient Beds Subject to a Total Limit of 25 Beds.--

[[Page H6138]]

       (1) In general.--Section 1820(c)(2)(B)(iii) (42 U.S.C. 
     1395i-4(c)(2)(B)(iii)) is amended to read as follows:
       ``(iii) provides not more than a total of 25 extended care 
     service beds (pursuant to an agreement under subsection (f)) 
     and acute care inpatient beds (meeting such standards as the 
     Secretary may establish) for providing inpatient care for a 
     period that does not exceed, as determined on an annual, 
     average basis, 96 hours per patient;''.
       (2) Conforming amendment.--Section 1820(f) (42 U.S.C. 
     1395i-4(f)) is amended by striking ``and the number of beds 
     used at any time for acute care inpatient services does not 
     exceed 15 beds''.
       (3) Effective date.--The amendments made by this subsection 
     shall with respect to designations made on or after October 
     1, 2004.
       (d) Elimination of the Isolation Test for Cost-Based CAH 
     Ambulance Services.--
       (1) Elimination.--
       (A) In general.--Section 1834(l)(8) (42 U.S.C. 
     1395m(l)(8)), as added by section 205(a) of BIPA (114 Stat. 
     2763A-482), is amended by striking the comma at the end of 
     subparagraph (B) and all that follows and inserting a period.
       (B) Effective date.--The amendment made by subparagraph (A) 
     shall apply to services furnished on or after January 1, 
     2005.
       (2) Technical correction.--Section 1834(l) (42 U.S.C. 
     1395m(l)) is amended by redesignating paragraph (8), as added 
     by section 221(a) of BIPA (114 Stat. 2763A-486), as paragraph 
     (9).
       (e) 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.
       (f) 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).
       (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 may adjust 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 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--

[[Page H6139]]

       (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) Prohibition on Nurse Practitioner Certifying Need for 
     Hospice.--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 
     an increase in the base rate of the fee schedule for mileage 
     for a trip established under this subsection. In establishing 
     such increase, the Secretary shall, based on the relationship 
     of cost and volume, estimate the average increase in cost per 
     trip for such services as compared with the cost per trip for 
     the average ambulance service.
       ``(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 three quartiles 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 10 
     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)) is amended--
       (1) in subparagraph (E), by striking ``and'' after the 
     semicolon at the end;
       (2) in subparagraph (F), by striking the period at the end 
     and inserting ``; and''; and
       (3) by adding at the end the following new subparagraph:
       ``(G) 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)(G) 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 
     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''.

[[Page H6140]]

     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. MEDICARE INPATIENT HOSPITAL PAYMENT ADJUSTMENT FOR 
                   LOW-VOLUME HOSPITALS.

       Section 1886(d) (42 U.S.C. 1395ww(d)) is amended by adding 
     at the end the following new paragraph:
       ``(12) Payment adjustment for low-volume hospitals.--
       ``(A) Payment adjustment.--
       ``(i) In general.--Notwithstanding any other provision of 
     this section, for each cost reporting period (beginning with 
     the cost reporting period that begins in fiscal year 2004), 
     the Secretary shall provide for an additional payment amount 
     to each low-volume hospital (as defined in clause (iii)) for 
     discharges occurring during that cost reporting period which 
     is equal to the applicable percentage increase (determined 
     under clause (ii)) in the amount paid to such hospital under 
     this section for such discharges.
       ``(ii) Applicable percentage increase.--The Secretary shall 
     determine a percentage increase applicable under this 
     paragraph that ensures that--

       ``(I) no percentage increase in payments under this 
     paragraph exceeds 25 percent of the amount of payment that 
     would (but for this paragraph) otherwise be made to a low-
     volume hospital under this section for each discharge;
       ``(II) low-volume hospitals that have the lowest number of 
     discharges during a cost reporting period receive the highest 
     percentage increases in payments due to the application of 
     this paragraph; and
       ``(III) the percentage increase in payments to any low-
     volume hospital due to the application of this paragraph is 
     reduced as the number of discharges per cost reporting period 
     increases.

       ``(iii) Low-volume hospital defined.--For purposes of this 
     paragraph, the term `low-volume hospital' means, for a cost 
     reporting period, a subsection (d) hospital (as defined in 
     paragraph (1)(B)) other than a critical access hospital (as 
     defined in section 1861(mm)(1)) that--

       ``(I) the Secretary determines had an average of less than 
     2,000 discharges (determined with respect to all patients and 
     not just individuals receiving benefits under this title) 
     during the 3 most recent cost reporting periods for which 
     data are available that precede the cost reporting period to 
     which this paragraph applies; and
       ``(II) is located at least 15 miles from a like hospital 
     (or is deemed by the Secretary to be so located by reason of 
     such factors as the Secretary determines appropriate, 
     including the time required for an individual to travel to 
     the nearest alternative source of appropriate inpatient care 
     (after taking into account the location of such alternative 
     source of inpatient care and any weather or travel conditions 
     that may affect such travel time).

       ``(B) Prohibiting certain reductions.--Notwithstanding 
     subsection (e), the Secretary shall not reduce the payment 
     amounts under this section to offset the increase in payments 
     resulting from the application of subparagraph (A).''.

     SEC. 419. TREATMENT OF CERTAIN CLINICAL DIAGNOSTIC LABORATORY 
                   TESTS FURNISHED BY A SOLE COMMUNITY HOSPITAL.

       Notwithstanding subsections (a), (b), and (h) of section 
     1833 of the Social Security Act (42 U.S.C. 1395l) and section 
     1834(d)(1) of such Act (42 U.S.C. 1395m(d)(1)), in the case 
     of a clinical diagnostic laboratory test covered under part B 
     of title XVIII of such Act that is furnished in 2004 or 2005 
     by a sole community hospital (as defined in section 
     1886(d)(5)(D)(iii) of such Act (42 U.S.C. 
     1395ww(d)(5)(D)(iii))) as part of services furnished to 
     patients of the hospital, the following rules shall apply:

[[Page H6141]]

       (1) Payment based on reasonable costs.--The amount of 
     payment for such test shall be 100 percent of the reasonable 
     costs of the hospital in furnishing such test.
       (2) No beneficiary cost-sharing.--Notwithstanding section 
     432, no coinsurance, deductible, copayment, or other cost-
     sharing otherwise applicable under such part B shall apply 
     with respect to such test.

     SEC. 420. ESTABLISHMENT OF FLOOR ON GEOGRAPHIC ADJUSTMENTS OF 
                   PAYMENTS FOR PHYSICIANS' SERVICES.

       Section 1848(e)(1) (42 U.S.C. 1395w-4(e)(1)) is amended--
       (1) in subparagraph (A), by striking ``subparagraphs (B) 
     and (C)'' and inserting ``subparagraphs (B), (C), (E), and 
     (F)''; and
       (2) by adding at the end the following new subparagraphs:
       ``(E) Floor for work geographic indices.--
       ``(i) In general.--For purposes of payment for services 
     furnished on or after January 1, 2004, and before January 1, 
     2008, after calculating the work geographic indices in 
     subparagraph (A)(iii), the Secretary shall increase the work 
     geographic index to the work floor index for any locality for 
     which such geographic index is less than the work floor 
     index.
       ``(ii) Work floor index.--For purposes of clause (i), the 
     term `applicable floor index' means--

       ``(I) 0.980 with respect to services furnished during 2004; 
     and
       ``(II) 1.000 for services furnished during 2005, 2006, and 
     2007.

       ``(F) Floor for practice expense and malpractice geographic 
     indices.--For purposes of payment for services furnished on 
     or after January 1, 2005, and before January 1, 2008, after 
     calculating the practice expense and malpractice indices in 
     clauses (i) and (ii) of subparagraph (A) and in subparagraph 
     (B), the Secretary shall increase any such index to 1.00 for 
     any locality for which such index is less than 1.00.

     SEC. 421. AMBULANCE PAYMENT RATES.

       (a) Payment Rates.--Section 1834(l)(3) (42 U.S.C. 
     1395m(l)(3)) is amended to read as follows:
       ``(3) Payment rates.--
       ``(A) In general.--Subject to any adjustment under 
     subparagraph (B) and paragraph (9) and the full payment of a 
     national mileage rate pursuant to subparagraph (2)(E), in 
     establishing such fee schedule, the following rules shall 
     apply:
       ``(i) Payment rates in 2003.--

       ``(I) Ground ambulance services.--In the case of ground 
     ambulance services furnished under this part in 2003, the 
     Secretary shall set the payment rates under the fee schedule 
     for such services at a rate based on the average costs (as 
     determined by the Secretary on the basis of the most recent 
     and reliable information available) incurred by full cost 
     ambulance suppliers in providing nonemergency basic life 
     support ambulance services covered under this title, with 
     adjustments to the rates for other ground ambulance service 
     levels to be determined based on the rule established under 
     paragraph (1). For the purposes of the preceding sentence, 
     the term `full cost ambulance supplier' means a supplier for 
     which volunteers or other unpaid staff comprise less than 20 
     percent of the supplier's total staff and which receives less 
     than 20 percent of space and other capital assets free of 
     charge.
       ``(II) Other ambulance services.--In the case of ambulance 
     services not described in subclause (I) that are furnished 
     under this part in 2003, the Secretary shall set the payment 
     rates under the fee schedule for such services based on the 
     rule established under paragraph (1).

       ``(ii) Payment rates in subsequent years for all ambulance 
     services.--In the case of any ambulance service furnished 
     under this part in 2004 or any subsequent year, the Secretary 
     shall set the payment rates under the fee schedule for such 
     service at amounts equal to the payment rate under the fee 
     schedule for that service furnished during the previous year, 
     increased by the percentage increase in the Consumer Price 
     Index for all urban consumers (United States city average) 
     for the 12-month period ending with June of the previous 
     year.
       ``(B) Adjustment in rural rates.--For years beginning with 
     2004, the Secretary, after taking into consideration the 
     recommendations contained in the report submitted under 
     section 221(b)(3) the Medicare, Medicaid, and SCHIP Benefits 
     Improvements and Protection Act of 2000, shall adjust the fee 
     schedule payment rates that would otherwise apply under this 
     subsection for ambulance services provided in low density 
     rural areas based on the increased cost (if any) of providing 
     such services in such areas.''.
       (b) Conforming Amendment.--Section 221(c) of BIPA is 
     repealed.

                 TITLE V--PROVISIONS RELATING TO PART A

                Subtitle A--Inpatient Hospital Services

     SEC. 501. ADJUSTMENT FOR INDIRECT COSTS OF MEDICAL EDUCATION 
                   (IME).

       Section 1886(d)(5)(B)(ii) (42 U.S.C. 1395ww(d)(5)(B)(ii)) 
     is amended--
       (1) by striking ``and'' at the end of subclause (VI);
       (2) in subclause (VII)--
       (A) by striking ``on or after October 1, 2002,'' and 
     inserting ``during fiscal year 2003,''; and
       (B) by striking the period at the end and inserting ``; 
     and''; and
       (3) by inserting after subclause (VII) the following new 
     subclauses:
       ``(VIII) during each of fiscal years 2004 and 2005, `c' is 
     equal to 1.47; and
       ``(IX) on or after October 1, 2005, `c' is equal to 
     1.35.''.

     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-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 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

[[Page H6142]]

     a diagnosis-related group where the average costs of care 
     most closely approximate the costs of care of using the new 
     technology. In such case, the new technology would no longer 
     meet the threshold of exceeding 75 percent of the standard 
     deviation for the diagnosis-related group involved under 
     clause (ii)(I). 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.--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),''.
       (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 2003 
     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 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 cost reporting period 
     beginning on or after October 1, 2004.

     SEC. 505. CLARIFICATIONS TO CERTAIN EXCEPTIONS TO MEDICARE 
                   LIMITS ON PHYSICIAN REFERRALS.

       (a) Ownership and investment interests in whole 
     hospitals.--
       (1) In general.--Section 1877(d)(3) (42 U.S.C. 
     1395nn(d)(3)) is amended--
       (A) by striking ``and'' at the end of subparagraph (A); and
       (B) by redesignating subparagraph (B) as subparagraph (C) 
     and inserting after subparagraph (A) the following:
       ``(B) the hospital is not a specialty hospital (as defined 
     in subsection (h)(7)); and''.
       (2) Definition.--Section 1877(h) (42 U.S.C. 1395nn(h)) is 
     amended by adding at the end the following:
       ``(7) Specialty hospital.--
       ``(A) In general.--For purposes of this section, except as 
     provided in subparagraph (B), the term `specialty hospital' 
     means a hospital that is primarily or exclusively engaged in 
     the care and treatment of one of the following:
       ``(i) patients with a cardiac condition;
       ``(ii) patients with an orthopedic condition;
       ``(iii) patients receiving a surgical procedure; or
       ``(iv) any other specialized category of patients or cases 
     that the Secretary designates as inconsistent with the 
     purpose of permitting physician ownership and investment 
     interests in a hospital under this section.
       ``(B) Exception.--For purposes of this section, the term 
     `specialty hospital' does not include any hospital--
       ``(i) determined by the Secretary--

       ``(I) to be in operation before June 12, 2003; or
       ``(II) under development as of such date;

       ``(ii) for which the number of beds and the number of 
     physician investors at any time on or after such date is no 
     greater than the number of such beds or investors as of such 
     date; and
       ``(iii) that meets such other requirements as the Secretary 
     may specify.''.
       (b) Effective Date.--Subject to subsection (c), the 
     amendments made by this section shall apply to referrals made 
     for designated health services on or after January 1, 2004.
       (c) Application of Exception for Hospitals Under 
     Development.--For purposes of section 1877(h)(7)(B)(i)(II) of 
     the Social Security Act, as added by subsection (a)(2), in 
     determining whether a hospital is under development as of 
     June 12, 2003, the Secretary shall consider--
       (1) whether architectural plans have been completed, 
     funding has been received, zoning requirements have been met, 
     and necessary approvals from appropriate State agencies have 
     been received; and
       (2) any other evidence the Secretary determines would 
     indicate whether a hospital is under development as of such 
     date.

                      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);

[[Page H6143]]

       (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.

                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).

     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.

                    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

[[Page H6144]]

     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 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) Adjustment to Technical Component.--For diagnostic 
     mammography performed on or after January 1, 2004, for which 
     payment is made under the physician fee schedule under 
     section 1848 of the Social Security Act (42 U.S.C. 1395w-4), 
     the Secretary, based on the most recent cost data available, 
     shall provide for an appropriate adjustment in the payment 
     amount for the technical component of the diagnostic 
     mammography.
       (c) 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 procedure 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:

[[Page H6145]]

       ``(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 drug or biological to 
     be identical to or similar to another drug or biological with 
     respect to its mechanism of action or clinical effect to deny 
     pass-through status to new drugs or biologics or to remove 
     such status of an existing eligible drug or biologic under 
     this paragraph unless--
       ``(i) the Secretary develops by regulation (after providing 
     notice and a period for public comment) criteria for the 
     application of such standard; and
       ``(ii) such criteria provide for coordination with the 
     Federal Food and Drug Administration and require scientific 
     studies that show the clinical relationship between the drugs 
     or biologicals treated as functionally equivalent.''.
       (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 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--
       (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 not be less than 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

[[Page H6146]]

     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.
       ``(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. 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. 629. 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.

[[Page H6147]]

       ``(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.

            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'';
       (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. 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. 703. 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 the 
     beneficiary--
       (1) has been certified by one physician as an individual 
     who has a permanent and severe condition that will not 
     improve;
       (2) 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) requires 1 or more home health services to achieve a 
     functional condition that gives the individual the ability to 
     leave home; and
       (4) 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--Chronic Care Improvement

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

       Title XVIII is amended by inserting after section 1806 the 
     following new section:


                       ``chronic care improvement

       ``Sec. 1807. (a) In General.--
       ``(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 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

[[Page H6148]]

     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+CHOICE 
                   PLANS.

       (a) In General.--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+Choice organization with 
     respect to each Medicare+Choice plan it offers shall have in 
     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+Choice plan of a Medicare+Choice 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)

[[Page H6149]]

     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+Choice 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+Choice 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) 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 1807 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 C--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 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

[[Page H6150]]

     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) Criteria and evidence used in making national 
     coverage determinations.--The Secretary shall make available 
     to the public the criteria the Secretary uses in making 
     national coverage determinations, including how evidence to 
     demonstrate that a procedure or device is reasonable and 
     necessary is considered.
       ``(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 12 months after the date 
     of the request.
       ``(3) Process for public comment in national coverage 
     determinations.--At the end of the 6-month period 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 or temporary or permanent code during 
     the 60-day period referred to in subparagraph (C).
       ``(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, 2001, and before January 1, 2006, 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 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.

[[Page H6151]]

     SEC. 735. MEDICARE PANCREATIC ISLET CELL TRANSPLANT 
                   DEMONSTRATION PROJECT.

       (a) Establishment.--In order to test the appropriateness of 
     pancreatic islet cell transplantation, not later than 120 
     days after the date of the enactment of this Act, the 
     Secretary shall establish a demonstration project which the 
     Secretary, provides for payment under the medicare program 
     under title XVIII of the Social Security Act for pancreatic 
     islet cell transplantation and related items and services in 
     the case of medicare beneficiaries who have type I (juvenile) 
     diabetes and have end stage renal disease.
       (b) Duration of Project.--The authority of the Secretary to 
     conduct the demonstration project under this section shall 
     terminate on the date that is 5 years after the date of the 
     establishment of the project.
       (c) Evaluation and Report.--The Secretary shall conduct an 
     evaluation of the outcomes of the demonstration project. Not 
     later than 120 days after the date of the termination of the 
     demonstration project under subsection (b), the Secretary 
     shall submit to Congress a report on the project, including 
     recommendations for such legislative and administrative 
     action as the Secretary deems appropriate.
       (d) Payment Methodology.--The Secretary shall establish an 
     appropriate payment methodology for the provision of items 
     and services under the demonstration project, which may 
     include a payment methodology that bundles, to the maximum 
     extent feasible, payment for all such items and services.
       (e) Waiver Authority.--The Secretary may waive compliance 
     with the requirements of title XVIII of the Social Security 
     Act to such extent and for such period as the Secretary 
     determines is necessary to conduct the demonstration project.

                          TITLE VIII--MEDICAID

     SEC. 801. CONTINUATION OF MEDICAID DSH ALLOTMENT ADJUSTMENTS 
                   UNDER BIPA 2000.

       (a) In General.--Section 1923(f) of the Social Security Act 
     (42 U.S.C. 1396r-4(f))--
       (1) in paragraph (2)--
       (A) in the heading, by striking ``through 2002'' and 
     inserting ``through 2000'';
       (B) by striking ``ending with fiscal year 2002'' and 
     inserting ``ending with fiscal year 2000''; and
       (C) in the table in such paragraph, by striking the columns 
     labeled ``FY 01'' and ``FY02'';
       (2) in paragraph (3)(A), by striking ``paragraph (2)'' and 
     inserting ``paragraph (4)''; and
       (3) in paragraph (4), as added by section 701(a)(1) of 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)--
       (A) by striking ``for fiscal years 2001 and 2002'' in the 
     heading;
       (B) in subparagraph (A), by striking ``Notwithstanding 
     paragraph (2), the'' and inserting ``The'';
       (C) in subparagraph (C)--
       (i) by striking ``No application'' and inserting 
     ``Application''; and
       (ii) by striking ``without regard to'' and inserting 
     ``taking into account''.
       (b) Increase in Medicaid DSH Allotment for the District of 
     Columbia.--
       (1) In general.--Effective for DSH allotments beginning 
     with fiscal year 2003, the item in the table contained in 
     section 1923(f)(2) of the Social Security Act (42 U.S.C. 
     1396r-4(f)(2)) for the District of Columbia for the DSH 
     allotment for FY 00 (fiscal year 2000) is amended by striking 
     ``32'' and inserting ``49''.
       (2) Construction.--Nothing in paragraph (1) shall be 
     construed as preventing the application of section 1923(f)(4) 
     of the Social Security Act (as amended by subsection (a)) to 
     the District of Columbia for fiscal year 2003 and subsequent 
     fiscal years.
       (c) Effective Date.--The amendments made by this section 
     shall apply to DSH allotments for fiscal years beginning with 
     fiscal year 2003.

     SEC. 802. INCREASE IN FLOOR FOR TREATMENT AS AN EXTREMELY LOW 
                   DSH STATE TO 3 PERCENT IN FISCAL YEAR 2003.

       (a) Increase in DSH Floor.--Section 1923(f)(5) of the 
     Social Security Act (42 U.S.C. 1396r-4(f)(5)) is amended--
       (1) by striking ``fiscal year 1999'' and inserting ``fiscal 
     year 2001'';
       (2) by striking ``August 31, 2000'' and inserting ``August 
     31, 2002'';
       (3) by striking ``1 percent'' each place it appears and 
     inserting ``3 percent''; and
       (4) by striking ``fiscal year 2001'' and inserting ``fiscal 
     year 2003''.
       (b) Effective Date.--The amendments made by subsection (a) 
     take effect as if enacted on October 1, 2002, and apply to 
     DSH allotments under title XIX of the Social Security Act for 
     fiscal year 2003 and each fiscal year thereafter.

     SEC. 803. 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)''.

         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.
       (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.''.

[[Page H6152]]

       (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 
     902(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 
     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

[[Page H6153]]

     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 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

[[Page H6154]]

       (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.

     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

[[Page H6155]]

       ``(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).
       ``(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

[[Page H6156]]

     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--
       (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

[[Page H6157]]

       ``(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''.
       (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

[[Page H6158]]

     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 
     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.

     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:

[[Page H6159]]

       ``(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), each 
     reviewing professional shall be a physician (allopathic or 
     osteopathic).
       ``(2) Independence.--
       ``(A) In general.--Subject to subparagraph (B), each 
     individual conducting a review in a case shall--
       ``(i) not be a related party (as defined in paragraph (5));
       ``(ii) not have a material familial, financial, or 
     professional relationship with such a party in the case under 
     review; and
       ``(iii) not otherwise have a conflict of interest with such 
     a party.
       ``(B) Exception.--Nothing in subparagraph (A) shall be 
     construed to--
       ``(i) prohibit an individual, solely on the basis of a 
     participation agreement with a fiscal intermediary, carrier, 
     or other contractor, from serving as a reviewing professional 
     if--

       ``(I) the individual is not involved in the provision of 
     items or services in the case under review;
       ``(II) the fact of such an agreement is disclosed to the 
     Secretary and the individual entitled to benefits under part 
     A or enrolled under part B, or both, (or 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.

[[Page H6160]]

       ``(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.
       ``(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

[[Page H6161]]

     limited sample of submitted claims to ensure that the 
     previous practice is not continuing.
       ``(5) Consent settlement reforms.--
       ``(A) In general.--The Secretary may use a consent 
     settlement (as defined in subparagraph (D)) to settle a 
     projected overpayment.
       ``(B) Opportunity to submit additional information before 
     consent settlement offer.--Before offering a provider of 
     services or supplier a consent settlement, the Secretary 
     shall--
       ``(i) communicate to the provider of services or supplier--

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

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

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

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

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

       (a) In General.--Section 1866 (42 U.S.C. 1395cc) is 
     amended--
       (1) by adding at the end of the heading the following: ``; 
     enrollment processes''; and
       (2) by adding at the end the following new subsection:
       ``(j) Enrollment Process for Providers of Services and 
     Suppliers.--
       ``(1) Enrollment process.--
       ``(A) In general.--The Secretary shall establish by 
     regulation a process for the enrollment of providers of 
     services and suppliers under this title.
       ``(B) Deadlines.--The Secretary shall establish by 
     regulation procedures under which there are deadlines for 
     actions on applications for enrollment (and, if applicable, 
     renewal of enrollment). The Secretary shall monitor the 
     performance of medicare administrative contractors in meeting 
     the deadlines established under this subparagraph.
       ``(C) Consultation before changing provider enrollment 
     forms.--The Secretary shall consult with providers of 
     services and suppliers before making changes in the provider 
     enrollment forms required of such providers and suppliers to 
     be eligible to submit claims for which payment may be made 
     under this title.
       ``(2) Hearing rights in cases of denial or non-renewal.--A 
     provider of services or supplier whose application to enroll 
     (or, if applicable, to renew enrollment) under this title is 
     denied may have a hearing and judicial review of such denial 
     under the procedures that apply under subsection (h)(1)(A) to 
     a provider of services that is dissatisfied with a 
     determination by the Secretary.''.
       (b) Effective Dates.--
       (1) Enrollment process.--The Secretary shall provide for 
     the establishment of the enrollment process under section 
     1866(j)(1) of the Social Security Act, as added by subsection 
     (a)(2), within 6 months after the date of the enactment of 
     this Act.
       (2) Consultation.--Section 1866(j)(1)(C) of the Social 
     Security Act, as added by subsection (a)(2), shall apply with 
     respect to changes in provider enrollment forms made on or 
     after January 1, 2004.
       (3) Hearing rights.--Section 1866(j)(2) of the Social 
     Security Act, as added by subsection (a)(2), shall apply to 
     denials occurring on or after such date (not later than 1 
     year after the date of the enactment of this Act) as the 
     Secretary specifies.

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

       (a) Claims.--The Secretary shall develop, in consultation 
     with appropriate medicare contractors (as defined in section 
     1889(g) of the Social Security Act, as inserted by section 
     301(a)(1)) and representatives of providers of services and 
     suppliers, a process whereby, in the case of minor errors or 
     omissions (as defined by the Secretary) that are detected in 
     the submission of claims under the programs under title XVIII 
     of such Act, a provider of services or supplier is given an 
     opportunity to correct such an error or omission without the 
     need to initiate an appeal. Such process shall include the 
     ability to resubmit corrected claims.
       (b) 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

[[Page H6162]]

     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 (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

[[Page H6163]]

       (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 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;

[[Page H6164]]

       ``(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 preceding sentence, if the National 
     Committee on Vital and Health Statistics has not made a 
     recommendation to the Secretary before 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 for 
     the reporting of diagnoses, the Secretary may implement ICD-
     10-PCS only with respect to inpatient services 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.

     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.

[[Page H6165]]

       (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:
       ``(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 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 described in subclause (II) of section 
     1886(d)(5)(F)(vi) of the Social Security Act (42 U.S.C. 
     1395ww(d)(5)(F)(vi)) used in computing the disproportionate 
     patient percentage under such section for that hospital. 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

[[Page H6166]]

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

               TITLE X--IMPORTATION OF PRESCRIPTION DRUGS

     SEC. 1001. 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; or
       ``(E) a drug that is inhaled during surgery.
       ``(4) Qualifying laboratory.--The term `qualifying 
     laboratory' means a laboratory in the United States that has 
     been approved by the Secretary for the purposes of this 
     section.
       ``(5) Wholesaler.--
       ``(A) In general.--The term `wholesaler' means a person 
     licensed as a wholesaler or distributor of prescription drugs 
     in the United States under section 503(e)(2)(A).
       ``(B) Exclusion.--The term `wholesaler' does not include a 
     person authorized to import drugs under section 801(d)(1).
       ``(b) Regulations.--The Secretary, after consultation with 
     the United States Trade Representative and the Commissioner 
     of Customs, shall promulgate regulations permitting 
     pharmacists and wholesalers to import prescription drugs from 
     Canada into the United States.
       ``(c) Limitation.--The regulations under subsection (b) 
     shall--
       ``(1) require that safeguards be in place to ensure that 
     each prescription drug imported under the regulations 
     complies with section 505 (including with respect to being 
     safe and effective for the intended use of the prescription 
     drug), with sections 501 and 502, and with other applicable 
     requirements of this Act;
       ``(2) require that an importer of a prescription drug under 
     the regulations comply with subsections (d)(1) and (e); and
       ``(3) contain any additional provisions determined by the 
     Secretary to be appropriate as a safeguard to protect the 
     public health or as a means to facilitate the importation of 
     prescription drugs.
       ``(d) Information and Records.--
       ``(1) In general.--The regulations under subsection (b) 
     shall require an importer of a prescription drug under 
     subsection (b) to submit to the Secretary the following 
     information and documentation:
       ``(A) The name and quantity of the active ingredient of the 
     prescription drug.
       ``(B) A description of the dosage form of the prescription 
     drug.
       ``(C) The date on which the prescription drug is shipped.
       ``(D) The quantity of the prescription drug that is 
     shipped.
       ``(E) The point of origin and destination of the 
     prescription drug.
       ``(F) The price paid by the importer for the prescription 
     drug.
       ``(G) Documentation from the foreign seller specifying--
       ``(i) the original source of the prescription drug; and
       ``(ii) the quantity of each lot of the prescription drug 
     originally received by the seller from that source.
       ``(H) The lot or control number assigned to the 
     prescription drug by the manufacturer of the prescription 
     drug.
       ``(I) The name, address, telephone number, and professional 
     license number (if any) of the importer.
       ``(J)(i) In the case of a prescription drug that is shipped 
     directly from the first foreign recipient of the prescription 
     drug from the manufacturer:
       ``(I) Documentation demonstrating that the prescription 
     drug was received by the recipient from the manufacturer and 
     subsequently shipped by the first foreign recipient to the 
     importer.
       ``(II) Documentation of the quantity of each lot of the 
     prescription drug received by the first foreign recipient 
     demonstrating that the quantity being imported into the 
     United States is not more than the quantity that was received 
     by the first foreign recipient.
       ``(III)(aa) In the case of an initial imported shipment, 
     documentation demonstrating that each batch of the 
     prescription drug in the shipment was statistically sampled 
     and tested for authenticity and degradation.
       ``(bb) In the case of any subsequent shipment, 
     documentation demonstrating that a statistically valid sample 
     of the shipment was tested for authenticity and degradation.
       ``(ii) In the case of a prescription drug that is not 
     shipped directly from the first foreign recipient of the 
     prescription drug from the manufacturer, documentation 
     demonstrating that each batch in each shipment offered for 
     importation into the United States was statistically sampled 
     and tested for authenticity and degradation.
       ``(K) Certification from the importer or manufacturer of 
     the prescription drug that the prescription drug--
       ``(i) is approved for marketing in the United States; and
       ``(ii) meets all labeling requirements under this Act.
       ``(L) Laboratory records, including complete data derived 
     from all tests necessary to ensure that the prescription drug 
     is in compliance with established specifications and 
     standards.
       ``(M) Documentation demonstrating that the testing required 
     by subparagraphs (J) and (L) was conducted at a qualifying 
     laboratory.
       ``(N) Any other information that the Secretary determines 
     is necessary to ensure the protection of the public health.
       ``(2) Maintenance by the secretary.--The Secretary shall 
     maintain information and documentation submitted under 
     paragraph (1) for such period of time as the Secretary 
     determines to be necessary.
       ``(e) Testing.--The regulations under subsection (b) shall 
     require--
       ``(1) that testing described in subparagraphs (J) and (L) 
     of subsection (d)(1) be conducted by the importer or by the 
     manufacturer of the prescription drug at a qualified 
     laboratory;
       ``(2) if the tests are conducted by the importer--
       ``(A) that information needed to--
       ``(i) authenticate the prescription drug being tested; and
       ``(ii) confirm that the labeling of the prescription drug 
     complies with labeling requirements under this Act;

     be supplied by the manufacturer of the prescription drug to 
     the pharmacist or wholesaler; and
       ``(B) that the information supplied under subparagraph (A) 
     be kept in strict confidence and used only for purposes of 
     testing or otherwise complying with this Act; and
       ``(3) may include such additional provisions as the 
     Secretary determines to be appropriate to provide for the 
     protection of trade secrets and commercial or financial 
     information that is privileged or confidential.
       ``(f) Registration of Foreign Sellers.--Any establishment 
     within Canada engaged in the distribution of a prescription 
     drug that is imported or offered for importation into the 
     United States shall register with the Secretary the name and 
     place of business of the establishment.
       ``(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.

[[Page H6167]]

       ``(i) Prohibition of Discrimination.--
       ``(1) In general.--It shall be unlawful for a manufacturer 
     of a prescription drug to discriminate against, or cause any 
     other person to discriminate against, a pharmacist or 
     wholesaler that purchases or offers to purchase a 
     prescription drug from the manufacturer or from any person 
     that distributes a prescription drug manufactured by the drug 
     manufacturer.
       ``(2) Discrimination.--For the purposes of paragraph (1), a 
     manufacturer of a prescription drug shall be considered to 
     discriminate against a pharmacist or wholesaler if the 
     manufacturer enters into a contract for sale of a 
     prescription drug, places a limit on supply, or employs any 
     other measure, that has the effect of--
       ``(A) providing pharmacists or wholesalers access to 
     prescription drugs on terms or conditions that are less 
     favorable than the terms or conditions provided to a foreign 
     purchaser (other than a charitable or humanitarian 
     organization) of the prescription drug; or
       ``(B) restricting the access of pharmacists or wholesalers 
     to a prescription drug that is permitted to be imported into 
     the United States under this section.
       ``(j) 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.
       ``(k) Waiver Authority for Importation by Individuals.--
       ``(1) Declarations.--Congress declares that in the 
     enforcement against individuals of the prohibition of 
     importation of prescription drugs and devices, the Secretary 
     should--
       ``(A) focus enforcement on cases in which the importation 
     by an individual poses a significant threat to public health; 
     and
       ``(B) exercise discretion to permit individuals to make 
     such importations in circumstances in which--
       ``(i) the importation is clearly for personal use; and
       ``(ii) the prescription drug or device imported does not 
     appear to present an unreasonable risk to the individual.
       ``(2) Waiver authority.--
       ``(A) In general.--The Secretary may grant to individuals, 
     by regulation or on a case-by-case basis, a waiver of the 
     prohibition of importation of a prescription drug or device 
     or class of prescription drugs or devices, under such 
     conditions as the Secretary determines to be appropriate.
       ``(B) Guidance on case-by-case waivers.--The Secretary 
     shall publish, and update as necessary, guidance that 
     accurately describes circumstances in which the Secretary 
     will consistently grant waivers on a case-by-case basis under 
     subparagraph (A), so that individuals may know with the 
     greatest practicable degree of certainty whether a particular 
     importation for personal use will be permitted.
       ``(3) Drugs imported from canada.--In particular, the 
     Secretary shall by regulation grant individuals a waiver to 
     permit individuals to import into the United States a 
     prescription drug that--
       ``(A) is imported from a licensed pharmacy for personal use 
     by an individual, not for resale, in quantities that do not 
     exceed a 90-day supply;
       ``(B) is accompanied by a copy of a valid prescription;
       ``(C) is imported from Canada, from a seller registered 
     with the Secretary;
       ``(D) is a prescription drug approved by the Secretary 
     under chapter V;
       ``(E) is in the form of a final finished dosage that was 
     manufactured in an establishment registered under section 
     510; and
       ``(F) is imported under such other conditions as the 
     Secretary determines to be necessary to ensure public safety.
       ``(l) 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, the United States Trade 
     Representative, and the Commissioner of Patents and 
     Trademarks 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).
       ``(m) 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.
       ``(n) Effectiveness of Section.--
       ``(1) In general.--If, after the date that is 1 year after 
     the effective date of the regulations under subsection (b) 
     and before the date that is 18 months after the effective 
     date, the Secretary submits to Congress a certification that, 
     in the opinion of the Secretary, based on substantial 
     evidence obtained after the effective date, the benefits of 
     implementation of this section do not outweigh any detriment 
     of implementation of this section, this section shall cease 
     to be effective as of the date that is 30 days after the date 
     on which the Secretary submits the certification.
       ``(2) Procedure.--The Secretary shall not submit a 
     certification under paragraph (1) unless, after a hearing on 
     the record under sections 556 and 557 of title 5, United 
     States Code, the Secretary--
       ``(A)(i) determines that it is more likely than not that 
     implementation of this section would result in an increase in 
     the risk to the public health and safety;
       ``(ii) identifies specifically, in qualitative and 
     quantitative terms, the nature of the increased risk;
       ``(iii) identifies specifically the causes of the increased 
     risk; and
       ``(iv)(I) considers whether any measures can be taken to 
     avoid, reduce, or mitigate the increased risk; and
       ``(II) if the Secretary determines that any measures 
     described in subclause (I) would require additional statutory 
     authority, submits to Congress a report describing the 
     legislation that would be required;
       ``(B) identifies specifically, in qualitative and 
     quantitative terms, the benefits that would result from 
     implementation of this section (including the benefit of 
     reductions in the cost of covered products to consumers in 
     the United States, allowing consumers to procure needed 
     medication that consumers might not otherwise be able to 
     procure without foregoing other necessities of life); and
       ``(C)(i) compares in specific terms the detriment 
     identified under subparagraph (A) with the benefits 
     identified under subparagraph (B); and
       ``(ii) determines that the benefits do not outweigh the 
     detriment.
       ``(o) Authorization of Appropriations.--There are 
     authorized to be appropriated such sums as are necessary to 
     carry out this section.
       ``(p) Conditions.--This section shall become effective only 
     if the Secretary certifies to the Congress that 
     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 
     covered products 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)''.

             TITLE XI--ACCESS TO AFFORDABLE PHARMACEUTICALS

     SEC. 1101. SHORT TITLE.

       This title may be cited as the ``Greater Access to 
     Affordable Pharmaceuticals Act''.

     SEC. 1102. 30-MONTH STAY-OF-EFFECTIVENESS PERIOD.

       (a) Abbreviated New Drug Applications.--Section 505(j) of 
     the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)) 
     is amended--
       (1) in paragraph (2), 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

[[Page H6168]]

     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
       (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''; and
       (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).'';
       (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.--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 does 
     not bring a civil action against the applicant for 
     infringement of the patent on or before the date that is 45 
     days after the date on which the notice given under paragraph 
     (2)(B) was received, the applicant may bring a civil action 
     against the owner or holder (but not against any owner or 
     holder that has brought such a civil action against that 
     applicant, unless that civil action was dismissed without 
     prejudice) for a declaratory judgment under section 2201 of 
     title 28, United States Code, that the patent is invalid or 
     will not be infringed by the drug for which the applicant 
     seeks approval.
       ``(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), by striking paragraph (3) and 
     inserting the following:
       ``(3) Notice of opinion that patent is invalid or will not 
     be infringed.--
       ``(A) Agreement to give notice.--An applicant that makes a 
     certification described in paragraph (2)(A)(iv) shall include 
     in the application a statement that the applicant will give 
     notice as required by this paragraph.
       ``(B) Timing of notice.--An applicant that makes a 
     certification described in paragraph (2)(A)(iv) shall give 
     notice as required under this paragraph--
       ``(i) if the certification is in the application, not later 
     than 20 days after the date of the postmark on the notice 
     with which the Secretary informs the applicant that the 
     application has been filed; or
       ``(ii) if the certification is in an amendment or 
     supplement to the application, at the time at which the 
     applicant submits the amendment or supplement, regardless of 
     whether the applicant has already given notice with respect 
     to another such certification contained in the application or 
     in an amendment or supplement to the application.
       ``(C) Recipients of notice.--An applicant required under 
     this paragraph to give notice shall give notice to--
       ``(i) each owner of the patent that is the subject of the 
     certification (or a representative of the owner designated to 
     receive such a notice); and
       ``(ii) the holder of the approved application under this 
     subsection for the drug that is claimed by the patent or a 
     use of which is claimed by the patent (or a representative of 
     the holder designated to receive such a notice).
       ``(D) Contents of notice.--A notice required under this 
     paragraph shall--
       ``(i) state that an application that contains data from 
     bioavailability or bioequivalence studies has been submitted 
     under this subsection for the drug with respect to which the 
     certification is made to obtain approval to engage in the 
     commercial manufacture, use, or sale of the drug before the 
     expiration of the patent referred to in the certification; 
     and
       ``(ii) include a detailed statement of the factual and 
     legal basis of the opinion of the applicant that the patent 
     is invalid or will not be infringed.''; and
       (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--

[[Page H6169]]

       ``(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''; and
       (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
       (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.--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 does 
     not bring a civil action against the applicant for 
     infringement of the patent on or before the date that is 45 
     days after the date on which the notice given under 
     subsection (b)(3) was received, the applicant may bring a 
     civil action against the owner or holder (but not against any 
     owner or holder that has brought such a civil action against 
     that applicant, unless that civil action was dismissed 
     without prejudice) for a declaratory judgment under section 
     2201 of title 28, United States Code, that the patent is 
     invalid or will not be infringed by the drug for which the 
     applicant seeks approval.
       ``(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) Infringement Actions.--Section 271(e) of title 35, 
     United States Code, is amended by adding at the end the 
     following:
       ``(5) The filing of an application described in paragraph 
     (2) that includes a certification under subsection 
     (b)(2)(A)(iv) or (j)(2)(A)(vii)(IV) of section 505 of the 
     Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355), and the 
     failure of the owner of the patent to bring an action for 
     infringement of a patent that is the subject of the 
     certification before the expiration of 45 days after the date 
     on which the notice given under subsection (b)(3) or 
     (j)(2)(B) of that section is received, shall establish an 
     actual controversy between the applicant and the patent owner 
     sufficient to confer subject matter jurisdiction in the 
     courts of the United States in any action brought by the 
     applicant under section 2201 of title 28 for a declaratory 
     judgment that any patent that is the subject of the 
     certification is invalid or not infringed.''.
       (d) 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. 1103. 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 1102) 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.--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.
       ``(cc) Substantially complete application.--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

[[Page H6170]]

     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. 1104. 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. 1105. REMEDIES FOR INFRINGEMENT.

       Section 287 of title 35, United States Code, is amended by 
     adding at the end the following:
       ``(d) Consideration.--In making a determination with 
     respect to remedy brought for infringement of a patent that 
     claims a drug or a method or using a drug, the court shall 
     consider whether information on the patent was filed as 
     required under 21 U.S.C. 355 (b) or (c), and, if such 
     information was required to be filed but was not, the court 
     may refuse to award treble damages under section 284.''.

     SEC. 1106. 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)''.

  The SPEAKER pro tempore. Pursuant to House Resolution 299, the 
gentleman from New York (Mr. Rangel) and the gentleman from Louisiana 
(Mr. Tauzin) each will control 30 minutes.
  Mr. TAUZIN. Mr. Speaker, I yield 15 minutes to the gentleman from 
California (Mr. Thomas) or his designee, and ask unanimous consent that 
he may control that time.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Louisiana?
  There was no objection.
  Mr. RANGEL. Mr. Speaker, I yield 15 minutes to the gentleman from 
Michigan (Mr. Dingell) and ask unanimous consent that he be permitted 
to further allocate that time.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from New York?
  There was no objection.
  The SPEAKER pro tempore. The gentleman from New York (Mr. Rangel) is 
recognized for 15 minutes.
  Mr. RANGEL. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I appreciate the statement made by the gentleman from 
Louisiana (Mr. Tauzin) that we all are concerned about our older 
citizens and those that are to follow, and certainly we all have to 
appreciate the fact that we are all here because we stand on someone 
else's shoulders, someone else who made the sacrifice, and I am very 
proud to share the responsibility of this bill with the gentleman from 
Michigan (Mr. Dingell), who has dedicated his entire life, and his dad 
before him, in making certain that he and those of us who support him 
and what he believes in improves the quality of life of not only the 
seniors today.
  It took us a long time to get where we are where people feel some 
degree of comfort that the Federal Government will be there for them, 
whether it is Social Security, whether it is Medicaid, whether it is 
Medicare. It has been government, yes, this government, this wonderful 
government, this government who gave me the GI bill, this government 
which allowed older citizens to have some degree of pride in having 
Social Security to cushion themselves from poverty, and this government 
that provided health care for the very poor, and under Medicare we had 
hoped that we would have provided prescription drugs for them.
  I do not know when this animosity came against government, why we 
felt we had to starve these programs which some of us have been so 
proud of. Somebody asked how do you pay for your bill? This is a 
strange thing to ask, especially when the chairman of the Committee on 
the Budget is on the floor. He has been able to do magic with numbers 
over there. He started out with a $5.6 trillion surplus, and with magic 
converted it to a $3.4 trillion deficit. He can take $9 trillion and 
find some way to spend it in tax cuts. Even tonight, some $173 billion, 
$100 billion just found last night, and we will get $400 billion from 
what they have allocated, but we think that it takes twice that much.
  Is that asking to do, is that something that we have to go to the 
Committee on the Budget for and ask? Can you sprinkle your magic powder 
on us and make it possible for the older people not to have gaps in 
services? Is it asking too much to treat them, not that they are 
wealthy in dollars and cents, but they are wealthy in terms of the 
investment they made in this country to make it possible for the 
multinationals and the wealthy people to get the tax breaks that they 
are getting, and it seems to me since compassion is not there, that 
maybe we can look at it as a cost savings vehicle.
  How many senior citizens will not have to go to the hospitals which 
are so expensive, how much of a part of our health expenses is a part 
of the institutions which our seniors are forced to go

[[Page H6171]]

into? If you have to make a decision and you are in doubt, why not make 
the doubt in favor of the senior citizens? Everything that is missing 
in the Republican bill that is good, we put in our bill to make certain 
that it is better.
  One thing that we are saying is this, do not hate the government 
until you do not have any need for it. And seniors when they read the 
difference of the bills, and you bet your life they can read, they may 
be old but they are not stupid. They can pick up the daily newspapers, 
and if they do not go to the pharmaceutical corporations but rather go 
to the local drugstore, they will find out in short order who is their 
best friend.
  Do not knock the government. It is not as bad as some Members think. 
Give the people an opportunity so that we can say citizens, we 
appreciate all that you have done for us, and we in the Congress 
believe that the least we can do for you as you grow older is to ease 
your pain and, more important, the fear you have that once you go to 
the doctor that at least you will be able to get the drugs that are 
prescribed for your illness.
  Mr. Speaker, we do not have to challenge each other's integrity, but 
I tell Members this, that there are Members on the other side of the 
aisle that hold Social Security in utter contempt. There are Members 
who talk about Medicare as though the communists created the package, 
and they resented it when it started, and they think it is worse than 
ever today.
  What I am saying is let us do what they tell doctors to do, and do no 
harm. Let us leave here saying that at least on this day there was a 
substitute, they did not have to do it the way the majority would want.
  Mr. Speaker, I yield the balance of my time to the gentleman from 
California (Mr. Stark), the ranking member of the Subcommittee on 
Health, and I ask unanimous consent that he may further allocate that 
time.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from New York?
  There was no objection.
  (Mr. WILSON of South Carolina asked and was given permission to speak 
out of order and to revise and extend his remarks.)


                     South Carolina Loses a Legend

  Mr. WILSON of South Carolina. Mr. Speaker, it is with great sadness 
tonight that I announce that Senator Strom Thurmond passed away at 
9:45. I was a former staff member of Senator Thurmond, my wife was a 
staff person for Senator Thurmond, and our three sons have been pages 
with his office.
  With the death of Strom Thurmond, South Carolina has lost its 
greatest statesman of the 20th century, just as John Calhoun was the 
most revered South Carolinian of the 19th century. Strom Thurmond will 
never be replaced in the countless hearts of those who loved and 
respected him.
  The entire Wilson family mourns this profound loss and we extend our 
sympathy to the Thurmond family.
  Senator Strom Thurmond will endure as the leading example of a public 
servant due to his love and devotion to all the people of South 
Carolina regardless of status, race, politics or region.
  He was our living legend. Strom's life was dedicated to achieving 
peace through strength, as shown by his military service in liberating 
Europe from Nazi fascists, his tireless work in fighting for a strong 
national defense in Congress which ultimately led to the defeat of 
Soviet communism.

                              {time}  2300

  He pioneered the development of the South Carolina Republican Party 
from effective nonexistence in the 1960s to majority status by the end 
of the century. He has been a role model of service to South Carolina's 
young people and our family has had three generations on his staff: my 
wife's two uncles were staff attorneys, my wife and I were interns, and 
our three oldest sons were pages. A distinguished highlight for our 
family was to host Senator Thurmond on the last Sunday before his last 
election in 1996 at the First Presbyterian Church in Columbia.
  The legacy of Strom Thurmond will always be felt in South Carolina 
because of his steadfast integrity and the meaningful results of his 
thoughtful constituent service. He was my personal hero, and I will 
miss him dearly.
  Mr. TAUZIN. Mr. Speaker, I yield myself such time as I may consume.
  Let me join in expressing the sorrow of the folks in Louisiana for 
your loss in South Carolina. We will pray for his soul.
  Mr. Speaker, the Democratic substitute in this debate can be summed 
up rather easily. According to CBO, it will spend over a trillion 
dollars. It busts the budget. Therefore, it is on the floor with a 
budget waiver. It at the same time excludes and does not contain any of 
the reforms that the base bill includes, that are designed to save 
Medicare from failure, from insolvency. I am not predicting Medicare's 
failure or insolvency. CBO is. CRS is. Everyone who has estimated the 
strength of our Medicare system predicts very soon, in our lifetimes, 
it will go insolvent. None of the reforms that are designed to save 
Medicare from insolvency are here. In fact, the Democratic substitute 
piles on a trillion dollars' worth of expenses to the Medicare system 
with no reforms to make sure the system is saved.
  When I mentioned earlier that you ought to test the credibility of 
arguments on this floor by what is said and what is fact and what is of 
record, let me take you back to the statements of the distinguished 
gentlewoman from California who criticized the base bill because CBO 
said it might mean that as much as 30 percent or so of employers might 
drop their retiree coverage under the base bill in favor of the plans 
we offer. CBO estimated the Democratic substitute, too, on that point.
  How credible is an argument against the base bill that complains 
about a potential 30 percent loss of employer coverage when CBO 
estimates that 100 percent of employers will drop retiree coverage 
under the Democratic substitute? That all taxpayer dollars will be used 
to substitute private dollars? And the Medicare system, already crushed 
and about to go into insolvency, will have to assume all that 
responsibility, too? If you really believe in Medicare, why would you 
burden it so? Why would you eliminate private coverage in America, as 
CBO estimates would happen under the Democratic substitute?
  This substitute busts our budget. It purports to provide more drug 
coverage than the base bill but no reforms, it does not save Medicare; 
and on top of that it virtually eliminates private retiree coverage in 
America. Why would we want to go that direction? We rejected that 
direction during the Clinton years when Mrs. Clinton presented us with 
one-size-fits-all health care for all Americans. We recognized then 
that if you do not have the competitive choices in America in health 
care, just as we do with so many other services, that things go bad in 
this country and that sooner or later the crushing weight of benefits 
added upon benefits added upon benefits means the working people of 
America have to pay more and more and more taxes. In fact, it is 
estimated that within 70 years, if we do not begin today making 
decisions like we ask the House to make, entitlements in America will 
eat up every tax dollar paid into the Treasury by every citizen in 
America, and we will have no money for any other function in this 
country. That is where this substitute takes us, and that is why we 
need to reject it.
  Mr. Speaker, I reserve the balance of my time.
  Mr. DINGELL. Mr. Speaker, I yield myself 3 minutes.
  (Mr. DINGELL asked and was given permission to revise and extend his 
remarks.)
  Mr. DINGELL. My dear friends and colleagues, I lay before you the 
Republican plan. I ask you to look at it with a straight face, because 
it is inexplicable, and I cannot explain it to you with a straight 
face. The amendment which was offered by my dear friend, the gentleman 
from New York (Mr. Rangel), on behalf of him and me, does the following 
things: it gives and sets forth a very clear set of benefits. Senior 
citizens pay $25 a month; they get 80 percent of drug costs from 
government after a $100 deductible. This is what you get if you get the 
Republican plan. But that is not the worst you get. If you are a senior 
citizen, you fall into a doughnut hole. After you get $2,000 in drugs 
that you get under the plan, all of a sudden your payments by the 
government stop; you have to keep on paying premiums, but you get no 
benefit

[[Page H6172]]

until you have got $5,100. They are going to privatize your Medicare in 
the year 2010. That is pretty bad.
  But it is followed by other things: massive subsidies to the 
insurance companies which commence in 2 years, in 2006. But that is not 
all. No guarantee as to what it costs you in terms of what you have to 
pay in the way of premiums, no assurance that you will get any 
particular level of benefits. The only person who is going to cut a fat 
hog out of this deal are those goodhearted, flinty-hearted, cold-
hearted folk in the insurance business who are going to all of a sudden 
get a key to the United States Treasury, the right to collect any 
amount of money they want and to sucker the Secretary of HHS any old 
way they are minded and to walk home and to pay the money perhaps to 
the senior citizens but possibly to their shareholders or in dividends 
or perhaps to pay it in salaries or in bonuses to their corporate 
officers. That is what you get under the Republican plan. And 
privatization of Social Security as you know it today.
  The Republicans have said that they intend to do away with Social 
Security. Well, this is what is happening here. The Democratic plan 
compels the drug houses to negotiate with the Federal Government and 
the Secretary. The Republicans preclude him by absolutely prohibiting 
him from negotiating. We do not tolerate under the Democratic plan the 
Republican opportunity to privatize Medicare. And just wait till your 
senior citizens find out what you are doing to them with privatization 
and doing away with fee-for-service and substituting in lieu of this 
the kind of plan that you talk about where there is no assurance of 
protection for the senior citizens.
  The Republicans say the bill costs too much. Well, it pays some $800 
billion to 40 million senior citizens. Just last week, without a gasp 
of shame, my Republican friends set it up so that 200,000 families got 
the same amount of money. I think it is time we looked after the senior 
citizens and not the fat cats that my Republican colleagues and friends 
look after.
  Vote for the Democratic plan. Vote down the Republican plan. Let us 
take care of the senior citizens. It is the right thing to do.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I yield myself such time as 
I may consume.
  Mr. Speaker, let us look at the facts behind the rhetoric here. What 
is going to be the impact of this Democratic substitute on seniors? My 
colleague from Louisiana just reminded us that 100 percent of employers 
are going to drop their plans. If there is one thing my senior citizens 
say to me when I go into senior centers it is, look, help those who 
need it, but do not destroy my employer-provided retiree plan. Do not 
touch it. This amendment destroys it, wipes it out. That is not in the 
interest of your seniors.
  But let us look at what it will do to premiums. You were concerned 
that we did not sock a premium into law. Look what you do in your bill. 
You sock the premium into law and then you have it rise according to 
drug inflation. Drug inflation is double-digit. Do you not get it? 
Those premiums are going to rise steeply. Why would you do that to our 
seniors?
  And let us look at the effect on prices. There is one thing seniors 
say to you over and over again, the prices are too high. Yet according 
to Dr. Holtz-Eakin's testimony of April 9, 2003, he says, ``If you 
subsidize 90 percent of any insurance product versus 70 percent of the 
product, the larger subsidy will lead to a lower incentive to control 
costs and will lead to higher prices and higher spending.'' Yours is a 
giveaway to the pharmaceutical industry. It will drive prices up 
because there is no incentive for the PBM or the plan to negotiate 
prices down and they can just pass it on to the government, because we 
are going to pay it all. Yours is going to drive prices up, premiums up 
and employer plans out of the market. I do not know why you think you 
are doing the seniors a good service.
  And look at the impact on their kids, because they care about their 
kids and their grandkids. We have heard testimony over and over again 
that if you have a 10-year-old child, in 20 years when that kid is 30 
and trying to pay back college loans, trying to buy a house, trying to 
get established, having to buy a car, that child will live in a Nation 
in which three-quarters of all the Federal revenues will go to Social 
Security, Medicare and Medicaid.
  What is that child to do about education for their children? What is 
that young person to do to make a living? You shoulder so much debt on 
the next generation that they will not have public education the way we 
know it today. They will not have the roads and bridges that a strong 
economy depends on. They will not be able to defend this Nation in a 
world that is going to be far more dangerous than the one we have 
known. This is utterly irresponsible. It is so irresponsible that when 
the other body proposed this plan in the Senate the last session of 
Congress, they could not write a budget resolution because they did not 
know how to handle the extraordinary debt that this creates in the 
decades ahead.
  I urge my colleagues to think that something that looks pretty for 
your seniors, in fact, will be terrible for their health.
  Mr. Speaker, I reserve the balance of my time.
  Mr. STARK. Mr. Speaker, I yield myself such time as I may consume. I 
know earlier I moved the distinguished gentleman from Louisiana, the 
chairman of the Committee on Energy and Commerce, to talk about his 
poverty and I wanted to join him in that. I too was raised poor. I was 
raised so poor that I never slept alone until I was married. I want to 
go on and suggest that I am not going to let you have that field all to 
yourself.
  We have introduced a substitute. Unlike your bill, ours has specific 
benefits. Your bill, I would remind the gentlewoman from Connecticut, 
has no benefit in it. It is all estimates. It is all examples. There is 
no benefit in your bill, and indeed in our substitute there is. You 
have heard it. It is simple. It is $25 a month, 20 percent coinsurance, 
no gaps; and we pay out of pocket after $2,000.
  Yes, you will say it costs a lot of money. The gentlewoman from 
Connecticut forgets about the $5.6 trillion surplus that Bush had when 
he came into office and which he squandered on tax cuts in the 
meantime. But we do have an income transfer as we have been accused of. 
It is very simple. You can look at it this way. You have given $800 
billion to 10,000 of the richest families each year when you did away 
with the inheritance tax. No question about it. That is what it costs. 
Those are the beneficiaries. We would take that money as an alternative 
and give it to what will be in a short 10 years 100 million seniors. 
What you have given away to the richest seniors in this country would 
more than pay for a drug benefit of the magnitude that we offer, a 
standard Medicare drug benefit, and I suggest that that is a transfer 
worth making and that that defines the difference between us.

                              {time}  2315

  You give $800 billion to 10,000 families a year, the richest in 
America. We would give that $800 billion to 100 million seniors who 
needed a drug benefit that they can define, depend on and understand, 
and that is why the Members should support the Democratic substitute. 
It is defined. It is real. It solves the problem for seniors, and it 
is, I think, one of the highest priorities that this House has.
  Mr. Speaker, I reserve the balance of my time.
  Mr. TAUZIN. Mr. Speaker, I yield 3 minutes to the gentleman from 
Pennsylvania (Mr. Greenwood), the chairman of the Oversight and 
Investigations Subcommittee of the Committee on Energy and Commerce.
  Mr. GREENWOOD. Mr. Speaker, I thank the chairman of the committee for 
yielding me this time.
  The gentleman from Michigan (Mr. Dingell) and others have presented a 
chart earlier that purported to show that somehow our plan was too 
complicated. It is a complicated issue to provide prescription drug 
benefits to millions of Americans who have never had them.
  Let me show another chart that describes our plan and it is not 
complicated at all. Today a senior citizen walks into a drugstore and 
wants to buy Lopressor, 100 milligrams. She has to pay, for 30 tabs, 
$45.99 right out of her pocket. Under our bill the price first comes 
down because of the group purchasing power to $36.79 and then what does 
she pay? She pays $7.36 and if she is low income she pays $5. That is a 
big difference from $46.

[[Page H6173]]

  Let us look at Lipitor. An awful lot of Americans take Lipitor every 
day to keep their cholesterol down. I do. It costs $108.65 today 
because for 40 years the Democrats did not do anything about 
prescription drugs and for 8 years President Clinton did not do 
anything about prescription drugs, but under our plan Lipitor goes down 
to $86.92 because of our purchasing power, but the beneficiary pays, 
his/her share, $17.38. Pretty straightforward. Pretty simple. Nothing 
complicated about that.
  Celebrex, an important anti- 
inflammatory drug for arthritis that so many seniors suffer from, a 
very popular drug, $86.28 today to get 30 tablets of that for 1 month. 
We bring it down to $69.02 because of our power of purchasing, but the 
beneficiary pays $13.80 for a month's supply and if they are a poor 
senior citizen, $5. $5, down from $86.28.
  Zoloft, 100 milligrams, 30 tabs for a month, it is an antidepressant. 
A lot of elderly suffer from depression, unfortunately, at their age in 
part because they do not have good health care. We bring the price down 
to $63.17. The beneficiary pays $12.63 a month and, if she is poor, $5 
a month.
  This chart is pretty straightforward and pretty simple. This 
demonstrates what happens when good-minded people do very hard work 
with very smart staff, employing very good ideas. We get the job done 
for the elderly, a job that I am sorry to the gentleman from California 
(Mr. Stark), I am sorry to the gentleman from Michigan (Mr. Dingell). 
They have been here for a long time and they have done nothing. A lot 
of talk tonight. A lot of good talk, a lot of bogeyman talk, a lot of 
scare-the-seniors talk tonight, but we will get this done. It will be 
very simple. It will be very straightforward. The senior citizens will 
love it, and as a measure of that you are all going to be voting for it 
next month.
  Mr. DINGELL. Mr. Speaker, I yield myself 15 seconds.
  I hope my colleagues look at that chart because it has the same 
factual value as Alice in Wonderland. There is no requirement that any 
of those drugs be made available. There is no requirement that they be 
made available at any particular price or that they have to be made 
available under the plan at any particular cost because of cost sharing 
with the insurance.
  Mr. Speaker, I yield 2\1/2\ minutes to the distinguished gentleman 
from California (Mr. Waxman).
  Mr. WAXMAN. Mr. Speaker, today the House should be considering a 
Medicare prescription drug benefit for all America's seniors and 
disabled citizens that would be a benefit that is certain, a benefit 
that is affordable, and a benefit that helps Medicare beneficiaries 
with all of their drugs. It should not have large gaps in coverage as 
the Republican bill does. It should not let private insurance companies 
charge whatever premium they want and cover whatever drugs they want as 
the Republican bill does. It should be available in every part of the 
country, not only in areas where private insurers decide they can make 
a profit, and it should not cost seniors more if they live in Iowa 
instead of Virginia or California instead of Rhode Island. Most 
importantly, it should be a part of the Medicare program, just as 
dependable as the rest of the Medicare is for seniors and disabled 
people today.
  The Republican bill fails all of these tests. It makes promises on 
the one hand and then takes them away when we read the fine print. It 
claims to give special help to America's low-income seniors so that 
they can afford to pay for the prescription drug program, but then it 
makes seniors subject to a detailed and invasive assets test before 
they can get help.
  If they have over $6,000 in the bank, they do not get any help. When 
we figure out what they have got if they count the value of their car 
and it is worth more than $4,500, and what car is not? They do not get 
any help. They count the value of the clothes and furniture and 
appliances if they are worth more than $2,000. They can even count the 
value of their burial plot if it exceeds $1,500. So instead of making 
sure people of very modest income who need help to get in, they get the 
fine print eliminating a lot of these people who should be helped, and 
it makes all of them go through a demeaning and complex process to 
prove they have few assets.
  All this to get help with their drug expenses. This is just wrong. 
Instead of spending the public's money to get the best possible drug 
benefit, this Republican bill spends our dollars to bribe insurance 
companies to sell a drug plan. It pays for profits for the insurance 
companies instead of the bills for our seniors.
  What we should be doing is using the purchasing power of America's 
seniors, 40 million of them, to get good prices on their drugs as they 
do in Canada and get good coverage. That is what the Democratic 
substitute does. I urge my colleagues to vote for the Democratic 
substitute and against the Republican bill.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I yield 2 minutes to the 
gentleman from Iowa (Mr. Nussle), a member of the Committee on Ways and 
Means and esteemed chairman of the Committee on the Budget.
  Mr. NUSSLE. Mr. Speaker, I thank the gentlewoman for yielding me this 
time.
  I would like to know where the new Democrat budget hawks are tonight, 
those new birds who seem to have flown the coop, who have spent the 
last many months here on the floor talking about the debt tax, 
something that does not exist but they have sure gotten a lot of ink 
about it. All sorts of national debt charts have been coming across the 
floor. In fact, they even one day used the pages, these young high 
school students, to demonstrate the national debt. But where are they 
tonight? Where are they when we read the letter from the Congressional 
Budget Office that says that their so-called substitute would add $1 
trillion to the deficit? Where are they? They have flown the coop. We 
are not hearing about the deficit all of a sudden. In fact, what we 
heard about is that tax cuts have caused all of the problems.
  In fact, one gentleman even had the audacity to stand up and act as 
though Washington hands money out to people. Tax relief, my friends, is 
money left in the pockets of people that they earned. We do not hand 
money out. Money comes from them. And if you are going to waste it on a 
$1 trillion program, that not only does not fit within the budget that 
controls tonight but did not even fit within your substitute budget of 
just 4 months ago.
  In fact, if we add the Democrat budget together with the budget that 
controls today, you bust not only the Republican budget, you bust the 
Democrat budget, but you bust both budgets combined. That takes a lot 
of work, to be able to bust both budgets and add $1 trillion to the 
deficit and have all of these new deficit Democrat hawks whom we cannot 
find tonight.
  It is interesting. Boy, we heard a lot from them all year long, 
nickeling and diming and worrying about all of that. But when you come 
to the floor with $1 trillion that says in the same letter that all the 
employers are going to drop their coverage for retirees, 100 percent 
are going to drop their coverage, and you have the audacity to present 
that kind of substitute that busts both budgets, do not come here any 
more this year and talk about the deficit.
  Mr. STARK. Mr. Speaker, I yield myself 30 seconds.
  I have the same letter, and it says nothing about employers dropping 
coverage.
  Mr. Speaker, I yield 2 minutes to the gentleman from Washington (Mr. 
McDermott), a member of the Committee on Ways and Means, who 
understands that spending money to provide a decent drug benefit for 
seniors is not wasting money.
  Mr. McDERMOTT. Mr. Speaker, Members of the House and those listening 
to this, I think you ought to take a piece of paper right now and write 
this down. The premium is $25. The deductible is $100 a year. The 
coinsurance means you pay 20 percent, the government pays 80 percent 
for your drugs, and there is a cap on how much you can spend out of 
pocket, $2,000. That is written into our bill.
  In contrast, we have this magic pill that has been given to us where 
the other side says trust us. Remember, these are the people who told 
us that there were weapons of mass destruction in Iraq. They were right 
there. They were going to be delivered in 45 minutes. And, in fact, the 
President of the United States stood right here and

[[Page H6174]]

said, Mr. Speaker, that he believed that they had tried to buy uranium 
from Niger. It was known that that was a lie. It was known. So now they 
come out here with this drug bill and they say listen, we think it will 
be about $35 and maybe you will get this and maybe you will get that, 
but nothing is written down. I want the people to remember those four 
things.


                Announcement by the Speaker Pro Tempore

  The SPEAKER pro tempore (Mr. Hastings of Washington). The Chair 
reminds the Member not to make personal remarks regarding the President 
of the United States.
  Mr. TAUZIN. Mr. Speaker, it is almost like Minister of Information 
Baghdad Bob just arrived here.
  Mr. Speaker, I yield myself 2 minutes.


                         Parliamentary Inquiry

  Mr. McDERMOTT. Mr. Speaker, Parliamentary inquiry.
  The SPEAKER pro tempore. The gentleman from Louisiana has the floor. 
Does the gentleman yield?
  Mr. TAUZIN. Mr. Speaker, I do not yield.
  Mr. McDERMOTT. Point of personal privilege, Mr. Speaker. Were you 
making some reference about Baghdad whom? Is that appropriate for the 
Speaker of the House?
  The SPEAKER pro tempore. The gentleman from Washington (Mr. 
McDermott) is not in order since the gentleman from Louisiana (Mr. 
Tauzin) has the time and such a point may not challenge debate.
  Mr. TAUZIN. Mr. Speaker, I want to illustrate one of the real 
inadequacies of the Democratic substitute. In the main bill we reformed 
something called average wholesale price. I hope everyone knows what 
that is. I am going to illustrate it for you tonight. Under average 
wholesale price systems built into Medicare by the Democratic Party all 
these years, this is what happens. A person goes in for cancer therapy, 
a senior citizen, and the doctor needs a drug that costs $10; so the 
doctor buys a chemotherapy drug for $10. The patient ought to have to 
pay $2 under that, 20 percent co-pay under law. But that is not what 
happens. Under the average wholesale price system devised by Democratic 
administrations in the past under Medicare, this is what happens. The 
government has a phony average wholesale price posted. It might be $200 
for that drug that only costs the doctor $10, and the poor patient has 
to put up 20 percent, not of the $10 but 20 percent of the $200. The 
patient puts up $40 for a drug that only costs the doctor $10 when the 
patient should have put up $2. That is called the average wholesale 
price system. It is rotten. It stinks. Our bill gets rid of it. And we 
replace it by reimbursing oncologists in America for not one time what 
their practice expense really ought to be reimbursed under the law, but 
we double it.

                              {time}  2330

  We give them $430 million, twice what CMS estimates they ought to 
get.
  So we get rid of this stinky system that is charging American seniors 
20 percent of phoney prices and costing the government Medicare system 
tens of times what the drugs are really costing the doctors, and we 
replace it with a rational, a rational reimbursement system.
  Now, the Democrats try to settle that system too. Let me tell my 
colleagues what they do in their substitute. They substitute this 
average wholesale price system with a system of reimbursement that, 
according to CBO estimates, is going to cost $14 billion over 10 years; 
and it is going to cost seniors another $3 billion of copays. We ought 
to reject that solution.
  Mr. DINGELL. Mr. Speaker, I yield 2\1/2\ minutes to the distinguished 
gentleman from New Jersey (Mr. Pallone).
  Mr. PALLONE. Mr. Speaker, the only thing that stinks here is the 
Republican bill, and it stinks for a lot of reasons.
  First of all, because it is not going to give the seniors any 
benefit. They are not going to have really any drug benefit whatsoever. 
It is going to force them into an HMO. They will not have any choice of 
doctors. And fundamentally, in the end what the Republican bill does is 
kill Medicare by setting up a voucher system so we do not even have 
traditional Medicare.
  I am sick and tired of hearing my Republican colleagues on the other 
side criticize traditional Medicare. Medicare is not insolvent. 
Medicare is a good program. Do not tell me that Medicare is broke or 
Medicare needs to be fixed. And I say to the gentlewoman from 
Connecticut, do not insult me and say the Democrats are irresponsible, 
the Democrats are putting us in debt. The Republicans are the ones that 
are putting us in debt, because you are borrowing from the trust fund 
so there is no money left in it because you want to kill Medicare. That 
is what you are all about.
  These gentlemen over here, these Democrats who have been here for a 
long time, they are here tonight because they want to save Medicare. 
They understand that Medicare can be helped by putting on a 
prescription drug benefit, so they look at the tried and true system, 
they look at what we do in part B for our doctor bills, and they say, 
yes, let us just add a benefit like part B. We will have a low premium. 
We will have a low deductible. We will pay 80 percent of the cost on 
the Federal Government. We will have a catastrophic at 2,000. Just add 
the tried and true program, like we have in part B, and add a drug 
benefit. We do not need HMOs. We do not need all of these other 
gimmicks that the Republicans come up with.
  And then these gentlemen, my colleagues, the gentleman from Michigan 
(Mr. Dingell) and the gentleman from New York (Mr. Rangel), they say, 
well, we can pay for this very easily by negotiating the price and 
giving the Secretary the power to lower the prices. That would cut the 
program in half. That is what our Democratic leader said. That would 
cut the cost of the program in half so we would not have to go into 
debt. We would not have to borrow from the trust fund and make it 
insolvent, which is what my Republican colleagues have been doing here 
and what they are proposing.
  Mr. Speaker, do not sell out to the HMOs and the insurance companies. 
That is what you are doing. You are selling out by saying everybody has 
got to go into an HMO because you are in bed with the insurance 
companies. You are selling out to the pharmaceutical industry because 
you want no price reductions, because you are going to get some benefit 
from the pharmaceutical industry.
  And then you come up with: this is complicated. The gentleman from 
Pennsylvania (Mr. Greenwood) said, oh this is complicated. There is 
nothing complicated here. It is simple. We have had the program for 
years. We just add the prescription drug benefit, and we have a 
negotiated price. It is very simple.
  Do not give me this chart. I mean, look at this garbage. How could 
anyone possibly understand it? I cannot even understand it myself, and 
you expect my mother or somebody's grandmother to understand this 
thing? You are making it complicated. You are destroying Medicare. Do 
not insult us as Democrats. We have been out there protecting it for 
years.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, it is my pleasure to yield 
2 minutes to the gentleman from Wisconsin (Mr. Ryan), a member of the 
Committee on Ways and Means.
  Mr. RYAN of Wisconsin. Mr. Speaker, I thank the gentlewoman for 
yielding me this time.
  I want to calm down a little bit. There has been a lot of shouting 
around here, a lot of heated rhetoric, a lot of hyperbole. Let us just 
look at a couple of facts.
  It is a fact that the Medicare actuaries are telling us that Medicare 
is going insolvent in 13 years. The entire trust fund goes bankrupt in 
2036. It is a fact that if we add more money on top of Medicare without 
doing any reforms, you are going to accelerate the insolvency of 
Medicare. We can try and speak those facts away, but the fact remains 
that those are facts.
  Now, what this Democrat substitute does is it costs over $1 trillion. 
It accelerates the bankruptcy of Medicare. The basic assumption in this 
CBO estimate is that every employer providing private drug coverage for 
the retirees is going to drop it. And why would they not? Why would 
they not drop it if the Federal Government is going to pay for it all?

[[Page H6175]]

  What the facts are is that this plan is going to accelerate the 
bankruptcy of Medicare.
  Now, what are we trying to achieve with the Republican bill? Mr. 
Speaker, there are parts of this bill that none of us all like. I have 
my own criticisms. But what we are trying to achieve is not only 
modernizing this program so it works for today's seniors by giving them 
cheaper drugs and coverage of drugs, but we are also trying to 
modernize this program and save it for the baby boom generation.
  We have 77 million retirees coming in this country starting in 15 
years; and if we accelerate the bankruptcy of this program as the 
Democrats are proposing to do, it is not going to be there for them.
  So what we are doing with these market-based reforms and giving 
seniors more choices? We are giving them the chance that this program 
will be solvent for the boomers when they retire. That is the 
responsible thing to do here. The responsible thing is to make it work 
for today's seniors, make it modern, make it comprehensive, work on 
prescription drug prices, work on prescription drug coverage, but give 
seniors more choices, use competition, use the things that have worked 
in the past so we can save this program for the baby boomers. That is 
what the Republican bill does.
  Mr. STARK. Mr. Speaker, I yield myself 30 seconds for a couple of 
housekeeping things.
  In 13 years, the revenues start to decline, but it does not go 
insolvent for 24 years. And I say to the gentleman from Ohio (Mr. 
Nussle), if he has indeed the same letter that we are informed we have 
from CBO dated June 26, it says nothing in there about employers 
turning back Medicare, so he either misspoke or made it up, which, in 
my State, we call telling a lie. Unless he has a different letter, 
which I am assured by CBO he does not, then he made that up.
  Mr. Speaker, I yield 1 minute to the gentleman from New Jersey (Mr. 
Menendez).
  Mr. MENENDEZ. Mr. Speaker, I rise on behalf of my 84-year-old mother 
and millions like her across this country. She worked her entire life 
in the factories of New Jersey. Today she has Alzheimer's and spends 
over half of her social security check on prescription drugs. If it was 
not for my sister and me, she would not be able to live with the 
dignity she deserves.
  Now, this Republican package is wrapped in a label that says, ``I 
care,'' but when you open it up, it contains nothing more than an empty 
promise.
  Under this Republican plan, which lacks the compassion promised by 
the President and expected from our doctors, millions of seniors who 
want to stay in traditional Medicare with their own doctor would 
essentially be forced into HMOs and left without the choices they 
deserve. This bill is the road towards privatizing Medicare.
  Republicans just cannot help themselves. Once again, they have chosen 
corporate interests over human interests. America's seniors deserve our 
respect. They have worked too hard, sacrificed too much to be forced to 
choose between paying their rent, putting food on the table, and having 
access to life-enhancing drugs.
  Support the Democratic substitute that has a real prescription drug 
provision under Medicare.
  Mr. TAUZIN. Mr. Speaker, I am pleased to yield 2 minutes to the 
gentleman from California (Mr. Cunningham), our fighter pilot commander 
extraordinaire.
  Mr. CUNNINGHAM. Mr. Speaker, I had pneumonia about 5 years ago, and I 
went to pick up the prescription drug and I looked at it. It was 120 
bucks. As I picked it up, I sat there and I thought, how does a family 
with three or four children afford 120 bucks per bottle of Augmentin to 
help them with the flu or with other antibiotics? It is a real fact. It 
is hard.
  But Mr. Speaker, I say to the gentleman from Michigan (Mr. Dingell), 
does he know the cost of my prescription drug? It cost me $17. Because 
my wife worked with the Encinitas school district and she had 
insurance. That is what we want, is a private-public partnership for 
those people that cannot afford prescription drugs to help them. Over 
1.4 million people in California will have no copay, no cost 
whatsoever. But it will help them in our bill.
  I think that your bill, with its costs, is devastating in the long 
run. It will not help.
  If Democrats can demonize pharmaceutical companies, then what is 
left? The government. If you can demonize insurance companies, what is 
left for health care? Government-controlled health care. We rejected 
that in 1993 when the then First Lady offered it. I oppose government-
controlled health care, and maybe that is the difference in us, because 
it will drive this country in debt.
  I talked to some people from Canada. Do my colleagues know where they 
go to get their health care? They come clear down to Buffalo, New York 
to get it, because it is so bad with their government-controlled health 
care.
  Let us defeat the Democratic substitute and support the primary bill.
  Mr. DINGELL. Mr. Speaker, I yield 2\1/2\ minutes to the distinguished 
gentleman from Michigan (Mr. Stupak).
  Mr. STUPAK. Mr. Speaker, the Republican prescription drug plan is bad 
for America and even worse for rural America.
  Today I sent around a letter to Members explaining exactly why this 
GOP bill shortchanges rural areas like Northern Michigan, which I 
represent.
  The Rangel-Dingell substitute ensures that rural areas are treated 
fairly. The Republican plan continues to put citizens in these areas at 
a huge disadvantage. The Rangel-Dingell bill goes far beyond the meager 
provisions for rural health care providers included in the GOP bill. 
Our bill, the Democratic bill, provides over $10 billion in additional 
relief for rural areas and removing the harmful Medicare privatization 
provisions that just have not worked in rural America.
  Instead of helping seniors with their prescription drug plan, the 
Republican plan subsidizes private insurance companies. This plan tends 
to bribe private insurance companies to provide service in rural 
districts like mine. These insurance companies have come before our 
Committee on Energy and Commerce and have testified that they will not 
be providing the service, and the Republican plan just will not work.
  If insurance companies do change their minds, there is nothing in 
this bill that will prevent them from shifting the added costs to our 
seniors. I had an amendment in the Committee on Energy and Commerce 
that would have prevented increases in the monthly premiums for 
seniors, no matter where they live. But unfortunately, it was voted 
down on a party line vote.
  The GOP plan has a huge gap in coverage and does nothing to reduce 
the inflated prices big drug companies are charging for prescription 
drugs. In fact, the Republican plan has a noninterference clause that 
says the Health and Human Services Secretary will not, will not be 
allowed to negotiate lower prices for Americans.
  The Rangel-Dingell bill will ensure that every senior, regardless of 
where they live, will be able to obtain the prescription drugs and the 
quality of health care they require to live a healthy life. This 
coverage will be provided through Medicare. Democrats are working to 
strengthen this program, not to do away with it, as the gentleman from 
California (Mr. Thomas) called for when he said, and I quote him, ``To 
those who say the GOP bill will end Medicare as we know it, our answer 
is: We certainly hope so.'' Thus, the real motive behind the GOP plan 
is to do away with Medicare. Democrats proudly stand behind Medicare. 
Support the Rangel-Dingell substitute.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I yield 2 minutes to the 
gentleman from Arizona (Mr. Hayworth), a member of the Committee on 
Ways and Means.
  Mr. HAYWORTH. Mr. Speaker, I thank my friend from Connecticut, and 
she has visited Arizona, and I know that the hour grows late and the 
debate grows heated and sometimes well-intentioned efforts from some 
are thrown in the confusion.
  Mr. Speaker, I rise to urge this House to reject the Democratic 
substitute and to vote ``yes'' for H.R. 1, for reasonable, rational, 
clear-cut reform of Medicare that will bring Medicare into the 21st 
century with prescription drug coverage.

                              {time}  2345

  Mr. Speaker, we have read even tonight in Europe the development of a

[[Page H6176]]

cardiac drug that is estimated to cut heart attacks by 80 percent. We 
have made great gains in pharmacology; but we do not continue those 
gains, Mr. Speaker, if we opt for a trillion dollar travesty. And make 
no mistake, that is what the minority substitute is offering to us this 
evening.
  It was interesting, my friend from Iowa, who pointed out that the 
deficit hawks on the other sides had flown the coop. It is interesting, 
so many on the left who are so quick to indict folks higher on the 
economic scale tonight are strangely silent when we offer a plan where 
we give the priorities to those who need the help first.
  The irony is, my friends on the left in the trillion dollars travesty 
section say, do not worry. Let us break the bank. Let the good times 
roll. Take command and control, put it together with a trillion bucks. 
No worries. But we know what would happen under that plan. It is a 
prescription for bankruptcy. And it is a prescription to mortgage the 
future of the working families that my friends purport to support.
  People of good will can have different opinions, and we certainly 
have them here in the House tonight. The question often comes down to 
this, when is enough enough? With the left it is never enough.
  Reject insanity. Vote for rationality, ``yes'' to H.R. 1; ``no'' to 
the Democratic substitute.
  The SPEAKER pro tempore (Mr. Hastings of Washington). The Chair would 
remind Members of the time remaining. The gentleman from Louisiana (Mr. 
Tauzin) has 4\1/2\ minutes remaining and the right to close. The 
gentleman from California (Mr. Stark) has 3\1/2\ minutes remaining and 
would be next in line to close. The gentlewoman from Connecticut (Mrs. 
Johnson) has 5\1/2\ minutes remaining and would be the second to close. 
The gentleman from Michigan (Mr. Dingell) has 4\1/4\ minutes remaining 
and would be the first to close.
  The Chair recognizes the gentleman from California.
  Mr. STARK. Mr. Speaker, I yield 1 minute to the gentleman from Ohio 
(Mr. Kucinich).
  Mr. KUCINICH. Mr. Speaker, everyone in America knows the price of 
drugs is too high. Seniors know it best. Proponents of H.R. 1 are not 
representing the seniors of America. They represent the biggest 
campaign contributors in America, the private health insurance industry 
led by drug makers.
  The Rangel-Dingell substitute will bring down the cost of the drugs. 
It allows Medicare to buy drugs in bulk and negotiate for lower prices, 
which the VA already does. Skyrocketing drug costs are not only driving 
up health care expenses but are causing seniors to make cruel choices 
between prescriptions and food, prescriptions and clothing. Some 
seniors are even splitting pills to make prescriptions last.
  Seniors are crying out for help, but their pleas are drowned out by 
the cash registers humming away at the majority party headquarters, 
while insurance and pharmaceutical company lobbyists rush to the great 
Medicare sell-out event.
  Yes, some of our friends are indeed trying to take care of people in 
their old age. Themselves.
  Mr. TAUZIN. Mr. Speaker, I yield myself 30 seconds.
  Mr. Speaker, I want to point out that despite what you may have heard 
on the floor tonight, our basic package contains $27.2 billion of 
assistance to rural health care. That is the largest package of rural 
health care we have ever voted on all the times we have voted on 
Medicare prescription drugs.
  Mr. Speaker, I yield 2 minutes to the gentleman from Michigan (Mr. 
Upton), the chairman of the Subcommittee on Telecommunications and the 
Internet of the Committee on Energy and Commerce.
  (Mr. UPTON asked and was given permission to revise and extend his 
remarks.)
  Mr. UPTON. Mr. Speaker, I have heard a lot of criticism tonight about 
this drug bill; and I want to remind all of us as we go back to our 
districts, as we have heard for so many years at our town meetings and 
so many events, America wants and needs a prescription drug program for 
our seniors. I remind all of our colleagues here tonight that this 
program is voluntary. You do not have to participate if you do not want 
to, but for many Americans they will want to participate. They are 
going to participate.
  Mr. Speaker, I want to relate a little story that happened to me in 
my district last summer. I was at my son's little league game. A woman 
ran up to me as I was getting in my car and packing up the gear. She 
said, My mom just had a stroke. It will cost her $600 a month to 
survive. We never had that in our budget. We cannot afford it. Is the 
plan that you passed last week, this was last year, is that going to 
help my mom? I put my hands on her shoulders and I said, Yes, I believe 
that it will. She will be able to benefit from this plan. You will be 
able to use the assets that you have and to have her survive in a 
meaningful way.
  Yet, the other body never came back. The other body never came back 
with a plan and, in fact, that woman and her family were very 
distraught.
  This is a plan tonight that can pass with bipartisan support, not 
only in this Chamber but the other Chamber on the other side of the 
Capitol. The President will sign this bill. It is within the budget. 
No, it is not perfect. But we can take a step to help the woman that I 
had talked to last year as well as the thousands of people that have 
come to our town meetings over the course of the last number of years.
  Mr. Speaker, I urge my colleagues to defeat the Democratic substitute 
and, yes, support this plan that we take up a little bit later this 
morning.
  Mr. DINGELL. Mr. Speaker, I yield 2\1/4\ minutes to the distinguished 
gentlewoman from Illinois (Ms. Schakowsky).
  Ms. SCHAKOWSKY. Mr. Speaker, once upon a time in 1989, a group of 
very angry seniors chased their Congressman, the powerful chairman of 
the House Committee on Ways and Means, into his car because they wanted 
him to know that they did not like the catastrophic health care bill.
  This happens to be the picture that appeared on the front page of the 
Chicago Tribune in August of 1989. This was a bill that passed this 
body with overwhelming bipartisan support and all of the national 
senior citizens organizations supported the bill. There was only one 
problem. No one had checked in with rank-and-file seniors around the 
country who sat down with their calculators and they figured out what 
the benefit would be that they would get and how much it would cost 
them, and they did not like the answer.
  Now, I show you this photo not to revive the debate on catastrophic 
because within a couple of months the bill was repealed, something very 
unusual and usually very difficult. I show you this photo as a friendly 
warning. If you pass H.R. 1 tonight, you better also go out and buy 
some running shoes because senior citizens are too smart to be fooled 
by Republican speeches or anybody else's speeches. They will figure out 
on their own what this bill does, which is, as the current chairman of 
the powerful House Committee on Ways and Means hopes, destroy Medicare 
as we know it.
  Seniors will get out their calculators and figure it out.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I yield 1\1/2\ minutes to 
the gentleman from Ohio (Mr. Portman).
  Mr. PORTMAN. Mr. Speaker, it has been a very interesting debate, too, 
as you listen to this debate tonight. We had 3 hours of good debate on 
the Republican legislation, the underlying bill which provides historic 
prescription drug coverage and does so within the budget. Now is the 
opportunity for the Democrats to talk about their substitute. So what 
is your idea? And you know what we are having? More discussion of the 
underlying legislation. Again, historic legislation to add prescription 
drug coverage that is within the budget.
  The Democrats are not talking about their bill. It adds $1 trillion 
to the deficit. That busts our budget. It busts their budget. In fact, 
it busts both budgets combined.
  The Democrat legislation does so by loading up the bill, not by 
helping those seniors who need it the most. The underlying legislation 
provides for about 30 percent of the seniors that need it most, those 
under 150 percent of poverty, no deduction, no deductible, no cost 
sharing, a simple copay when you go to the pharmacy, total subsidy for 
the prescription drug coverage. Instead, the Democrat plan by going to 
a

[[Page H6177]]

trillion dollars would provide coverage for those who do not even need 
it. It sounds like what they accuse Republicans of.
  I was really interested to see, when you look at page 12 of the 
Democrat bill, there is also something else interesting. They say we do 
not provide guaranteed access. We do provide guaranteed access. The 
government actually steps in when there are not plans available, 
negotiates down the risk which assures coverage.
  If you look at page 12, what does the Democrat plan do? It says, 
``The Secretary shall develop procedures to ensure coverage.''
  That will give you some comfort. I can see why they are not talking 
about their legislation. I would not either. Vote for the underlying 
bill. Vote down this substitute that they will not talk about.
  Mr. STARK. Mr. Speaker, I yield myself 1\1/2\ minutes.
  Mr. Speaker, just to straighten out some of the figures, the 
Republicans do indeed add $26.7 billion for rural providers. We add 
$39.1 billion for rural providers. That is $2.5 billion more, and I 
would hope that the Republicans are not lying to the seniors.
  You can lie to us because we are used to it. The White House has set 
the tone for that. But do not lie to the seniors. There is nothing in 
your bill. I say to the gentleman from Ohio (Mr. Portman), there is 
nothing in your bill that guarantees anything, and to say that to the 
seniors is lying to them.
  There is nothing in your bill that guarantees a thing to the seniors 
and you know it. And if you do not know it, read it again. Otherwise, 
you are lying to the seniors.
  Our bill provides a Medicare benefit which is definable. Yours does 
not. You do not require any benefits if no insurance company steps up 
to the plate and there is nothing that requires it. There is not one 
line in your bill that requires an insurance company to provide 
anything. So it is all a fantasy. At least we are requiring the 
government to provide a benefit to the seniors in the same manner they 
are now familiar, under Medicare with a determined premium, a 
determined deductible, determined benefits, the same across the 
country. None of that is available through the Republican bill. To tell 
the seniors otherwise is lying. You have lied to us tonight and stop 
lying to the seniors. So support our substitute and vote down the great 
Republican lie.
  Mr. DINGELL. Mr. Speaker, I have an inquiry as to time first before I 
yield the balance of my time. I believe the gentlewoman from Illinois 
(Ms. Schakowsky) did not get the full 2\1/4\ minutes that I yielded to 
her. I would like to know how much time I have left and how much I can 
properly yield the gentlewoman from Illinois.
  The SPEAKER pro tempore. The gentleman from Michigan has 3 minutes 
remaining.
  Mr. DINGELL. Mr. Speaker, I yield 1 minute to the distinguished 
gentlewoman from Illinois (Ms. Schakowsky).
  Ms. SCHAKOWSKY. Mr. Speaker, I thank the gentleman from Michigan (Mr. 
Dingell) for yielding me time.
  Again, this is just a warning, a friendly warning to you that if you 
pass H.R. 1 tonight, you better also go out and get your running shoes 
because the seniors are too smart to be fooled by your proposal. And 
you can trash Medicare all you want. You can call it an outdated 
program, antiquated; but I do not know who you are talking to.
  I do believe that you love your mothers, but it is obvious to me that 
you do not call them enough. You do not go to senior centers enough. 
Not the ones I have gone to in my 5 years as director of the State 
Council of Senior Citizens. Seniors love their Medicare. The only thing 
they do not like is that it does not cover prescription drugs. And that 
is why if you are smart or out of shape and not able to be chased by 
seniors, you will vote for the Rangel-Dingell substitute.
  The Democratic substitute is what seniors have been asking for and 
what every politician has been promising them, an understandable, 
defined, dependable Medicare prescription drug benefit. It has all the 
features of Medicare that our seniors know and love, a set premium, no 
copayments.
  Vote for the substitute or start running.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I yield 1\1/2\ minutes to 
the gentleman from Virginia (Mr. Tom Davis).
  Mr. TOM DAVIS of Virginia. Mr. Speaker, I would like to engage in a 
colloquy with my colleague.
  Can she confirm that the language in H.R. 1 includes plans under the 
Federal Employee Retirement Plan as an employment base plan?

                              {time}  0000

  Mrs. JOHNSON of Connecticut. Mr. Speaker, will the gentleman yield?
  Mr. TOM DAVIS of Virginia. I yield to the gentlewoman from 
Connecticut.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, yes, that is correct.
  Mr. TOM DAVIS of Virginia. This will allow OPM to take advantage of 
the subsidies in the bill just as other employees and unions will?
  Mrs. JOHNSON of Connecticut. That is correct.
  Mr. TOM DAVIS of Virginia. Mr. Speaker, I appreciate the 
gentlewoman's and the chairman's willingness to work with us on this 
issue. I think that allowing the subsidies H.R. 1 provides for will 
result in lower premiums and improved benefits for all FEHBP enrollees.
  Mrs. JOHNSON of Connecticut. I thank the gentleman, and I look 
forward to working with the gentleman on this issue as the bill moves 
to conference.
  Mr. TOM DAVIS of Virginia. Mr. Speaker, as I said, I appreciate the 
willingness of the gentlewoman to clarify that.
  I have another concern, that Federal employees are often treated 
differently from current Federal employees in ways that are not always 
equitable. Retirees are different from current Federal employees. For 
example, current employees are allowed to pay their health insurance 
premiums from pre-tax dollars. Federal retirees are not.
  FEHBP currently does not provide different benefits for retirees and 
current employees. One is simply a member of FEHBP. I think it is 
important that this dynamic remain once a Medicare prescription drug 
benefit is put into place, whichever plan passes.
  As chairman of the Committee on Government Reform, I look at this 
from an employer's perspective. We do not want private employers to 
drop the prescription drug coverage they provide for their retirees. 
H.R. 1 provides incentives so that they will not do so, but we as the 
Federal Government have to lead by example.
  I have introduced legislation that simply states that Federal 
retirees will continue to be treated on par with current Federal 
employees when it comes to prescription benefits. I regret we were 
unable to include this language in H.R. 1, but I am grateful to have 
the commitment of the Speaker and the majority leader to bring this 
bill to the floor as soon as we return from recess.
  Mr. TAUZIN. Mr. Speaker, may I inquire how many minutes are left for 
each one of the four who have allocated time.
  The SPEAKER pro tempore (Mr. Hastings of Washington). The gentleman 
from Louisiana (Mr. Tauzin) has 2 minutes remaining and the right to 
close. The gentleman from California (Mr. Stark) has 1 minute remaining 
and would be next to close. The gentlewoman from Connecticut (Mrs. 
Johnson) has 2\1/2\ minutes remaining, and the gentleman from Michigan 
(Mr. Dingell) has 2 minutes remaining.
  Mr. TAUZIN. Mr. Speaker, we reserve the balance of our time. If 
anyone wants to use some more time at this time would be a good time to 
do it.
  Mr. DINGELL. Mr. Speaker, I reserve the balance of my time, and I 
want to yield it to our leader.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I yield myself 30 seconds.
  This is a historic evening. It is our opportunity tonight to provide 
prescription drugs to all seniors under Medicare as an entitlement and 
to do it in a way that is fair, simple and generous and sustainable. It 
is our opportunity tonight to modernize the benefit program under 
Medicare to deal with chronic care for our seniors, a big concern for 
them, and to structure Medicare in such a way that it will be 
sustainable, the dollars will be there and Medicare will be able to 
provide the health retirement security in the future that it has in the 
past.
  I urge support of H.R. 1 and defeat of the substitute.

[[Page H6178]]



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