[Congressional Record Volume 149, Number 96 (Thursday, June 26, 2003)]
[House]
[Pages H6178-H6256]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
MEDICARE PRESCRIPTION DRUG AND MODERNIZATION ACT OF 2003
The SPEAKER pro tempore. The gentleman from Michigan (Mr. Dingell) is
recognized.
Mr. DINGELL. Mr. Speaker, I yield the balance of my time to the
distinguished gentleman from Arkansas (Mr. Berry).
The SPEAKER pro tempore. The gentleman from Arkansas is recognized
for 2 minutes.
Mr. BERRY. Mr. Speaker, we are here this evening on a very serious
matter. It can literally mean life or death for many of our elderly
citizens. Our great Nation was founded, and has so far been successful,
based on the self-evident truth in the Declaration of Independence that
all men are created equal. They are endowed by their Creator with
certain inalienable rights, and that among these are life, liberty, and
the pursuit of happiness.
Mr. Speaker, these founding truths were followed by a firm commitment
from our Founding Fathers, the last sentence in the Declaration of
Independence. It says: In support of this declaration, with a firm
reliance on the protection of Divine Providence, we mutually pledge to
each other our lives, our fortunes, and our sacred honor.
Mr. Speaker, I think that those men would be heartbroken to see what
happens here this evening. As I said earlier, the Republicans are in
charge. We recognize that. You can do what you want to do. You do, and
I give you credit, for publicly acknowledging that you want to destroy
Medicare. You do, and I give you credit, for some of your leaders
publicly acknowledging that you would put us into bankruptcy just so we
can make the government smaller, so we can do away with certain social
programs that you do not like. And I give you credit for that. In fact,
I think some of you, and I have seen it, have publicly proclaimed you
are proud of it.
My dilemma is, why would you want to do what you are trying to do
tonight to the greatest generation, the men and women that went through
the Depression, fought World War II, and then built this great Nation
into what it is today and turned it over to my generation?
I had a cute little remark in there, but I am not going to use it
because I think this is far too serious, this business we take up this
evening. A government should not make poor people poorer, rich people
richer. It should not create a situation where no one has to be
responsible, and it should not make it possible for a person or group
of persons to be able to take advantage of others because of an act of
that government.
If you do what you are talking about doing, you will make that exact
thing possible. You will make it possible for insurance companies and
pharmaceutical companies to rob the senior citizens of this country.
The SPEAKER pro tempore. The gentlewoman from Connecticut (Mrs.
Johnson) is recognized.
Mrs. JOHNSON of Connecticut. Mr. Speaker, I yield the balance of my
time to the gentleman from Texas (Mr. DeLay), the majority leader.
Mr. DeLAY. Mr. Speaker, I want to commend all those that have worked
so hard on probably the most important issue that most of us will vote
on in our career. There is very few times that you are going to have a
vote like this.
[[Page H6179]]
{time} 0030
Mr. Speaker, the gentleman from California (Mr. Thomas), the
gentlewoman from Connecticut (Mrs. Johnson), the gentleman from
Louisiana (Mr. Tauzin), the members of the Committee on Ways and Means,
members of the Committee on Energy and Commerce, Members know this is
incredibly important. The future of our seniors, the future of our
children are at stake.
Yogi Berra said when you reach a fork in the road, take it. That is
sort of where we are tonight, at that fork in the road. Many of us want
to take it because we know, we have witnessed Medicare being a system
at the present time that is a disaster waiting to happen.
We are spending $267-plus billion a year on Medicare. Payroll taxes
only pay 57 percent of that, general revenue and other taxes pay 30
percent, and premiums pay 10 percent. In less than 20 years, the
payroll taxes will only cover 30 percent, the rest will come from our
children and their incomes. That is on top of the fact that there is
over $13 trillion in unfunded liability. In just 5 years, we will be
spending over $400 billion per year on Medicare. Now some on my side of
the aisle think $400 billion is a lot of money over 10 years, and
giving this benefit is really expensive.
But at the same time what are we getting for this system that has
been designed to bankrupt this country? What we are getting is doctors
refusing to take seniors as patients. We have hospitals closing. We
have costs escalating through the roof. Medicare is driving other
health care costs through the roof. Seniors are having to make spending
decisions based upon the cost of their health care or their drugs. This
is the system they want to preserve. This is the system that they want
to see continue. But many of us, both Democrats and Republicans, think
that this is a time that we have an incredible opportunity.
I came here to make a difference; and, frankly, since this Republican
House has been in the majority we have made an incredible difference.
Some Members wanted to preserve the old welfare system. We reformed
welfare. Some of our Members have commented over the last few days that
entitlements are forever. No, they are not. Welfare was an entitlement,
and we changed it. We stood up and led and took the responsibility to
do so. Tax relief, tax reform, paying down the debt, not one time in 40
years did the other side of the aisle balance the budget, we did. They
spent 40 years driving up the debt on our children, we paid over $550
billion on that debt.
So what are we faced with on this road that forks? What is the
solution? The Democrats have offered their solution, and I say to
Members, we get a glimpse of the future. I hope Members watched the
debate on their substitute because that is a glimpse of the future if
this bill does not pass.
Let me tell Members what people have said about their substitute.
According to Tom Saving, who is a current Medicare trustee, the
Democrat plan would lead to Medicare consuming not only all of the
Medicare payroll taxes, but also more than 54 percent of all Federal
income taxes by the year 2040 and over 90 percent of all Federal income
taxes by the year 2075. They want to continue the plan. The Democrat
plan would add between $18 trillion and $30 trillion in unfunded
liabilities to the Federal Government's balance sheet. They want to
preserve Medicare, and that is what it would be.
Now what is the Senate's solution? More of the same. The Senate is
writing a bill over there that Senator Kennedy is very proud of. Well,
the Senate has got to do what it has got to do.
What is our solution? It has been talked about over and over again,
but what we are desperately trying to do is bend that growth curve and
get a handle on this and still bring good quality health care to our
senior citizens by bringing market forces into play, by addressing the
third party payment problem through copayments, deductibles and so
forth, but give seniors the right to choose the type of health care
that they think is best suited for their needs, not what some
government program tells them is going to suit their needs.
We want to start us down that fork to make Medicare a viable,
reliable program for generations to come. I just ask my colleagues and
Democrats to vote no. What is the alternative if this bill does not
pass tonight? What is the alternative? I do not know the answer to that
question. I have asked that question for the 6 months that we have been
working on this piece of legislation. I do not know what the
alternative is, but I do know we have an opportunity.
Mr. Speaker, sometimes things are not the way you want them to be.
Sometimes a bill does not have quite as many reforms as Members want.
This bill does not have as many reforms as I would like to see, but it
is starting us on a different path, a path of fiscal responsibility, a
path that provides quality health care to our seniors, provides them
choice.
A study was just done. They claim that all these private plans will
not work. Our own plan, FEHBP, has been growing at a slower rate than
the Medicare plan. That ought to tell Members something, when there is
competitiveness in the process, costs are held down and quality is
increased.
Let me tell Members, this is the beginning of something that we can
be proud of. It may not be the end. We may have to change it down the
line, but we need the opportunity to move this forward so we can
provide a future for our children that brings sanity to this process.
That is why we came here, to bring sanity to this process. I urge all
Members on both sides of the aisle to join us because Medicare is too
important for partisan politics.
Mr. Speaker, the American people have asked us for this. They sent us
here to do this, and they deserve this approach. It is the right thing
to do. It is the right time to do it, and if we fail to act now, we may
never have another chance to make it right. The American people have
given us this opportunity to lead; and in leadership, responsibility
has to be there. We are ready to stand up and lead, and it is our job
to seize that opportunity today. I just ask Members, I implore Members
to vote yes for Medicare, vote yes for our seniors, vote yes for this
bill.
Mr. STARK. Mr. Speaker, I yield the balance of my time to the
gentlewoman from California (Ms. Pelosi), the minority leader.
Ms. PELOSI. Mr. Speaker, the distinguished majority leader who just
spoke said something that I agree with. He said that this issue that we
are voting on tonight is probably one of the most important issues we
will vote on in our career. Mr. Leader, I quite agree.
Mr. Speaker, that is why it is hard to understand why we are taking
up this debate in the dark of night when the Senate has taken up the
bill for 2 weeks with the consideration of 30 amendments, to have a
free and open exchange of ideas about this most important issue in our
careers. And when the bill was sent to the floor in this House of
Representatives for this most important issue, no amendments were
allowed. Why were they not allowed, because of the fear that they might
have passed and improved this Republican bill on the floor which
dishonors the seniors that it pretends to support and dishonors the
people who sent us to this House of Representatives by not allowing
their amendments to be heard on this floor.
My leadership role afforded me the opportunity to speak at some
length earlier about my concerns about the Republican bill and my
preference for the Democratic bill. I had only intended to take one
moment to close, but after hearing my colleagues talk about fiscal
responsibility, I cannot resist the opportunity to state the facts
because it is one of the mysteries of this floor, that Members can come
to the floor and misrepresent the facts, and that is in order, but to
call them on it is out of order. But I am going to take that risk.
The fact is that under the Clinton administration and the legislation
passed in this House with 100 percent of the Democratic votes and not
one Republican vote, coming out of the Clinton years we were on a path
of $5.6 trillion in surplus, in surplus. In the 2\1/2\ years in the
Bush administration, we are now on a path going to $3 trillion in
deficit, a swing of over $8 trillion onto the national debt, and they
call that fiscally sound, as they give away huge tax cuts to the
200,000 wealthiest families in America, and many of us in this room are
part of that and would benefit, but not in the enlightened self-
interest of this country. But for that same money,
[[Page H6180]]
every senior citizen in America could have a real, guaranteed, defined
prescription drug benefit.
Mr. Speaker, I want to make two more points. We have had some debate;
unfortunately, none of our amendments were we allowed to bring to the
floor. It is late, and we usually do these things in the dark of night
so the American people cannot see and cannot have the bright light of
day on the debate on this floor to see what is happening to them and to
their futures.
{time} 0045
But I want to make just two points about the bills. The Democratic
bill is a defined guaranteed benefit under Medicare. The Republican
bill is not. I heard the distinguished chairman of the Committee on the
Budget speak about the cost of the Democratic bill. The Democratic bill
cost would be in half if the Republicans would allow the Secretary of
HHS to negotiate for best prices. That provision is in the Democratic
bill. It makes sense, right? Forty million seniors, lots of purchasing
power, lots of leverage. It makes sense. Not to the Republicans. Their
bill has a prohibition on the Secretary negotiating for best prices. A
prohibition.
I think there are many questions about the Republican bill. It is
very complex. But as seniors look at it and they ask those questions, I
think there is one question that every American should have: Why do the
Republicans have a prohibition on the Secretary negotiating for the
best possible price, reducing the cost of prescription drugs to seniors
and to the American taxpayer? Why? I will tell you why. Because tonight
we have a debate between the special interests and the public interest.
The Democrats have come to this floor as servants of the people. The
Republicans have come to this floor as handmaidens of the prescription
drug industry.
I urge my colleagues to support this amendment and oppose the
Republican bill.
Mr. TAUZIN. Mr. Speaker, in order to close this historic debate, I
yield the balance of my time to the gentleman from Illinois (Mr.
Hastert), the distinguished Speaker of our whole House.
Mr. HASTERT. Mr. Speaker, the hour is late. We have had a lot of
rhetoric. We have had a lot of flailing of arms and pointing fingers
across the aisle. It is time for us to come to a reasoned decision. It
is time for us to look at all the debate that we have had, to look at
the facts. I guess I could be suckered into a debate about fiscal
responsibility over the past years, votes we have had and votes we did
not have. But the fact is we have a very important bill on the floor of
this House tonight, a bill that probably will reach into every American
household and give people decisions and benefits on how they are going
to take care of their mothers and their fathers and the elderly people
that they hold dear.
I want to salute those folks who worked hard on both sides of the
aisle to carry on this debate. I thank the gentleman from California
(Mr. Thomas) and the gentleman from Louisiana (Mr. Tauzin). I am
grateful for their hard work. I have worked on health care issues in
this Congress for more than a decade. When you compare me to the great
gentleman from Michigan, that is probably not very much time. But Bob
Michel put me on Mrs. Clinton's health care task force back in 1993 and
Newt Gingrich asked me to deal with the issue of health insurance
portability in 1995 and we did that. In every Congress that I have
presided as Speaker, this House has passed a prescription drug benefit
as part of an effort to modernize Medicare. Today, we have a chance to
take a most dramatic step in health care reform, the most dramatic step
we have taken in 25 years.
Some of my friends on the other side of the aisle say that we do not
spend enough. That is not surprising, because they think that $1
trillion over $400 billion is better over a 10-year period of time.
Some of my friends on this side of the aisle believe we spend too much.
That is not surprising, either, given their philosophical beliefs. But
this bill spends what we can afford to spend. We cannot afford to
ignore this issue this year. We on both sides of the aisle have held
out a promise to America's seniors that we will give them an
opportunity to have a prescription drug benefit and a new modern
Medicare. Ladies and gentlemen, we hold out this promise. Tonight is
the night that we have an opportunity to fulfill that promise.
In a sense, this is the best of times and the worst of times when it
comes to health care in this country. We have the finest doctors. We
have the best hospitals. We have people who are uninsured. But we also
have the cutting-edge issues and lifesaving prescription drugs. We also
have skyrocketing costs. And we have too many people who are uninsured.
And we have drugs that for some folks are just too expensive. Last
week, we passed legislation to deal with the uninsured when we passed
association health plans. Today we deal with the cost issues of health
care. Earlier today we passed a health savings account bill which puts
the consumer in the driver's seat in driving down costs. And now, in
this bill, we make Medicare work better for senior citizens. A Medicare
program that does not include a prescription drug benefit is not
serving America's seniors well.
When Medicare was first conceived in the 1960s, it was at its heart a
program with the costs of going to hospitals and going to doctors. Back
then, prescription drugs were not used to the extent they are today.
You got an aspirin once in a while, but they just did not play the role
they play today. Today because of advancements made over the last 30
years and the R&D we have done in this country, we have drugs that help
us stay out of the hospital, we have drugs to help with cholesterol, we
have drugs that help us with diabetes, with arthritis, with high blood
pressure, on and on and on. And there are lifesaving drugs.
Seniors should have better access at a better price to these drugs
through the Medicare system. This bill makes that happen. It will cut
drug costs by an average of 37 percent for the average senior. It also
includes catastrophic coverage so that no senior with high drug costs
will be forced into bankruptcy. This is a compassionate program for
senior citizens.
This bill also includes conservative reforms to make sure that
Medicare stays solvent. We cannot allow the Medicare system to continue
to grow so large that it actually bankrupts this country. We must
introduce market-based reforms that lead to greater choices for seniors
and greater competition among providers. I agree with the proposition
that an 80-year-old grandmother should not be forced into a PPO simply
because she gets a prescription drug benefit. But I also agree that a
50-year-old father who has health care choices throughout his whole
working career will feel comfortable shopping around for the best
health care plan for his individual needs when he qualifies for
Medicare. Competition, choice, the marketplace, these are the concepts
which will save Medicare for the coming decades.
Mr. Speaker, I urge my colleagues on both sides of the aisle to
support this bill. This is a defining moment for this Congress. It is
too late for obstruction. It is too late for nit-picking. It is too
late for all the lame excuses that we often hear. Senior citizens will
long remember if you voted for them today, but they will never forget
if you voted against them.
Ladies and gentlemen, not many times in this great hall do we have a
piece of legislation when all the forces come together and we have an
opportunity to make real change. We have that opportunity tonight. I
ask you to vote to provide senior citizens with a better Medicare
system and a real prescription drug benefit.
The SPEAKER pro tempore (Mr. Hastings of Washington). All time for
debate has expired.
Pursuant to House Resolution 299, the previous question is ordered on
the bill and on the amendment in the nature of a substitute offered by
the gentleman from New York (Mr. Rangel).
The question is on the amendment in the nature of a substitute
offered by the gentleman from New York (Mr. Rangel).
The question was taken; and the Speaker pro tempore announced that
the noes appeared to have it.
Recorded Vote
Mr. RANGEL. Mr. Speaker, I demand a recorded vote.
A recorded vote was ordered.
The vote was taken by electronic device, and there were--ayes 175,
noes 255, answered ``present'' 1, not voting 4, as follows:
[[Page H6181]]
[Roll No. 330]
AYES--175
Abercrombie
Ackerman
Alexander
Allen
Andrews
Baca
Baldwin
Ballance
Becerra
Bell
Berkley
Berman
Berry
Bishop (GA)
Bishop (NY)
Boswell
Boucher
Brady (PA)
Brown (OH)
Brown, Corrine
Capps
Capuano
Cardin
Cardoza
Carson (IN)
Carson (OK)
Clay
Clyburn
Conyers
Cooper
Cramer
Crowley
Cummings
Davis (AL)
Davis (CA)
Davis (IL)
Davis (TN)
DeGette
Delahunt
DeLauro
Deutsch
Dicks
Dingell
Doggett
Doyle
Emanuel
Engel
Eshoo
Etheridge
Evans
Farr
Fattah
Filner
Ford
Frank (MA)
Frost
Gephardt
Gonzalez
Gordon
Green (TX)
Grijalva
Gutierrez
Harman
Hastings (FL)
Hinchey
Hinojosa
Hoeffel
Holden
Holt
Honda
Hoyer
Inslee
Israel
Jackson (IL)
Jackson-Lee (TX)
Jefferson
Johnson, E. B.
Jones (OH)
Kanjorski
Kaptur
Kennedy (RI)
Kildee
Kilpatrick
Kleczka
Kucinich
Lampson
Langevin
Lantos
Larson (CT)
Lee
Levin
Lewis (GA)
Lofgren
Lowey
Lucas (KY)
Lynch
Majette
Maloney
Markey
Matsui
McCarthy (MO)
McCarthy (NY)
McCollum
McDermott
McGovern
McNulty
Meehan
Meek (FL)
Meeks (NY)
Menendez
Michaud
Millender-McDonald
Miller (NC)
Miller, George
Mollohan
Moran (VA)
Murtha
Nadler
Napolitano
Neal (MA)
Oberstar
Obey
Olver
Ortiz
Owens
Pallone
Pascrell
Pastor
Payne
Pelosi
Pomeroy
Price (NC)
Rahall
Rangel
Reyes
Rodriguez
Ross
Rothman
Roybal-Allard
Ruppersberger
Rush
Ryan (OH)
Sanchez, Linda T.
Sanders
Sandlin
Schakowsky
Schiff
Scott (GA)
Scott (VA)
Serrano
Sherman
Skelton
Slaughter
Solis
Spratt
Stark
Strickland
Stupak
Thompson (MS)
Tierney
Towns
Turner (TX)
Udall (NM)
Van Hollen
Velazquez
Visclosky
Waters
Watson
Watt
Waxman
Weiner
Wexler
Woolsey
Wu
Wynn
NOES--255
Aderholt
Akin
Bachus
Baker
Ballenger
Barrett (SC)
Bartlett (MD)
Barton (TX)
Bass
Beauprez
Bereuter
Biggert
Bilirakis
Bishop (UT)
Blackburn
Blumenauer
Blunt
Boehlert
Boehner
Bonilla
Bonner
Bono
Boozman
Boyd
Bradley (NH)
Brady (TX)
Brown (SC)
Brown-Waite, Ginny
Burgess
Burns
Burr
Burton (IN)
Buyer
Calvert
Camp
Cannon
Cantor
Capito
Carter
Case
Castle
Chabot
Chocola
Coble
Cole
Collins
Costello
Cox
Crane
Crenshaw
Cubin
Culberson
Cunningham
Davis (FL)
Davis, Jo Ann
Davis, Tom
Deal (GA)
DeFazio
DeLay
DeMint
Diaz-Balart, L.
Diaz-Balart, M.
Dooley (CA)
Doolittle
Dreier
Duncan
Dunn
Edwards
Ehlers
Emerson
English
Everett
Feeney
Ferguson
Flake
Fletcher
Foley
Forbes
Fossella
Franks (AZ)
Frelinghuysen
Gallegly
Garrett (NJ)
Gerlach
Gibbons
Gilchrest
Gillmor
Gingrey
Goode
Goodlatte
Goss
Granger
Graves
Green (WI)
Greenwood
Gutknecht
Hall
Harris
Hart
Hastert
Hastings (WA)
Hayes
Hayworth
Hefley
Hensarling
Herger
Hill
Hobson
Hoekstra
Hooley (OR)
Hostettler
Houghton
Hulshof
Hunter
Hyde
Isakson
Issa
Istook
Janklow
Jenkins
John
Johnson (CT)
Johnson (IL)
Johnson, Sam
Jones (NC)
Keller
Kelly
Kennedy (MN)
Kind
King (IA)
King (NY)
Kingston
Kirk
Kline
Knollenberg
Kolbe
LaHood
Larsen (WA)
Latham
Leach
Lewis (CA)
Lewis (KY)
Linder
Lipinski
LoBiondo
Lucas (OK)
Manzullo
Marshall
Matheson
McCotter
McCrery
McHugh
McIntyre
McKeon
Mica
Miller (FL)
Miller (MI)
Miller, Gary
Moore
Moran (KS)
Murphy
Musgrave
Myrick
Nethercutt
Neugebauer
Ney
Northup
Norwood
Nunes
Nussle
Osborne
Ose
Otter
Oxley
Paul
Pearce
Pence
Peterson (MN)
Peterson (PA)
Petri
Pickering
Pitts
Platts
Pombo
Porter
Portman
Pryce (OH)
Putnam
Quinn
Radanovich
Ramstad
Regula
Rehberg
Renzi
Reynolds
Rogers (AL)
Rogers (KY)
Rogers (MI)
Rohrabacher
Ros-Lehtinen
Royce
Ryan (WI)
Ryun (KS)
Sabo
Sanchez, Loretta
Saxton
Schrock
Sensenbrenner
Sessions
Shadegg
Shaw
Shays
Sherwood
Shimkus
Shuster
Simmons
Simpson
Smith (MI)
Smith (NJ)
Smith (TX)
Snyder
Souder
Stearns
Stenholm
Sullivan
Sweeney
Tancredo
Tanner
Tauscher
Tauzin
Taylor (MS)
Taylor (NC)
Terry
Thomas
Thompson (CA)
Thornberry
Tiahrt
Tiberi
Toomey
Turner (OH)
Udall (CO)
Upton
Vitter
Walden (OR)
Walsh
Wamp
Weldon (FL)
Weldon (PA)
Weller
Whitfield
Wicker
Wilson (NM)
Wilson (SC)
Wolf
Young (AK)
ANSWERED ``PRESENT''--1
Baird
NOT VOTING--4
LaTourette
McInnis
Smith (WA)
Young (FL)
Announcement by the Speaker Pro Tempore
The SPEAKER pro tempore (Mr. Hastings of Washington) (during the
vote). Members are advised there are 2 minutes remaining in this vote.
{time} 0112
Messrs. BACHUS, COSTELLO, and LIPINSKI changed their vote from
``aye'' to ``no.''
So the amendment in the nature of a substitute was rejected.
The result of the vote was announced as above recorded.
The SPEAKER pro tempore. The question is on the engrossment and third
reading of the bill.
The bill was ordered to be engrossed and read a third time, and was
read the third time.
Motion to Recommit Offered by Mr. Thompson of California
Mr. THOMPSON of California. Mr. Speaker, I offer a motion to
recommit.
The SPEAKER pro tempore. Is the gentleman opposed to the bill?
Mr. THOMPSON of California. Yes, I am, Mr. Speaker, in its present
form.
The SPEAKER pro tempore. The Clerk will report the motion to
recommit.
The Clerk read as follows:
Motion to Recommit With Instructions
Mr. Thompson of California moves to recommit the bill H.R.
1 jointly to the Committee on Ways and Means and the
Committee on Energy and Commerce with instructions to report
the same back to the House promptly with the following
amendments:
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
``Prescription Drug and Medicare Improvement Act of 2003''.
(b) Amendments to Social Security Act.--Except as otherwise
specifically provided, whenever in this Act an amendment is
expressed in terms of an amendment to or repeal of a section
or other provision, the reference shall be considered to be
made to that section or other provision of the Social
Security Act.
(c) BIPA; Secretary.--In this Act:
(1) BIPA.--The term ``BIPA'' means the Medicare, Medicaid,
and SCHIP Benefits Improvement and Protection Act of 2000, as
enacted into law by section 1(a)(6) of Public Law 106-554.
(2) Secretary.--The term ``Secretary'' means the Secretary
of Health and Human Services.
(d) Table of Contents.--The table of contents of this Act
is as follows:
Sec. 1. Short title; amendments to Social Security Act; references to
BIPA and Secretary; table of contents.
TITLE I--MEDICARE PRESCRIPTION DRUG BENEFIT
Subtitle A--Medicare Voluntary Prescription Drug Delivery Program
Sec. 101. Medicare voluntary prescription drug delivery program.
``Part D--Voluntary Prescription Drug Delivery Program
``Sec. 1860D. Definitions; treatment of references to provisions in
MedicareAdvantage program.
``Subpart 1--Establishment of Voluntary Prescription Drug Delivery
Program
``Sec. 1860D-1. Establishment of voluntary prescription drug delivery
program.
``Sec. 1860D-2. Enrollment under program.
``Sec. 1860D-3. Election of a Medicare Prescription Drug plan.
``Sec. 1860D-4. Providing information to beneficiaries.
``Sec. 1860D-5. Beneficiary protections.
``Sec. 1860D-6. Prescription drug benefits.
``Sec. 1860D-7. Requirements for entities offering Medicare
Prescription Drug plans; establishment of standards.
``Subpart 2--Prescription Drug Delivery System
``Sec. 1860D-10. Establishment of service areas.
``Sec. 1860D-11. Publication of risk adjusters.
``Sec. 1860D-12. Submission of bids for proposed Medicare Prescription
Drug plans.
``Sec. 1860D-13. Approval of proposed Medicare Prescription Drug plans.
``Sec. 1860D-14. Computation of monthly standard prescription drug
coverage premiums.
[[Page H6182]]
``Sec. 1860D-15. Computation of monthly national average premium.
``Sec. 1860D-16. Payments to eligible entities.
``Sec. 1860D-17. Computation of monthly beneficiary obligation.
``Sec. 1860D-18. Collection of monthly beneficiary obligation.
``Sec. 1860D-19. Premium and cost-sharing subsidies for low-income
individuals.
``Sec. 1860D-20. Reinsurance payments for expenses incurred in
providing prescription drug coverage above the annual
out-of-pocket threshold.
``Sec. 1860D-21. Direct subsidy for sponsor of a qualified retiree
prescription drug plan for plan enrollees eligible for,
but not enrolled in, this part.
``Subpart 3--Miscellaneous Provisions
``Sec. 1860D-25. Prescription Drug Account in the Federal Supplementary
Medical Insurance Trust Fund.
``Sec. 1860D-26. Other related provisions.
Sec. 102. Study and report on permitting part B only individuals to
enroll in medicare voluntary prescription drug delivery
program.
Sec. 103. Rules relating to medigap policies that provide prescription
drug coverage.
Sec. 104. Medicaid and other amendments related to low-income
beneficiaries.
Sec. 105. Expansion of membership and duties of Medicare Payment
Advisory Commission (MedPAC).
Sec. 106. Study regarding variations in spending and drug utilization.
Subtitle B--Medicare Prescription Drug Discount Card and Transitional
Assistance for Low-Income Beneficiaries
Sec. 111. Medicare prescription drug discount card and transitional
assistance for low-income beneficiaries.
Subtitle C--Standards for Electronic Prescribing
Sec. 121. Standards for electronic prescribing.
TITLE II--MEDICAREADVANTAGE
Subtitle A--MedicareAdvantage Competition
Sec. 201. Eligibility, election, and enrollment.
Sec. 202. Benefits and beneficiary protections.
Sec. 203. Payments to MedicareAdvantage organizations.
Sec. 204. Submission of bids; premiums.
Sec. 205. Special rules for prescription drug benefits.
Sec. 206. Facilitating employer participation.
Sec. 207. Administration by the Center for Medicare Choices.
Sec. 208. Conforming amendments.
Sec. 209. Effective date.
Subtitle B--Preferred Provider Organizations
Sec. 211. Establishment of MedicareAdvantage preferred provider program
option.
Subtitle C--Other Managed Care Reforms
Sec. 221. Extension of reasonable cost contracts.
Sec. 222. Specialized Medicare+Choice plans for special needs
beneficiaries.
Sec. 223. Payment by PACE providers for medicare and medicaid services
furnished by noncontract providers.
Sec. 224. Institute of Medicine evaluation and report on health care
performance measures.
Sec. 225. Expanding the work of medicare quality improvement
organizations to include parts C and D.
TITLE III--CENTER FOR MEDICARE CHOICES
Sec. 301. Establishment of the Center for Medicare Choices.
Sec. 302. Miscellaneous administrative provisions.
TITLE IV--MEDICARE FEE-FOR-SERVICE IMPROVEMENTS
Subtitle A--Provisions Relating to Part A
Sec. 401. Equalizing urban and rural standardized payment amounts under
the medicare inpatient hospital prospective payment
system.
Sec. 402. Adjustment to the medicare inpatient hospital PPS wage index
to revise the labor-related share of such index.
Sec. 403. Medicare inpatient hospital payment adjustment for low-volume
hospitals.
Sec. 404. Fairness in the medicare disproportionate share hospital
(DSH) adjustment for rural hospitals.
Sec. 405. Critical access hospital (CAH) improvements.
Sec. 406. Authorizing use of arrangements to provide core hospice
services in certain circumstances.
Sec. 407. Services provided to hospice patients by nurse practitioners,
clinical nurse specialists, and physician assistants.
Sec. 408. Authority to include costs of training of psychologists in
payments to hospitals under medicare.
Sec. 409. Revision of Federal rate for hospitals in Puerto Rico.
Sec. 410. Authority regarding geriatric fellowships.
Sec. 411. Clarification of congressional intent regarding the counting
of residents in a nonprovider setting and a technical
amendment regarding the 3-year rolling average and the
IME ratio.
Sec. 412. Limitation on charges for inpatient hospital contract health
services provided to Indians by medicare participating
hospitals.
Sec. 413. GAO study and report on appropriateness of payments under the
prospective payment system for inpatient hospital
services.
Subtitle B--Provisions Relating to Part B
Sec. 421. Establishment of floor on geographic adjustments of payments
for physicians' services.
Sec. 422. Medicare incentive payment program improvements.
Sec. 423. Increase in renal dialysis composite rate.
Sec. 424. Extension of hold harmless provisions for small rural
hospitals and treatment of certain sole community
hospitals to limit decline in payment under the OPD PPS.
Sec. 425. Increase in payments for certain services furnished by small
rural and sole community hospitals under medicare
prospective payment system for hospital outpatient
department services.
Sec. 426. Increase for ground ambulance services furnished in a rural
area.
Sec. 427. Ensuring appropriate coverage of air ambulance services under
ambulance fee schedule.
Sec. 428. Treatment of certain clinical diagnostic laboratory tests
furnished by a sole community hospital.
Sec. 429. Improvement in rural health clinic reimbursement.
Sec. 430. Elimination of consolidated billing for certain services
under the medicare PPS for skilled nursing facility
services.
Sec. 431. Freeze in payments for certain items of durable medical
equipment and certain orthotics; establishment of quality standards
and accreditation requirements for DME providers...................
Sec. 432. Application of coinsurance and deductible for clinical
diagnostic laboratory tests.
Sec. 433. Basing medicare payments for covered outpatient drugs on
market prices.
Sec. 434. Indexing part B deductible to inflation..................
Sec. 435. Revisions to reassignment provisions.
Sec. 436. Extension of treatment of certain physician pathology
services under medicare.
Sec. 437. Adequate reimbursement for outpatient pharmacy therapy
under the hospital outpatient PPS..................................
Sec. 438. Limitation of application of functional equivalence standard.
Sec. 439. Medicare coverage of routine costs associated with certain
clinical trials.
Sec. 440. Waiver of part B late enrollment penalty for certain
military retirees; special enrollment period.......................
Sec. 441. Demonstration of coverage of chiropractic services under
medicare.
Sec. 442. Medicare health care quality demonstration programs.
Sec. 443. Medicare complex clinical care management payment
demonstration......................................................
Sec. 444. Medicare fee-for-service care coordination demonstration
program.
Sec. 445. GAO study of geographic differences in payments for
physicians' services.
Subtitle C--Provisions Relating to Parts A and B
Sec. 451. Increase for home health services furnished in a rural area.
Sec. 452. Limitation on reduction in area wage adjustment factors under
the prospective payment system for home health services.
Sec. 453. Clarifications to certain exceptions to medicare limits
on physician referrals.............................................
Sec. 454. Demonstration program for substitute adult day services.
Sec. 455. Medicare secondary payor (MSP) provisions.
TITLE V--MEDICARE APPEALS, REGULATORY, AND CONTRACTING IMPROVEMENTS
Subtitle A--Regulatory Reform
Sec. 501. Rules for the publication of a final regulation based on the
previous publication of an interim final regulation.
Sec. 502. Compliance with changes in regulations and policies.
Sec. 503. Report on legal and regulatory inconsistencies.
[[Page H6183]]
Subtitle B--Appeals Process Reform
Sec. 511. Submission of plan for transfer of responsibility for
medicare appeals.
Sec. 512. Expedited access to judicial review.
Sec. 513. Expedited review of certain provider agreement
determinations.
Sec. 514. Revisions to medicare appeals process.
Sec. 515. Hearing rights related to decisions by the Secretary to
deny or not renew a medicare enrollment agreement; consultation
before changing provider enrollment forms..........................
Sec. 516. Appeals by providers when there is no other party available.
Sec. 517. Provider access to review of local coverage determinations.
Subtitle C--Contracting Reform
Sec. 521. Increased flexibility in medicare administration.
Subtitle D--Education and Outreach Improvements
Sec. 531. Provider education and technical assistance.
Sec. 532. Access to and prompt responses from medicare contractors.
Sec. 533. Reliance on guidance.
Sec. 534. Medicare provider ombudsman.
Sec. 535. Beneficiary outreach demonstration programs.
Subtitle E--Review, Recovery, and Enforcement Reform
Sec. 541. Prepayment review.
Sec. 542. Recovery of overpayments.
Sec. 543. Process for correction of minor errors and omissions on
claims without pursuing appeals process.
Sec. 544. Authority to waive a program exclusion.
TITLE VI--OTHER PROVISIONS
Sec. 601. Increase in medicaid DSH allotments for fiscal years 2004 and
2005.
Sec. 602. Increase in floor for treatment as an extremely low DSH
State under the medicaid program for fiscal years 2004 and 2005....
Sec. 603. Increased reporting requirements to ensure the
appropriateness of payment adjustments to
disproportionate share hospitals under the medicaid
program.
Sec. 604. Clarification of inclusion of inpatient drug prices charged
to certain public hospitals in the best price exemptions
for the medicaid drug rebate program.
Sec. 605. Assistance with coverage of legal immigrants under the
medicaid program and SCHIP.
Sec. 606. Establishment of consumer ombudsman account.
Sec. 607. GAO study regarding impact of assets test for low-income
beneficiaries.
Sec. 608. Health care infrastructure improvement.
Sec. 609. Capital infrastructure revolving loan program............
Sec. 610. Federal reimbursement of emergency health services furnished
to undocumented aliens.
Sec. 611. Increase in appropriation to the health care fraud and abuse
control account.
Sec. 612. Increase in civil penalties under the False Claims Act.
Sec. 613. Increase in civil monetary penalties under the Social
Security Act.
Sec. 614. Extension of customs user fees.
TITLE VII--ACCESS TO AFFORDABLE PHARMACEUTICALS
Sec. 701. Short title.
Sec. 702. 30-month stay-of-effectiveness period.
Sec. 703. Forfeiture of 180-day exclusivity period.
Sec. 704. Bioavailability and bioequivalence.......................
Sec. 705. Remedies for infringement.
Sec. 706. Conforming amendments.
TITLE VIII--IMPORTATION OF PRESCRIPTION DRUGS
Sec. 801. Importation of prescription drugs.
TITLE I--MEDICARE PRESCRIPTION DRUG BENEFIT
Subtitle A--Medicare Voluntary Prescription Drug Delivery Program
SEC. 101. MEDICARE VOLUNTARY PRESCRIPTION DRUG DELIVERY
PROGRAM.
(a) Establishment.--Title XVIII (42 U.S.C. 1395 et seq.) is
amended by redesignating part D as part E and by inserting
after part C the following new part:
``Part D--Voluntary Prescription Drug Delivery Program
``definitions; treatment of references to provisions in
medicareadvantage program
``Sec. 1860D. (a) Definitions.--In this part:
``(1) Administrator.--The term `Administrator' means the
Administrator of the Center for Medicare Choices as
established under section 1808.
``(2) Covered drug.--
``(A) In general.--Except as provided in subparagraphs (B),
(C), and (D), the term `covered drug' means--
``(i) a drug that may be dispensed only upon a prescription
and that is described in clause (i) or (ii) of subparagraph
(A) of section 1927(k)(2); or
``(ii) a biological product described in clauses (i)
through (iii) of subparagraph (B) of such section; or
``(iii) insulin described in subparagraph (C) of such
section;
and such term includes a vaccine licensed under section 351
of the Public Health Service Act and any use of a covered
drug for a medically accepted indication (as defined in
section 1927(k)(6)).
``(B) Exclusions.--
``(i) In general.--The term `covered drug' does not include
drugs or classes of drugs, or their medical uses, which may
be excluded from coverage or otherwise restricted under
section 1927(d)(2), other than subparagraph (E) thereof
(relating to smoking cessation agents), or under section
1927(d)(3).
``(ii) Avoidance of duplicate coverage.--A drug prescribed
for an individual that would otherwise be a covered drug
under this part shall not be so considered if payment for
such drug is available under part A or B, but shall be so
considered if such payment is not available under part A or B
or because benefits under such parts have been exhausted.
``(C) Application of formulary restrictions.--A drug
prescribed for an individual that would otherwise be a
covered drug under this part shall not be so considered under
a plan if the plan excludes the drug under a formulary and
such exclusion is not successfully resolved under subsection
(d) or (e)(2) of section 1860D-5.
``(D) Application of general exclusion provisions.--A
Medicare Prescription Drug plan or a MedicareAdvantage plan
may exclude from qualified prescription drug coverage any
covered drug--
``(i) for which payment would not be made if section
1862(a) applied to part D; or
``(ii) which are not prescribed in accordance with the plan
or this part.
Such exclusions are determinations subject to reconsideration
and appeal pursuant to section 1860D-5(e).
``(3) Eligible beneficiary.--The term `eligible
beneficiary' means an individual who is entitled to, or
enrolled for, benefits under part A and enrolled under part
B.
``(4) Eligible entity.--The term `eligible entity' means
any risk-bearing entity that the Administrator determines to
be appropriate to provide eligible beneficiaries with the
benefits under a Medicare Prescription Drug plan, including--
``(A) a pharmaceutical benefit management company;
``(B) a wholesale or retail pharmacist delivery system;
``(C) an insurer (including an insurer that offers medicare
supplemental policies under section 1882);
``(D) any other risk-bearing entity; or
``(E) any combination of the entities described in
subparagraphs (A) through (D).
``(5) Initial coverage limit.--The term `initial coverage
limit' means the limit as established under section 1860D-
6(c)(3), or, in the case of coverage that is not standard
prescription drug coverage, the comparable limit (if any)
established under the coverage.
``(6) Medicareadvantage organization; medicareadvantage
plan.--The terms `MedicareAdvantage organization' and
`MedicareAdvantage plan' have the meanings given such terms
in subsections (a)(1) and (b)(1), respectively, of section
1859 (relating to definitions relating to MedicareAdvantage
organizations).
``(7) Medicare prescription drug plan.--The term `Medicare
Prescription Drug plan' means prescription drug coverage that
is offered under a policy, contract, or plan--
``(A) that has been approved under section 1860D-13; and
``(B) by an eligible entity pursuant to, and in accordance
with, a contract between the Administrator and the entity
under section 1860D-7(b).
``(8) Prescription drug account.--The term `Prescription
Drug Account' means the Prescription Drug Account (as
established under section 1860D-25) in the Federal
Supplementary Medical Insurance Trust Fund under section
1841.
``(9) Qualified prescription drug coverage.--The term
`qualified prescription drug coverage' means the coverage
described in section 1860D-6(a)(1).
``(10) Standard prescription drug coverage.--The term
`standard prescription drug coverage' means the coverage
described in section 1860D-6(c).
``(b) Application of Medicare Advantage Provisions Under
This Part.--For purposes of applying provisions of part C
under this part with respect to a Medicare Prescription Drug
plan and an eligible entity, unless otherwise provided in
this part such provisions shall be applied as if--
``(1) any reference to a MedicareAdvantage plan included a
reference to a Medicare Prescription Drug plan;
``(2) any reference to a provider-sponsored organization
included a reference to an eligible entity;
``(3) any reference to a contract under section 1857
included a reference to a contract under section 1860D-7(b);
and
``(4) any reference to part C included a reference to this
part.
``Subpart 1--Establishment of Voluntary Prescription Drug Delivery
Program
``establishment of voluntary prescription drug delivery program
``Sec. 1860D-1. (a) Provision of Benefit.--
``(1) In general.--The Administrator shall provide for and
administer a voluntary prescription drug delivery program
under which
[[Page H6184]]
each eligible beneficiary enrolled under this part shall be
provided with access to qualified prescription drug coverage
as follows:
``(A) Medicareadvantage enrollees receive coverage through
medicareadvantage plan.--
``(i) In general.--Except as provided in clause (ii), an
eligible beneficiary who is enrolled under this part and
enrolled in a MedicareAdvantage plan offered by a
MedicareAdvantage organization shall receive coverage of
benefits under this part through such plan.
``(ii) Exception for enrollees in medicareadvantage msa
plans.--An eligible beneficiary who is enrolled under this
part and enrolled in an MSA plan under part C shall receive
coverage of benefits under this part through enrollment in a
Medicare Prescription Drug plan that is offered in the
geographic area in which the beneficiary resides. For
purposes of this part, the term `MSA plan' has the meaning
given such term in section 1859(b)(3).
``(iii) Exception for enrollees in medicareadvantage
private fee-for-service plans.--An eligible beneficiary who
is enrolled under this part and enrolled in a private fee-
for-service plan under part C shall--
``(i) receive benefits under this part through such plan if
the plan provides qualified prescription drug coverage; and
``(ii) if the plan does not provide qualified prescription
drug coverage, receive coverage of benefits under this part
through enrollment in a Medicare Prescription Drug plan that
is offered in the geographic area in which the beneficiary
resides. For purposes of this part, the term `private fee-
for-service plan' has the meaning given such term in section
1859(b)(2).
``(B) Fee-for-service enrollees receive coverage through a
medicare prescription drug plan.--An eligible beneficiary who
is enrolled under this part but is not enrolled in a
MedicareAdvantage plan (except for an MSA plan or a private
fee-for-service plan that does not provide qualified
prescription drug coverage) shall receive coverage of
benefits under this part through enrollment in a Medicare
Prescription Drug plan that is offered in the geographic area
in which the beneficiary resides.
``(2) Voluntary nature of program.--Nothing in this part
shall be construed as requiring an eligible beneficiary to
enroll in the program under this part.
``(3) Scope of benefits.--Pursuant to section 1860D-
6(b)(3)(C), the program established under this part shall
provide for coverage of all therapeutic categories and
classes of covered drugs (although not necessarily for all
drugs within such categories and classes).
``(4) Program to begin in 2006.--The Administrator shall
establish the program under this part in a manner so that
benefits are first provided beginning on January 1, 2006.
``(b) Access to Alternative Prescription Drug Coverage.--In
the case of an eligible beneficiary who has creditable
prescription drug coverage (as defined in section 1860D-
2(b)(1)(F)), such beneficiary--
``(1) may continue to receive such coverage and not enroll
under this part; and
``(2) pursuant to section 1860D-2(b)(1)(C), is permitted to
subsequently enroll under this part without any penalty and
obtain access to qualified prescription drug coverage in the
manner described in subsection (a) if the beneficiary
involuntarily loses such coverage.
``(c) Financing.--The costs of providing benefits under
this part shall be payable from the Prescription Drug
Account.
``enrollment under program
``Sec. 1860D-2. (a) Establishment of Enrollment Process.--
``(1) Process similar to part b enrollment.--The
Administrator shall establish a process through which an
eligible beneficiary (including an eligible beneficiary
enrolled in a MedicareAdvantage plan offered by a
MedicareAdvantage organization) may make an election to
enroll under this part. Such process shall be similar to the
process for enrollment in part B under section 1837,
including the deeming provisions of such section.
``(2) Condition of enrollment.--An eligible beneficiary
must be enrolled under this part in order to be eligible to
receive access to qualified prescription drug coverage.
``(b) Special Enrollment Procedures.--
``(1) Late enrollment penalty.--
``(A) Increase in monthly beneficiary obligation.--Subject
to the succeeding provisions of this paragraph, in the case
of an eligible beneficiary whose coverage period under this
part began pursuant to an enrollment after the beneficiary's
initial enrollment period under part B (determined pursuant
to section 1837(d)) and not pursuant to the open enrollment
period described in paragraph (2), the Administrator shall
establish procedures for increasing the amount of the monthly
beneficiary obligation under section 1860D-17 applicable to
such beneficiary by an amount that the Administrator
determines is actuarially sound for each full 12-month period
(in the same continuous period of eligibility) in which the
eligible beneficiary could have been enrolled under this part
but was not so enrolled.
``(B) Periods taken into account.--For purposes of
calculating any 12-month period under subparagraph (A), there
shall be taken into account--
``(i) the months which elapsed between the close of the
eligible beneficiary's initial enrollment period and the
close of the enrollment period in which the beneficiary
enrolled; and
``(ii) in the case of an eligible beneficiary who reenrolls
under this part, the months which elapsed between the date of
termination of a previous coverage period and the close of
the enrollment period in which the beneficiary reenrolled.
``(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 eligible
beneficiary can demonstrate that the beneficiary had
creditable prescription drug coverage (as defined in
subparagraph (F)).
``(ii) Beneficiary must involuntarily lose coverage.--
Clause (i) shall only apply with respect to coverage--
``(I) in the case of coverage described in clause (ii) of
subparagraph (F), if the plan terminates, ceases to provide,
or reduces the value of the prescription drug coverage under
such plan to below the actuarial value of standard
prescription drug coverage (as determined under section
1860D-6(f));
``(II) in the case of coverage described in clause (i),
(iii), or (iv) of subparagraph (F), if the beneficiary is
involuntarily disenrolled or becomes ineligible for such
coverage; or
``(III) in the case of a beneficiary with coverage
described in clause (v) of subparagraph (F), if the issuer of
the policy terminates coverage under the policy.
``(D) Periods treated separately.--Any increase in an
eligible beneficiary's monthly beneficiary obligation under
subparagraph (A) with respect to a particular continuous
period of eligibility shall not be applicable with respect to
any other continuous period of eligibility which the
beneficiary may have.
``(E) Continuous period of eligibility.--
``(i) In general.--Subject to clause (ii), for purposes of
this paragraph, an eligible beneficiary's `continuous period
of eligibility' is the period that begins with the first day
on which the beneficiary is eligible to enroll under section
1836 and ends with the beneficiary's death.
``(ii) Separate period.--Any period during all of which an
eligible beneficiary satisfied paragraph (1) of section 1836
and which terminated in or before the month preceding the
month in which the beneficiary attained age 65 shall be a
separate `continuous period of eligibility' with respect to
the beneficiary (and each such period which terminates shall
be deemed not to have existed for purposes of subsequently
applying this paragraph).
``(F) Creditable prescription drug coverage defined.--
Subject to subparagraph (G), for purposes of this part, the
term `creditable prescription drug coverage' means any of the
following:
``(i) Drug-only coverage under Medicaid.--Coverage of
covered outpatient drugs (as defined in section 1927) under
title XIX through a waiver under 1115 where covered
outpatient drugs are the sole medical assistance benefit.
``(ii) Prescription drug coverage under a group health
plan.--Any outpatient prescription drug coverage under a
group health plan, including a health benefits plan under
chapter 89 of title 5, United States Code (commonly known as
the Federal employees health benefits program), and a
qualified retiree prescription drug plan (as defined in
section 1860D-20(e)(4)).
``(iii) State pharmaceutical assistance program.--Coverage
of prescription drugs under a State pharmaceutical assistance
program.
``(iv) Veterans' coverage of prescription drugs.--Coverage
of prescription drugs for veterans, and survivors and
dependents of veterans, under chapter 17 of title 38, United
States Code.
``(v) Prescription drug coverage under medigap policies.--
Coverage under a medicare supplemental policy under section
1882 that provides benefits for prescription drugs (whether
or not such coverage conforms to the standards for packages
of benefits under section 1882(p)(1)).
``(G) Requirement for creditable coverage.--Coverage
described in clauses (i) through (v) of subparagraph (F)
shall not be considered to be creditable coverage under this
part unless the coverage provides coverage of the cost of
prescription drugs the actuarial value of which (as defined
by the Administrator) to the beneficiary equals or exceeds
the actuarial value of standard prescription drug coverage
(as determined under section 1860D-6(f)).
``(H) Disclosure.--
``(i) In general.--Each entity that offers coverage of the
type described in clause (ii) (iii), (iv), or (v) of
subparagraph (F) shall provide for disclosure, consistent
with standards established by the Administrator, of whether
the coverage provides coverage of the cost of prescription
drugs the actuarial value of which (as defined by the
Administrator) to the beneficiary equals or exceeds the
actuarial value of standard prescription drug coverage (as
determined under section 1860D-6(f)).
``(ii) Waiver of limitations.--An individual may apply to
the Administrator to waive the application of subparagraph
(G) if the individual establishes that the individual was not
adequately informed that the coverage the beneficiary was
enrolled in did not provide the level of benefits required in
order for the coverage to be considered creditable coverage
under subparagraph (F).
``(2) Initial election periods.--
[[Page H6185]]
``(A) Open enrollment period for current beneficiaries in
which late enrollment procedures do not apply.--In the case
of an individual who is an eligible beneficiary as of
November 1, 2005, there shall be an open enrollment period of
6 months beginning on that date under which such beneficiary
may enroll under this part without the application of the
late enrollment procedures established under paragraph
(1)(A).
``(B) Individual covered in future.--In the case of an
individual who becomes an eligible beneficiary after such
date, there shall be an initial election period which is the
same as the initial enrollment period under section 1837(d).
``(3) Special enrollment period for beneficiaries who
involuntarily lose creditable prescription drug coverage.--
``(A) Establishment.--The Administrator shall establish a
special open enrollment period (as described in subparagraph
(B)) for an eligible beneficiary that loses creditable
prescription drug coverage.
``(B) Special open enrollment period.--The special open
enrollment period described in this subparagraph is the 63-
day period that begins on--
``(i) in the case of a beneficiary with coverage described
in clause (ii) of paragraph (1)(F), the later of the date on
which the plan terminates, ceases to provide, or
substantially reduces (as defined by the Administrator) the
value of the prescription drug coverage under such plan or
the date the beneficiary is provided with notice of such
termination or reduction;
``(ii) in the case of a beneficiary with coverage described
in clause (i), (iii), or (iv) of paragraph (1)(F), the later
of the date on which the beneficiary is involuntarily
disenrolled or becomes ineligible for such coverage or the
date the beneficiary is provided with notice of such loss of
eligibility; or
``(iii) in the case of a beneficiary with coverage
described in clause (v) of paragraph (1)(F), the latter of
the date on which the issuer of the policy terminates
coverage under the policy or the date the beneficiary is
provided with notice of such termination.
``(c) Period of Coverage.--
``(1) In general.--Except as provided in paragraph (2) and
subject to paragraph (3), an eligible beneficiary's coverage
under the program under this part shall be effective for the
period provided in section 1838, as if that section applied
to the program under this part.
``(2) Open and special enrollment.--
``(A) Open enrollment.--An eligible beneficiary who enrolls
under the program under this part pursuant to subsection
(b)(2) shall be entitled to the benefits under this part
beginning on January 1, 2006.
``(B) Special enrollment.--Subject to paragraph (3), an
eligible beneficiary who enrolls under the program under this
part pursuant to subsection (b)(3) shall be entitled to the
benefits under this part beginning on the first day of the
month following the month in which such enrollment occurs.
``(3) Limitation.--Coverage under this part shall not begin
prior to January 1, 2006.
``(d) Termination.--
``(1) In general.--The causes of termination specified in
section 1838 shall apply to this part in the same manner as
such causes apply to part B.
``(2) Coverage terminated by termination of coverage under
part a or b.--
``(A) In general.--In addition to the causes of termination
specified in paragraph (1), the Administrator shall terminate
an individual's coverage under this part if the individual is
no longer enrolled in both parts A and B.
``(B) Effective date.--The termination described in
subparagraph (A) shall be effective on the effective date of
termination of coverage under part A or (if earlier) under
part B.
``(3) Procedures regarding termination of a beneficiary
under a plan.--The Administrator shall establish procedures
for determining the status of an eligible beneficiary's
enrollment under this part if the beneficiary's enrollment in
a Medicare Prescription Drug plan offered by an eligible
entity under this part is terminated by the entity for cause
(pursuant to procedures established by the Administrator
under section 1860D-3(a)(1)).
``election of a medicare prescription drug plan
``Sec. 1860D-3. (a) In General.--
``(1) Process.--
``(A) Election.--
``(i) In general.--The Administrator shall establish a
process through which an eligible beneficiary who is enrolled
under this part but not enrolled in a MedicareAdvantage plan
(except for an MSA plan or a private fee-for-service plan
that does not provide qualified prescription drug coverage)
offered by a MedicareAdvantage organization--
``(I) shall make an election to enroll in any Medicare
Prescription Drug plan that is offered by an eligible entity
and that serves the geographic area in which the beneficiary
resides; and
``(II) may make an annual election to change the election
under this clause.
``(ii) Clarification regarding enrollment.--The process
established under clause (i) shall include, in the case of an
eligible beneficiary who is enrolled under this part but who
has failed to make an election of a Medicare Prescription
Drug plan in an area, for the enrollment in any Medicare
Prescription Drug plan that has been designated by the
Administrator in the area. The Administrator shall establish
a process for designating a plan or plans in order to carry
out the preceding sentence.
``(B) Requirements for process.--In establishing the
process under subparagraph (A), the Administrator shall--
``(i) use rules similar to the rules for enrollment,
disenrollment, and termination of enrollment with a
MedicareAdvantage plan under section 1851, including--
``(I) the establishment of special election periods under
subsection (e)(4) of such section; and
``(II) the application of the guaranteed issue and renewal
provisions of section 1851(g) (other than clause (i) and the
second sentence of clause (ii) of paragraph (3)(C), relating
to default enrollment); and
``(ii) coordinate enrollments, disenrollments, and
terminations of enrollment under part C with enrollments,
disenrollments, and terminations of enrollment under this
part.
``(2) First enrollment period for plan enrollment.--The
process developed under paragraph (1) shall ensure that
eligible beneficiaries who enroll under this part during the
open enrollment period under section 1860D-2(b)(2) are
permitted to elect an eligible entity prior to January 1,
2006, in order to ensure that coverage under this part is
effective as of such date.
``(b) Enrollment in a MedicareAdvantage Plan.--
``(1) In general.--An eligible beneficiary who is enrolled
under this part and enrolled in a MedicareAdvantage plan
(except for an MSA plan or a private fee-for-service plan
that does not provide qualified prescription drug coverage)
offered by a MedicareAdvantage organization shall receive
access to such coverage under this part through such plan.
``(2) Rules.--Enrollment in a MedicareAdvantage plan is
subject to the rules for enrollment in such plan under
section 1851.
``(c) Information to entities to facilitate enrollment.--
Notwithstanding any other provision of law, the Administrator
may provide to each eligible entity with a contract under
this part such information about eligible beneficiaries as
the Administrator determines to be necessary to facilitate
efficient enrollment by such beneficiaries with such
entities. The Administrator may provide such information only
so long as and to the extent necessary to carry out such
objective.
``providing information to beneficiaries
``Sec. 1860D-4. (a) Activities.--
``(1) In general.--The Administrator shall conduct
activities that are designed to broadly disseminate
information to eligible beneficiaries (and prospective
eligible beneficiaries) regarding the coverage provided under
this part.
``(2) Special rule for first enrollment under the
program.--The activities described in paragraph (1) shall
ensure that eligible beneficiaries are provided with such
information at least 30 days prior to the first enrollment
period described in section 1860D-3(a)(2).
``(b) Requirements.--
``(1) In general.--The activities described in subsection
(a) shall--
``(A) be similar to the activities performed by the
Administrator under section 1851(d);
``(B) be coordinated with the activities performed by--
``(i) the Administrator under such section; and
``(ii) the Secretary under section 1804; and
``(C) provide for the dissemination of information
comparing the plans offered by eligible entities under this
part that are available to eligible beneficiaries residing in
an area.
``(2) Comparative information.--The comparative information
described in paragraph (1)(C) shall include a comparison of
the following:
``(A) Benefits.--The benefits provided under the plan and
the formularies and grievance and appeals processes under the
plan.
``(B) Monthly beneficiary obligation.--The monthly
beneficiary obligation under the plan.
``(C) Quality and performance.--The quality and performance
of the eligible entity offering the plan.
``(D) Beneficiary cost-sharing.--The cost-sharing required
of eligible beneficiaries under the plan.
``(E) Consumer satisfaction surveys.--The results of
consumer satisfaction surveys regarding the plan and the
eligible entity offering such plan (conducted pursuant to
section 1860D-5(h).
``(F) Additional information.--Such additional information
as the Administrator may prescribe.
``beneficiary protections
``Sec. 1860D-5. (a) Dissemination of Information.--
``(1) General information.--An eligible entity offering a
Medicare Prescription Drug plan shall disclose, in a clear,
accurate, and standardized form to each enrollee at the time
of enrollment, and at least annually thereafter, the
information described in section 1852(c)(1) relating to such
plan. Such information includes the following:
``(A) Access to covered drugs, including access through
pharmacy networks.
``(B) How any formulary used by the entity functions.
``(C) Copayments, coinsurance, and deductible requirements.
[[Page H6186]]
``(D) Grievance and appeals processes.
The information described in the preceding sentence shall
also be made available on request to prospective enrollees
during open enrollment periods.
``(2) Disclosure upon request of general coverage,
utilization, and grievance information.--Upon request of an
individual eligible to enroll in a Medicare Prescription Drug
plan, the eligible entity offering such plan shall provide
information similar (as determined by the Administrator) to
the information described in subparagraphs (A), (B), and (C)
of section 1852(c)(2) to such individual.
``(3) Response to beneficiary questions.--An eligible
entity offering a Medicare Prescription Drug plan shall have
a mechanism for providing on a timely basis specific
information to enrollees upon request, including information
on the coverage of specific drugs and changes in its
formulary.
``(4) Claims information.--An eligible entity offering a
Medicare Prescription Drug plan must furnish to enrolled
individuals in a form easily understandable to such
individuals--
``(A) an explanation of benefits (in accordance with
section 1806(a) or in a comparable manner); and
``(B) when prescription drug benefits are provided under
this part, a notice of the benefits in relation to the
initial coverage limit and annual out-of-pocket limit for the
current year (except that such notice need not be provided
more often than monthly).
``(5) Approval of marketing material and application
forms.--The provisions of section 1851(h) shall apply to
marketing material and application forms under this part in
the same manner as such provisions apply to marketing
material and application forms under part C.
``(b) Access to Covered Drugs.--
``(1) Access to negotiated prices for prescription drugs.--
An eligible entity offering a Medicare Prescription Drug plan
shall have in place procedures to ensure that beneficiaries
are not charged more than the negotiated price of a covered
drug. Such procedures shall include the issuance of a card
(or other technology) that may be used by an enrolled
beneficiary for the purchase of prescription drugs for which
coverage is not otherwise provided under the Medicare
Prescription Drug plan.
``(2) Assuring pharmacy access.--
``(A) In general.--An eligible entity offering a Medicare
Prescription Drug plan shall secure the participation in its
network of a sufficient number of pharmacies that dispense
(other than by mail order) drugs directly to patients to
ensure convenient access (as determined by the Administrator
and including adequate emergency access) for enrolled
beneficiaries, in accordance with standards established by
the Administrator under section 1860D-7(g) that ensure such
convenient access. Such standards shall take into account
reasonable distances to pharmacy services in both urban and
rural areas.
``(B) Use of point-of-service system.--An eligible entity
offering a Medicare Prescription Drug plan shall establish an
optional point-of-service method of operation under which--
``(i) the plan provides access to any or all pharmacies
that are not participating pharmacies in its network; and
``(ii) the plan may charge beneficiaries through
adjustments in copayments any additional costs associated
with the point-of-service option.
The additional copayments so charged shall not count toward
the application of section 1860D-6(c).
``(3) Requirements on development and application of
formularies.--If an eligible entity offering a Medicare
Prescription Drug plan uses a formulary, the following
requirements must be met:
``(A) Pharmacy and therapeutic (p&t) committee.--
``(i) In general.--The eligible entity must establish a
pharmacy and therapeutic committee that develops and reviews
the formulary.
``(ii) Composition.--A pharmacy and therapeutic committee
shall include at least 1 academic expert, at least 1
practicing physician, and at least 1 practicing pharmacist,
all of whom have expertise in the care of elderly or disabled
persons, and a majority of the members of such committee
shall consist of individuals who are a practicing physician
or a practicing pharmacist (or both).
``(B) Formulary development.--In developing and reviewing
the formulary, the committee shall base clinical decisions on
the strength of scientific evidence and standards of
practice, including assessing peer-reviewed medical
literature, such as randomized clinical trials,
pharmacoeconomic studies, outcomes research data, and on such
other information as the committee determines to be
appropriate.
``(C) Inclusion of drugs in all therapeutic categories and
classes.--
``(i) In general.--The formulary must include drugs within
each therapeutic category and class of covered drugs (as
defined by the Administrator), although not necessarily for
all drugs within such categories and classes.
``(ii) Requirement.--In defining therapeutic categories and
classes of covered drugs pursuant to clause (i), the
Administrator shall use--
``(I) the compendia referred to section 1927(g)(1)(B)(i);
and
``(II) other recognized sources of drug classifications and
categorizations determined appropriate by the Administrator.
``(D) Provider education.--The committee shall establish
policies and procedures to educate and inform health care
providers concerning the formulary.
``(E) Notice before removing drugs from formulary.--Any
removal of a drug from a formulary shall take effect only
after appropriate notice is made available to beneficiaries,
physicians, and pharmacists.
``(F) Appeals and exceptions to application.--The eligible
entity must have, as part of the appeals process under
subsection (e), a process for timely appeals for denials of
coverage based on such application of the formulary.
``(c) Cost and Utilization Management; Quality Assurance;
Medication Therapy Management Program.--
``(1) In general.--An eligible entity shall have in place
the following with respect to covered drugs:
``(A) A cost-effective drug utilization management program,
including incentives to reduce costs when appropriate.
``(B) Quality assurance measures to reduce medical errors
and adverse drug interactions and to improve medication use,
which--
``(i) shall include a medication therapy management program
described in paragraph (2); and
``(ii) may include beneficiary education programs,
counseling, medication refill reminders, and special
packaging.
``(C) A program to control fraud, abuse, and waste.
Nothing in this section shall be construed as impairing an
eligible entity from applying cost management tools
(including differential payments) under all methods of
operation.
``(2) Medication therapy management program.--
``(A) In general.--A medication therapy management program
described in this paragraph is a program of drug therapy
management and medication administration that is designed to
assure, with respect to beneficiaries with chronic diseases
(such as diabetes, asthma, hypertension, hyperlipidemia, and
congestive heart failure) or multiple prescriptions, that
covered drugs under the Medicare Prescription Drug plan are
appropriately used to optimize therapeutic outcomes through
improved medication use and to achieve therapeutic goals and
reduce the risk of adverse events, including adverse drug
interactions.
``(B) Elements.--Such program may include--
``(i) enhanced beneficiary understanding of such
appropriate use through beneficiary education, counseling,
and other appropriate means;
``(ii) increased beneficiary adherence with prescription
medication regimens through medication refill reminders,
special packaging, and other appropriate means; and
``(iii) detection of patterns of overuse and underuse of
prescription drugs.
``(C) Development of program in cooperation with licensed
pharmacists.--The program shall be developed in cooperation
with licensed and practicing pharmacists and physicians.
``(D) Considerations in pharmacy fees.--The eligible entity
offering a Medicare Prescription Drug plan shall take into
account, in establishing fees for pharmacists and others
providing services under the medication therapy management
program, the resources and time used in implementing the
program.
``(3) Public disclosure of pharmaceutical prices for
equivalent drugs.--The eligible entity offering a Medicare
Prescription Drug plan shall provide that each pharmacy or
other dispenser that arranges for the dispensing of a covered
drug shall inform the beneficiary at the time of purchase of
the drug of any differential between the price of the
prescribed drug to the enrollee and the price of the lowest
cost generic drug covered under the plan that is
therapeutically equivalent and bioequivalent.
``(d) Grievance Mechanism, Coverage Determinations, and
Reconsiderations.--
``(1) In general.--An eligible entity shall provide
meaningful procedures for hearing and resolving grievances
between the eligible entity (including any entity or
individual through which the eligible entity provides covered
benefits) and enrollees with Medicare Prescription Drug plans
of the eligible entity under this part in accordance with
section 1852(f).
``(2) Application of coverage determination and
reconsideration provisions.--The requirements of paragraphs
(1) through (3) of section 1852(g) shall apply to an eligible
entity with respect to covered benefits under the Medicare
Prescription Drug plan it offers under this part in the same
manner as such requirements apply to a MedicareAdvantage
organization with respect to benefits it offers under a
MedicareAdvantage plan under part C.
``(3) Request for review of tiered formulary
determinations.--In the case of a Medicare Prescription Drug
plan offered by an eligible entity that provides for tiered
cost-sharing for drugs included within a formulary and
provides lower cost-sharing for preferred drugs included
within the formulary, an individual who is enrolled in the
plan may request coverage of a nonpreferred drug under the
terms applicable for preferred drugs if the prescribing
physician determines that the preferred drug for treatment of
the same condition is not as effective for the individual or
has adverse effects for the individual.
[[Page H6187]]
``(e) Appeals.--
``(1) In general.--Subject to paragraph (2), the
requirements of paragraphs (4) and (5) of section 1852(g)
shall apply to an eligible entity with respect to drugs not
included on any formulary in a manner that is similar (as
determined by the Administrator) to the manner that such
requirements apply to a MedicareAdvantage organization with
respect to benefits it offers under a MedicareAdvantage plan
under part C.
``(2) Formulary determinations.--An individual who is
enrolled in a Medicare Prescription Drug plan offered by an
eligible entity may appeal to obtain coverage for a covered
drug that is not on a formulary of the entity under the terms
applicable for a formulary drug if the prescribing physician
determines that the formulary drug for treatment of the same
condition is not as effective for the individual or has
adverse effects for the individual.
``(f) Privacy, Confidentiality, and Accuracy of Enrollee
Records.--Insofar as an eligible entity maintains
individually identifiable medical records or other health
information regarding eligible beneficiaries enrolled in the
Medicare Prescription Drug plan offered by the entity, the
entity shall have in place procedures to--
``(1) safeguard the privacy of any individually
identifiable beneficiary information in a manner consistent
with the Federal regulations (concerning the privacy of
individually identifiable health information) promulgated
under section 264(c) of the Health Insurance Portability and
Accountability Act of 1996;
``(2) maintain such records and information in a manner
that is accurate and timely;
``(3) ensure timely access by such beneficiaries to such
records and information; and
``(4) otherwise comply with applicable laws relating to
patient privacy and confidentiality.
``(g) Uniform Monthly Plan Premium.--An eligible entity
shall ensure that the monthly plan premium for a Medicare
Prescription Drug plan charged under this part is the same
for all eligible beneficiaries enrolled in the plan.
``(h) Consumer Satisfaction Surveys.--An eligible entity
shall conduct consumer satisfaction surveys with respect to
the plan and the entity. The Administrator shall establish
uniform requirements for such surveys.
``prescription drug benefits
``Sec. 1860D-6. (a) Requirements.--
``(1) In general.--For purposes of this part and part C,
the term `qualified prescription drug coverage' means either
of the following:
``(A) Standard prescription drug coverage with access to
negotiated prices.--Standard prescription drug coverage (as
defined in subsection (c)) and access to negotiated prices
under subsection (e).
``(B) Actuarially equivalent prescription drug coverage
with access to negotiated prices.--Coverage of covered drugs
which meets the alternative coverage requirements of
subsection (d) and access to negotiated prices under
subsection (e), but only if it is approved by the
Administrator as provided under subsection (d).
``(2) Permitting additional prescription drug coverage.--
``(A) In general.--Subject to subparagraph (B) and section
1860D-13(c)(2), nothing in this part shall be construed as
preventing qualified prescription drug coverage from
including coverage of covered drugs that exceeds the coverage
required under paragraph (1).
``(B) Requirement.--An eligible entity may not offer a
Medicare Prescription Drug plan that provides additional
benefits pursuant to subparagraph (A) in an area unless the
eligible entity offering such plan also offers a Medicare
Prescription Drug plan in the area that only provides the
coverage of prescription drugs that is required under
paragraph (1).
``(3) Cost control mechanisms.--In providing qualified
prescription drug coverage, the entity offering the Medicare
Prescription Drug plan or the MedicareAdvantage plan may use
a variety of cost control mechanisms, including the use of
formularies, tiered copayments, selective contracting with
providers of prescription drugs, and mail order pharmacies.
``(b) Application of Secondary Payor Provisions.--The
provisions of section 1852(a)(4) shall apply under this part
in the same manner as they apply under part C.
``(c) Standard Prescription Drug Coverage.--For purposes of
this part and part C, the term `standard prescription drug
coverage' means coverage of covered drugs that meets the
following requirements:
``(1) Deductible.--
``(A) In general.--The coverage has an annual deductible--
``(i) for 2006, that is equal to $275; or
``(ii) for a subsequent year, that is equal to the amount
specified under this paragraph for the previous year
increased by the percentage specified in paragraph (5) for
the year involved.
``(B) Rounding.--Any amount determined under subparagraph
(A)(ii) that is not a multiple of $1 shall be rounded to the
nearest multiple of $1.
``(2) Limits on cost-sharing.--The coverage has cost-
sharing (for costs above the annual deductible specified in
paragraph (1) and up to the initial coverage limit under
paragraph (3)) that is equal to 50 percent or that is
actuarially consistent (using processes established under
subsection (f)) with an average expected payment of 50
percent of such costs.
``(3) Initial coverage limit.--
``(A) In general.--Subject to paragraph (4), the coverage
has an initial coverage limit on the maximum costs that may
be recognized for payment purposes (including the annual
deductible)--
``(i) for 2006, that is equal to $4,500; or
``(ii) for a subsequent year, that is equal to the amount
specified in this paragraph for the previous year, increased
by the annual percentage increase described in paragraph (5)
for the year involved.
``(B) Rounding.--Any amount determined under subparagraph
(A)(ii) that is not a multiple of $1 shall be rounded to the
nearest multiple of $1.
``(4) Limitation on out-of-pocket expenditures by
beneficiary.--
``(A) In general.--The coverage provides benefits with
cost-sharing that is equal to 20 percent after the individual
has incurred costs (as described in subparagraph (C)) for
covered drugs in a year equal to the annual out-of-pocket
limit specified in subparagraph (B).
``(B) Annual out-of-pocket limit.--
``(i) In general.--For purposes of this part, the `annual
out-of-pocket limit' specified in this subparagraph--
``(I) for 2006, is equal to $3,700; or
``(II) for a subsequent year, is equal to the amount
specified in this subparagraph for the previous year,
increased by the annual percentage increase described in
paragraph (5) for the year involved.
``(ii) Rounding.--Any amount determined under clause
(i)(II) that is not a multiple of $1 shall be rounded to the
nearest multiple of $1.
``(C) Application.--In applying subparagraph (A)--
``(i) incurred costs shall only include costs incurred,
with respect to covered drugs, for the annual deductible
(described in paragraph (1)), cost-sharing (described in
paragraph (2)), and amounts for which benefits are not
provided because of the application of the initial coverage
limit described in paragraph (3) (including costs incurred
for covered drugs described in section 1860D(a)(2)(C)); and
``(ii) such costs shall be treated as incurred without
regard to whether the individual or another person, including
a State program or other third-party coverage, has paid for
such costs, except that only the applicable percent
(specified in subparagraph (D)) of the amount of portion of
such costs that are paid or reimbursed through insurance, a
group health plan, or other third-party payment arrangement
for such costs shall not be counted.
``(D) Applicable percent defined.--
``(i) In general.--For purposes of subparagraph (C)(ii),
but subject to clause (ii), the applicable percent specified
in this subparagraph is--
``(I) for years before 2010, 20 percent;
``(II) for 2011, 2012, 2013, 2014, and 2015, 40 percent;
and
``(III) for any year thereafter, 100 percent.
``(ii) Secretarial limitation on total expenditures.--The
Secretary, in consultation with the Office of Management and
Budget, shall estimate at the time of enactment of this part,
the aggregate budget outlays that will result during the 10-
fiscal-year period beginning with fiscal year 2004 from the
enactment of the Prescription Drug and Medicare Improvement
Act of 2003. If such estimate exceeds $393,000,000,000, the
Secretary shall provide for such proportional reductions in
the percentages specified in clause (i) as the Secretary
determines to be necessary to assure that such aggregate
budget outlays during such period do not exceed such amount.
``(E) Information regarding third-party reimbursement.--In
order to ensure compliance with the requirements of
subparagraph (C)(ii), the Administrator is authorized to
establish procedures, in coordination with the Secretary of
Treasury and the Secretary of Labor, for determining whether
costs for individuals are being reimbursed through insurance
or otherwise, a group health plan, or other third-party
payment arrangement, and for alerting the entities in which
such individuals are enrolled about such reimbursement
arrangements. An entity with a contract under this part may
also periodically ask individuals enrolled in a plan offered
by the entity whether the individuals have or expect to
receive such third-party reimbursement. A material
misrepresentation of the information described in the
preceding sentence by an individual (as defined in standards
set by the Administrator and determined through a process
established by the Administrator) shall constitute grounds
for termination of enrollment under section 1860D-2(d).
``(5) Annual percentage increase.--For purposes of this
part, the annual percentage increase specified in this
paragraph for a year is equal to the annual percentage
increase in average per capita aggregate expenditures for
covered drugs in the United States for beneficiaries under
this title, as determined by the Administrator for the 12-
month period ending in July of the previous year.
``(d) Alternative Coverage Requirements.--A Medicare
Prescription Drug plan or MedicareAdvantage plan may provide
a different prescription drug benefit design from the
standard prescription drug coverage described in subsection
(c) so long as the Administrator determines (based on an
actuarial analysis by the Administrator) that the following
requirements are met and the plan
[[Page H6188]]
applies for, and receives, the approval of the Administrator
for such benefit design:
``(1) Assuring at least actuarially equivalent prescription
drug coverage.--
``(A) Assuring equivalent value of total coverage.--The
actuarial value of the total coverage (as determined under
subsection (f)) is at least equal to the actuarial value (as
so determined) of standard prescription drug coverage.
``(B) Assuring equivalent unsubsidized value of coverage.--
The unsubsidized value of the coverage is at least equal to
the unsubsidized value of standard prescription drug
coverage. For purposes of this subparagraph, the unsubsidized
value of coverage is the amount by which the actuarial value
of the coverage (as determined under subsection (f)) exceeds
the actuarial value of the amounts associated with the
application of section 1860D-17(c) and reinsurance payments
under section 1860D-20 with respect to such coverage.
``(C) Assuring standard payment for costs at initial
coverage limit.--The coverage is designed, based upon an
actuarially representative pattern of utilization (as
determined under subsection (f)), to provide for the payment,
with respect to costs incurred that are equal to the initial
coverage limit under subsection (c)(3), of an amount equal to
at least the product of--
``(i) such initial coverage limit minus the deductible
under subsection (c)(1); and
``(ii) the percentage specified in subsection (c)(2).
Benefits other than qualified prescription drug coverage
shall not be taken into account for purposes of this
paragraph.
``(2) Deductible and limitation on out-of-pocket
expenditures by beneficiaries may not vary.--The coverage may
not vary the deductible under subsection (c)(1) for the year
or the limitation on out-of-pocket expenditures by
beneficiaries described in subsection (c)(4) for the year.
``(e) Access to Negotiated Prices.--
``(1) Access.--
``(A) In general.--Under qualified prescription drug
coverage offered by an eligible entity or a MedicareAdvantage
organization, the entity or organization shall provide
beneficiaries with access to negotiated prices used for
payment for covered drugs, regardless of the fact that no
benefits may be payable under the coverage with respect to
such drugs because of the application of the deductible, any
cost-sharing, or an initial coverage limit (described in
subsection (c)(3)). For purposes of this part, the term
`negotiated prices' includes all discounts, direct or
indirect subsidies, rebates, or other price concessions or
direct or indirect remunerations and shall reflect prices
that are no higher than the prices negotiated by the
Secretary under subparagraph (B).
``(B) Secretarial negotiated price.--Notwithstanding any
other provision of this part, 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 drugs that provide for the maximum prices that
may be charged to individuals enrolled under this part by
participating pharmacies for dispensing such drugs to such
individuals.
``(C) Medicaid related provisions.--Insofar as a State
elects to provide medical assistance under title XIX for a
drug based on the prices negotiated under a Medicare
Prescription Drug plan under this part, the requirements of
section 1927 shall not apply to such drugs. The prices
negotiated under a Medicare Prescription Drug plan with
respect to covered drugs, under a MedicareAdvantage plan with
respect to such drugs, or under a qualified retiree
prescription drug plan (as defined in section 1860D-20(e)(4))
with respect to such drugs, on behalf of eligible
beneficiaries, shall (notwithstanding any other provision of
law) not be taken into account for the purposes of
establishing the best price under section 1927(c)(1)(C).
``(2) Cards or other technology.--
``(A) In general.--In providing the access under paragraph
(1), the eligible entity or MedicareAdvantage organization
shall issue a card or use other technology pursuant to
section 1860D-5(b)(1).
``(B) National standards.--
``(i) Development.--The Administrator shall provide for the
development of national standards relating to a standardized
format for the card or other technology required under
subparagraph (A). Such standards shall be compatible with
parts C and D of title XI and may be based on standards
developed by an appropriate standard setting organization.
``(ii) Consultation.--In developing the standards under
clause (i), the Administrator shall consult with the National
Council for Prescription Drug Programs and other standard-
setting organizations determined appropriate by the
Administrator.
``(iii) Implementation.--The Administrator shall implement
the standards developed under clause (i) by January 1, 2008.
``(3) Disclosure.--The eligible entity offering a Medicare
Prescription Drug plan and the MedicareAdvantage organization
offering a MedicareAdvantage plan shall disclose to the
Administrator (in a manner specified by the Administrator)
the extent to which discounts, direct or indirect subsidies,
rebates, or other price concessions or direct or indirect
remunerations made available to the entity or organization by
a manufacturer are passed through to enrollees through
pharmacies and other dispensers or otherwise. The provisions
of section 1927(b)(3)(D) shall apply to information disclosed
to the Administrator under this paragraph in the same manner
as such provisions apply to information disclosed under such
section.
``(4) Audits and reports.--To protect against fraud and
abuse and to ensure proper disclosures and accounting under
this part, in addition to any protections against fraud and
abuse provided under section 1860D-7(f)(1), the Administrator
may periodically audit the financial statements and records
of an eligible entity offering a Medicare Prescription Drug
plan and a MedicareAdvantage organization offering a
MedicareAdvantage plan.
``(f) Actuarial Valuation; Determination of Annual
Percentage Increases.--
``(1) Processes.--For purposes of this section, the
Administrator shall establish processes and methods--
``(A) for determining the actuarial valuation of
prescription drug coverage, including--
``(i) an actuarial valuation of standard prescription drug
coverage and of the reinsurance payments under section 1860D-
20;
``(ii) the use of generally accepted actuarial principles
and methodologies; and
``(iii) applying the same methodology for determinations of
alternative coverage under subsection (d) as is used with
respect to determinations of standard prescription drug
coverage under subsection (c); and
``(B) for determining annual percentage increases described
in subsection (c)(5).
Such processes shall take into account any effect that
providing actuarially equivalent prescription drug coverage
rather than standard prescription drug coverage has on drug
utilization.
``(2) Use of outside actuaries.--Under the processes under
paragraph (1)(A), eligible entities and MedicareAdvantage
organizations may use actuarial opinions certified by
independent, qualified actuaries to establish actuarial
values, but the Administrator shall determine whether such
actuarial values meet the requirements under subsection
(c)(1).
``requirements for entities offering medicare prescription drug plans;
establishment of standards
``Sec. 1860D-7. (a) General Requirements.--An eligible
entity offering a Medicare Prescription Drug plan shall meet
the following requirements:
``(1) Licensure.--Subject to subsection (c), the entity is
organized and licensed under State law as a risk-bearing
entity eligible to offer health insurance or health benefits
coverage in each State in which it offers a Medicare
Prescription Drug plan.
``(2) Assumption of financial risk.--
``(A) In general.--Subject to subparagraph (B) and
subsections (d)(2) and (e) of section 1860D-13, to the extent
that the entity is at risk pursuant to such section 1860D-16,
the entity assumes financial risk on a prospective basis for
the benefits that it offers under a Medicare Prescription
Drug plan and that is not covered under section 1860D-20.
``(B) Reinsurance permitted.--To the extent that the entity
is at risk pursuant to section 1860D-16, the entity may
obtain insurance or make other arrangements for the cost of
coverage provided to any enrolled member under this part.
``(3) Solvency for unlicensed entities.--In the case of an
eligible entity that is not described in paragraph (1) and
for which a waiver has been approved under subsection (c),
such entity shall meet solvency standards established by the
Administrator under subsection (d).
``(b) Contract Requirements.--The Administrator shall not
permit an eligible beneficiary to elect a Medicare
Prescription Drug plan offered by an eligible entity under
this part, and the entity shall not be eligible for payments
under section 1860D-16 or 1860D-20, unless the Administrator
has entered into a contract under this subsection with the
entity with respect to the offering of such plan. Such a
contract with an entity may cover more than 1 Medicare
Prescription Drug plan. Such contract shall provide that the
entity agrees to comply with the applicable requirements and
standards of this part and the terms and conditions of
payment as provided for in this part.
``(c) Waiver of Certain Requirements in Order To Ensure
Beneficiary Choice.--
``(1) In general.--In the case of an eligible entity that
seeks to offer a Medicare Prescription Drug plan in a State,
the Administrator shall waive the requirement of subsection
(a)(1) that the entity be licensed in that State if the
Administrator determines, based on the application and other
evidence presented to the Administrator, that any of the
grounds for approval of the application described in
paragraph (2) have been met.
``(2) Grounds for approval.--The grounds for approval under
this paragraph are the grounds for approval described in
subparagraphs (B), (C), and (D) of section 1855(a)(2), and
also include the application by a State of any grounds other
than those required under Federal law.
``(3) Application of waiver procedures.--With respect to an
application for a waiver (or a waiver granted) under this
subsection, the provisions of subparagraphs (E), (F), and (G)
of section 1855(a)(2) shall apply.
``(4) References to certain provisions.--For purposes of
this subsection, in applying the provisions of section
1855(a)(2) under this
[[Page H6189]]
subsection to Medicare Prescription Drug plans and eligible
entities--
``(A) any reference to a waiver application under section
1855 shall be treated as a reference to a waiver application
under paragraph (1); and
``(B) any reference to solvency standards were treated as a
reference to solvency standards established under subsection
(d).
``(d) Solvency Standards for Non-Licensed Entities.--
``(1) Establishment and publication.--The Administrator, in
consultation with the National Association of Insurance
Commissioners, shall establish and publish, by not later than
January 1, 2005, financial solvency and capital adequacy
standards for entities described in paragraph (2).
``(2) Compliance with standards.--An eligible entity that
is not licensed by a State under subsection (a)(1) and for
which a waiver application has been approved under subsection
(c) shall meet solvency and capital adequacy standards
established under paragraph (1). The Administrator shall
establish certification procedures for such eligible entities
with respect to such solvency standards in the manner
described in section 1855(c)(2).
``(e) Licensure Does Not Substitute for or Constitute
Certification.--The fact that an entity is licensed in
accordance with subsection (a)(1) or has a waiver application
approved under subsection (c) does not deem the eligible
entity to meet other requirements imposed under this part for
an eligible entity.
``(f) Incorporation of Certain MedicareAdvantage Contract
Requirements.--The following provisions of section 1857 shall
apply, subject to subsection (c)(4), to contracts under this
section in the same manner as they apply to contracts under
section 1857(a):
``(1) Protections against fraud and beneficiary
protections.--Section 1857(d).
``(2) Intermediate sanctions.--Section 1857(g), except that
in applying such section--
``(A) the reference in section 1857(g)(1)(B) to section
1854 is deemed a reference to this part; and
``(B) the reference in section 1857(g)(1)(F) to section
1852(k)(2)(A)(ii) shall not be applied.
``(3) Procedures for termination.--Section 1857(h).
``(g) Other Standards.--The Administrator shall establish
by regulation other standards (not described in subsection
(d)) for eligible entities and Medicare Prescription Drug
plans consistent with, and to carry out, this part. The
Administrator shall publish such regulations by January 1,
2005.
``(h) Periodic Review and Revision of Standards.--
``(1) In general.--Subject to paragraph (2), the
Administrator shall periodically review the standards
established under this section and, based on such review, may
revise such standards if the Administrator determines such
revision to be appropriate.
``(2) Prohibition of midyear implementation of significant
new regulatory requirements.--The Administrator may not
implement, other than at the beginning of a calendar year,
regulations under this section that impose new, significant
regulatory requirements on an eligible entity or a Medicare
Prescription Drug plan.
``(i) Relation to State Laws.--
``(1) In general.--The standards established under this
part shall supersede any State law or regulation (including
standards described in paragraph (2)) with respect to
Medicare Prescription Drug plans which are offered by
eligible entities under this part--
``(A) to the extent such law or regulation is inconsistent
with such standards; and
``(B) in the same manner as such laws and regulations are
superseded under section 1856(b)(3).
``(2) Standards specifically superseded.--State standards
relating to the following are superseded under this section:
``(A) Benefit requirements, including requirements relating
to cost-sharing and the structure of formularies.
``(B) Premiums.
``(C) Requirements relating to inclusion or treatment of
providers.
``(D) Coverage determinations (including related appeals
and grievance processes).
``(E) Requirements relating to marketing materials and
summaries and schedules of benefits regarding a Medicare
Prescription Drug plan.
``(3) Prohibition of state imposition of premium taxes.--No
State may impose a premium tax or similar tax with respect
to--
``(A) monthly beneficiary obligations paid to the
Administrator for Medicare Prescription Drug plans under this
part; or
``(B) any payments made by the Administrator under this
part to an eligible entity offering such a plan.
``Subpart 2--Prescription Drug Delivery System
``establishment of service areas
``Sec. 1860D-10. (a) Establishment.--
``(1) Initial establishment.--Not later than April 15,
2005, the Administrator shall establish and publish the
service areas in which Medicare Prescription Drug plans may
offer benefits under this part.
``(2) Periodic review and revision of service areas.--The
Administrator shall periodically review the service areas
applicable under this section and, based on such review, may
revise such service areas if the Administrator determines
such revision to be appropriate.
``(b) Requirements for Establishment of Service Areas.--
``(1) In general.--The Administrator shall establish the
service areas under subsection (a) in a manner that--
``(A) maximizes the availability of Medicare Prescription
Drug plans to eligible beneficiaries; and
``(B) minimizes the ability of eligible entities offering
such plans to favorably select eligible beneficiaries.
``(2) Additional requirements.--The Administrator shall
establish the service areas under subsection (a) consistent
with the following requirements:
``(A) There shall be at least 10 service areas.
``(B) Each service area must include at least 1 State.
``(C) The Administrator may not divide States so that
portions of the State are in different service areas.
``(D) To the extent possible, the Administrator shall
include multistate metropolitan statistical areas in a single
service area. The Administrator may divide metropolitan
statistical areas where it is necessary to establish service
areas of such size and geography as to maximize the
participation of Medicare Prescription Drug plans.
``(3) May conform to medicareadvantage preferred provider
regions.--The Administrator may conform the service areas
established under this section to the preferred provider
regions established under section 1858(a)(3).
``publication of risk adjusters
``Sec. 1860D-11. (a) Publication.--Not later than April 15
of each year (beginning in 2005), the Administrator shall
publish the risk adjusters established under subsection (b)
to be used in computing--
``(1) the amount of payment to Medicare Prescription Drug
plans in the subsequent year under section 1860D-16(a),
insofar as it is attributable to standard prescription drug
coverage (or actuarially equivalent prescription drug
coverage); and
``(2) the amount of payment to MedicareAdvantage plans in
the subsequent year under section 1858A(c), insofar as it is
attributable to standard prescription drug coverage (or
actuarially equivalent prescription drug coverage).
``(b) Establishment of Risk Adjusters.--
``(1) In general.--Subject to paragraph (2), the
Administrator shall establish an appropriate methodology for
adjusting the amount of payment to plans referred to in
subsection (a) to take into account variation in costs based
on the differences in actuarial risk of different enrollees
being served. Any such risk adjustment shall be designed in a
manner as to not result in a change in the aggregate payments
described in paragraphs (1) and (2) of subsection (a).
``(2) Considerations.--In establishing the methodology
under paragraph (1), the Administrator may take into account
the similar methodologies used under section 1853(a)(3) to
adjust payments to MedicareAdvantage organizations.
``(3) Data collection.--In order to carry out this
subsection, the Administrator shall require--
``(A) eligible entities to submit data regarding drug
claims that can be linked at the beneficiary level to part A
and part B data and such other information as the
Administrator determines necessary; and
``(B) MedicareAdvantage organizations (except MSA plans or
a private fee-for-service plan that does not provide
qualified prescription drug coverage) to submit data
regarding drug claims that can be linked to other data that
such organizations are required to submit to the
Administrator and such other information as the Administrator
determines necessary.
``submission of bids for proposed medicare prescription drug plans
``Sec. 1860D-12. (a) Submission.--
``(1) In general.--Each eligible entity that intends to
offer a Medicare Prescription Drug plan in an area in a year
(beginning with 2006) shall submit to the Administrator, at
such time in the previous year and in such manner as the
Administrator may specify, such information as the
Administrator may require, including the information
described in subsection (b).
``(2) Annual submission.--An eligible entity shall submit
the information required under paragraph (1) with respect to
a Medicare Prescription Drug plan that the entity intends to
offer on an annual basis.
``(b) Information Described.--The information described in
this subsection includes information on each of the
following:
``(1) The benefits under the plan (as required under
section 1860D-6).
``(2) The actuarial value of the qualified prescription
drug coverage.
``(3) The amount of the monthly plan premium under the
plan, including an actuarial certification of--
``(A) the actuarial basis for such monthly plan premium;
``(B) the portion of such monthly plan premium attributable
to standard prescription drug coverage or actuarially
equivalent prescription drug coverage and, if applicable, to
benefits that are in addition to such coverage; and
``(C) the reduction in such monthly plan premium resulting
from the payments provided under section 1860D-20.
``(4) The service area for the plan.
``(5) Whether the entity plans to use any funds in the plan
stabilization reserve fund in the Prescription Drug Account
that are
[[Page H6190]]
available to the entity to stabilize or reduce the monthly
plan premium submitted under paragraph (3), and if so, the
amount in such reserve fund that is to be used.
``(6) Such other information as the Administrator may
require to carry out this part.
``(c) Options Regarding Service Areas.--
``(1) In general.--The service area of a Medicare
Prescription Drug plan shall be either--
``(A) the entire area of 1 of the service areas established
by the Administrator under section 1860D-10; or
``(B) the entire area covered by the medicare program.
``(2) Rule of construction.--Nothing in this part shall be
construed as prohibiting an eligible entity from submitting
separate bids in multiple service areas as long as each bid
is for a single service area.
``approval of proposed medicare prescription drug plans
``Sec. 1860D-13. (a) Approval.--
``(1) In general.--The Administrator shall review the
information filed under section 1860D-12 and shall approve or
disapprove the Medicare Prescription Drug plan.
``(2) Requirements for approval.--The Administrator may not
approve a Medicare Prescription Drug plan unless the
following requirements are met:
``(A) Compliance with requirements.--The plan and the
entity offering the plan comply with the requirements under
this part.
``(B) Application of fehbp standard.--(i) The portion of
the monthly plan premium submitted under section 1860D-12(b)
that is attributable to standard prescription drug coverage
reasonably and equitably reflects the actuarial value of the
standard prescription drug coverage less the actuarial value
of the reinsurance payments under section 1860D-20 and the
amount of any funds in the plan stabilization reserve fund in
the Prescription Drug Account used to stabilize or reduce the
monthly plan premium.
``(ii) If the plan provides additional prescription drug
coverage pursuant to section 1860D-6(a)(2), the monthly plan
premium reasonably and equitably reflects the actuarial value
of the coverage provided less the actuarial value of the
reinsurance payments under section 1860D-20 and the amount of
any funds in the plan stabilization reserve fund in the
Prescription Drug Account used to stabilize or reduce the
monthly plan premium.
``(b) Negotiation.--In exercising the authority under
subsection (a), the Administrator shall have the authority
to--
``(1) negotiate the terms and conditions of the proposed
monthly plan premiums submitted and other terms and
conditions of a proposed plan; and
``(2) disapprove, or limit enrollment in, a proposed plan
based on--
``(A) the costs to beneficiaries under the plan;
``(B) the quality of the coverage and benefits under the
plan;
``(C) the adequacy of the network under the plan; or
``(D) other factors determined appropriate by the
Administrator.
``(c) Special Rules for Approval.--The Administrator may
approve a Medicare Prescription Drug plan submitted under
section 1860D-12 only if the benefits under such plan--
``(1) include the required benefits under section 1860D-
6(a)(1); and
``(2) are not designed in such a manner that the
Administrator finds is likely to result in favorable
selection of eligible beneficiaries.
``(d) Access to Competitive Coverage.--
``(1) Number of contracts.--The Administrator, consistent
with the requirements of this part and the goal of containing
costs under this title, shall, with respect to a year,
approve at least 2 contracts to offer a Medicare Prescription
Drug plan in each service area (established under section
1860D-10) for the year.
``(2) Authority to reduce risk to ensure access.--
``(A) In general.--Subject to subparagraph (B), if the
Administrator determines, with respect to an area, that the
access required under paragraph (1) is not going to be
provided in the area during the subsequent year, the
Administrator shall--
``(i) adjust the percents specified in paragraphs (2) and
(4) of section 1860D-16(b) in an area in a year; or
``(ii) increase the percent specified in section 1860D-
20(c)(1) in an area in a year.
The administrator shall exercise the authority under the
preceding sentence only so long as (and to the extent)
necessary to assure the access guaranteed under paragraph
(1).
``(B) Requirements for use of authority.--In exercising
authority under subparagraph (A), the Administrator--
``(i) shall not provide for the full underwriting of
financial risk for any eligible entity;
``(ii) shall not provide for any underwriting of financial
risk for a public eligible entity with respect to the
offering of a nationwide Medicare Prescription Drug plan; and
``(iii) shall seek to maximize the assumption of financial
risk by eligible entities to ensure fair competition among
Medicare Prescription Drug plans.
``(C) Requirement to accept 2 full-risk qualified bids
before exercising authority.--The Administrator may not
exercise the authority under subparagraph (A) with respect to
an area and year if 2 or more qualified bids are submitted by
eligible entities to offer a Medicare Prescription Drug plan
in the area for the year under paragraph (1) before the
application of subparagraph (A).
``(D) Reports.--The Administrator, in each annual report to
Congress under section 1808(c)(1)(D), shall include
information on the exercise of authority under subparagraph
(A). The Administrator also shall include such
recommendations as may be appropriate to limit the exercise
of such authority.
``(e) Guaranteed Access.--
``(1) Access.--In order to assure access to qualified
prescription drug coverage in an area, the Administrator
shall take the following steps:
``(A) Determination.--Not later than September 1 of each
year (beginning in 2005) and for each area (established under
section 1860D-10), the Administrator shall make a
determination as to whether the access required under
subsection (d)(1) is going to be provided in the area during
the subsequent year. Such determination shall be made after
the Administrator has exercised the authority under
subsection (d)(2).
``(B) Contract with an entity to provide coverage in an
area.--Subject to paragraph (3), if the Administrator makes a
determination under subparagraph (A) that the access required
under subsection (d)(1) is not going to be provided in an
area during the subsequent year, the Administrator shall
enter into a contract with an entity to provide eligible
beneficiaries enrolled under this part (and not, except for
an MSA plan or a private fee-for-service plan that does not
provide qualified prescription drug coverage enrolled in a
MedicareAdvantage plan) and residing in the area with
standard prescription drug coverage (including access to
negotiated prices for such beneficiaries pursuant to section
1860D-6(e)) during the subsequent year. An entity may be
awarded a contract for more than 1 of the areas for which the
Administrator is required to enter into a contract under this
paragraph but the Administrator may enter into only 1 such
contract in each such area. An entity with a contract under
this part shall meet the requirements described in section
1860D-5 and such other requirements determined appropriate by
the Administrator.
``(C) Requirement to accept 2 reduced-risk qualified bids
before entering into contract.--The Administrator may not
enter into a contract under subparagraph (B) with respect to
an area and year if 2 or more qualified bids are submitted by
eligible entities to offer a Medicare Prescription Drug plan
in the area for the year after the Administrator has
exercised the authority under subsection (d)(2) in the area
for the year.
``(D) Entity required to meet beneficiary protection and
other requirements.--An entity with a contract under
subparagraph (B) shall meet the requirements described in
section 1860D-5 and such other requirements determined
appropriate by the Administrator.
``(E) 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 a
contract under subparagraph (B).
``(2) Monthly beneficiary obligation for enrollment.--
``(A) In general.--In the case of an eligible beneficiary
receiving access to qualified prescription drug coverage
through enrollment with an entity with a contract under
paragraph (1)(B), the monthly beneficiary obligation of such
beneficiary for such enrollment shall be an amount equal to
the applicable percent (as determined under section 1860D-
17(c)) of the monthly national average premium (as computed
under section 1860D-15) for the area for the year, as
adjusted using the geographic adjuster under subparagraph
(B).
``(B) Establishment of geographic adjuster.--The
Administrator shall establish an appropriate methodology for
adjusting the monthly beneficiary obligation (as computed
under subparagraph (A)) for the year in an area to take into
account differences in drug prices among areas. In
establishing such methodology, the Administrator may take
into account differences in drug utilization between eligible
beneficiaries in an area and eligible beneficiaries in other
areas and the results of the ongoing study required under
section 106 of the Prescription Drug and Medicare Improvement
Act of 2003. Any such adjustment shall be applied in a manner
so as to not result in a change in the aggregate payments
made under this part that would have been made if the
Administrator had not applied such adjustment.
``(3) Payments under the contract.--
``(A) In general.--A contract entered into under paragraph
(1)(B) shall provide for--
``(i) payment for the negotiated costs of covered drugs
provided to eligible beneficiaries enrolled with the entity;
and
``(ii) payment of prescription management fees that are
tied to performance requirements established by the
Administrator for the management, administration, and
delivery of the benefits under the contract.
``(B) Performance requirements.--The performance
requirements established by the Administrator pursuant to
subparagraph (A)(ii) shall include the following:
``(i) The entity contains costs to the Prescription Drug
Account and to eligible beneficiaries enrolled under this
part and with the entity.
[[Page H6191]]
``(ii) The entity provides such beneficiaries with quality
clinical care.
``(iii) The entity provides such beneficiaries with quality
services.
``(C) Entity only at risk to the extent of the fees tied to
performance requirements.--An entity with a contract under
paragraph (1)(B) shall only be at risk for the provision of
benefits under the contract to the extent that the management
fees paid to the entity are tied to performance requirements
under subparagraph (A)(ii).
``(4) Eligible entity that submitted a bid for the area not
eligible to be awarded the contract.--An eligible entity that
submitted a bid to offer a Medicare Prescription Drug plan
for an area for a year under section 1860D-12, including a
bid submitted after the Administrator has exercised the
authority under subsection (d)(2), may not be awarded a
contract under paragraph (1)(B) for that area and year. The
previous sentence shall apply to an entity that was awarded a
contract under paragraph (1)(B) for the area in the previous
year and submitted such a bid under section 1860D-12 for the
year.
``(5) Contract to be available in designated area for 2
years.--Notwithstanding paragraph (1), if the Administrator
enters into a contract with an entity with respect to an area
designated under subparagraph (B) of such paragraph for a
year, the following rules shall apply:
``(A) The contract shall be for a 2-year period.
``(B) The Secretary is not required to make the
determination under paragraph (1)(A) with respect to the
second year of the contract for the area.
``(C) During the second year of the contract, an eligible
beneficiary residing in the area may continue to receive
standard prescription drug coverage (including access to
negotiated prices for such beneficiaries pursuant to section
1860D-6(e)) under such contract or through any Medicare
Prescription Drug plan that is available in the area.
``(6) Entity not permitted to market or brand the
contract.--An entity with a contract under paragraph (1)(B)
may not engage in any marketing or branding of such contract.
``(7) Rules for areas where only 1 competitively bid plan
was approved.--In the case of an area where (before the
application of this subsection) only 1 Medicare Prescription
Drug plan was approved for a year--
``(A) the plan may (at the option of the plan) be offered
in the area for the year (under rules applicable to such
plans under this part and not under this subsection);
``(B) eligible beneficiaries described in paragraph (1)(B)
may receive access to qualified prescription drug coverage
through enrollment in the plan or with an entity with a
contract under paragraph (1)(B); and
``(C) for purposes of applying section 1860D-
3(a)(1)(A)(ii), such plan shall be the plan designated in the
area under such section.
``(f) Two-Year Contracts.--Except for a contract entered
into under subsection (e)(1)(B), a contract approved under
this part (including a contract under) shall be for a 2-year
period.
``computation of monthly standard prescription drug coverage premiums
``Sec. 1860D-14. (a) In General.--For each year (beginning
with 2006), the Administrator shall compute a monthly
standard prescription drug coverage premium for each Medicare
Prescription Drug plan approved under section 1860D-13 and
for each MedicareAdvantage plan.
``(b) Requirements.--The monthly standard prescription drug
coverage premium for a plan for a year shall be equal to--
``(1) in the case of a plan offered by an eligible entity
or MedicareAdvantage organization that provides standard
prescription drug coverage or an actuarially equivalent
prescription drug coverage and does not provide additional
prescription drug coverage pursuant to section 1860D-6(a)(2),
the monthly plan premium approved for the plan under section
1860D-13 for the year; and
``(2) in the case of a plan offered by an eligible entity
or MedicareAdvantage organization that provides additional
prescription drug coverage pursuant to section 1860D-
6(a)(2)--
``(A) an amount that reflects only the actuarial value of
the standard prescription drug coverage offered under the
plan; or
``(B) if determined appropriate by the Administrator, the
monthly plan premium approved under section 1860D-13 for the
year for the Medicare Prescription Drug plan (or, if
applicable, the MedicareAdvantage plan) that, as required
under section 1860D-6(a)(2)(B) for a Medicare Prescription
Drug plans and a MedicareAdvantage plan--
``(i) is offered by such entity or organization in the same
area as the plan; and
``(ii) does not provide additional prescription drug
coverage pursuant to such section.
``computation of monthly national average premium
``Sec. 1860D-15. (a) Computation.--
``(1) In general.--For each year (beginning with 2006) the
Administrator shall compute a monthly national average
premium equal to the average of the monthly standard
prescription drug coverage premium for each Medicare
Prescription Drug plan and each MedicareAdvantage plan (as
computed under section 1860D-14). Such premium may be
adjusted pursuant to any methodology determined under
subsection (b), as determined appropriate by the
Administrator.
``(2) Weighted average.--The monthly national average
premium computed under paragraph (1) shall be a weighted
average, with the weight for each plan being equal to the
average number of beneficiaries enrolled under such plan in
the previous year.
``(b) Geographic Adjustment.--The Administrator shall
establish an appropriate methodology for adjusting the
monthly national average premium (as computed under
subsection (a)) for the year in an area to take into account
differences in prices for covered drugs among different
areas. In establishing such methodology, the Administrator
may take into account differences in drug utilization between
eligible beneficiaries in that area and other eligible
beneficiaries and the results of the ongoing study required
under section 106 of the Prescription Drug and Medicare
Improvement Act of 2003. Any such adjustment shall be applied
in a manner as to not result in a change in aggregate
payments made under this part than would have been made if
the Administrator had not applied such adjustment.
``(c) Special Rule for 2006.--For purposes of applying this
section for 2006, the Administrator shall establish
procedures for determining the weighted average under
subsection (a)(2) for 2005.
``payments to eligible entities
``Sec. 1860D-16. (a) Payment of Monthly Plan Premiums.--For
each year (beginning with 2006), the Administrator shall pay
to each entity offering a Medicare Prescription Drug plan in
which an eligible beneficiary is enrolled an amount equal to
the full amount of the monthly plan premium approved for the
plan under section 1860D-13 on behalf of each eligible
beneficiary enrolled in such plan for the year, as adjusted
using the risk adjusters that apply to the standard
prescription drug coverage published under section 1860D-11.
``(b) Portion of Total Payments of Monthly Plan Premiums
Subject to Risk.--
``(1) Notification of spending under the plan.--
``(A) In general.--For each year (beginning in 2007), the
eligible entity offering a Medicare Prescription Drug plan
shall notify the Administrator of the following:
``(i) Total actual costs.--The total amount of costs that
the entity incurred in providing standard prescription drug
coverage (or prescription drug coverage that is actuarially
equivalent pursuant to section 1860D-6(a)(1)(B)) for all
enrollees under the plan in the previous year.
``(ii) Actual costs for specific drugs.--With respect to
the total amount under clause (i) for the year, a breakdown
of--
``(I) each covered drug that constitutes a portion of such
amount;
``(II) the negotiated price for the eligible entity for
each such drug;
``(III) the number of prescriptions; and
``(IV) the average beneficiary coinsurance rate for a each
covered drug that constitutes a portion of such amount.
``(B) Certain expenses not included.--The amounts under
clauses (i) and (ii)(II) of subparagraph (A) may not
include--
``(i) administrative expenses incurred in providing the
coverage described in subparagraph (A)(i);
``(ii) amounts expended on providing additional
prescription drug coverage pursuant to section 1860D-6(a)(2);
or
``(iii) amounts expended for which the entity is
subsequently provided with reinsurance payments under section
1860D-20.
``(2) Adjustment of payment.--
``(A) No adjustment if allowable costs within risk
corridor.--If the allowable costs (specified in paragraph
(3)) for the plan for the year are not more than the first
threshold upper limit of the risk corridor (specified in
paragraph (4)(A)(iii)) and are not less than the first
threshold lower limit of the risk corridor (specified in
paragraph (4)(A)(i)) for the plan for the year, then no
additional payments shall be made by the Administrator and no
payments shall be made by (or collected from) the eligible
entity offering the plan.
``(B) Increase in payment if allowable costs above upper
limit of risk corridor.--
``(i) In general.--If the allowable costs for the plan for
the year are more than the first threshold upper limit of the
risk corridor for the plan for the year, then the
Administrator shall increase the total of the monthly
payments made to the entity offering the plan for the year
under subsection (a) by an amount equal to the sum of--
``(I) the applicable percent (as defined in subparagraph
(D)) of such allowable costs which are more than such first
threshold upper limit of the risk corridor and not more than
the second threshold upper limit of the risk corridor for the
plan for the year (as specified under paragraph (4)(A)(iv));
and
``(II) 90 percent of such allowable costs which are more
than such second threshold upper limit of the risk corridor.
``(ii) Special transitional corridor for 2006 and 2007.--If
the Administrator determines with respect to 2006 or 2007
that at least 60 percent of Medicare Prescription Drug plans
and MedicareAdvantage Plans (excluding MSA plans or private
fee-for-service plans that do not provide qualified
prescription drug coverage) have allowable costs for the plan
for the year that are more than the first threshold upper
limit of the risk corridor for the plan for the year and that
such plans represent at least 60 percent of eligible
beneficiaries enrolled under this part, clause (i)(I) shall
be applied by substituting `90 percent' for `applicable
percent'.
[[Page H6192]]
``(C) Plan payment if allowable costs below lower limit of
risk corridor.--If the allowable costs for the plan for the
year are less than the first threshold lower limit of the
risk corridor for the plan for the year, then the entity
offering the plan shall a make a payment to the Administrator
of an amount (or the Administrator shall otherwise recover
from the plan an amount) equal to--
``(i) the applicable percent (as so defined) of such
allowable costs which are less than such first threshold
lower limit of the risk corridor and not less than the second
threshold lower limit of the risk corridor for the plan for
the year (as specified under paragraph (4)(A)(ii)); and
``(ii) 90 percent of such allowable costs which are less
than such second threshold lower limit of the risk corridor.
``(D) Applicable percent defined.--For purposes of this
paragraph, the term `applicable percent' means--
``(i) for 2006 and 2007, 75 percent; and
``(ii) for 2008 and subsequent years, 50 percent.
``(3) Establishment of allowable costs.--
``(A) In general.--For each year, the Administrator shall
establish the allowable costs for each Medicare Prescription
Drug plan for the year. The allowable costs for a plan for a
year shall be equal to the amount described in paragraph
(1)(A)(i) for the plan for the year, adjusted under
subparagraph (B)(ii).
``(B) Repricing of costs.--
``(i) Calculation of average plan cost.--Utilizing the
information obtained under paragraph (1)(A)(ii) and section
1860D-20(b)(1)(B), for each year (beginning with 2006), the
Administrator shall establish an average negotiated price
with respect to all Medicare Prescription Drug plans for each
covered drug.
``(ii) Adjustment if actual costs exceed average costs.--
With respect to a Medicare Prescription Drug plan for a year,
the Administrator shall reduce the amount described in
paragraph (1)(A)(i) for the plan for the year to the extent
such amount is based on costs of specific covered drugs
furnished under the plan in the year (as specified under
paragraph (1)(A)(ii)) for which the negotiated prices are
greater than the average negotiated price for the covered
drug for the year (as determined under clause (i)).
``(4) Establishment of risk corridors.--
``(A) In general.--For each year (beginning with 2006), the
Administrator shall establish a risk corridor for each
Medicare Prescription Drug plan. The risk corridor for a plan
for a year shall be equal to a range as follows:
``(i) First threshold lower limit.--The first threshold
lower limit of such corridor shall be equal to--
``(I) the target amount described in subparagraph (B) for
the plan; minus
``(II) an amount equal to the first threshold risk
percentage for the plan (as determined under subparagraph
(C)(i)) of such target amount.
``(ii) Second threshold lower limit.--The second threshold
lower limit of such corridor shall be equal to--
``(I) the target amount described in subparagraph (B) for
the plan; minus
``(II) an amount equal to the second threshold risk
percentage for the plan (as determined under subparagraph
(C)(ii)) of such target amount.
``(iii) First threshold upper limit.--The first threshold
upper limit of such corridor shall be equal to the sum of--
``(I) such target amount; and
``(II) the amount described in clause (i)(II).
``(iv) Second threshold upper limit.--The second threshold
upper limit of such corridor shall be equal to the sum of--
``(I) such target amount; and
``(II) the amount described in clause (ii)(II).
``(B) Target amount described.--The target amount described
in this paragraph is, with respect to a Medicare Prescription
Drug plan offered by an eligible entity in a year--
``(i) in the case of a plan offered by an eligible entity
that provides standard prescription drug coverage or
actuarially equivalent prescription drug coverage and does
not provide additional prescription drug coverage pursuant to
section 1860D-6(a)(2), an amount equal to the total of the
monthly plan premiums paid to such entity for such plan for
the year pursuant to subsection (a), reduced by the
percentage specified in subparagraph (D); and
``(ii) in the case of a plan offered by an eligible entity
that provides additional prescription drug coverage pursuant
to section 1860D-6(a)(2), an amount equal to the total of the
monthly plan premiums paid to such entity for such plan for
the year pursuant to subsection (a) that are related to
standard prescription drug coverage (determined using the
rules under section 1860D-14(b)), reduced by the percentage
specified in subparagraph (D).
``(C) First and second threshold risk percentage defined.--
``(i) First threshold risk percentage.--Subject to clause
(iii), for purposes of this section, the first threshold risk
percentage is--
``(I) for 2006 and 2007, and 2.5 percent;
``(II) for 2008 through 2011, 5 percent; and
``(III) for 2012 and subsequent years, a percentage
established by the Administrator, but in no case less than 5
percent.
``(ii) Second threshold risk percentage.--Subject to clause
(iii), for purposes of this section, the second threshold
risk percentage is--
``(I) for 2006 and 2007, 5.0 percent;
``(II) for 2008 through 2011, 10 percent
``(III) for 2012 and subsequent years, a percentage
established by the Administrator that is greater than the
percent established for the year under clause (i)(III), but
in no case less than 10 percent.
``(iii) Reduction of risk percentage to ensure 2 plans in
an area.--Pursuant to paragraph (2) of section 1860D-13(d),
the Administrator may reduce the applicable first or second
threshold risk percentage in an area in a year in order to
ensure the access to plans required under paragraph (1) of
such section.
``(D) Target amount not to include administrative expenses
negotiated between the administrator and the entity offering
the plan.--For each year (beginning in 2006), the
Administrator and the entity offering a Medicare Prescription
Drug plan shall negotiate, as part of the negotiation process
described in section 1860D-13(b) during the previous year,
the percentage of the payments to the entity under subsection
(a) with respect to the plan that are attributable and
reasonably incurred for administrative expenses for providing
standard prescription drug coverage or actuarially equivalent
prescription drug coverage in the year.
``(5) Plans at risk for entire amount of additional
prescription drug coverage.--An eligible entity that offers a
Medicare Prescription Drug plan that provides additional
prescription drug coverage pursuant to section 1860D-6(a)(2)
shall be at full financial risk for the provision of such
additional coverage.
``(6) No effect on eligible beneficiaries.--No change in
payments made by reason of this subsection shall affect the
beneficiary obligation under section 1860D-17 for the year in
which such change in payments is made.
``(7) Disclosure of information.--
``(A) In general.--Each contract under this part shall
provide that--
``(i) the entity offering a Medicare Prescription Drug plan
shall provide the Administrator with such information as the
Administrator determines is necessary to carry out this
section; and
``(ii) the Administrator shall have the right to inspect
and audit any books and records of the eligible entity that
pertain to the information regarding costs provided to the
Administrator under paragraph (1).
``(B) Restriction on use of information.--Information
disclosed or obtained pursuant to the provisions of this
section may be used by officers and employees of the
Department of Health and Human Services only for the purposes
of, and to the extent necessary in, carrying out this
section.
``(c) Stabilization Reserve Fund.--
``(1) Establishment.--
``(A) In general.--There is established, within the
Prescription Drug Account, a stabilization reserve fund in
which the Administrator shall deposit amounts on behalf of
eligible entities in accordance with paragraph (2) and such
amounts shall be made available by the Secretary for the use
of eligible entities in contract year 2008 and subsequent
contract years in accordance with paragraph (3).
``(B) Reversion of unused amounts.--Any amount in the
stabilization reserve fund established under subparagraph (A)
that is not expended by an eligible entity in accordance with
paragraph (3) or that was deposited for the use of an
eligible entity that no longer has a contract under this part
shall revert for the use of the Prescription Drug Account.
``(2) Deposit of amounts for 5 years.--
``(A) In general.--If the target amount for a Medicare
Prescription Drug plan for 2006, 2007, 2008, 2009, or 2010
(as determined under subsection (b)(4)(B)) exceeds the
applicable costs for the plan for the year by more than 3
percent, then--
``(i) the entity offering the plan shall make a payment to
the Administrator of an amount (or the Administrator shall
otherwise recover from the plan an amount) equal to the
portion of such excess that is in excess of 3 percent of the
target amount; and
``(ii) the Administrator shall deposit an amount equal to
the amount collected or otherwise recovered under clause (i)
in the stabilization reserve fund on behalf of the eligible
entity offering such plan.
``(B) Applicable costs.--For purposes of subparagraph (A),
the term `applicable costs' means, with respect to a Medicare
Prescription Drug plan and year, an amount equal the sum of--
``(i) the allowable costs for the plan and year (as
determined under subsection (b)(3)(A); and
``(ii) the total amount by which monthly payments to the
plan were reduced (or otherwise recovered from the plan) for
the year under subsection (b)(2)(C).
``(3) Use of reserve fund to stabilize or reduce monthly
plan premiums.--
``(A) In general.--For any contract year beginning after
2007, an eligible entity offering a Medicare Prescription
Drug plan may use funds in the stabilization reserve fund in
the Prescription Drug Account that were deposited in such
fund on behalf of the entity to stabilize or reduce monthly
plan premiums submitted under section 1860D-12(b)(3).
``(B) Procedures.--The Administrator shall establish
procedures for--
[[Page H6193]]
``(i) reducing monthly plan premiums submitted under
section 1860D-12(b)(3) pursuant to subparagraph (A); and
``(ii) making payments from the plan stabilization reserve
fund in the Prescription Drug Account to eligible entities
that inform the Secretary under section 1860D-12(b)(5) of the
entity's intent to use funds in such reserve fund to reduce
such premiums.
``(d) Portion of Payments of Monthly Plan Premiums
Attributable to Administrative Expenses Tied to Performance
Requirements.--
``(1) In general.--The Administrator shall establish
procedures to adjust the portion of the payments made to an
entity under subsection (a) that are attributable to
administrative expenses (as determined pursuant to subsection
(b)(4)(D)) to ensure that the entity meets the performance
requirements described in clauses (ii) and (iii) of section
1860D-13(e)(4)(B).
``(2) No effect on eligible beneficiaries.--No change in
payments made by reason of this subsection shall affect the
beneficiary obligation under section 1860D-17 for the year in
which such change in payments is made.
``(e) Payment Terms.--
``(1) Administrator payments.--Payments to an entity
offering a Medicare Prescription Drug plan under this section
shall be made in a manner determined by the Administrator and
based upon the manner in which payments are made under
section 1853(a) (relating to payments to MedicareAdvantage
organizations).
``(2) Plan payments.--The Administrator shall establish a
process for collecting (or other otherwise recovering)
amounts that an entity offering a Medicare Prescription Drug
plan is required to make to the Administrator under this
section.
``(f) Payments to MedicareAdvantage Plans.--For provisions
related to payments to MedicareAdvantage organizations
offering MedicareAdvantage plans for qualified prescription
drug coverage made available under the plan, see section
1858A(c).
``(g) Secondary Payer Provisions.--The provisions of
section 1862(b) shall apply to the benefits provided under
this part.
``computation of monthly beneficiary obligation
``Sec. 1860D-17. (a) Beneficiaries Enrolled in a Medicare
Prescription Drug Plan.--In the case of an eligible
beneficiary enrolled under this part and in a Medicare
Prescription Drug plan, the monthly beneficiary obligation
for enrollment in such plan in a year shall be determined as
follows:
``(1) Monthly plan premium equals monthly national average
premium.--If the amount of the monthly plan premium approved
by the Administrator under section 1860D-13 for a Medicare
Prescription Drug plan for the year is equal to the monthly
national average premium (as computed under section 1860D-15)
for the area for the year, the monthly beneficiary obligation
of the eligible beneficiary in that year shall be an amount
equal to the applicable percent (as determined in subsection
(c)) of the amount of such monthly national average premium.
``(2) Monthly plan premium less than monthly national
average premium.--If the amount of the monthly plan premium
approved by the Administrator under section 1860D-13 for the
Medicare Prescription Drug plan for the year is less than the
monthly national average premium (as computed under section
1860D-15) for the area for the year, the monthly beneficiary
obligation of the eligible beneficiary in that year shall be
an amount equal to--
``(A) the applicable percent of the amount of such monthly
national average premium; minus
``(B) the amount by which such monthly national average
premium exceeds the amount of the monthly plan premium
approved by the Administrator for the plan.
``(3) Monthly plan premium exceeds monthly national average
premium.--If the amount of the monthly plan premium approved
by the Administrator under section 1860D-13 for a Medicare
Prescription Drug plan for the year exceeds the monthly
national average premium (as computed under section 1860D-15)
for the area for the year, the monthly beneficiary obligation
of the eligible beneficiary in that year shall be an amount
equal to the sum of--
``(A) the applicable percent of the amount of such monthly
national average premium; plus
``(B) the amount by which the monthly plan premium approved
by the Administrator for the plan exceeds the amount of such
monthly national average premium.
``(b) Beneficiaries Enrolled in a MedicareAdvantage Plan.--
In the case of an eligible beneficiary that is enrolled in a
MedicareAdvantage plan (except for an MSA plan or a private
fee-for-service plan that does not provide qualified
prescription drug coverage), the Medicare monthly beneficiary
obligation for qualified prescription drug coverage shall be
determined pursuant to section 1858A(d).
``(c) Applicable Percent.--For purposes of this section,
except as provided in section 1860D-19 (relating to premium
subsidies for low-income individuals), the applicable percent
for any year is the percentage equal to a fraction--
``(1) the numerator of which is 27.5 percent; and
``(2) the denominator of which is 100 percent minus a
percentage equal to--
``(A) the total reinsurance payments which the
Administrator estimates will be made under section 1860D-20
to qualifying entities described in subsection (e)(3) of such
section during the year; divided by
``(B) the sum of--
``(i) the amount estimated under subparagraph (A) for the
year; and
``(ii) the total payments which the Administrator estimates
will be made under sections 1860D-16 and 1858A(c) during the
year that relate to standard prescription drug coverage (or
actuarially equivalent prescription drug coverage).
``collection of monthly beneficiary obligation
``Sec. 1860D-18. (a) Collection of Amount in Same Manner as
Part B Premium.--
``(1) In general.--Subject to paragraph (2), the amount of
the monthly beneficiary obligation (determined under section
1860D-17) applicable to an eligible beneficiary under this
part (after application of any increase under section 1860D-
2(b)(1)(A)) shall be collected and credited to the
Prescription Drug Account in the same manner as the monthly
premium determined under section 1839 is collected and
credited to the Federal Supplementary Medical Insurance Trust
Fund under section 1840.
``(2) Procedures for sponsor to pay obligation on behalf of
retiree.--The Administrator shall establish procedures under
which an eligible beneficiary enrolled in a Medicare
Prescription Drug plan may elect to have the sponsor (as
defined in paragraph (5) of section 1860D-20(e)) of
employment-based retiree health coverage (as defined in
paragraph (4)(B) of such section) in which the beneficiary is
enrolled pay the amount of the monthly beneficiary obligation
applicable to the beneficiary under this part directly to the
Administrator.
``(b) Information Necessary for Collection.--In order to
carry out subsection (a), the Administrator shall transmit to
the Commissioner of Social Security--
``(1) by the beginning of each year, the name, social
security account number, monthly beneficiary obligation owed
by each individual enrolled in a Medicare Prescription Drug
plan for each month during the year, and other information
determined appropriate by the Administrator; and
``(2) periodically throughout the year, information to
update the information previously transmitted under this
paragraph for the year.
``(c) Collection for Beneficiaries Enrolled in a
MedicareAdvantage Plan.--For provisions related to the
collection of the monthly beneficiary obligation for
qualified prescription drug coverage under a
MedicareAdvantage plan, see section 1858A(e).
``premium and cost-sharing subsidies for low-income individuals
``Sec. 1860D-19. (a) Amount of Subsidies.--
``(1) Full premium subsidy and reduction of cost-sharing
for qualified medicare beneficiaries.--In the case of a
qualified medicare beneficiary (as defined in paragraph
(4)(A))--
``(A) section 1860D-17 shall be applied--
``(i) in subsection (c), by substituting `0 percent' for
the applicable percent that would otherwise apply under such
subsection; and
``(ii) in subsection (a)(3)(B), by substituting `the amount
of the monthly plan premium for the Medicare Prescription
Drug plan with the lowest monthly plan premium in the area
that the beneficiary resides' for `the amount of such monthly
national average premium', but only if there is no Medicare
Prescription Drug plan offered in the area in which the
individual resides that has a monthly plan premium for the
year that is equal to or less than the monthly national
average premium (as computed under section 1860D-15) for the
area for the year;
``(B) the annual deductible applicable under section 1860D-
6(c)(1) in a year shall be reduced to $0;
``(C) section 1860D-6(c)(2) shall be applied by
substituting `2.5 percent' for `50 percent' each place it
appears;
``(D) such individual shall be responsible for cost-sharing
for the cost of any covered drug provided in the year (after
the individual has reached the initial coverage limit
described in section 1860D-6(c)(3) and before the individual
has reached the annual out-of-pocket limit under section
1860D-6(c)(4)(A)), that is equal to 5.0 percent; and
``(E) section 1860D-6(c)(4)(A) shall be applied by
substituting `2.5 percent' for `10 percent'.
In no case may the application of subparagraph (A) result in
a monthly beneficiary obligation that is below 0.
``(2) Full premium subsidy and reduction of cost-sharing
for specified low income medicare beneficiaries and
qualifying individuals.--In the case of a specified low
income medicare beneficiary (as defined in paragraph (4)(B))
or a qualifying individual (as defined in paragraph (4)(C))--
``(A) section 1860D-17 shall be applied--
``(i) in subsection (c), by substituting `0 percent' for
the applicable percent that would otherwise apply under such
subsection; and
``(ii) in subsection (a)(3)(B), by substituting `the amount
of the monthly plan premium for the Medicare Prescription
Drug plan with the lowest monthly plan premium in the area
that the beneficiary resides' for `the amount of such monthly
national average premium', but only if there is no Medicare
Prescription Drug plan offered in the area in which the
individual resides that has a
[[Page H6194]]
monthly plan premium for the year that is equal to or less
than the monthly national average premium (as computed under
section 1860D-15) for the area for the year;
``(B) the annual deductible applicable under section 1860D-
6(c)(1) in a year shall be reduced to $0;
``(C) section 1860D-6(c)(2) shall be applied by
substituting `5.0 percent' for `50 percent' each place it
appears;
``(D) such individual shall be responsible for cost-sharing
for the cost of any covered drug provided in the year (after
the individual has reached the initial coverage limit
described in section 1860D-6(c)(3) and before the individual
has reached the annual out-of-pocket limit under section
1860D-6(c)(4)(A)), that is equal to 10.0 percent; and
``(E) section 1860D-6(c)(4)(A) shall be applied by
substituting `2.5 percent' for `10 percent'.
In no case may the application of subparagraph (A) result in
a monthly beneficiary obligation that is below 0.
``(3) Sliding scale premium subsidy and reduction of cost-
sharing for subsidy-eligible individuals.--
``(A) In general.--In the case of a subsidy-eligible
individual (as defined in paragraph (4)(D))--
``(i) section 1860D-17 shall be applied--
``(I) in subsection (c), by substituting `subsidy percent'
for the applicable percentage that would otherwise apply
under such subsection; and
``(II) in subparagraphs (A) and (B) of subsection (a)(3),
by substituting `the amount of the monthly plan premium for
the Medicare Prescription Drug plan with the lowest monthly
plan premium in the area that the beneficiary resides' for
`the amount of such monthly national average premium', but
only if there is no Medicare Prescription Drug plan offered
in the area in which the individual resides that has a
monthly plan premium for the year that is equal to or less
than the monthly national average premium (as computed under
section 1860D-15) for the area for the year; and
``(ii) the annual deductible applicable under section
1860D-6(c)(1)--
``(I) for 2006, shall be reduced to $50; and
``(II) for a subsequent year, shall be reduced to the
amount specified under this clause for the previous year
increased by the percentage specified in section 1860D-
6(c)(5) for the year involved;
``(iii) section 1860D-6(c)(2) shall be applied by
substituting `10.0 percent' for `50 percent' each place it
appears;
``(iv) such individual shall be responsible for cost-
sharing for the cost of any covered drug provided in the year
(after the individual has reached the initial coverage limit
described in section 1860D-6(c)(3) and before the individual
has reached the annual out-of-pocket limit under section
1860D-6(c)(4)(A)), that is equal to 20.0 percent; and
``(v) such individual shall be responsible for the cost-
sharing described in section 1860D-6(c)(4)(A).
In no case may the application of clause (i) result in a
monthly beneficiary obligation that is below 0.
``(B) Subsidy percent defined.--For purposes of
subparagraph (A)(i), the term `subsidy percent' means, with
respect to a State, a percent determined on a linear sliding
scale ranging from--
``(i) 0 percent with respect to a subsidy-eligible
individual residing in the State whose income does not exceed
135 percent of the poverty line; to
``(ii) the highest percentage that would otherwise apply
under section 1860D-17 in the service area in which the
subsidy-eligible individual resides, in the case of a
subsidy-eligible individual residing in the State whose
income equals 160 percent of the poverty line.
``(4) Definitions.--In this part:
``(A) Qualified medicare beneficiary.--Subject to
subparagraph (H), the term `qualified medicare beneficiary'
means an individual who--
``(i) is enrolled under this part, including an individual
who is enrolled under a MedicareAdvantage plan; and
``(ii) is described in section 1905(p)(1).
``(B) Specified low income medicare beneficiary.--Subject
to subparagraph (H), the term `specified low income medicare
beneficiary' means an individual who--
``(i) is enrolled under this part, including an individual
who is enrolled under a MedicareAdvantage plan; and
``(ii) is described in section 1902(a)(10)(E)(iii).
``(C) Qualifying individual.--Subject to subparagraph (H),
the term `qualifying individual' means an individual who--
``(i) is enrolled under this part, including an individual
who is enrolled under a MedicareAdvantage plan; and
``(ii) is described in section 1902(a)(10)(E)(iv) (without
regard to any termination of the application of such section
under title XIX).
``(D) Subsidy-eligible individual.--Subject to subparagraph
(H), the term `subsidy-eligible individual' means an
individual--
``(i) who is enrolled under this part, including an
individual who is enrolled under a MedicareAdvantage plan;
and
``(ii) whose income is less than 160 percent of the poverty
line; and
``(iii) who is not--
``(I) a qualified medicare beneficiary;
``(II) a specified low-income medicare beneficiary; or
``(III) a qualifying individual. *
``(E) Poverty line.--The term `poverty line' has the
meaning given such term in section 673(2) of the Community
Services Block Grant Act (42 U.S.C. 9902(2)), including any
revision required by such section.
``(F) Eligibility determinations.--Beginning on November 1,
2005, the determination of whether an individual residing in
a State is an individual described in subparagraph (A), (B),
(C), or (D) and, for purposes of paragraph (3), the amount of
an individual's income, shall be determined under the State
medicaid plan for the State under section 1935(a). In the
case of a State that does not operate such a medicaid plan
(either under title XIX or under a statewide waiver granted
under section 1115), such determination shall be made under
arrangements made by the Administrator.
``(G) Nonapplication to territorial residents.--In the case
of an individual who is not a resident of the 50 States or
the District of Columbia--
``(i) the subsidies provided under this section shall not
apply; and
``(ii) such individuals may be provided with medical
assistance for covered outpatient drugs (as such term is
defined for purposes of section 1927) in accordance with
section 1935 under the State medicaid program under title
XIX.
``(b) Rules in Applying Cost-Sharing Subsidies.--Nothing in
this section shall be construed as preventing an eligible
entity offering a Medicare Prescription Drug plan or a
MedicareAdvantage organization offering a MedicareAdvantage
plan from waiving or reducing the amount of the deductible or
other cost-sharing otherwise applicable pursuant to section
1860D-6(a)(2).
``(c) Administration of Subsidy Program.--The Administrator
shall establish a process whereby, in the case of an
individual eligible for a cost-sharing subsidy under
subsection (a) who is enrolled in a Medicare Prescription
Drug plan or a MedicareAdvantage plan--
``(1) the Administrator provides for a notification of the
eligible entity or MedicareAdvantage organization involved
that the individual is eligible for a cost-sharing subsidy
and the amount of the subsidy under such subsection;
``(2) the entity or organization involved reduces the cost-
sharing otherwise imposed by the amount of the applicable
subsidy and submits to the Administrator information on the
amount of such reduction; and
``(3) the Administrator periodically and on a timely basis
reimburses the entity or organization for the amount of such
reductions.
The reimbursement under paragraph (3) may be computed on a
capitated basis, taking into account the actuarial value of
the subsidies and with appropriate adjustments to reflect
differences in the risks actually involved.
``(d) Relation to Medicaid Program.--For provisions
providing for eligibility determinations and additional
Federal payments for expenditures related to providing
prescription drug coverage for territorial residents under
the medicaid program, see section 1935.
``reinsurance payments for expenses incurred in providing prescription
drug coverage above the annual out-of-pocket threshold
``Sec. 1860D-20. (a) Reinsurance Payments.--
``(1) In general.--Subject to section 1860D-21(b), the
Administrator shall provide in accordance with this section
for payment to a qualifying entity of the reinsurance payment
amount (as specified in subsection (c)(1)) for costs incurred
by the entity in providing prescription drug coverage for a
qualifying covered individual after the individual has
reached the annual out-of-pocket threshold specified in
section 1860D-6(c)(4)(B) for the year.
``(2) Budget authority.--This section constitutes budget
authority in advance of appropriations Acts and represents
the obligation of the Administrator to provide for the
payment of amounts provided under this section.
``(b) Notification of Spending Under the Plan for Costs
Incurred in Providing Prescription Drug Coverage Above the
Annual Out-of-Pocket Threshold.--
``(1) In general.--Each qualifying entity shall notify the
Administrator of the following with respect to a qualifying
covered individual for a coverage year:
``(A) Total actual costs.--The total amount (if any) of
costs that the qualifying entity incurred in providing
prescription drug coverage for the individual in the year
after the individual had reached the annual out-of-pocket
threshold specified in section 1860D-6(c)(4)(B) for the year.
``(B) Actual costs for specific drugs.--With respect to the
total amount under subparagraph (A) for the year, a breakdown
of--
``(i) each covered drug that constitutes a portion of such
amount;
``(ii) the negotiated price for the qualifying entity for
each such drug;
``(iii) the number of prescriptions; and
``(iv) the average beneficiary coinsurance rate for a each
covered drug that constitutes a portion of such amount.
``(2) Certain expenses not included.--The amounts under
subparagraphs (A) and (B)(ii) of paragraph (1) may not
include--
``(A) administrative expenses incurred in providing the
coverage described in paragraph (1)(A); or
``(B) amounts expended on providing additional prescription
drug coverage pursuant to section 1860D-6(a)(2).
[[Page H6195]]
``(3) Restriction on use of information.--The restriction
specified in section 1860D-16(b)(7)(B) shall apply to
information disclosed or obtained pursuant to the provisions
of this section.
``(c) Reinsurance Payment Amount.--
``(1) In general.--The reinsurance payment amount under
this subsection for a qualifying covered individual for a
coverage year is an amount equal to 80 percent of the
allowable costs (as specified in paragraph (2)) incurred by
the qualifying entity with respect to the individual and
year.
``(2) Allowable costs.--*
``(A) In general.--In the case of a qualifying entity that
has incurred costs described in subsection (b)(1)(A) with
respect to a qualifying covered individual for a coverage
year, the Administrator shall establish the allowable costs
for the individual and year. Such allowable costs shall be
equal to the amount described in such subsection for the
individual and year, adjusted under subparagraph (B).
``(B) Repricing of costs if actual costs exceed average
costs.--The Administrator shall reduce the amount described
in subsection (b)(1)(A) with respect to a qualifying covered
individual for a coverage year to the extent such amount is
based on costs of specific covered drugs furnished under the
plan in the year (as specified under subsection (b)(1)(B))
that are greater than the average cost for the covered drug
for the year (as determined under section 1860D-16(b)(3)(A)).
``(d) Payment Methods.--
``(1) In general.--Payments under this section shall be
based on such a method as the Administrator determines. The
Administrator may establish a payment method by which
interim payments of amounts under this section are made
during a year based on the Administrator's best estimate
of amounts that will be payable after obtaining all of the
information.
``(2) Source of payments.--Payments under this section
shall be made from the Prescription Drug Account.
``(e) Definitions.--In this section:
``(1) Coverage year.--The term `coverage year' means a
calendar year in which covered drugs are dispensed if a claim
for payment is made under the plan for such drugs, regardless
of when the claim is paid.
``(2) Qualifying covered individual.--The term `qualifying
covered individual' means an individual who--
``(A) is enrolled in this part and in a Medicare
Prescription Drug plan;
``(B) is enrolled in this part and in a MedicareAdvantage
plan (except for an MSA plan or a private fee-for-service
plan that does not provide qualified prescription drug
coverage); or
``(C) is eligible for, but not enrolled in, the program
under this part, and is covered under a qualified retiree
prescription drug plan.
``(3) Qualifying entity.--The term `qualifying entity'
means any of the following that has entered into an agreement
with the Administrator to provide the Administrator with such
information as may be required to carry out this section:
``(A) An eligible entity offering a Medicare Prescription
Drug plan under this part.
``(B) A MedicareAdvantage organization offering a
MedicareAdvantage plan under part C (except for an MSA plan
or a private fee-for-service plan that does not provide
qualified prescription drug coverage).
``(C) The sponsor of a qualified retiree prescription drug
plan.
``(4) Qualified retiree prescription drug plan.--
``(A) In general.--The term `qualified retiree prescription
drug plan' means employment-based retiree health coverage if,
with respect to a qualifying covered individual who is
covered under the plan, the following requirements are met:
``(i) Assurance.--The sponsor of the plan shall annually
attest, and provide such assurances as the Administrator may
require, that the coverage meets or exceeds the requirements
for qualified prescription drug coverage.
``(ii) Disclosure of information.--The sponsor complies
with the requirements described in clauses (i) and (ii) of
section 1860D-16(b)(7)(A).
``(B) Employment-based retiree health coverage.--The term
`employment-based retiree health coverage' means health
insurance or other coverage, whether provided by voluntary
insurance coverage or pursuant to statutory or contractual
obligation, of health care costs for retired individuals (or
for such individuals and their spouses and dependents) based
on their status as former employees or labor union members.
``(5) Sponsor.--The term `sponsor' means a plan sponsor, as
defined in section 3(16)(B) of the Employee Retirement Income
Security Act of 1974.
``direct subsidy for sponsor of a qualified retiree prescription drug
plan for plan enrollees eligible for, but not enrolled in, this part
``Sec. 1860D-21. (a) Direct Subsidy.--
``(1) In general.--The Administrator shall provide for the
payment to a sponsor of a qualified retiree prescription drug
plan (as defined in section 1860D-20(e)(4)) for each
qualifying covered individual (described in subparagraph (C)
of section 1860D-20(e)(2)) enrolled in the plan for each
month for which such individual is so enrolled.
``(2) Amount of payment.--
``(A) In general.--The amount of the payment under
paragraph (1) shall be an amount equal to the direct subsidy
percent determined for the year of the monthly national
average premium for the area for the year (determined under
section 1860D-15), as adjusted using the risk adjusters that
apply to the standard prescription drug coverage published
under section 1860D-11.
``(B) Direct subsidy percent.--For purposes of subparagraph
(A), the term `direct subsidy percent' means the percentage
equal to--
``(i) 100 percent; minus
``(ii) the applicable percent for the year (as determined
under section 1860D-17(c).
``(b) Payment Methods.--
``(1) In general.--Payments under this section shall be
based on such a method as the Administrator determines. The
Administrator may establish a payment method by which interim
payments of amounts under this section are made during a year
based on the Administrator's best estimate of amounts that
will be payable after obtaining all of the information.
``(2) Source of payments.--Payments under this section
shall be made from the Prescription Drug Account.
``Subpart 3--Miscellaneous Provisions
``prescription drug account in the federal supplementary medical
insurance trust fund
``Sec. 1860D-25. (a) Establishment.--
``(1) In general.--There is created within the Federal
Supplementary Medical Insurance Trust Fund established by
section 1841 an account to be known as the `Prescription Drug
Account' (in this section referred to as the `Account').
``(2) Funds.--The Account 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, the
Account as provided in this part.
``(3) Separate from rest of trust fund.--Funds provided
under this part to the Account shall be kept separate from
all other funds within the Federal Supplementary Medical
Insurance Trust Fund.
``(b) Payments From Account.--
``(1) In general.--The Managing Trustee shall pay from time
to time from the Account such amounts as the Secretary
certifies are necessary to make payments to operate the
program under this part, including--
``(A) payments to eligible entities under section 1860D-16;
``(B) payments under 1860D-19 for low-income subsidy
payments for cost-sharing;
``(C) reinsurance payments under section 1860D-20;
``(D) payments to sponsors of qualified retiree
prescription drug plans under section 1860D-21;
``(E) payments to MedicareAdvantage organizations for the
provision of qualified prescription drug coverage under
section 1858A(c); and
``(F) payments with respect to administrative expenses
under this part in accordance with section 201(g).
``(2) Treatment in relation to part b premium.--Amounts
payable from the Account shall not be taken into account in
computing actuarial rates or premium amounts under section
1839.
``(c) Appropriations To Cover Benefits and Administrative
Costs.--There are appropriated to the Account in a fiscal
year, out of any moneys in the Treasury not otherwise
appropriated, an amount equal to the payments and transfers
made from the Account in the year.
``other related provisions
``Sec. 1860D-26. (a) Restriction on Enrollment in a
Medicare Prescription Drug Plan Offered by a Sponsor of
Employment-Based Retiree Health Coverage.--
``(1) In general.--In the case of a Medicare Prescription
Drug plan offered by an eligible entity that is a sponsor (as
defined in paragraph (5) of section 1860D-20(e)) of
employment-based retiree health coverage (as defined in
paragraph (4)(B) of such section), notwithstanding any other
provision of this part and in accordance with regulations of
the Administrator, the entity offering the plan may restrict
the enrollment of eligible beneficiaries enrolled under this
part to eligible beneficiaries who are enrolled in such
coverage.
``(2) Limitation.--The sponsor of the employment-based
retiree health coverage described in paragraph (1) may not
offer enrollment in the Medicare Prescription Drug plan
described in such paragraph based on the health status of
eligible beneficiaries enrolled for such coverage.
``(b) Coordination With State Pharmaceutical Assistance
Programs.--
``(1) In general.--An eligible entity offering a Medicare
Prescription Drug plan, or a MedicareAdvantage organization
offering a MedicareAdvantage plan (other than an MSA plan or
a private fee-for-service plan that does not provide
qualified prescription drug coverage), may enter into an
agreement with a State pharmaceutical assistance program
described in paragraph (2) to coordinate the coverage
provided under the plan with the assistance provided under
the State pharmaceutical assistance program.
``(2) State pharmaceutical assistance program described.--
For purposes of paragraph (1), a State pharmaceutical
assistance program described in this paragraph is a program
that has been established pursuant to a waiver under section
1115 or otherwise.
``(c) Regulations To Carry Out This Part.--
[[Page H6196]]
``(1) Authority for interim final regulations.--The
Secretary may promulgate initial regulations implementing
this part in interim final form without prior opportunity for
public comment.
``(2) Final regulations.--A final regulation reflecting
public comments must be published within 1 year of the
interim final regulation promulgated under paragraph (1).''.
(b) Conforming Amendments to Federal Supplementary Medical
Insurance Trust Fund.--Section 1841 (42 U.S.C. 1395t) is
amended--
(1) in the last sentence of subsection (a)--
(A) by striking ``and'' before ``such amounts''; and
(B) by inserting before the period the following: ``, and
such amounts as may be deposited in, or appropriated to, the
Prescription Drug Account established by section 1860D-25'';
(2) in subsection (g), by inserting after ``by this part,''
the following: ``the payments provided for under part D (in
which case the payments shall be made from the Prescription
Drug Account in the Trust Fund),'';
(3) in subsection (h), by inserting after ``1840(d)'' the
following: ``and sections 1860D-18 and 1858A(e) (in which
case the payments shall be made from the Prescription Drug
Account in the Trust Fund)''; and
(4) in subsection (i), by inserting after ``section
1840(b)(1)'' the following: ``, sections 1860D-18 and
1858A(e) (in which case the payments shall be made from the
Prescription Drug Account in the Trust Fund),''.
(c) Conforming References to Previous Part D.--Any
reference in law (in effect before the date of enactment of
this Act) to part D of title XVIII of the Social Security Act
is deemed a reference to part F of such title (as in effect
after such date).
(d) Submission of Legislative Proposal.--Not later than 6
months after the date of the enactment of this Act, the
Secretary shall submit to the appropriate committees of
Congress a legislative proposal providing for such technical
and conforming amendments in the law as are required by the
provisions of this Act.
SEC. 102. STUDY AND REPORT ON PERMITTING PART B ONLY
INDIVIDUALS TO ENROLL IN MEDICARE VOLUNTARY
PRESCRIPTION DRUG DELIVERY PROGRAM.
(a) Study.--The Administrator of the Center for Medicare
Choices (as established under section 1808 of the Social
Security Act, as added by section 301(a)) shall conduct a
study on the need for rules relating to permitting
individuals who are enrolled under part B of title XVIII of
the Social Security Act but are not entitled to benefits
under part A of such title to buy into the medicare voluntary
prescription drug delivery program under part D of such title
(as so added).
(b) Report.--Not later than January 1, 2005, the
Administrator of the Center for Medicare Choices shall submit
a report to Congress on the study conducted under subsection
(a), together with any recommendations for legislation that
the Administrator determines to be appropriate as a result of
such study.
SEC. 103. RULES RELATING TO MEDIGAP POLICIES THAT PROVIDE
PRESCRIPTION DRUG COVERAGE.
(a) Rules Relating to Medigap Policies That Provide
Prescription Drug Coverage.--Section 1882 (42 U.S.C. 1395ss)
is amended by adding at the end the following new subsection:
``(v) Rules Relating to Medigap Policies That Provide
Prescription Drug Coverage.--
``(1) Prohibition on sale, issuance, and renewal of
policies that provide prescription drug coverage to part d
enrollees.--
``(A) In general.--Notwithstanding any other provision of
law, on or after January 1, 2006, no medicare supplemental
policy that provides coverage of expenses for prescription
drugs may be sold, issued, or renewed under this section to
an individual who is enrolled under part D.
``(B) Penalties.--The penalties described in subsection
(d)(3)(A)(ii) shall apply with respect to a violation of
subparagraph (A).
``(2) Issuance of substitute policies if the policyholder
obtains prescription drug coverage under part d.--
``(A) In general.--The issuer of a medicare supplemental
policy--
``(i) may not deny or condition the issuance or
effectiveness of a medicare supplemental policy that has a
benefit package classified as `A', `B', `C', `D', `E', `F'
(including the benefit package classified as `F' with a high
deductible feature, as described in subsection (p)(11)), or
`G' (under the standards established under subsection (p)(2))
and that is offered and is available for issuance to new
enrollees by such issuer;
``(ii) may not discriminate in the pricing of such policy,
because of health status, claims experience, receipt of
health care, or medical condition; and
``(iii) may not impose an exclusion of benefits based on a
pre-existing condition under such policy,
in the case of an individual described in subparagraph (B)
who seeks to enroll under the policy during the open
enrollment period established under section 1860D-2(b)(2) and
who submits evidence that they meet the requirements under
subparagraph (B) along with the application for such medicare
supplemental policy.
``(B) Individual described.--An individual described in
this subparagraph is an individual who--
``(i) enrolls in the medicare prescription drug delivery
program under part D; and
``(ii) at the time of such enrollment was enrolled and
terminates enrollment in a medicare supplemental policy which
has a benefit package classified as `H', `I', or `J'
(including the benefit package classified as `J' with a high
deductible feature, as described in section 1882(p)(11))
under the standards referred to in subparagraph (A)(i) or
terminates enrollment in a policy to which such standards do
not apply but which provides benefits for prescription drugs.
``(C) Enforcement.--The provisions of subparagraph (A)
shall be enforced as though they were included in subsection
(s).
``(3) Notice required to be provided to current
policyholders with prescription drug coverage.--No medicare
supplemental policy of an issuer shall be deemed to meet the
standards in subsection (c) unless the issuer provides
written notice during the 60-day period immediately preceding
the period established for the open enrollment period
established under section 1860D-2(b)(2), to each individual
who is a policyholder or certificate holder of a medicare
supplemental policy issued by that issuer that provides some
coverage of expenses for prescription drugs (at the most
recent available address of that individual) of--
``(A) the ability to enroll in a new medicare supplemental
policy pursuant to paragraph (2); and
``(B) the fact that, so long as such individual retains
coverage under such policy, the individual shall be
ineligible for coverage of prescription drugs under part
D.''.
(b) Rule of Construction.--
(1) In general.--Nothing in this Act shall be construed to
require an issuer of a medicare supplemental policy under
section 1882 of the Social Security Act (42 U.S.C. 1395rr) to
participate as an eligible entity under part D of such Act,
as added by section 101, as a condition for issuing such
policy.
(2) Prohibition on state requirement.--A State may not
require an issuer of a medicare supplemental policy under
section 1882 of the Social Security Act (42 U.S.C. 1395rr) to
participate as an eligible entity under part D of such Act,
as added by section 101, as a condition for issuing such
policy.
SEC. 104. MEDICAID AND OTHER AMENDMENTS RELATED TO LOW-INCOME
BENEFICIARIES.
(a) Determinations of Eligibility for Low-Income
Subsidies.--Section 1902(a) (42 U.S.C. 1396a(a)) is amended--
(1) by striking ``and'' at the end of paragraph (64);
(2) by striking the period at the end of paragraph (65) and
inserting ``; and''; and
(3) by inserting after paragraph (65) the following new
paragraph:
``(66) provide for making eligibility determinations under
section 1935(a).''.
(b) New Section.--
(1) In general.--Title XIX (42 U.S.C. 1396 et seq.) is
amended--
(A) by redesignating section 1935 as section 1936; and
(B) by inserting after section 1934 the following new
section:
``special provisions relating to medicare prescription drug benefit
``Sec. 1935. (a) Requirement for Making Eligibility
Determinations for Low-Income Subsidies.--As a condition of
its State plan under this title under section 1902(a)(66) and
receipt of any Federal financial assistance under section
1903(a), a State shall satisfy the following:
``(1) Determination of eligibility for transitional
prescription drug assistance card program for eligible low-
income beneficiaries.--For purposes of section 1807A, submit
to the Secretary an eligibility plan under which the State--
``(A) establishes eligibility standards consistent with the
provisions of that section;
``(B) establishes procedures for providing presumptive
eligibility for eligible low-income beneficiaries (as defined
in section 1807A(i)(2)) under that section in a manner that
is similar to the manner in which presumptive eligibility is
provided to children and pregnant women under this title;
``(C) makes determinations of eligibility and income for
purposes of identifying eligible low-income beneficiaries (as
so defined) under that section; and
``(D) communicates to the Secretary determinations of
eligibility or discontinuation of eligibility under that
section for purposes of notifying prescription drug card
sponsors under that section of the identity of eligible
medicare low-income beneficiaries.
``(2) Determination of eligibility for premium and cost-
sharing subsidies under part D of title XVIII for low-income
individuals.--Beginning November 1, 2005, for purposes of
section 1860D-19--
``(A) make determinations of eligibility for premium and
cost-sharing subsidies under and in accordance with such
section;
``(B) establish procedures for providing presumptive
eligibility for individuals eligible for subsidies under that
section in a manner that is similar to the manner in which
presumptive eligibility is provided to children and pregnant
women under this title;
``(C) inform the Administrator of the Center for Medicare
Choices of such determinations in cases in which such
eligibility is established; and
``(D) otherwise provide such Administrator with such
information as may be required to carry out part D of title
XVIII (including section 1860D-19).
``(3) Agreement to establish information and enrollment
sites at social security
[[Page H6197]]
field offices.--Enter into an agreement with the Commissioner
of Social Security to use all Social Security field offices
located in the State as information and enrollment sites for
making the eligibility determinations required under
paragraphs (1) and (2).
``(b) Federal Subsidy of Administrative Costs.--
``(1) Enhanced match for eligibility determinations.--
Subject to paragraphs (2) and (4), with respect to calendar
quarters beginning on or after January 1, 2004, the amounts
expended by a State in carrying out subsection (a) are
expenditures reimbursable under section 1903(a)(7) except
that, in applying such section with respect to such
expenditures incurred for--
``(A) such calendar quarters occurring in fiscal year 2004
or 2005, `75 percent' shall be substituted for `50 per
centum';
``(B) calendar quarters occurring in fiscal year 2006, `70
percent' shall be substituted for `50 per centum';
``(C) calendar quarters occurring in fiscal year 2007, `65
percent' shall be substituted for `50 per centum'; and
``(D) calendar quarters occurring in fiscal year 2008 or
any fiscal year thereafter, `60 percent' shall be substituted
for `50 per centum'.
``(2) 100 percent match for eligibility determinations for
subsidy-eligible individuals.--In the case of amounts
expended by a State on or after November 1, 2005, to
determine whether an individual is a subsidy-eligible
individual for purposes of section 1860D-19, such
expenditures shall be reimbursed under section 1903(a)(7) by
substituting `100 percent' for `50 per centum'.
``(3) Enhanced match for updates or improvements to
eligibility determination systems.--With respect to calendar
quarters occurring in fiscal year 2004, 2005, or 2006, the
Secretary, in addition to amounts otherwise paid under
section 1903(a), shall pay to each State which has a plan
approved under this title, for each such quarter an amount
equal to 90 percent of so much of the sums expended during
such quarter as are attributable to the design, development,
acquisition, or installation of improved eligibility
determination systems (including hardware and software for
such systems) in order to carry out the requirements of
subsection (a) and section 1807A(h)(1) and to the design,
development, acquisition or installation of improved data
systems necessary to track prescription drug spending for
purposes of implementing section 1935(c). No payment shall be
made to a State under the preceding sentence unless the
State's improved eligibility determination system--
``(A) satisfies such standards for improvement as the
Secretary may establish; and
``(B) complies, and is compatible, with the standards
established under part C of title XI and any regulations
promulgated under section 264(c) of the Health Insurance
Portability and Accountability Act of 1996 (42 U.S.C. 1320d-2
note).
``(4) Coordination.--The State shall provide the Secretary
with such information as may be necessary to properly
allocate expenditures described in paragraph (1), (2), or (3)
that may otherwise be made for similar eligibility
determinations or expenditures.
``(c) Federal Assumption of Medicaid Prescription Drug
Costs for Dually Eligible Beneficiaries.--
``(1) In general.--For purpose of section 1903(a)(1) for a
State for a calendar quarter in a year (beginning with 2006)
the amount computed under this subsection is equal to the
product of the following:
``(A) Standard prescription drug coverage under medicare.--
With respect to individuals who are residents of the State,
who are entitled to, or enrolled for, benefits under part A
of title XVIII, or are enrolled under part B of title XVIII
and are receiving medical assistance under subparagraph
(A)(i), (A)(ii), or (C) of section 1902(a)(10) (or as the
result of the application of section 1902(f)) that includes
covered outpatient drugs (as defined for purposes of section
1927) under the State plan under this title (including such a
plan operated under a waiver under section 1115)--
``(i) the total amounts attributable to such individuals in
the quarter under section 1860D-19 (relating to premium and
cost-sharing subsidies for low-income medicare
beneficiaries); and
``(ii) the actuarial value of standard prescription drug
coverage (as determined under section 1860D-6(f)) provided to
such individuals in the quarter.
``(B) State matching rate.--A proportion computed by
subtracting from 100 percent the Federal medical assistance
percentage (as defined in section 1905(b)) applicable to the
State and the quarter.
``(C) Phase-out proportion.--Subject to subparagraph (D),
the phase-out proportion for a quarter in--
``(i) 2006 is 100 percent;
``(ii) 2007 is 95 percent;
``(iii) 2008 or 2009, is 90 percent;
``(iv) 2010 is 85 percent; or
``(v) 2011, 2012, or 2013 is 80 percent.
``(d) Medicaid as Secondary Payor.--In the case of an
individual who is entitled to a Medicare Prescription Drug
plan under part D or drug coverage under a MedicareAdvantage
plan, and medical assistance including covered outpatient
drugs under this title, medical assistance shall continue to
be provided under this title for covered outpatient drugs to
the extent payment is not made under the Medicare
Prescription Drug plan or a MedicareAdvantage plan.
``(e) Treatment of Territories.--
``(1) In general.--In the case of a State, other than the
50 States and the District of Columbia--
``(A) the previous provisions of this section shall not
apply to residents of such State; and
``(B) if the State establishes a plan described in
paragraph (2), the amount otherwise determined under section
1108(f) (as increased under section 1108(g)) for the State
shall be further increased by the amount specified in
paragraph (3).
``(2) Plan.--The plan described in this paragraph is a plan
that--
``(A) provides medical assistance with respect to the
provision of covered drugs (as defined in section
1860D(a)(2)) to individuals described in subparagraph (A),
(B), (C), or (D) of section 1860D-19(a)(3); and
``(B) ensures that additional amounts received by the State
that are attributable to the operation of this subsection are
used only for such assistance.
``(3) Increased amount.--
``(A) In general.--The amount specified in this paragraph
for a State for a fiscal year is equal to the product of--
``(i) the aggregate amount specified in subparagraph (B);
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.
``(B) Aggregate amount.--The aggregate amount specified in
this subparagraph for--
``(i) the last 3 quarters of fiscal year 2006, is equal to
$22,500,000;
``(ii) fiscal year 2007, is equal to $30,000,000; and
``(iii) any subsequent fiscal year, is equal to the
aggregate amount specified in this subparagraph for the
previous fiscal year increased by the annual percentage
increase specified in section 1860D-6(c)(5) for the calendar
year beginning in such fiscal year.
``(4) Nonapplication.--Section 1927(d)(2)(E) shall not
apply to a State described in paragraph (1) for purposes of
providing medical assistance described in paragraph (2)(A).
``(5) Report.--The Secretary shall submit to Congress a
report on the application of this subsection and may include
in the report such recommendations as the Secretary deems
appropriate.
``(f) Definition.--For purposes of this section, the term
`subsidy-eligible individual' has the meaning given that term
in subparagraph (D) of section 1860D-19(a)(4).''.
(C) Conforming amendments.--
(1) Section 1903(a)(1) (42 U.S.C. 1396a(a)(1)) is amended
by inserting before the semicolon the following: ``, reduced
by the amount computed under section 1935(c)(1) for the State
and the quarter''.
(2) Section 1108(f) (42 U.S.C. 1308(f)) is amended by
inserting ``and section 1935(e)(1)(B)'' after ``Subject to
subsection (g)''.
(4) Amendment to best price.--Section 1927(c)(1)(C)(i) (42
U.S.C. 1396r-8(c)(1)(C)(i)), as amended by section 111(b), is
amended--
(A) by striking ``and'' at the end of subclause (IV);
(B) by striking the period at the end of subclause (V) and
inserting ``; and''; and
(C) by adding at the end the following new subclause:
``(VI) any prices charged which are negotiated under a
Medicare Prescription Drug plan under part D of title XVIII
with respect to covered drugs, under a MedicareAdvantage plan
under part C of such title with respect to such drugs, or
under a qualified retiree prescription drug plan (as defined
in section 1860D-20(f)(1)) with respect to such drugs, on
behalf of eligible beneficiaries (as defined in section
1860D(a)(3).''.
(c) Extension of Medicare Cost-Sharing for Part B Premium
for Qualifying Individuals Through 2008.--
(1) In general.--Section 1902(a)(10)(E)(iv) (42 U.S.C.
1396a(a)(10)(E)(iv)) is amended to read as follows:
``(iv) subject to sections 1933 and 1905(p)(4), for making
medical assistance available (but only for premiums payable
with respect to months during the period beginning with
January 1998, and ending with December 2008) for medicare
cost-sharing described in section 1905(p)(3)(A)(ii) for
individuals who would be qualified medicare beneficiaries
described in section 1905(p)(1) but for the fact that their
income exceeds the income level established by the State
under section 1905(p)(2) and is at least 120 percent, but
less than 135 percent, of the official poverty line (referred
to in such section) for a family of the size involved and who
are not otherwise eligible for medical assistance under the
State plan;''.
(2) Total amount available for allocation.--Section 1933(c)
(42 U.S.C. 1396u-3(c)) is amended--
(A) in paragraph (1)--
(i) in subparagraph (D), by striking ``and'' at the end;
(ii) in subparagraph (E)--
(I) by striking ``fiscal year 2002'' and inserting ``each
of fiscal years 2002 through 2008''; and
(II) by striking the period and inserting ``; and''; and
(iii) by adding at the end the following new subparagraph:
``(F) the first quarter of fiscal year 2009,
$100,000,000.''; and
(B) in paragraph (2)(A), by striking ``the sum of'' and all
that follows through ``1902(a)(10)(E)(iv)(II) in the State;
to'' and
[[Page H6198]]
inserting ``twice the total number of individuals described
in section 1902(a)(10)(E)(iv) in the State; to''.
(d) Outreach by the Commissioner of Social Security.--
Section 1144 (42 U.S.C. 1320b-14) is amended--
(1) in the section heading, by inserting ``and subsidies
for low-income individuals under title xviii'' after ``cost-
sharing'';
(2) in subsection (a)--
(A) in paragraph (1)--
(i) in subparagraph (A), by inserting ``for the
transitional prescription drug assistance card program under
section 1807A, or for premium and cost-sharing subsidies
under section 1860D-19'' before the semicolon; and
(ii) in subparagraph (B), by inserting ``, program, and
subsidies'' after ``medical assistance''; and
(B) in paragraph (2)--
(i) in the matter preceding subparagraph (A), by inserting
``, the transitional prescription drug assistance card
program under section 1807A, or premium and cost-sharing
subsidies under section 1860D-19'' after ``assistance''; and
(ii) in subparagraph (A), by striking ``such eligibility''
and inserting ``eligibility for medicare cost-sharing under
the medicaid program''; and
(3) in subsection (b)--
(A) in paragraph (1)(A), by inserting ``, for the
transitional prescription drug assistance card program under
section 1807A, or for premium and cost-sharing subsidies for
low-income individuals under section 1860D-19'' after
``1933''; and
(B) in paragraph (2), by inserting ``, program, and
subsidies'' after ``medical assistance''.
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 drug 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, 2005.
(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) Voluntary prescription drug delivery program.--
Specifically, the Commission shall review, with respect to
the voluntary prescription drug delivery program under part
D, competition among eligible entities offering Medicare
Prescription Drug plans and beneficiary access to such plans
and covered drugs, particularly in rural areas.''.
SEC. 106. STUDY REGARDING VARIATIONS IN SPENDING AND DRUG
UTILIZATION.
(a) Study.--The Secretary shall study on an ongoing basis
variations in spending and drug utilization under part D of
title XVIII of the Social Security Act for covered drugs to
determine the impact of such variations on premiums imposed
by eligible entities offering Medicare Prescription Drug
plans under that part. In conducting such study, the
Secretary shall examine the impact of geographic adjustments
of the monthly national average premium under section 1860D-
15 of such Act on--
(1) maximization of competition under part D of title XVIII
of such Act; and
(2) the ability of eligible entities offering Medicare
Prescription Drug plans to contain costs for covered drugs.
(b) Report.--Beginning with 2007, the Secretary shall
submit annual reports to Congress on the study required under
subsection (a).
Subtitle B--Medicare Prescription Drug Discount Card and Transitional
Assistance for Low-Income Beneficiaries
SEC. 111. MEDICARE PRESCRIPTION DRUG DISCOUNT CARD AND
TRANSITIONAL ASSISTANCE FOR LOW-INCOME
BENEFICIARIES.
(a) In General.--Title XVIII is amended by inserting after
section 1806 the following new sections:
``medicare prescription drug discount card endorsement program
``Sec. 1807. (a) Establishment.--There is established a
medicare prescription drug discount card endorsement program
under which the Secretary shall--
``(1) endorse prescription drug discount card programs
offered by prescription drug card sponsors that meet the
requirements of this section; and
``(2) make available to eligible beneficiaries information
regarding such endorsed programs.
``(b) Eligibility, Election of Program, and Enrollment
Fees.--
``(1) Eligibility and election of program.--
``(A) In general.--Subject to subparagraph (B), the
Secretary shall establish procedures--
``(i) for identifying eligible beneficiaries; and
``(ii) under which such beneficiaries may make an election
to enroll in any prescription drug discount card program
endorsed under this section and disenroll from such a
program.
``(B) Limitation.--An eligible beneficiary may not be
enrolled in more than 1 prescription drug discount card
program at any time.
``(2) Enrollment fees.--
``(A) In general.--A prescription drug card sponsor may
charge an annual enrollment fee to each eligible beneficiary
enrolled in a prescription drug discount card program offered
by such sponsor.
``(B) Amount.--No enrollment fee charged under subparagraph
(A) may exceed $25.
``(C) Uniform enrollment fee.--A prescription drug card
sponsor shall ensure that the enrollment fee for a
prescription drug discount card program endorsed under this
section is the same for all eligible medicare beneficiaries
enrolled in the program.
``(D) Collection.--Any enrollment fee shall be collected by
the prescription drug card sponsor.
``(c) Providing Information to Eligible Beneficiaries.--
``(1) Promotion of informed choice.--
``(A) By the secretary.--In order to promote informed
choice among endorsed prescription drug discount card
programs, the Secretary shall provide for the dissemination
of information which compares the costs and benefits of such
programs. Such dissemination shall be coordinated with the
dissemination of educational information on other medicare
options.
``(B) By prescription drug card sponsors.--Each
prescription drug card sponsor shall make available to each
eligible beneficiary (through the Internet and otherwise)
information--
``(i) that the Secretary identifies as being necessary to
promote informed choice among endorsed prescription drug
discount card programs by eligible beneficiaries, including
information on enrollment fees, negotiated prices for
prescription drugs charged to beneficiaries, and services
relating to prescription drugs offered under the program;
``(ii) on how any formulary used by such sponsor functions.
``(2) Use of medicare toll-free number.--The Secretary
shall provide through the 1-800-MEDICARE toll free telephone
number for the receipt and response to inquiries and
complaints concerning the medicare prescription drug discount
card endorsement program established under this section and
prescription drug discount card programs endorsed under such
program.
``(d) Beneficiary Protections.--
``(1) In general.--Each prescription drug discount card
program endorsed under this section shall meet such
requirements as the Secretary identifies to protect and
promote the interest of eligible beneficiaries, including
requirements that--
``(A) relate to appeals by eligible beneficiaries and
marketing practices; and
``(B) ensure that beneficiaries are not charged more than
the lower of the negotiated retail price or the usual and
customary price.
``(2) Ensuring pharmacy access.--Each prescription drug
card sponsor offering a prescription drug discount card
program endorsed under this section shall secure the
participation in its network of a sufficient number of
pharmacies that dispense (other than by mail order) drugs
directly to patients to ensure convenient access (as
determined by the Secretary and including adequate emergency
access) for enrolled beneficiaries. Such standards shall take
into account reasonable distances to pharmacy services in
both urban and rural areas.
``(3) Quality assurance.--Each prescription drug card
sponsor offering a prescription drug discount card program
endorsed under this section shall have in place adequate
procedures for assuring that quality service is provided to
eligible beneficiaries enrolled in a prescription drug
discount card program offered by such sponsor.
``(4) Confidentiality of enrollee records.--Insofar as a
prescription drug card sponsor maintains individually
identifiable medical records or other health information
regarding eligible beneficiaries enrolled in a prescription
drug discount card program endorsed under this section, the
prescription drug card sponsor shall have in place procedures
to safeguard the privacy of any individually identifiable
beneficiary information in a manner that the Secretary
determines is consistent with the Federal regulations
(concerning the privacy of individually identifiable health
information) promulgated under section 264(c) of the Health
Insurance Portability and Accountability Act of 1996.
``(5) No other fees.--A prescription drug card sponsor may
not charge any fee to an eligible beneficiary under a
prescription drug discount card program endorsed under this
section other than an enrollment fee charged under subsection
(b)(2)(A).
``(6) Prices.--
``(A) Avoidance of high priced drugs.--A prescription drug
card sponsor may not recommend switching an eligible
beneficiary to a drug with a higher negotiated price absent a
recommendation by a licensed health professional that there
is a clinical indication with respect to the patient for such
a switch.
``(B) Price stability.--Negotiated prices charged for
prescription drugs covered under
[[Page H6199]]
a prescription drug discount card program endorsed under this
section may not change more frequently than once every 60
days.
``(e) Prescription Drug Benefits.--
``(1) In general.--Each prescription drug card sponsor may
only provide benefits that relate to prescription drugs (as
defined in subsection (i)(2)) under a prescription drug
discount card program endorsed under this section.
``(2) Savings to eligible beneficiaries.--
``(A) In general.--Subject to subparagraph (D), each
prescription drug card sponsor shall provide eligible
beneficiaries who enroll in a prescription drug discount card
program offered by such sponsor that is endorsed under this
section with access to negotiated prices used by the sponsor
with respect to prescription drugs dispensed to eligible
beneficiaries.
``(B) Inapplicability of medicaid best price rules.--The
requirements of section 1927 relating to manufacturer best
price shall not apply to the negotiated prices for
prescription drugs made available under a prescription drug
discount card program endorsed under this section.
``(C) Guaranteed access to negotiated prices.--The
Secretary, in consultation with the Inspector General of the
Department of Health and Human Services, shall establish
procedures to ensure that eligible beneficiaries have access
to the negotiated prices for prescription drugs provided
under subparagraph (A).
``(D) Application of formulary restrictions.--A drug
prescribed for an eligible beneficiary that would otherwise
be a covered drug under this section shall not be so
considered under a prescription drug discount card program if
the program excludes the drug under a formulary.
``(3) Beneficiary services.--Each prescription drug
discount card program endorsed under this section shall
provide pharmaceutical support services, such as education,
counseling, and services to prevent adverse drug
interactions.
``(4) Discount cards.--Each prescription drug card sponsor
shall issue a card to eligible beneficiaries enrolled in a
prescription drug discount card program offered by such
sponsor that the beneficiary may use to obtain benefits under
the program.
``(f) Submission of Applications for Endorsement and
Approval.--
``(1) Submission of applications for endorsement.--Each
prescription drug card sponsor that seeks endorsement of a
prescription drug discount card program under this section
shall submit to the Secretary, at such time and in such
manner as the Secretary may specify, such information as
the Secretary may require.
``(2) Approval.--The Secretary shall review the information
submitted under paragraph (1) and shall determine whether to
endorse the prescription drug discount card program to which
such information relates. The Secretary may not approve a
program unless the program and prescription drug card sponsor
offering the program comply with the requirements under this
section.
``(g) Requirements on Development and Application of
Formularies.--If a prescription drug card sponsor offering a
prescription drug discount card program uses a formulary, the
following requirements must be met:
``(1) Pharmacy and therapeutic (p&t) committee.--
``(A) In general.--The eligible entity must establish a
pharmacy and therapeutic committee that develops and reviews
the formulary.
``(B) Composition.--A pharmacy and therapeutic committee
shall include at least 1 academic expert, at least 1
practicing physician, and at least 1 practicing pharmacist,
all of whom have expertise in the care of elderly or disabled
persons, and a majority of the members of such committee
shall consist of individuals who are a practicing physician
or a practicing pharmacist (or both).
``(2) Formulary development.--In developing and reviewing
the formulary, the committee shall base clinical decisions on
the strength of scientific evidence and standards of
practice, including assessing peer-reviewed medical
literature, such as randomized clinical trials,
pharmacoeconomic studies, outcomes research data, and such
other information as the committee determines to be
appropriate.
``(3) Inclusion of drugs in all therapeutic categories and
classes.--
``(A) In general.--The formulary must include drugs within
each therapeutic category and class of covered outpatient
drugs (as defined by the Secretary), although not necessarily
for all drugs within such categories and classes.
``(B) Requirement.--In defining therapeutic categories and
classes of covered outpatient drugs pursuant to subparagraph
(A), the Secretary shall use the compendia referred to
section 1927(g)(1)(B)(i) or other recognized sources for
categorizing drug therapeutic categories and classes.
``(4) Provider education.--The committee shall establish
policies and procedures to educate and inform health care
providers concerning the formulary.
``(5) Notice before removing drugs from formulary.--Any
removal of a drug from a formulary shall take effect only
after appropriate notice is made available to beneficiaries
and pharmacies.
``(h) Fraud and Abuse Prevention.--
``(1) In general.--The Secretary shall provide appropriate
oversight to ensure compliance of endorsed programs with the
requirements of this section, including verification of the
negotiated prices and services provided.
``(2) Disqualification for abusive practices.--The
Secretary may implement intermediate sanctions and may revoke
the endorsement of a program that the Secretary determines no
longer meets the requirements of this section or that has
engaged in false or misleading marketing practices.
``(3) Authority with respect to civil money penalties.--The
Secretary may impose a civil money penalty in an amount not
to exceed $10,000 for any violation of this section. The
provisions of section 1128A (other than subsections (a) and
(b)) shall apply to a civil money penalty under the previous
sentence in the same manner as such provisions apply to a
penalty or proceeding under section 1128A(a).
``(4) Reporting to secretary.--Each prescription drug card
sponsor offering a prescription drug discount card program
endorsed under this section shall report information relating
to program performance, use of prescription drugs by eligible
beneficiaries enrolled in the program, financial information
of the sponsor, and such other information as the Secretary
may specify. The Secretary may not disclose any proprietary
data reported under this paragraph.
``(5) Drug utilization review.--The Secretary may use
claims data from parts A and B for purposes of conducting a
drug utilization review program.
``(i) Definitions.--In this section:
``(1) Eligible beneficiary.--
``(A) In general.--The term `eligible beneficiary' means an
individual who--
``(i) is entitled to, or enrolled for, benefits under part
A and enrolled under part B; and
``(ii) is not a dual eligible individual (as defined in
subparagraph (B)).
``(B) Dual eligible individual.--
``(i) In general.--The term `dual eligible individual'
means an individual who is--
``(I) enrolled under title XIX or under a waiver under
section 1115 of the requirements of such title for medical
assistance that includes but is limited solely to covered
outpatient drugs (as such term is defined for purposes of
section 1927); and
``(II) entitled to benefits under part A and enrolled under
part B.
``(ii) Inclusion of medically needy.--Such term includes an
individual described in section 1902(a)(10)(C).
``(2) Prescription drug.--
``(A) In general.--Except as provided in subparagraph (B),
the term `prescription drug' means--
``(i) a drug that may be dispensed only upon a prescription
and that is described in clause (i) or (ii) of subparagraph
(A) of section 1927(k)(2); or
``(ii) a biological product or insulin described in
subparagraph (B) or (C) of such section,
and such term includes a vaccine licensed under section 351
of the Public Health Service Act and any use of a covered
outpatient drug for a medically accepted indication (as
defined in section 1927(k)(6)).
``(B) Exclusions.--The term `prescription drug' does not
include drugs or classes of drugs, or their medical uses,
which may be excluded from coverage or otherwise restricted
under section 1927(d)(2), other than subparagraph (E) thereof
(relating to smoking cessation agents), or under section
1927(d)(3).
``(3) Negotiated price.--The term `negotiated price'
includes all discounts, direct or indirect subsidies,
rebates, price concessions, and direct or indirect
remunerations.
``(4) Prescription drug card sponsor.--The term
`prescription drug card sponsor' means any entity with
demonstrated experience and expertise in operating a
prescription drug discount card program, an insurance program
that provides coverage for prescription drugs, or a similar
program that the Secretary determines to be appropriate to
provide eligible beneficiaries with the benefits under a
prescription drug discount card program endorsed by the
Secretary under this section, including--
``(A) a pharmaceutical benefit management company;
``(B) a wholesale or retail pharmacist delivery system;
``(C) an insurer (including an insurer that offers medicare
supplemental policies under section 1882);
``(D) any other entity; or
``(E) any combination of the entities described in
subparagraphs (A) through (D).
``transitional prescription drug assistance card program for eligible
low-income beneficiaries
``Sec. 1807A. (a) Establishment.--
``(1) In general.--There is established a program under
which the Secretary shall award contracts to prescription
drug card sponsors offering a prescription drug discount card
that has been endorsed by the Secretary under section 1807
under which such sponsors shall offer a prescription drug
assistance card program to eligible low-income beneficiaries
in accordance with the requirements of this section.
``(2) Application of discount card provisions.--Except as
otherwise provided in this section, the provisions of section
1807 shall apply to the program established under this
section.
``(b) Eligibility, Election of Program, and Enrollment
Fees.--
``(1) Eligibility and election of program.--
[[Page H6200]]
``(A) In general.--Subject to the succeeding provisions of
this paragraph, the enrollment procedures established under
section 1807(b)(1)(A)(ii) shall apply for purposes of this
section.
``(B) Enrollment of any eligible low-income beneficiary.--
Each prescription drug card sponsor offering a prescription
drug assistance card program under this section shall permit
any eligible low-income beneficiary to enroll in such program
if it serves the geographic area in which the beneficiary
resides.
``(C) Simultaneous enrollment in prescription drug discount
card program.--An eligible low-income beneficiary who enrolls
in a prescription drug assistance card program offered by a
prescription drug card sponsor under this section shall be
simultaneously enrolled in a prescription drug discount card
program offered by such sponsor.
``(2) Waiver of enrollment fees.--
``(A) In general.--A prescription drug card sponsor may not
charge an enrollment fee to any eligible low-income
beneficiary enrolled in a prescription drug discount card
program offered by such sponsor.
``(B) Payment by secretary.--Under a contract awarded under
subsection (f)(2), the Secretary shall pay to each
prescription drug card sponsor an amount equal to any
enrollment fee charged under section 1807(b)(2)(A) on behalf
of each eligible low-income beneficiary enrolled in a
prescription drug discount card program under paragraph
(1)(C) offered by such sponsor.
``(c) Additional Beneficiary Protections.--
``(1) Providing information to eligible low-income
beneficiaries.--In addition to the information provided to
eligible beneficiaries under section 1807(c), the
prescription drug card sponsor shall--
``(A) periodically notify each eligible low-income
beneficiary enrolled in a prescription drug assistance card
program offered by such sponsor of the amount of coverage for
prescription drugs remaining under subsection (d)(2)(A); and
``(B) notify each eligible low-income beneficiary enrolled
in a prescription drug assistance card program offered by
such sponsor of the grievance and appeals processes under the
program.
``(2) Convenient access in long-term care facilities.--For
purposes of determining whether convenient access has been
provided under section 1807(d)(2) with respect to eligible
low-income beneficiaries enrolled in a prescription drug
assistance card program, the Secretary may only make a
determination that such access has been provided if an
appropriate arrangement is in place for eligible low-income
beneficiaries who are in a long-term care facility (as
defined by the Secretary) to receive prescription drug
benefits under the program.
``(3) Coordination of benefits.--
``(A) In general.--The Secretary shall establish procedures
under which eligible low-income beneficiaries who are
enrolled for coverage described in subparagraph (B) and
enrolled in a prescription drug assistance card program have
access to the prescription drug benefits available under such
program.
``(B) Coverage described.--Coverage described in this
subparagraph is as follows:
``(i) Coverage of prescription drugs under a State
pharmaceutical assistance program.
``(ii) Enrollment in a Medicare+Choice plan under part C.
``(4) Grievance mechanism.--Each prescription drug card
sponsor with a contract under this section shall provide in
accordance with section 1852(f) meaningful procedures for
hearing and resolving grievances between the prescription
drug card sponsor (including any entity or individual through
which the prescription drug card sponsor provides covered
benefits) and enrollees in a prescription drug assistance
card program offered by such sponsor.
``(5) Application of coverage determination and
reconsideration provisions.--
``(A) In general.--The requirements of paragraphs (1)
through (3) of section 1852(g) shall apply with respect to
covered benefits under a prescription drug assistance card
program under this section in the same manner as such
requirements apply to a Medicare+Choice organization with
respect to benefits it offers under a Medicare+Choice plan
under part C.
``(B) Request for review of tiered formulary
determinations.--In the case of a prescription drug
assistance card program offered by a prescription drug card
sponsor that provides for tiered pricing for drugs included
within a formulary and provides lower prices for preferred
drugs included within the formulary, an eligible low-income
beneficiary who is enrolled in the program may request
coverage of a nonpreferred drug under the terms applicable
for preferred drugs if the prescribing physician determines
that the preferred drug for treatment of the same condition
is not as effective for the eligible low-income beneficiary
or has adverse effects for the eligible low-income
beneficiary.
``(C) Formulary determinations.--An eligible low-income
beneficiary who is enrolled in a prescription drug assistance
card program offered by a prescription drug card sponsor may
appeal to obtain coverage for a covered drug that is not on a
formulary of the entity if the prescribing physician
determines that the formulary drug for treatment of the same
condition is not as effective for the eligible low-income
beneficiary or has adverse effects for the eligible low-
income beneficiary.
``(6) Appeals.--
``(A) In general.--Subject to subparagraph (B), a
prescription drug card sponsor shall meet the requirements of
paragraphs (4) and (5) of section 1852(g) with respect to
drugs not included on any formulary in a similar manner (as
determined by the Secretary) as such requirements apply to a
Medicare+Choice organization with respect to benefits it
offers under a Medicare+Choice plan under part C.
``(B) Formulary determinations.--An eligible low-income
beneficiary who is enrolled in a prescription drug assistance
card program offered by a prescription drug card sponsor may
appeal to obtain coverage for a covered drug that is not on a
formulary of the entity if the prescribing physician
determines that the formulary drug for treatment of the same
condition is not as effective for the eligible low-income
beneficiary or has adverse effects for the eligible low-
income beneficiary.
``(C) Appeals and exceptions to application.--The
prescription drug card sponsor must have, as part of the
appeals process under this paragraph, a process for timely
appeals for denials of coverage based on the application of
the formulary.
``(d) Prescription Drug Benefits.--
``(1) In general.--Subject to paragraph (5), all the
benefits available under a prescription drug discount card
program offered by a prescription drug card sponsor and
endorsed under section 1807 shall be available to eligible
low-income beneficiaries enrolled in a prescription drug
assistance card program offered by such sponsor.
``(2) Assistance for eligible low-income beneficiaries.--
``(A) $600 annual assistance.--Subject to subparagraphs (B)
and (C) and paragraph (5), each prescription drug card
sponsor with a contract under this section shall provide
coverage for the first $600 of expenses for prescription
drugs incurred during each calendar year by an eligible low-
income beneficiary enrolled in a prescription drug assistance
card program offered by such sponsor.
``(B) Coinsurance.--
``(i) In general.--The prescription drug card sponsor shall
determine an amount of coinsurance to collect from each
eligible low-income beneficiary enrolled in a prescription
drug assistance card program offered by such sponsor for
which coverage is available under subparagraph (A).
``(ii) Amount.--The amount of coinsurance collected under
clause (i) shall be at least 10 percent of the negotiated
price of each prescription drug dispensed to an eligible low-
income beneficiary.
``(iii) Construction.--Amounts collected under clause (i)
shall not be counted against the total amount of coverage
available under subparagraph (A).
``(C) Reduction for late enrollment.--For each month during
a calendar quarter in which an eligible low-income
beneficiary is not enrolled in a prescription drug assistance
card program offered by a prescription drug card sponsor with
a contract under this section, the amount of assistance
available under subparagraph (A) shall be reduced by $50.
``(D) Crediting of unused benefits toward future years.--
The dollar amount of coverage described in subparagraph (A)
shall be increased by any amount of coverage described in
such subparagraph that was not used during the previous
calendar year.
``(E) Waiver to ensure provision of benefit.--The Secretary
may waive such requirements of this section and section 1807
as may be necessary to ensure that each eligible low-income
beneficiaries has access to the assistance described in
subparagraph (A).
``(3) Additional discounts.--A prescription drug card
sponsor with a contract under this section shall provide each
eligible low-income beneficiary enrolled in a prescription
drug assistance program offered by the sponsor with access to
negotiated prices that reflect a minimum average discount of
at least 20 percent of the average wholesale price for
prescription drugs covered under that program.
``(4) Assistance cards.--Each prescription drug card
sponsor shall permit eligible low-income beneficiaries
enrolled in a prescription drug assistance card program
offered by such sponsor to use the discount card issued under
section 1807(e)(4) to obtain benefits under the program.
``(5) Application of formulary restrictions.--A drug
prescribed for an eligible low-income beneficiary that would
otherwise be a covered drug under this section shall not be
so considered under a prescription drug assistance card
program if the program excludes the drug under a formulary
and such exclusion is not successfully resolved under
paragraph (4), (5), or (6) of subsection (c).
``(e) Requirements for Prescription Drug Card Sponsors That
Offer Prescription Drug Assistance Card Programs.--
``(1) In general.--Each prescription drug card sponsor
shall--
``(A) process claims made by eligible low-income
beneficiaries;
``(B) negotiate with brand name and generic prescription
drug manufacturers and others for low prices on prescription
drugs;
``(C) track individual beneficiary expenditures in a format
and periodicity specified by the Secretary; and
``(D) perform such other functions as the Secretary may
assign.
[[Page H6201]]
``(2) Data exchanges.--Each prescription drug card sponsor
shall receive data exchanges in a format specified by the
Secretary and shall maintain real-time beneficiary files.
``(3) Public disclosure of pharmaceutical prices for
equivalent drugs.--The prescription drug card sponsor
offering the prescription drug assistance card program shall
provide that each pharmacy or other dispenser that arranges
for the dispensing of a covered drug shall inform the
eligible low-income beneficiary at the time of purchase of
the drug of any differential between the price of the
prescribed drug to the enrollee and the price of the lowest
priced generic drug covered under the plan that is
therapeutically equivalent and bioequivalent and available at
such pharmacy or other dispenser.
``(f) Submission of Bids and Awarding of Contracts.--
``(1) Submission of bids.--Each prescription drug card
sponsor that seeks to offer a prescription drug assistance
card program under this section shall submit to the
Secretary, at such time and in such manner as the Secretary
may specify, such information as the Secretary may require.
``(2) Awarding of contracts.--The Secretary shall review
the information submitted under paragraph (1) and shall
determine whether to award a contract to the prescription
drug card sponsor offering the program to which such
information relates. The Secretary may not approve a program
unless the program and prescription drug card sponsor
offering the program comply with the requirements under this
section.
``(3) Number of contracts.--There shall be no limit on the
number of prescription drug card sponsors that may be awarded
contracts under paragraph (2).
``(4) Contract provisions.--
``(A) Duration.--A contract awarded under paragraph (2)
shall be for the lifetime of the program under this section.
``(B) Withdrawal.--A prescription drug card sponsor that
desires to terminate the contract awarded under paragraph (2)
may terminate such contract without penalty if such sponsor
gives notice--
``(i) to the Secretary 90 days prior to the termination of
such contract; and
``(ii) to each eligible low-income beneficiary that is
enrolled in a prescription drug assistance card program
offered by such sponsor 60 days prior to such termination.
``(C) Service area.--The service area under the contract
shall be the same as the area served by the prescription drug
card sponsor under section 1807.
``(5) Simultaneous approval of discount card and assistance
programs.--A prescription drug card sponsor may submit an
application for endorsement under section 1807 as part of the
bid submitted under paragraph (1) and the Secretary may
approve such application at the same time as the Secretary
awards a contract under this section.
``(g) Payments to Prescription Drug Card Sponsors.--
``(1) In general.--The Secretary shall pay to each
prescription drug card sponsor offering a prescription drug
assistance card program in which an eligible low-income
beneficiary is enrolled an amount equal to the amount agreed
to by the Secretary and the sponsor in the contract awarded
under subsection (f)(2).
``(2) Payment from part b trust fund.--The costs of
providing benefits under this section shall be payable from
the Federal Supplementary Medical Insurance Trust Fund
established under section 1841.
``(h) Eligibility Determinations Made by States;
Presumptive Eligibility.--States shall perform the functions
described in section 1935(a)(1).
``(i) Appropriations.--There are appropriated from the
Federal Supplementary Medical Insurance Trust Fund
established under section 1841 such sums as may be necessary
to carry out the program under this section.
``(j) Definitions.--In this section:
``(1) Eligible beneficiary; negotiated price; prescription
drug.--The terms `eligible beneficiary', `negotiated price',
and `prescription drug' have the meanings given those terms
in section 1807(i).
``(2) Eligible low-income beneficiary.--The term `eligible
low-income beneficiary' means an individual who--
``(A) is an eligible beneficiary (as defined in section
1807(i));
``(B) is not a dual eligible beneficiary as defined under
section 1807(i)(1)(B); and
``(C) is described in clause (iii) or (iv) of section
1902(a)(10)(E) or in section 1905(p)(1).
``(3) Prescription drug card sponsor.--The term
`prescription drug card sponsor' has the meaning given that
term in section 1807(i), except that such sponsor shall also
be an entity that the Secretary determines is--
``(A) is appropriate to provide eligible low-income
beneficiaries with the benefits under a prescription drug
assistance card program under this section; and
``(B) is able to manage the monetary assistance made
available under subsection (d)(2);
``(C) agrees to submit to audits by the Secretary; and
``(D) provides such other assurances as the Secretary may
require.
``(4) State.--The term `State' has the meaning given such
term for purposes of title XIX.''.
(b) Exclusion of Prices From Determination of Best Price.--
Section 1927(c)(1)(C)(i) (42 U.S.C. 1396r-8(c)(1)(C)(i)) is
amended--
(1) by striking ``and'' at the end of subclause (III);
(2) by striking the period at the end of subclause (IV) and
inserting ``; and''; and
(3) by adding at the end the following new subclause:
``(V) any negotiated prices charged under the medicare
prescription drug discount card endorsement program under
section 1807 or under the transitional prescription drug
assistance card program for eligible low-income beneficiaries
under section 1807A.''.
(c) Exclusion of Prescription Drug Assistance Card Costs
From Determination of Part B Monthly Premium.--Section
1839(g) of the Social Security Act (42 U.S.C. 1395r(g)) is
amended--
(1) by striking ``attributable to the application of
section'' and inserting ``attributable to--
``(1) the application of section'';
(2) by striking the period and inserting ``; and''; and
(3) by adding at the end the following new paragraph:
``(2) the prescription drug assistance card program under
section 1807A.''.
(d) Regulations.--
(1) Authority for interim final regulations.--The Secretary
may promulgate initial regulations implementing sections 1807
and 1807A of the Social Security Act (as added by this
section) in interim final form without prior opportunity for
public comment.
(2) Final regulations.--A final regulation reflecting
public comments must be published within 1 year of the
interim final regulation promulgated under paragraph (1).
(3) Exemption from the paperwork reduction act.--The
promulgation of the regulations under this subsection and the
administration the programs established by sections 1807 and
1807A of the Social Security Act (as added by this section)
shall be made without regard to chapter 35 of title 44,
United States Code (commonly known as the ``Paperwork
Reduction Act'').
(e) Implementation; Transition.--
(1) Implementation.--The Secretary shall implement the
amendments made by this section in a manner that discounts
are available to eligible beneficiaries under section 1807 of
the Social Security Act and assistance is available to
eligible low-income beneficiaries under section 1807A of such
Act not later than January 1, 2004.
(2) Transition.--The Secretary shall provide for an
appropriate transition and discontinuation of the programs
under section 1807 and 1807A of the Social Security Act. Such
transition and discontinuation shall ensure that such
programs continue to operate until the date on which the
first enrollment period under part D ends.
Subtitle C--Standards for Electronic Prescribing
SEC. 121. STANDARDS FOR ELECTRONIC PRESCRIBING.
Title XI (42 U.S.C. 1301 et seq.) is amended by adding at
the end the following new part:
``Part D--Electronic Prescribing
``standards for electronic prescribing
``Sec. 1180. (a) Standards.--
``(1) Development and Adoption.--
``(A) In general.--The Secretary shall develop or adopt
standards for transactions and data elements for such
transactions (in this section referred to as `standards') to
enable the electronic transmission of medication history,
eligibility, benefit, and other prescription information.
``(B) Consultation.--In developing and adopting the
standards under subparagraph (A), the Secretary shall consult
with representatives of physicians, hospitals, pharmacists,
standard setting organizations, pharmacy benefit managers,
beneficiary information exchange networks, technology
experts, and representatives of the Departments of Veterans
Affairs and Defense and other interested parties.
``(2) Objective.--Any standards developed or adopted under
this part shall be consistent with the objectives of
improving--
``(A) patient safety; and
``(B) the quality of care provided to patients.
``(3) Requirements.--Any standards developed or adopted
under this part shall comply with the following:
``(A) Electronic transmittal of prescriptions.--
``(i) In general.--Except as provided in clause (ii), the
standards require that prescriptions be written and
transmitted electronically.
``(ii) Exceptions.--The standards shall not require a
prescription to be written and transmitted electronically--
``(I) in emergency cases and other exceptional
circumstances recognized by the Administrator; or
``(II) if the patient requests that the prescription not be
transmitted electronically.
If a patient makes a request under subclause (II), no
additional charges may be imposed on the patient for making
such request.
``(B) Patient-specific medication history, eligibility,
benefit, and other prescription information.--
``(i) In general.--The standards shall accommodate
electronic transmittal of patient-specific medication
history, eligibility, benefit, and other prescription
information among prescribing and dispensing professionals at
the point of care.
``(ii) Required information.--The information described in
clause (i) shall include the following:
[[Page H6202]]
``(I) Information (to the extent available and feasible) on
the drugs being prescribed for that patient and other
information relating to the medication history of the patient
that may be relevant to the appropriate prescription for that
patient.
``(II) Cost-effective alternatives (if any) to the drug
prescribed.
``(III) Information on eligibility and benefits, including
the drugs included in the applicable formulary and any
requirements for prior authorization.
``(IV) Information on potential interactions with drugs
listed on the medication history, graded by severity of the
potential interaction.
``(V) Other information to improve the quality of patient
care and to reduce medical errors.
``(C) Undue burden.--The standards shall be designed so
that, to the extent practicable, the standards do not impose
an undue administrative burden on the practice of medicine,
pharmacy, or other health professions.
``(D) Compatibility with administrative simplification and
privacy laws.--The standards shall be--
``(i) consistent with the Federal regulations (concerning
the privacy of individually identifiable health information)
promulgated under section 264(c) of the Health Insurance
Portability and Accountability Act of 1996; and
``(ii) compatible with the standards adopted under part C.
``(4) Transfer of information.--The Secretary shall develop
and adopt standards for transferring among prescribing and
insurance entities and other necessary entities appropriate
standard data elements needed for the electronic exchange of
medication history, eligibility, benefit, and other
prescription drug information and other health information
determined appropriate in compliance with the standards
adopted or modified under this part.
``(b) Timetable for Adoption of Standards.--
``(1) In general.--The Secretary shall adopt the standards
under this part by January 1, 2006.
``(2) Additions and modifications to standards.--The
Secretary shall, in consultation with appropriate
representatives of interested parties, review the standards
developed or adopted under this part and adopt modifications
to the standards (including additions to the standards), as
determined appropriate. Any addition or modification to such
standards shall be completed in a manner which minimizes the
disruption and cost of compliance.
``(c) Compliance With Standards.--
``(1) Requirement for all individuals and entities that
transmit or receive prescriptions electronically.--
``(A) In general.--Individuals or entities that transmit or
receive electronic medication history, eligibility, benefit
and prescription information, shall comply with the standards
adopted or modified under this part.
``(B) Relation to state laws.--The standards adopted or
modified under this part shall supersede any State law or
regulations pertaining to the electronic transmission of
medication history, eligibility, benefit and prescription
information.
``(2) Timetable for compliance.--
``(A) Initial compliance.--
``(i) In general.--Not later than 24 months after the date
on which an initial standard is adopted under this part, each
individual or entity to whom the standard applies shall
comply with the standard.
``(ii) Special rule for small health plans.--In the case of
a small health plan, as defined by the Secretary for purposes
of section 1175(b)(1)(B), clause (i) shall be applied by
substituting `36 months' for `24 months'.
``(d) Consultation With Attorney General.--The Secretary
shall consult with the Attorney General before developing,
adopting, or modifying a standard under this part to ensure
that the standard accommodates secure electronic transmission
of prescriptions for controlled substances in a manner that
minimizes the possibility of violations under the
Comprehensive Drug Abuse Prevention and Control Act of 1970
and related Federal laws.
``grants to health care providers to implement electronic prescription
programs
``Sec. 1180A. (a) In General.--The Secretary is authorized
to make grants to health care providers for the purpose of
assisting such entities to implement electronic prescription
programs that comply with the standards adopted or modified
under this part.
``(b) Application.--No grant may be made under this section
except pursuant to a grant application that is submitted in a
time, manner, and form approved by the Secretary.
``(c) Authorization of Appropriations.--There are
authorized to be appropriated for each of fiscal years 2006,
2007, and 2008, such sums as may be necessary to carry out
this section.''.
TITLE II--MEDICAREADVANTAGE
Subtitle A--MedicareAdvantage Competition
SEC. 201. ELIGIBILITY, ELECTION, AND ENROLLMENT.
Section 1851 (42 U.S.C. 1395w-21) is amended to read as
follows:
``eligibility, election, and enrollment
``Sec. 1851. (a) Choice of Medicare Benefits Through
MedicareAdvantage Plans.--
``(1) In general.--Subject to the provisions of this
section, each MedicareAdvantage eligible individual (as
defined in paragraph (3)) is entitled to elect to receive
benefits under this title--
``(A) through--
``(i) the original Medicare fee-for-service program under
parts A and B; and
``(ii) the voluntary prescription drug delivery program
under part D; or
``(B) through enrollment in a MedicareAdvantage plan under
this part.
``(2) Types of medicareadvantage plans that may be
available.--A MedicareAdvantage plan may be any of the
following types of plans of health insurance:
``(A) Coordinated care plans.--Coordinated care plans which
provide health care services, including health maintenance
organization plans (with or without point of service options)
and plans offered by provider-sponsored organizations (as
defined in section 1855(d)).
``(B) Combination of msa plan and contributions to
medicareadvantage msa.--An MSA plan, as defined in section
1859(b)(3), and a contribution into a MedicareAdvantage
medical savings account (MSA).
``(C) Private fee-for-service plans.--A MedicareAdvantage
private fee-for-service plan, as defined in section
1859(b)(2).
``(3) Medicareadvantage eligible individual.--
``(A) In general.--Subject to subparagraph (B), in this
title, the term `MedicareAdvantage eligible individual' means
an individual who is entitled to (or enrolled for) benefits
under part A, enrolled under part B, and enrolled under part
D.
``(B) Special rule for end-stage renal disease.--Such term
shall not include an individual medically determined to have
end-stage renal disease, except that--
``(i) an individual who develops end-stage renal disease
while enrolled in a Medicare+Choice or a MedicareAdvantage
plan may continue to be enrolled in that plan; and
``(ii) in the case of such an individual who is enrolled in
a Medicare+Choice plan or a MedicareAdvantage plan under
clause (i) (or subsequently under this clause), if the
enrollment is discontinued under circumstances described in
section 1851(e)(4)(A), then the individual will be treated as
a `MedicareAdvantage eligible individual' for purposes of
electing to continue enrollment in another MedicareAdvantage
plan.
``(b) Special Rules.--
``(1) Residence requirement.--
``(A) In general.--Except as the Secretary may otherwise
provide and except as provided in subparagraph (C), an
individual is eligible to elect a MedicareAdvantage plan
offered by a MedicareAdvantage organization only if the plan
serves the geographic area in which the individual resides.
``(B) Continuation of enrollment permitted.--Pursuant to
rules specified by the Secretary, the Secretary shall provide
that a plan may offer to all individuals residing in a
geographic area the option to continue enrollment in the
plan, notwithstanding that the individual no longer resides
in the service area of the plan, so long as the plan provides
that individuals exercising this option have, as part of the
basic benefits described in section 1852(a)(1)(A), reasonable
access within that geographic area to the full range of basic
benefits, subject to reasonable cost-sharing liability in
obtaining such benefits.
``(C) Continuation of enrollment permitted where service
changed.--Notwithstanding subparagraph (A) and in addition to
subparagraph (B), if a MedicareAdvantage organization
eliminates from its service area a MedicareAdvantage payment
area that was previously within its service area, the
organization may elect to offer individuals residing in all
or portions of the affected area who would otherwise be
ineligible to continue enrollment the option to continue
enrollment in a MedicareAdvantage plan it offers so long as--
``(i) the enrollee agrees to receive the full range of
basic benefits (excluding emergency and urgently needed care)
exclusively at facilities designated by the organization
within the plan service area; and
``(ii) there is no other MedicareAdvantage plan offered in
the area in which the enrollee resides at the time of the
organization's election.
``(2) Special rule for certain individuals covered under
fehbp or eligible for veterans or military health benefits.--
``(A) FEHBP.--An individual who is enrolled in a health
benefit plan under chapter 89 of title 5, United States Code,
is not eligible to enroll in an MSA plan until such time as
the Director of the Office of Management and Budget certifies
to the Secretary that the Office of Personnel Management has
adopted policies which will ensure that the enrollment of
such individuals in such plans will not result in increased
expenditures for the Federal Government for health benefit
plans under such chapter.
``(B) VA and dod.--The Secretary may apply rules similar to
the rules described in subparagraph (A) in the case of
individuals who are eligible for health care benefits under
chapter 55 of title 10, United States Code, or under chapter
17 of title 38 of such Code.
``(3) Limitation on eligibility of qualified medicare
beneficiaries and other medicaid beneficiaries to enroll in
an msa plan.--An individual who is a qualified medicare
beneficiary (as defined in section 1905(p)(1)), a qualified
disabled and working
[[Page H6203]]
individual (described in section 1905(s)), an individual
described in section 1902(a)(10)(E)(iii), or otherwise
entitled to medicare cost-sharing under a State plan under
title XIX is not eligible to enroll in an MSA plan.
``(4) Coverage under msa plans on a demonstration basis.--
``(A) In general.--An individual is not eligible to enroll
in an MSA plan under this part--
``(i) on or after January 1, 2004, unless the enrollment is
the continuation of such an enrollment in effect as of such
date; or
``(ii) as of any date if the number of such individuals so
enrolled as of such date has reached 390,000.
Under rules established by the Secretary, an individual is
not eligible to enroll (or continue enrollment) in an MSA
plan for a year unless the individual provides assurances
satisfactory to the Secretary that the individual will reside
in the United States for at least 183 days during the year.
``(B) Evaluation.--The Secretary shall regularly evaluate
the impact of permitting enrollment in MSA plans under this
part on selection (including adverse selection), use of
preventive care, access to care, and the financial status of
the Trust Funds under this title.
``(C) Reports.--The Secretary shall submit to Congress
periodic reports on the numbers of individuals enrolled in
such plans and on the evaluation being conducted under
subparagraph (B).
``(c) Process for Exercising Choice.--
``(1) In general.--The Secretary shall establish a process
through which elections described in subsection (a) are made
and changed, including the form and manner in which such
elections are made and changed. Such elections shall be made
or changed only during coverage election periods specified
under subsection (e) and shall become effective as provided
in subsection (f).
``(2) Coordination through medicareadvantage
organizations.--
``(A) Enrollment.--Such process shall permit an individual
who wishes to elect a MedicareAdvantage plan offered by a
MedicareAdvantage organization to make such election through
the filing of an appropriate election form with the
organization.
``(B) Disenrollment.--Such process shall permit an
individual, who has elected a MedicareAdvantage plan offered
by a MedicareAdvantage organization and who wishes to
terminate such election, to terminate such election through
the filing of an appropriate election form with the
organization.
``(3) Default.--
``(A) Initial election.--
``(i) In general.--Subject to clause (ii), an individual
who fails to make an election during an initial election
period under subsection (e)(1) is deemed to have chosen the
original medicare fee-for-service program option.
``(ii) Seamless continuation of coverage.--The Secretary
may establish procedures under which an individual who is
enrolled in a Medicare+Choice plan or another health plan
(other than a MedicareAdvantage plan) offered by a
MedicareAdvantage organization at the time of the initial
election period and who fails to elect to receive coverage
other than through the organization is deemed to have elected
the MedicareAdvantage plan offered by the organization (or,
if the organization offers more than 1 such plan, such plan
or plans as the Secretary identifies under such procedures).
``(B) Continuing periods.--An individual who has made (or
is deemed to have made) an election under this section is
considered to have continued to make such election until such
time as--
``(i) the individual changes the election under this
section; or
``(ii) the MedicareAdvantage plan with respect to which
such election is in effect is discontinued or, subject to
subsection (b)(1)(B), no longer serves the area in which the
individual resides.
``(d) Providing Information To Promote Informed Choice.--
``(1) In general.--The Secretary shall provide for
activities under this subsection to broadly disseminate
information to medicare beneficiaries (and prospective
medicare beneficiaries) on the coverage options provided
under this section in order to promote an active, informed
selection among such options.
``(2) Provision of notice.--
``(A) Open season notification.--At least 15 days before
the beginning of each annual, coordinated election period (as
defined in subsection (e)(3)(B)), the Secretary shall mail to
each MedicareAdvantage eligible individual residing in an
area the following:
``(i) General information.--The general information
described in paragraph (3).
``(ii) List of plans and comparison of plan options.--A
list identifying the MedicareAdvantage plans that are (or
will be) available to residents of the area and information
described in paragraph (4) concerning such plans. Such
information shall be presented in a comparative form.
``(iii) Additional information.--Any other information that
the Secretary determines will assist the individual in making
the election under this section.
The mailing of such information shall be coordinated, to the
extent practicable, with the mailing of any annual notice
under section 1804.
``(B) Notification to newly eligible medicareadvantage
eligible individuals.--To the extent practicable, the
Secretary shall, not later than 30 days before the beginning
of the initial MedicareAdvantage enrollment period for an
individual described in subsection (e)(1), mail to the
individual the information described in subparagraph (A).
``(C) Form.--The information disseminated under this
paragraph shall be written and formatted using language that
is easily understandable by medicare beneficiaries.
``(D) Periodic updating.--The information described in
subparagraph (A) shall be updated on at least an annual basis
to reflect changes in the availability of MedicareAdvantage
plans, the benefits under such plans, and the
MedicareAdvantage monthly basic beneficiary premium,
MedicareAdvantage monthly beneficiary premium for enhanced
medical benefits, and MedicareAdvantage monthly beneficiary
obligation for qualified prescription drug coverage for such
plans.
``(3) General information.--General information under this
paragraph, with respect to coverage under this part during a
year, shall include the following:
``(A) Benefits under the original medicare fee-for-service
program option.--A general description of the benefits
covered under parts A and B of the original medicare fee-for-
service program, including--
``(i) covered items and services;
``(ii) beneficiary cost-sharing, such as deductibles,
coinsurance, and copayment amounts; and
``(iii) any beneficiary liability for balance billing.
``(B) Catastrophic coverage and combined deductible.--A
description of the catastrophic coverage and unified
deductible applicable under the plan.
``(C) Outpatient prescription drug coverage benefits.--The
information required under section 1860D-4 with respect to
coverage for prescription drugs under the plan.
``(D) Election procedures.--Information and instructions on
how to exercise election options under this section.
``(E) Rights.--A general description of procedural rights
(including grievance and appeals procedures) of beneficiaries
under the original medicare fee-for-service program
(including such rights under part D) and the
MedicareAdvantage program and the right to be protected
against discrimination based on health status-related factors
under section 1852(b).
``(F) Information on medigap and medicare select.--A
general description of the benefits, enrollment rights, and
other requirements applicable to medicare supplemental
policies under section 1882 and provisions relating to
medicare select policies described in section 1882(t).
``(G) Potential for contract termination.--The fact that a
MedicareAdvantage organization may terminate its contract,
refuse to renew its contract, or reduce the service area
included in its contract, under this part, and the effect of
such a termination, nonrenewal, or service area reduction may
have on individuals enrolled with the MedicareAdvantage plan
under this part.
``(4) Information comparing plan options.--Information
under this paragraph, with respect to a MedicareAdvantage
plan for a year, shall include the following:
``(A) Benefits.--The benefits covered under the plan,
including the following:
``(i) Covered items and services beyond those provided
under the original medicare fee-for-service program option.
``(ii) Beneficiary cost-sharing for any items and services
described in clause (i) and paragraph (3)(A)(i), including
information on the unified deductible under section
1852(a)(1)(C).
``(iii) The maximum limitations on out-of-pocket expenses
under section 1852(a)(1)(C).
``(iv) In the case of an MSA plan, differences in cost-
sharing, premiums, and balance billing under such a plan
compared to under other MedicareAdvantage plans.
``(v) In the case of a MedicareAdvantage private fee-for-
service plan, differences in cost-sharing, premiums, and
balance billing under such a plan compared to under other
MedicareAdvantage plans.
``(vi) The extent to which an enrollee may obtain benefits
through out-of-network health care providers.
``(vii) The extent to which an enrollee may select among
in-network providers and the types of providers participating
in the plan's network.
``(viii) The organization's coverage of emergency and
urgently needed care.
``(ix) The comparative information described in section
1860D-4(b)(2) relating to prescription drug coverage under
the plan.
``(B) Premiums.--
``(i) In general.--The MedicareAdvantage monthly basic
beneficiary premium and MedicareAdvantage monthly beneficiary
premium for enhanced medical benefits, if any, for the plan
or, in the case of an MSA plan, the MedicareAdvantage monthly
MSA premium.
``(ii) Reductions.--The reduction in part B premiums, if
any.
``(iii) Nature of the premium for enhanced medical
benefits.--Whether the MedicareAdvantage monthly premium for
enhanced benefits is optional or mandatory.
``(C) Service area.--The service area of the plan.
``(D) Quality and performance.--Plan quality and
performance indicators for the
[[Page H6204]]
benefits under the plan (and how such indicators compare to
quality and performance indicators under the original
medicare fee-for-service program under parts A and B and
under the voluntary prescription drug delivery program under
part D in the area involved), including--
``(i) disenrollment rates for medicare enrollees electing
to receive benefits through the plan for the previous 2 years
(excluding disenrollment due to death or moving outside the
plan's service area);
``(ii) information on medicare enrollee satisfaction;
``(iii) information on health outcomes; and
``(iv) the recent record regarding compliance of the plan
with requirements of this part (as determined by the
Secretary).
``(5) Maintaining a toll-free number and internet site.--
The Secretary shall maintain a toll-free number for inquiries
regarding MedicareAdvantage options and the operation of this
part in all areas in which MedicareAdvantage plans are
offered and an Internet site through which individuals may
electronically obtain information on such options and
MedicareAdvantage plans.
``(6) Use of non-federal entities.--The Secretary may enter
into contracts with non-Federal entities to carry out
activities under this subsection.
``(7) Provision of information.--A MedicareAdvantage
organization shall provide the Secretary with such
information on the organization and each MedicareAdvantage
plan it offers as may be required for the preparation of the
information referred to in paragraph (2)(A).
``(e) Coverage Election Periods.--
``(1) Initial choice upon eligibility to make election if
medicareadvantage plans available to individual.--If, at the
time an individual first becomes eligible to elect to receive
benefits under part B or D (whichever is later), there is 1
or more MedicareAdvantage plans offered in the area in which
the individual resides, the individual shall make the
election under this section during a period specified by the
Secretary such that if the individual elects a
MedicareAdvantage plan during the period, coverage under the
plan becomes effective as of the first date on which the
individual may receive such coverage.
``(2) Open enrollment and disenrollment opportunities.--
Subject to paragraph (5), the following rules shall apply:
``(A) Continuous open enrollment and disenrollment through
2005.--At any time during the period beginning January 1,
1998, and ending on December 31, 2005, a Medicare+Choice
eligible individual may change the election under subsection
(a)(1).
``(B) Continuous open enrollment and disenrollment for
first 6 months during 2006.--
``(i) In general.--Subject to clause (ii) and subparagraph
(D), at any time during the first 6 months of 2006, or, if
the individual first becomes a MedicareAdvantage eligible
individual during 2006, during the first 6 months during 2006
in which the individual is a MedicareAdvantage eligible
individual, a MedicareAdvantage eligible individual may
change the election under subsection (a)(1).
``(ii) Limitation of 1 change.--An individual may exercise
the right under clause (i) only once. The limitation under
this clause shall not apply to changes in elections effected
during an annual, coordinated election period under paragraph
(3) or during a special enrollment period under the first
sentence of paragraph (4).
``(C) Continuous open enrollment and disenrollment for
first 3 months in subsequent years.--
``(i) In general.--Subject to clause (ii) and subparagraph
(D), at any time during the first 3 months of 2007 and each
subsequent year, or, if the individual first becomes a
MedicareAdvantage eligible individual during 2007 or any
subsequent year, during the first 3 months of such year in
which the individual is a MedicareAdvantage eligible
individual, a MedicareAdvantage eligible individual may
change the election under subsection (a)(1).
``(ii) Limitation of 1 change during open enrollment period
each year.--An individual may exercise the right under clause
(i) only once during the applicable 3-month period described
in such clause in each year. The limitation under this clause
shall not apply to changes in elections effected during an
annual, coordinated election period under paragraph (3) or
during a special enrollment period under paragraph (4).
``(D) Continuous open enrollment for institutionalized
individuals.--At any time during 2006 or any subsequent year,
in the case of a MedicareAdvantage eligible individual who is
institutionalized (as defined by the Secretary), the
individual may elect under subsection (a)(1)--
``(i) to enroll in a MedicareAdvantage plan; or
``(ii) to change the MedicareAdvantage plan in which the
individual is enrolled.
``(3) Annual, coordinated election period.--
``(A) In general.--Subject to paragraph (5), each
individual who is eligible to make an election under this
section may change such election during an annual,
coordinated election period.
``(B) Annual, coordinated election period.--For purposes of
this section, the term `annual, coordinated election period'
means, with respect to a year before 2003 and after 2006, the
month of November before such year and with respect to 2003,
2004, 2005, and 2006, the period beginning on November 15 and
ending on December 31 of the year before such year.
``(C) Medicareadvantage health information fairs.--During
the fall season of each year (beginning with 2006), in
conjunction with the annual coordinated election period
defined in subparagraph (B), the Secretary shall provide for
a nationally coordinated educational and publicity campaign
to inform MedicareAdvantage eligible individuals about
MedicareAdvantage plans and the election process provided
under this section.
``(D) Special information campaign in 2005.--During the
period beginning on November 15, 2005, and ending on December
31, 2005, the Secretary shall provide for an educational and
publicity campaign to inform MedicareAdvantage eligible
individuals about the availability of MedicareAdvantage
plans, and eligible organizations with risk-sharing contracts
under section 1876, offered in different areas and the
election process provided under this section.
``(4) Special election periods.--Effective on and after
January 1, 2006, an individual may discontinue an election of
a MedicareAdvantage plan offered by a MedicareAdvantage
organization other than during an annual, coordinated
election period and make a new election under this section
if--
``(A)(i) the certification of the organization or plan
under this part has been terminated, or the organization or
plan has notified the individual of an impending termination
of such certification; or
``(ii) the organization has terminated or otherwise
discontinued providing the plan in the area in which the
individual resides, or has notified the individual of an
impending termination or discontinuation of such plan;
``(B) the individual is no longer eligible to elect the
plan because of a change in the individual's place of
residence or other change in circumstances (specified by the
Secretary, but not including termination of the individual's
enrollment on the basis described in clause (i) or (ii) of
subsection (g)(3)(B));
``(C) the individual demonstrates (in accordance with
guidelines established by the Secretary) that--
``(i) the organization offering the plan substantially
violated a material provision of the organization's contract
under this part in relation to the individual (including the
failure to provide an enrollee on a timely basis medically
necessary care for which benefits are available under the
plan or the failure to provide such covered care in
accordance with applicable quality standards); or
``(ii) the organization (or an agent or other entity acting
on the organization's behalf) materially misrepresented the
plan's provisions in marketing the plan to the individual; or
``(D) the individual meets such other exceptional
conditions as the Secretary may provide.
Effective on and after January 1, 2006, an individual who,
upon first becoming eligible for benefits under part A at age
65, enrolls in a MedicareAdvantage plan under this part, the
individual may discontinue the election of such plan, and
elect coverage under the original fee-for-service plan, at
any time during the 12-month period beginning on the
effective date of such enrollment.
``(5) Special rules for msa plans.--Notwithstanding the
preceding provisions of this subsection, an individual--
``(A) may elect an MSA plan only during--
``(i) an initial open enrollment period described in
paragraph (1);
``(ii) an annual, coordinated election period described in
paragraph (3)(B); or
``(iii) the month of November 1998;
``(B) subject to subparagraph (C), may not discontinue an
election of an MSA plan except during the periods described
in clause (ii) or (iii) of subparagraph (A) and under the
first sentence of paragraph (4); and
``(C) who elects an MSA plan during an annual, coordinated
election period, and who never previously had elected such a
plan, may revoke such election, in a manner determined by the
Secretary, by not later than December 15 following the date
of the election.
``(6) Open enrollment periods.--Subject to paragraph (5), a
MedicareAdvantage organization--
``(A) shall accept elections or changes to elections during
the initial enrollment periods described in paragraph (1),
during the period beginning on November 15, 2005, and ending
on December 31, 2005, and during the annual, coordinated
election period under paragraph (3) for each subsequent year,
and during special election periods described in the first
sentence of paragraph (4); and
``(B) may accept other changes to elections at such other
times as the organization provides.
``(f) Effectiveness of Elections and Changes of
Elections.--
``(1) During initial coverage election period.--An election
of coverage made during the initial coverage election period
under subsection (e)(1)(A) shall take effect upon the date
the individual becomes entitled to (or enrolled for) benefits
under part A, enrolled under part B, and enrolled under part
D, except as the Secretary may provide (consistent with
sections 1838 and 1860D-2)) in order to prevent retroactive
coverage.
``(2) During continuous open enrollment periods.--An
election or change of coverage made under subsection (e)(2)
shall take effect with the first day of the first calendar
month following the date on which the election or change is
made.
[[Page H6205]]
``(3) Annual, coordinated election period.--An election or
change of coverage made during an annual, coordinated
election period (as defined in subsection (e)(3)(B)) in a
year shall take effect as of the first day of the following
year.
``(4) Other periods.--An election or change of coverage
made during any other period under subsection (e)(4) shall
take effect in such manner as the Secretary provides in a
manner consistent (to the extent practicable) with protecting
continuity of health benefit coverage.
``(g) Guaranteed Issue and Renewal.--
``(1) In general.--Except as provided in this subsection, a
MedicareAdvantage organization shall provide that at any time
during which elections are accepted under this section with
respect to a MedicareAdvantage plan offered by the
organization, the organization will accept without
restrictions individuals who are eligible to make such
election.
``(2) Priority.--If the Secretary determines that a
MedicareAdvantage organization, in relation to a
MedicareAdvantage plan it offers, has a capacity limit and
the number of MedicareAdvantage eligible individuals who
elect the plan under this section exceeds the capacity limit,
the organization may limit the election of individuals of the
plan under this section but only if priority in election is
provided--
``(A) first to such individuals as have elected the plan at
the time of the determination; and
``(B) then to other such individuals in such a manner that
does not discriminate, on a basis described in section
1852(b), among the individuals (who seek to elect the plan).
The preceding sentence shall not apply if it would result in
the enrollment of enrollees substantially nonrepresentative,
as determined in accordance with regulations of the
Secretary, of the medicare population in the service area of
the plan.
``(3) Limitation on termination of election.--
``(A) In general.--Subject to subparagraph (B), a
MedicareAdvantage organization may not for any reason
terminate the election of any individual under this section
for a MedicareAdvantage plan it offers.
``(B) Basis for termination of election.--A
MedicareAdvantage organization may terminate an individual's
election under this section with respect to a
MedicareAdvantage plan it offers if--
``(i) any MedicareAdvantage monthly basic beneficiary
premium, MedicareAdvantage monthly beneficiary obligation for
qualified prescription drug coverage, or MedicareAdvantage
monthly beneficiary premium for required or optional enhanced
medical benefits required with respect to such plan are not
paid on a timely basis (consistent with standards under
section 1856 that provide for a grace period for late payment
of such premiums);
``(ii) the individual has engaged in disruptive behavior
(as specified in such standards); or
``(iii) the plan is terminated with respect to all
individuals under this part in the area in which the
individual resides.
``(C) Consequence of termination.--
``(i) Terminations for cause.--Any individual whose
election is terminated under clause (i) or (ii) of
subparagraph (B) is deemed to have elected to receive
benefits under the original medicare fee-for-service program
option.
``(ii) Termination based on plan termination or service
area reduction.--Any individual whose election is terminated
under subparagraph (B)(iii) shall have a special election
period under subsection (e)(4)(A) in which to change coverage
to coverage under another MedicareAdvantage plan. Such an
individual who fails to make an election during such period
is deemed to have chosen to change coverage to the original
medicare fee-for-service program option.
``(D) Organization obligation with respect to election
forms.--Pursuant to a contract under section 1857858., each
MedicareAdvantage organization receiving an election form
under subsection (c)(2) shall transmit to the Secretary (at
such time and in such manner as the Secretary may specify) a
copy of such form or such other information respecting the
election as the Secretary may specify.
``(h) Approval of Marketing Material and Application
Forms.--
``(1) Submission.--No marketing material or application
form may be distributed by a MedicareAdvantage organization
to (or for the use of) MedicareAdvantage eligible individuals
unless--
``(A) at least 45 days (or 10 days in the case described in
paragraph (5)) before the date of distribution the
organization has submitted the material or form to the
Secretary for review; and
``(B) the Secretary has not disapproved the distribution of
such material or form.
``(2) Review.--The standards established under section 1856
shall include guidelines for the review of any material or
form submitted and under such guidelines the Secretary shall
disapprove (or later require the correction of) such material
or form if the material or form is materially inaccurate or
misleading or otherwise makes a material misrepresentation.
``(3) Deemed approval (1-stop shopping).--In the case of
material or form that is submitted under paragraph (1)(A) to
the Secretary or a regional office of the Department of
Health and Human Services and the Secretary or the office has
not disapproved the distribution of marketing material or
form under paragraph (1)(B) with respect to a
MedicareAdvantage plan in an area, the Secretary is deemed
not to have disapproved such distribution in all other areas
covered by the plan and organization except with regard to
that portion of such material or form that is specific only
to an area involved.
``(4) Prohibition of certain marketing practices.--Each
MedicareAdvantage organization shall conform to fair
marketing standards, in relation to MedicareAdvantage plans
offered under this part, included in the standards
established under section 1856. Such standards--
``(A) shall not permit a MedicareAdvantage organization to
provide for cash or other monetary rebates as an inducement
for enrollment or otherwise (other than as an additional
benefit described in section 1854(g)(1)(C)(i)); and
``(B) may include a prohibition against a MedicareAdvantage
organization (or agent of such an organization) completing
any portion of any election form used to carry out elections
under this section on behalf of any individual.
``(5) Special treatment of marketing material following
model marketing language.--In the case of marketing material
of an organization that uses, without modification, proposed
model language specified by the Secretary, the period
specified in paragraph (1)(A) shall be reduced from 45 days
to 10 days.
``(i) Effect of Election of MedicareAdvantage Plan
Option.--
``(1) Payments to organizations.--Subject to sections
1852(a)(5), 1853(h), 1853(i), 1886(d)(11), and 1886(h)(3)(D),
payments under a contract with a MedicareAdvantage
organization under section 1853(a) with respect to an
individual electing a MedicareAdvantage plan offered by the
organization shall be instead of the amounts which (in the
absence of the contract) would otherwise be payable under
parts A, B, and D for items and services furnished to the
individual.
``(2) Only organization entitled to payment.--Subject to
sections 1853(f), 1853(h), 1853(i), 1857(f)(2), 1886(d)(11),
and 1886(h)(3)(D), only the MedicareAdvantage organization
shall be entitled to receive payments from the Secretary
under this title for services furnished to the individual.''.
SEC. 202. BENEFITS AND BENEFICIARY PROTECTIONS.
Section 1852 (42 U.S.C. 1395w-22) is amended to read as
follows:
``benefits and beneficiary protections
``Sec. 1852. (a) Basic Benefits.--
``(1) In general.--Except as provided in section 1859(b)(3)
for MSA plans, each MedicareAdvantage plan shall provide to
members enrolled under this part, through providers and other
persons that meet the applicable requirements of this title
and part A of title XI--
``(A) those items and services (other than hospice care)
for which benefits are available under parts A and B to
individuals residing in the area served by the plan;
``(B) except as provided in paragraph (2)(D), qualified
prescription drug coverage under part D to individuals
residing in the area served by the plan;
``(C) a maximum limitation on out-of-pocket expenses and a
unified deductible; and
``(D) additional benefits required under section
1854(d)(1).
``(2) Satisfaction of requirement.--
``(A) In general.--A MedicareAdvantage plan (other than an
MSA plan) offered by a MedicareAdvantage organization
satisfies paragraph (1)(A), with respect to benefits for
items and services furnished other than through a provider or
other person that has a contract with the organization
offering the plan, if the plan provides payment in an amount
so that--
``(i) the sum of such payment amount and any cost-sharing
provided for under the plan; is equal to at least
``(ii) the total dollar amount of payment for such items
and services as would otherwise be authorized under parts A
and B (including any balance billing permitted under such
parts).
``(B) Reference to related provisions.--For provisions
relating to--
``(i) limitations on balance billing against
MedicareAdvantage organizations for noncontract providers,
see sections 1852(k) and 1866(a)(1)(O); and
``(ii) limiting actuarial value of enrollee liability for
covered benefits, see section 1854(f).
``(C) Election of uniform coverage policy.--In the case of
a MedicareAdvantage organization that offers a
MedicareAdvantage plan in an area in which more than 1 local
coverage policy is applied with respect to different parts of
the area, the organization may elect to have the local
coverage policy for the part of the area that is most
beneficial to MedicareAdvantage enrollees (as identified by
the Secretary) apply with respect to all MedicareAdvantage
enrollees enrolled in the plan.
``(D) Special rule for private fee-for-service plans.--
``(i) In general.--A private fee-for-service plan may elect
not to provide qualified prescription drug coverage under
part D to individuals residing in the area served by the
plan.
``(ii) Availability of drug coverage for enrollees.--If a
beneficiary enrolls in a plan making the election described
in clause (i),
[[Page H6206]]
the beneficiary may enroll for drug coverage under part D
with an eligible entity under such part.
``(3) Enhanced medical benefits.--
``(A) Benefits included subject to secretary's approval.--
Each MedicareAdvantage organization may provide to
individuals enrolled under this part, other than under an MSA
plan (without affording those individuals an option to
decline the coverage), enhanced medical benefits that the
Secretary may approve. The Secretary shall approve any such
enhanced medical benefits unless the Secretary determines
that including such enhanced medical benefits would
substantially discourage enrollment by MedicareAdvantage
eligible individuals with the organization.
``(B) At enrollees' option.--A MedicareAdvantage
organization may not provide, under an MSA plan, enhanced
medical benefits that cover the deductible described in
section 1859(b)(2)(B). In applying the previous sentence,
health benefits described in section 1882(u)(2)(B) shall not
be treated as covering such deductible.
``(C) Application to medicareadvantage private fee-for-
service plans.--Nothing in this paragraph shall be construed
as preventing a MedicareAdvantage private fee-for-service
plan from offering enhanced medical benefits that include
payment for some or all of the balance billing amounts
permitted consistent with section 1852(k) and coverage of
additional services that the plan finds to be medically
necessary.
``(D) Rule for approval of medical and prescription drug
benefits.--Notwithstanding the preceding provisions of this
paragraph, the Secretary may not approve any enhanced medical
benefit that provides for the coverage of any prescription
drug (other than that relating to prescription drugs covered
under the original medicare fee-for-service program option).
``(4) Organization as secondary payer.--Notwithstanding any
other provision of law, a MedicareAdvantage organization may
(in the case of the provision of items and services to an
individual under a MedicareAdvantage plan under circumstances
in which payment under this title is made secondary pursuant
to section 1862(b)(2)) charge or authorize the provider of
such services to charge, in accordance with the charges
allowed under a law, plan, or policy described in such
section--
``(A) the insurance carrier, employer, or other entity
which under such law, plan, or policy is to pay for the
provision of such services; or
``(B) such individual to the extent that the individual has
been paid under such law, plan, or policy for such services.
``(5) National coverage determinations and legislative
changes in benefits.--If there is a national coverage
determination or legislative change in benefits required to
be provided under this part made in the period beginning on
the date of an announcement under section 1853(b) and ending
on the date of the next announcement under such section and
the Secretary projects that the determination will result in
a significant change in the costs to a MedicareAdvantage
organization of providing the benefits that are the subject
of such national coverage determination and that such change
in costs was not incorporated in the determination of the
benchmark amount announced under section 1853(b)(1)(A) at the
beginning of such period, then, unless otherwise required by
law--
``(A) such determination or legislative change in benefits
shall not apply to contracts under this part until the first
contract year that begins after the end of such period; and
``(B) if such coverage determination or legislative change
provides for coverage of additional benefits or coverage
under additional circumstances, section 1851(i)(1) shall not
apply to payment for such additional benefits or benefits
provided under such additional circumstances until the first
contract year that begins after the end of such period.
The projection under the previous sentence shall be based on
an analysis by the Secretary of the actuarial costs
associated with the coverage determination or legislative
change in benefits.
``(6) Authority to prohibit risk selection.--The Secretary
shall have the authority to disapprove any MedicareAdvantage
plan that the Secretary determines is designed to attract a
population that is healthier than the average population
residing in the service area of the plan.
``(7) Unified deductible defined.--In this part, the term
`unified deductible' means an annual deductible amount that
is applied in lieu of the inpatient hospital deductible under
section 1813(b)(1) and the deductible under section 1833(b).
Nothing in this part shall be construed as preventing a
MedicareAdvantage organization from requiring coinsurance or
a copayment for inpatient hospital services after the unified
deductible is satisfied, subject to the limitation on
enrollee liability under section 1854(f).
``(b) Antidiscrimination.--
``(1) Beneficiaries.--
``(A) In general.--A MedicareAdvantage organization may not
deny, limit, or condition the coverage or provision of
benefits under this part, for individuals permitted to be
enrolled with the organization under this part, based on any
health status-related factor described in section 2702(a)(1)
of the Public Health Service Act.
``(B) Construction.--Except as provided under section
1851(a)(3)(B), subparagraph (A) shall not be construed as
requiring a MedicareAdvantage organization to enroll
individuals who are determined to have end-stage renal
disease.
``(2) Providers.--A MedicareAdvantage organization shall
not discriminate with respect to participation,
reimbursement, or indemnification as to any provider who is
acting within the scope of the provider's license or
certification under applicable State law, solely on the basis
of such license or certification. This paragraph shall not be
construed to prohibit a plan from including providers only to
the extent necessary to meet the needs of the plan's
enrollees or from establishing any measure designed to
maintain quality and control costs consistent with the
responsibilities of the plan.
``(c) Disclosure Requirements.--
``(1) Detailed description of plan provisions.--A
MedicareAdvantage organization shall disclose, in clear,
accurate, and standardized form to each enrollee with a
MedicareAdvantage plan offered by the organization under this
part at the time of enrollment and at least annually
thereafter, the following information regarding such plan:
``(A) Service area.--The plan's service area.
``(B) Benefits.--Benefits offered under the plan, including
information described section 1852(a)(1) (relating to
benefits under the original medicare fee-for-service program
option, the maximum limitation in out-of-pocket expenses and
the unified deductible, and qualified prescription drug
coverage under part D, respectively) and exclusions from
coverage and, if it is an MSA plan, a comparison of benefits
under such a plan with benefits under other MedicareAdvantage
plans.
``(C) Access.--The number, mix, and distribution of plan
providers, out-of-network coverage (if any) provided by the
plan, and any point-of-service option (including the
MedicareAdvantage monthly beneficiary premium for enhanced
medical benefits for such option).
``(D) Out-of-area coverage.--Out-of-area coverage provided
by the plan.
``(E) Emergency coverage.--Coverage of emergency services,
including--
``(i) the appropriate use of emergency services, including
use of the 911 telephone system or its local equivalent in
emergency situations and an explanation of what constitutes
an emergency situation;
``(ii) the process and procedures of the plan for obtaining
emergency services; and
``(iii) the locations of--
``(I) emergency departments; and
``(II) other settings, in which plan physicians and
hospitals provide emergency services and post-stabilization
care.
``(F) Enhanced medical benefits.--Enhanced medical benefits
available from the organization offering the plan,
including--
``(i) whether the enhanced medical benefits are optional;
``(ii) the enhanced medical benefits covered; and
``(iii) the MedicareAdvantage monthly beneficiary premium
for enhanced medical benefits.
``(G) Prior authorization rules.--Rules regarding prior
authorization or other review requirements that could result
in nonpayment.
``(H) Plan grievance and appeals procedures.--All plan
appeal or grievance rights and procedures.
``(I) Quality assurance program.--A description of the
organization's quality assurance program under subsection
(e).
``(2) Disclosure upon request.--Upon request of a
MedicareAdvantage eligible individual, a MedicareAdvantage
organization must provide the following information to such
individual:
``(A) The general coverage information and general
comparative plan information made available under clauses (i)
and (ii) of section 1851(d)(2)(A).
``(B) Information on procedures used by the organization to
control utilization of services and expenditures.
``(C) Information on the number of grievances,
reconsiderations, and appeals and on the disposition in the
aggregate of such matters.
``(D) An overall summary description as to the method of
compensation of participating physicians.
``(E) The information described in subparagraphs (A)
through (C) in relation to the qualified prescription drug
coverage provided by the organization.
``(d) Access to Services.--
``(1) In general.--A MedicareAdvantage organization
offering a MedicareAdvantage plan may select the providers
from whom the benefits under the plan are provided so long
as--
``(A) the organization makes such benefits available and
accessible to each individual electing the plan within the
plan service area with reasonable promptness and in a manner
which assures continuity in the provision of benefits;
``(B) when medically necessary the organization makes such
benefits available and accessible 24 hours a day and 7 days a
week;
``(C) the plan provides for reimbursement with respect to
services which are covered under subparagraphs (A) and (B)
and which are provided to such an individual other than
through the organization, if--
``(i) the services were not emergency services (as defined
in paragraph (3)), but--
[[Page H6207]]
``(I) the services were medically necessary and immediately
required because of an unforeseen illness, injury, or
condition; and
``(II) it was not reasonable given the circumstances to
obtain the services through the organization;
``(ii) the services were renal dialysis services and were
provided other than through the organization because the
individual was temporarily out of the plan's service area; or
``(iii) the services are maintenance care or post-
stabilization care covered under the guidelines established
under paragraph (2);
``(D) the organization provides access to appropriate
providers, including credentialed specialists, for medically
necessary treatment and services; and
``(E) coverage is provided for emergency services (as
defined in paragraph (3)) without regard to prior
authorization or the emergency care provider's contractual
relationship with the organization.
``(2) Guidelines respecting coordination of post-
stabilization care.--A MedicareAdvantage plan shall comply
with such guidelines as the Secretary may prescribe relating
to promoting efficient and timely coordination of appropriate
maintenance and post-stabilization care of an enrollee after
the enrollee has been determined to be stable under section
1867.
``(3) Definition of emergency services.--In this
subsection--
``(A) In general.--The term `emergency services' means,
with respect to an individual enrolled with an organization,
covered inpatient and outpatient services that--
``(i) are furnished by a provider that is qualified to
furnish such services under this title; and
``(ii) are needed to evaluate or stabilize an emergency
medical condition (as defined in subparagraph (B)).
``(B) Emergency medical condition based on prudent
layperson.--The term `emergency medical condition' means a
medical condition manifesting itself by acute symptoms of
sufficient severity (including severe pain) such that a
prudent layperson, who possesses an average knowledge of
health and medicine, could reasonably expect the absence of
immediate medical attention to result in--
``(i) placing the health of the individual (or, with
respect to a pregnant woman, the health of the woman or her
unborn child) in serious jeopardy;
``(ii) serious impairment to bodily functions; or
``(iii) serious dysfunction of any bodily organ or part.
``(4) Assuring access to services in medicareadvantage
private fee-for-service plans.--In addition to any other
requirements under this part, in the case of a
MedicareAdvantage private fee-for-service plan, the
organization offering the plan must demonstrate to the
Secretary that the organization has sufficient number and
range of health care professionals and providers willing to
provide services under the terms of the plan. The Secretary
shall find that an organization has met such requirement with
respect to any category of health care professional or
provider if, with respect to that category of provider--
``(A) the plan has established payment rates for covered
services furnished by that category of provider that are not
less than the payment rates provided for under part A, B, or
D for such services; or
``(B) the plan has contracts or agreements with a
sufficient number and range of providers within such category
to provide covered services under the terms of the plan,
or a combination of both. The previous sentence shall not be
construed as restricting the persons from whom enrollees
under such a plan may obtain covered benefits.
``(e) Quality Assurance Program.--
``(1) In general.--Each MedicareAdvantage organization must
have arrangements, consistent with any regulation, for an
ongoing quality assurance program for health care services it
provides to individuals enrolled with MedicareAdvantage plans
of the organization.
``(2) Elements of program.--
``(A) In general.--The quality assurance program of an
organization with respect to a MedicareAdvantage plan (other
than a MedicareAdvantage private fee-for-service plan or a
nonnetwork MSA plan) it offers shall--
``(i) stress health outcomes and provide for the
collection, analysis, and reporting of data (in accordance
with a quality measurement system that the Secretary
recognizes) that will permit measurement of outcomes and
other indices of the quality of MedicareAdvantage plans and
organizations;
``(ii) monitor and evaluate high volume and high risk
services and the care of acute and chronic conditions;
``(iii) provide access to disease management and chronic
care services;
``(iv) provide access to preventive benefits and
information for enrollees on such benefits;
``(v) evaluate the continuity and coordination of care that
enrollees receive;
``(vi) be evaluated on an ongoing basis as to its
effectiveness;
``(vii) include measures of consumer satisfaction;
``(viii) provide the Secretary with such access to
information collected as may be appropriate to monitor and
ensure the quality of care provided under this part;
``(ix) provide review by physicians and other health care
professionals of the process followed in the provision of
such health care services;
``(x) provide for the establishment of written protocols
for utilization review, based on current standards of medical
practice;
``(xi) have mechanisms to detect both underutilization and
overutilization of services;
``(xii) after identifying areas for improvement, establish
or alter practice parameters;
``(xiii) take action to improve quality and assesses the
effectiveness of such action through systematic followup; and
``(xiv) make available information on quality and outcomes
measures to facilitate beneficiary comparison and choice of
health coverage options (in such form and on such quality and
outcomes measures as the Secretary determines to be
appropriate).
Such program shall include a separate focus (with respect to
all the elements described in this subparagraph) on racial
and ethnic minorities.
``(B) Elements of program for organizations offering
medicareadvantage private fee-for-service plans, and
nonnetwork msa plans.--The quality assurance program of an
organization with respect to a MedicareAdvantage private fee-
for-service plan or a nonnetwork MSA plan it offers shall--
``(i) meet the requirements of clauses (i) through (viii)
of subparagraph (A);
``(ii) insofar as it provides for the establishment of
written protocols for utilization review, base such protocols
on current standards of medical practice; and
``(iii) have mechanisms to evaluate utilization of services
and inform providers and enrollees of the results of such
evaluation.
Such program shall include a separate focus (with respect to
all the elements described in this subparagraph) on racial
and ethnic minorities.
``(C) Definition of nonnetwork msa plan.--In this
subsection, the term `nonnetwork MSA plan' means an MSA plan
offered by a MedicareAdvantage organization that does not
provide benefits required to be provided by this part, in
whole or in part, through a defined set of providers under
contract, or under another arrangement, with the
organization.
``(3) External review.--
``(A) In general.--Each MedicareAdvantage organization
shall, for each MedicareAdvantage plan it operates, have an
agreement with an independent quality review and improvement
organization approved by the Secretary to perform functions
of the type described in paragraphs (4)(B) and (14) of
section 1154(a) with respect to services furnished by
MedicareAdvantage plans for which payment is made under this
title. The previous sentence shall not apply to a
MedicareAdvantage private fee-for-service plan or a
nonnetwork MSA plan that does not employ utilization review.
``(B) Nonduplication of accreditation.--Except in the case
of the review of quality complaints, and consistent with
subparagraph (C), the Secretary shall ensure that the
external review activities conducted under subparagraph (A)
are not duplicative of review activities conducted as part of
the accreditation process.
``(C) Waiver authority.--The Secretary may waive the
requirement described in subparagraph (A) in the case of an
organization if the Secretary determines that the
organization has consistently maintained an excellent record
of quality assurance and compliance with other requirements
under this part.
``(4) Treatment of accreditation.--
``(A) In general.--The Secretary shall provide that a
MedicareAdvantage organization is deemed to meet all the
requirements described in any specific clause of subparagraph
(B) if the organization is accredited (and periodically
reaccredited) by a private accrediting organization under a
process that the Secretary has determined assures that the
accrediting organization applies and enforces standards that
meet or exceed the standards established under section 1856
to carry out the requirements in such clause.
``(B) Requirements described.--The provisions described in
this subparagraph are the following:
``(i) Paragraphs (1) and (2) of this subsection (relating
to quality assurance programs).
``(ii) Subsection (b) (relating to antidiscrimination).
``(iii) Subsection (d) (relating to access to services).
``(iv) Subsection (h) (relating to confidentiality and
accuracy of enrollee records).
``(v) Subsection (i) (relating to information on advance
directives).
``(vi) Subsection (j) (relating to provider participation
rules).
``(C) Timely action on applications.--The Secretary shall
determine, within 210 days after the date the Secretary
receives an application by a private accrediting organization
and using the criteria specified in section 1865(b)(2),
whether the process of the private accrediting organization
meets the requirements with respect to any specific clause in
subparagraph (B) with respect to which the application is
made. The Secretary may not deny such an application on the
basis that it seeks to meet the requirements with respect to
only one, or more than one, such specific clause.
``(D) Construction.--Nothing in this paragraph shall be
construed as limiting the authority of the Secretary under
section 1857,
[[Page H6208]]
including the authority to terminate contracts with
MedicareAdvantage organizations under subsection (c)(2) of
such section.
``(5) Report to congress.--
``(A) In general.--The Secretary shall submit to Congress a
biennial report regarding how quality assurance programs
conducted under this subsection focus on racial and ethnic
minorities.
``(B) Contents of report.--Each such report shall include
the following:
``(i) A description of the means by which such programs
focus on such racial and ethnic minorities.
``(ii) An evaluation of the impact of such programs on
eliminating health disparities and on improving health
outcomes, continuity and coordination of care, management of
chronic conditions, and consumer satisfaction.
``(iii) Recommendations on ways to reduce clinical outcome
disparities among racial and ethnic minorities.
``(f) Grievance Mechanism.--Each MedicareAdvantage
organization must provide meaningful procedures for hearing
and resolving grievances between the organization (including
any entity or individual through which the organization
provides health care services) and enrollees with
MedicareAdvantage plans of the organization under this part.
``(g) Coverage Determinations, Reconsiderations, and
Appeals.--
``(1) Determinations by organization.--
``(A) In general.--A MedicareAdvantage organization shall
have a procedure for making determinations regarding whether
an individual enrolled with the plan of the organization
under this part is entitled to receive a health service under
this section and the amount (if any) that the individual is
required to pay with respect to such service. Subject to
paragraph (3), such procedures shall provide for such
determination to be made on a timely basis.
``(B) Explanation of determination.--Such a determination
that denies coverage, in whole or in part, shall be in
writing and shall include a statement in understandable
language of the reasons for the denial and a description of
the reconsideration and appeals processes.
``(2) Reconsiderations.--
``(A) In general.--The organization shall provide for
reconsideration of a determination described in paragraph
(1)(B) upon request by the enrollee involved. The
reconsideration shall be within a time period specified by
the Secretary, but shall be made, subject to paragraph (3),
not later than 60 days after the date of the receipt of the
request for reconsideration.
``(B) Physician decision on certain reconsiderations.--A
reconsideration relating to a determination to deny coverage
based on a lack of medical necessity shall be made only by a
physician with appropriate expertise in the field of medicine
which necessitates treatment who is other than a physician
involved in the initial determination.
``(3) Expedited determinations and reconsiderations.--
``(A) Receipt of requests.--
``(i) Enrollee requests.--An enrollee in a
MedicareAdvantage plan may request, either in writing or
orally, an expedited determination under paragraph (1) or an
expedited reconsideration under paragraph (2) by the
MedicareAdvantage organization.
``(ii) Physician requests.--A physician, regardless whether
the physician is affiliated with the organization or not, may
request, either in writing or orally, such an expedited
determination or reconsideration.
``(B) Organization procedures.--
``(i) In general.--The MedicareAdvantage organization shall
maintain procedures for expediting organization
determinations and reconsiderations when, upon request of an
enrollee, the organization determines that the application of
the normal timeframe for making a determination (or a
reconsideration involving a determination) could seriously
jeopardize the life or health of the enrollee or the
enrollee's ability to regain maximum function.
``(ii) Expedition required for physician requests.--In the
case of a request for an expedited determination or
reconsideration made under subparagraph (A)(ii), the
organization shall expedite the determination or
reconsideration if the request indicates that the application
of the normal timeframe for making a determination (or a
reconsideration involving a determination) could seriously
jeopardize the life or health of the enrollee or the
enrollee's ability to regain maximum function.
``(iii) Timely response.--In cases described in clauses (i)
and (ii), the organization shall notify the enrollee (and the
physician involved, as appropriate) of the determination or
reconsideration under time limitations established by the
Secretary, but not later than 72 hours of the time of receipt
of the request for the determination or reconsideration (or
receipt of the information necessary to make the
determination or reconsideration), or such longer period as
the Secretary may permit in specified cases.
``(4) Independent review of certain coverage denials.--The
Secretary shall contract with an independent, outside entity
to review and resolve in a timely manner reconsiderations
that affirm denial of coverage, in whole or in part. The
provisions of section 1869(c)(5) shall apply to independent
outside entities under contract with the Secretary under this
paragraph.
``(5) Appeals.--An enrollee with a MedicareAdvantage plan
of a MedicareAdvantage organization under this part who is
dissatisfied by reason of the enrollee's failure to receive
any health service to which the enrollee believes the
enrollee is entitled and at no greater charge than the
enrollee believes the enrollee is required to pay is
entitled, if the amount in controversy is $100 or more, to a
hearing before the Secretary to the same extent as is
provided in section 205(b), and in any such hearing the
Secretary shall make the organization a party. If the amount
in controversy is $1,000 or more, the individual or
organization shall, upon notifying the other party, be
entitled to judicial review of the Secretary's final decision
as provided in section 205(g), and both the individual and
the organization shall be entitled to be parties to that
judicial review. In applying subsections (b) and (g) of
section 205 as provided in this paragraph, and in applying
section 205(l) thereto, any reference therein to the
Commissioner of Social Security or the Social Security
Administration shall be considered a reference to the
Secretary or the Department of Health and Human Services,
respectively.
``(h) Confidentiality and Accuracy of Enrollee Records.--
Insofar as a MedicareAdvantage organization maintains medical
records or other health information regarding enrollees under
this part, the MedicareAdvantage organization shall establish
procedures--
``(1) to safeguard the privacy of any individually
identifiable enrollee information;
``(2) to maintain such records and information in a manner
that is accurate and timely; and
``(3) to assure timely access of enrollees to such records
and information.
``(i) Information on Advance Directives.--Each
MedicareAdvantage organization shall meet the requirement of
section 1866(f) (relating to maintaining written policies and
procedures respecting advance directives).
``(j) Rules Regarding Provider Participation.--
``(1) Procedures.--Insofar as a MedicareAdvantage
organization offers benefits under a MedicareAdvantage plan
through agreements with physicians, the organization shall
establish reasonable procedures relating to the participation
(under an agreement between a physician and the organization)
of physicians under such a plan. Such procedures shall
include--
``(A) providing notice of the rules regarding
participation;
``(B) providing written notice of participation decisions
that are adverse to physicians; and
``(C) providing a process within the organization for
appealing such adverse decisions, including the presentation
of information and views of the physician regarding such
decision.
``(2) Consultation in medical policies.--A
MedicareAdvantage organization shall consult with physicians
who have entered into participation agreements with the
organization regarding the organization's medical policy,
quality, and medical management procedures.
``(3) Prohibiting interference with provider advice to
enrollees.--
``(A) In general.--Subject to subparagraphs (B) and (C), a
MedicareAdvantage organization (in relation to an individual
enrolled under a MedicareAdvantage plan offered by the
organization under this part) shall not prohibit or otherwise
restrict a covered health care professional (as defined in
subparagraph (D)) from advising such an individual who is a
patient of the professional about the health status of the
individual or medical care or treatment for the individual's
condition or disease, regardless of whether benefits for such
care or treatment are provided under the plan, if the
professional is acting within the lawful scope of practice.
``(B) Conscience protection.--Subparagraph (A) shall not be
construed as requiring a MedicareAdvantage plan to provide,
reimburse for, or provide coverage of a counseling or
referral service if the MedicareAdvantage organization
offering the plan--
``(i) objects to the provision of such service on moral or
religious grounds; and
``(ii) in the manner and through the written
instrumentalities such MedicareAdvantage organization deems
appropriate, makes available information on its policies
regarding such service to prospective enrollees before or
during enrollment and to enrollees within 90 days after the
date that the organization or plan adopts a change in policy
regarding such a counseling or referral service.
``(C) Construction.--Nothing in subparagraph (B) shall be
construed to affect disclosure requirements under State law
or under the Employee Retirement Income Security Act of 1974.
``(D) Health care professional defined.--For purposes of
this paragraph, the term `health care professional' means a
physician (as defined in section 1861(r)) or other health
care professional if coverage for the professional's services
is provided under the MedicareAdvantage plan for the services
of the professional. Such term includes a podiatrist,
optometrist, chiropractor, psychologist, dentist, licensed
pharmacist, physician assistant, physical or occupational
therapist and therapy assistant, speech-language pathologist,
audiologist, registered or licensed practical nurse
(including nurse practitioner, clinical nurse specialist,
certified registered nurse anesthetist, and certified nurse-
midwife), licensed certified social
[[Page H6209]]
worker, registered respiratory therapist, and certified
respiratory therapy technician.
``(4) Limitations on physician incentive plans.--
``(A) In general.--No MedicareAdvantage organization may
operate any physician incentive plan (as defined in
subparagraph (B)) unless the following requirements are met:
``(i) No specific payment is made directly or indirectly
under the plan to a physician or physician group as an
inducement to reduce or limit medically necessary services
provided with respect to a specific individual enrolled with
the organization.
``(ii) If the plan places a physician or physician group at
substantial financial risk (as determined by the Secretary)
for services not provided by the physician or physician
group, the organization--
``(I) provides stop-loss protection for the physician or
group that is adequate and appropriate, based on standards
developed by the Secretary that take into account the number
of physicians placed at such substantial financial risk in
the group or under the plan and the number of individuals
enrolled with the organization who receive services from the
physician or group; and
``(II) conducts periodic surveys of both individuals
enrolled and individuals previously enrolled with the
organization to determine the degree of access of such
individuals to services provided by the organization and
satisfaction with the quality of such services.
``(iii) The organization provides the Secretary with
descriptive information regarding the plan, sufficient to
permit the Secretary to determine whether the plan is in
compliance with the requirements of this subparagraph.
``(B) Physician incentive plan defined.--In this paragraph,
the term `physician incentive plan' means any compensation
arrangement between a MedicareAdvantage organization and a
physician or physician group that may directly or indirectly
have the effect of reducing or limiting services provided
with respect to individuals enrolled with the organization
under this part.
``(5) Limitation on provider indemnification.--A
MedicareAdvantage organization may not provide (directly or
indirectly) for a health care professional, provider of
services, or other entity providing health care services (or
group of such professionals, providers, or entities) to
indemnify the organization against any liability resulting
from a civil action brought for any damage caused to an
enrollee with a MedicareAdvantage plan of the organization
under this part by the organization's denial of medically
necessary care.
``(6) Special rules for medicareadvantage private fee-for-
service plans.--For purposes of applying this part (including
subsection (k)(1)) and section 1866(a)(1)(O), a hospital (or
other provider of services), a physician or other health care
professional, or other entity furnishing health care services
is treated as having an agreement or contract in effect with
a MedicareAdvantage organization (with respect to an
individual enrolled in a MedicareAdvantage private fee-for-
service plan it offers), if--
``(A) the provider, professional, or other entity furnishes
services that are covered under the plan to such an enrollee;
and
``(B) before providing such services, the provider,
professional, or other entity --
``(i) has been informed of the individual's enrollment
under the plan; and
``(ii) either--
``(I) has been informed of the terms and conditions of
payment for such services under the plan; or
``(II) is given a reasonable opportunity to obtain
information concerning such terms and conditions,
in a manner reasonably designed to effect informed agreement
by a provider.
The previous sentence shall only apply in the absence of an
explicit agreement between such a provider, professional, or
other entity and the MedicareAdvantage organization.
``(k) Treatment of Services Furnished by Certain
Providers.--
``(1) In general.--Except as provided in paragraph (2), a
physician or other entity (other than a provider of services)
that does not have a contract establishing payment amounts
for services furnished to an individual enrolled under this
part with a MedicareAdvantage organization described in
section 1851(a)(2)(A) shall accept as payment in full for
covered services under this title that are furnished to such
an individual the amounts that the physician or other entity
could collect if the individual were not so enrolled. Any
penalty or other provision of law that applies to such a
payment with respect to an individual entitled to benefits
under this title (but not enrolled with a MedicareAdvantage
organization under this part) also applies with respect to an
individual so enrolled.
``(2) Application to medicareadvantage private fee-for-
service plans.--
``(A) Balance billing limits under medicareadvantage
private fee-for-service plans in case of contract
providers.--
``(i) In general.--In the case of an individual enrolled in
a MedicareAdvantage private fee-for-service plan under this
part, a physician, provider of services, or other entity that
has a contract (including through the operation of subsection
(j)(6)) establishing a payment rate for services furnished to
the enrollee shall accept as payment in full for covered
services under this title that are furnished to such an
individual an amount not to exceed (including any
deductibles, coinsurance, copayments, or balance billing
otherwise permitted under the plan) an amount equal to 115
percent of such payment rate.
``(ii) Procedures to enforce limits.--The MedicareAdvantage
organization that offers such a plan shall establish
procedures, similar to the procedures described in section
1848(g)(1)(A), in order to carry out clause (i).
``(iii) Assuring enforcement.--If the MedicareAdvantage
organization fails to establish and enforce procedures
required under clause (ii), the organization is subject to
intermediate sanctions under section 1857(g).
``(B) Enrollee liability for noncontract providers.--For
provisions--
``(i) establishing a minimum payment rate in the case of
noncontract providers under a MedicareAdvantage private fee-
for-service plan, see section 1852(a)(2); or
``(ii) limiting enrollee liability in the case of covered
services furnished by such providers, see paragraph (1) and
section 1866(a)(1)(O).
``(C) Information on beneficiary liability.--
``(i) In general.--Each MedicareAdvantage organization that
offers a MedicareAdvantage private fee-for-service plan shall
provide that enrollees under the plan who are furnished
services for which payment is sought under the plan are
provided an appropriate explanation of benefits (consistent
with that provided under parts A, B, and D, and, if
applicable, under medicare supplemental policies) that
includes a clear statement of the amount of the enrollee's
liability (including any liability for balance billing
consistent with this subsection) with respect to payments for
such services.
``(ii) Advance notice before receipt of inpatient hospital
services and certain other services.--In addition, such
organization shall, in its terms and conditions of payments
to hospitals for inpatient hospital services and for other
services identified by the Secretary for which the amount of
the balance billing under subparagraph (A) could be
substantial, require the hospital to provide to the enrollee,
before furnishing such services and if the hospital imposes
balance billing under subparagraph (A)--
``(I) notice of the fact that balance billing is permitted
under such subparagraph for such services; and
``(II) a good faith estimate of the likely amount of such
balance billing (if any), with respect to such services,
based upon the presenting condition of the enrollee.
``(l) Return to Home Skilled Nursing Facilities for Covered
Post-Hospital Extended Care Services.--
``(1) Ensuring return to home snf.--
``(A) In general.--In providing coverage of post-hospital
extended care services, a MedicareAdvantage plan shall
provide for such coverage through a home skilled nursing
facility if the following conditions are met:
``(i) Enrollee election.--The enrollee elects to receive
such coverage through such facility.
``(ii) SNF agreement.--The facility has a contract with the
MedicareAdvantage organization for the provision of such
services, or the facility agrees to accept substantially
similar payment under the same terms and conditions that
apply to similarly situated skilled nursing facilities that
are under contract with the MedicareAdvantage organization
for the provision of such services and through which the
enrollee would otherwise receive such services.
``(B) Manner of payment to home snf.--The organization
shall provide payment to the home skilled nursing facility
consistent with the contract or the agreement described in
subparagraph (A)(ii), as the case may be.
``(2) No less favorable coverage.--The coverage provided
under paragraph (1) (including scope of services, cost-
sharing, and other criteria of coverage) shall be no less
favorable to the enrollee than the coverage that would be
provided to the enrollee with respect to a skilled nursing
facility the post-hospital extended care services of which
are otherwise covered under the MedicareAdvantage plan.
``(3) Rule of construction.--Nothing in this subsection
shall be construed to do the following:
``(A) To require coverage through a skilled nursing
facility that is not otherwise qualified to provide benefits
under part A for medicare beneficiaries not enrolled in a
MedicareAdvantage plan.
``(B) To prevent a skilled nursing facility from refusing
to accept, or imposing conditions upon the acceptance of, an
enrollee for the receipt of post-hospital extended care
services.
``(4) Definitions.--In this subsection:
``(A) Home skilled nursing facility.--The term `home
skilled nursing facility' means, with respect to an enrollee
who is entitled to receive post-hospital extended care
services under a MedicareAdvantage plan, any of the following
skilled nursing facilities:
``(i) SNF residence at time of admission.--The skilled
nursing facility in which the enrollee resided at the time of
admission to the hospital preceding the receipt of such post-
hospital extended care services.
``(ii) SNF in continuing care retirement community.--A
skilled nursing facility that is providing such services
through a continuing care retirement community (as defined in
subparagraph (B)) which provided residence to the enrollee at
the time of such admission.
[[Page H6210]]
``(iii) SNF residence of spouse at time of discharge.--The
skilled nursing facility in which the spouse of the enrollee
is residing at the time of discharge from such hospital.
``(B) Continuing care retirement community.--The term
`continuing care retirement community' means, with respect to
an enrollee in a MedicareAdvantage plan, an arrangement under
which housing and health-related services are provided (or
arranged) through an organization for the enrollee under an
agreement that is effective for the life of the enrollee or
for a specified period.''.
SEC. 203. PAYMENTS TO MEDICAREADVANTAGE ORGANIZATIONS.
Section 1853 (42 U.S.C. 1395w-23) is amended to read as
follows:
``payments to medicareadvantage organizations
``Sec. 1853. (a) Payments to Organizations.--
``(1) Monthly payments.--
``(A) In general.--Under a contract under section 1857 and
subject to subsections (f), (h), and (j) and section
1859(e)(4), the Secretary shall make, to each
MedicareAdvantage organization, with respect to coverage of
an individual for a month under this part in a
MedicareAdvantage payment area, separate monthly payments
with respect to--
``(i) benefits under the original medicare fee-for-service
program under parts A and B in accordance with subsection
(d); and
``(ii) benefits under the voluntary prescription drug
program under part D in accordance with section 1858A and the
other provisions of this part.
``(B) Special rule for end-stage renal disease.--The
Secretary shall establish separate rates of payment to a
MedicareAdvantage organization with respect to classes of
individuals determined to have end-stage renal disease and
enrolled in a MedicareAdvantage plan of the organization.
Such rates of payment shall be actuarially equivalent to
rates paid to other enrollees in the MedicareAdvantage
payment area (or such other area as specified by the
Secretary). In accordance with regulations, the Secretary
shall provide for the application of the seventh sentence of
section 1881(b)(7) to payments under this section covering
the provision of renal dialysis treatment in the same manner
as such sentence applies to composite rate payments described
in such sentence. In establishing such rates, the Secretary
shall provide for appropriate adjustments to increase each
rate to reflect the demonstration rate (including the risk
adjustment methodology associated with such rate) of the
social health maintenance organization end-stage renal
disease capitation demonstrations (established by section
2355 of the Deficit Reduction Act of 1984, as amended by
section 13567(b) of the Omnibus Budget Reconciliation Act of
1993), and shall compute such rates by taking into account
such factors as renal treatment modality, age, and the
underlying cause of the end-stage renal disease.
``(2) Adjustment to reflect number of enrollees.--
``(A) In general.--The amount of payment under this
subsection may be retroactively adjusted to take into account
any difference between the actual number of individuals
enrolled with an organization under this part and the number
of such individuals estimated to be so enrolled in
determining the amount of the advance payment.
``(B) Special rule for certain enrollees.--
``(i) In general.--Subject to clause (ii), the Secretary
may make retroactive adjustments under subparagraph (A) to
take into account individuals enrolled during the period
beginning on the date on which the individual enrolls with a
MedicareAdvantage organization under a plan operated,
sponsored, or contributed to by the individual's employer or
former employer (or the employer or former employer of the
individual's spouse) and ending on the date on which the
individual is enrolled in the organization under this part,
except that for purposes of making such retroactive
adjustments under this subparagraph, such period may not
exceed 90 days.
``(ii) Exception.--No adjustment may be made under clause
(i) with respect to any individual who does not certify that
the organization provided the individual with the disclosure
statement described in section 1852(c) at the time the
individual enrolled with the organization.
``(C) Equalization of federal contribution.--In applying
subparagraph (A), the Secretary shall ensure that the payment
to the MedicareAdvantage organization for each individual
enrolled with the organization shall equal the
MedicareAdvantage benchmark amount for the payment area in
which that individual resides (as determined under paragraph
(4)), as adjusted--
``(i) by multiplying the benchmark amount for that payment
area by the ratio of--
``(I) the payment amount determined under subsection
(d)(4); to
``(II) the weighted service area benchmark amount
determined under subsection (d)(2); and
``(ii) using such risk adjustment factor as specified by
the Secretary under subsection (b)(1)(B).
``(3) Comprehensive risk adjustment methodology.--
``(A) Application of methodology.--The Secretary shall
apply the comprehensive risk adjustment methodology described
in subparagraph (B) to 100 percent of the amount of payments
to plans under subsection (d)(4)(B).
``(B) Comprehensive risk adjustment methodology
described.--The comprehensive risk adjustment methodology
described in this subparagraph is the risk adjustment
methodology that would apply with respect to
MedicareAdvantage plans offered by MedicareAdvantage
organizations in 2005, except that if such methodology does
not apply to groups of beneficiaries who are aged or disabled
and groups of beneficiaries who have end-stage renal disease,
the Secretary shall revise such methodology to apply to such
groups.
``(C) Uniform application to all types of plans.--Subject
to section 1859(e)(4), the comprehensive risk adjustment
methodology established under this paragraph shall be applied
uniformly without regard to the type of plan.
``(D) Data collection.--In order to carry out this
paragraph, the Secretary shall require MedicareAdvantage
organizations to submit such data and other information as
the Secretary deems necessary.
``(E) Improvement of payment accuracy.--Notwithstanding any
other provision of this paragraph, the Secretary may revise
the comprehensive risk adjustment methodology described in
subparagraph (B) from time to time to improve payment
accuracy.
``(4) Annual calculation of benchmark amounts.--For each
year, the Secretary shall calculate a benchmark amount for
each MedicareAdvantage payment area for each month for such
year with respect to coverage of the benefits available
under the original medicare fee-for-service program option
equal to the greater of the following amounts (adjusted as
appropriate for the application of the risk adjustment
methodology under paragraph (3)):
``(A) Minimum amount.--\1/12\ of the annual Medicare+Choice
capitation rate determined under subsection (c)(1)(B) for the
payment area for the year.
``(B) Local fee-for-service rate.--The local fee-for-
service rate for such area for the year (as calculated under
paragraph (5)).
``(5) Annual calculation of local fee-for-service rates.--
``(A) In general.--Subject to subparagraph (B), the term
`local fee-for-service rate' means the amount of payment for
a month in a MedicareAdvantage payment area for benefits
under this title and associated claims processing costs for
an individual who has elected to receive benefits under the
original medicare fee-for-service program option and not
enrolled in a MedicareAdvantage plan under this part. The
Secretary shall annually calculate such amount in a manner
similar to the manner in which the Secretary calculated the
adjusted average per capita cost under section 1876.
``(B) Removal of medical education costs from calculation
of local fee-for-service rate.--
``(i) In general.--In calculating the local fee-for-service
rate under subparagraph (A) for a year, the amount of payment
described in such subparagraph shall be adjusted to exclude
from such payment the payment adjustments described in clause
(ii).
``(ii) Payment adjustments described.--
``(I) In general.--Subject to subclause (II), the payment
adjustments described in this subparagraph are payment
adjustments which the Secretary estimates are payable during
the year--
``(aa) for the indirect costs of medical education under
section 1886(d)(5)(B); and
``(bb) for direct graduate medical education costs under
section 1886(h).
``(II) Treatment of payments covered under state hospital
reimbursement system.--To the extent that the Secretary
estimates that the amount of the local fee-for-service rates
reflects payments to hospitals reimbursed under section
1814(b)(3), the Secretary shall estimate a payment adjustment
that is comparable to the payment adjustment that would have
been made under clause (i) if the hospitals had not been
reimbursed under such section.
``(b) Annual Announcement of Payment Factors.--
``(1) Annual announcement.--Beginning in 2005, at the same
time as the Secretary publishes the risk adjusters under
section 1860D-11, the Secretary shall annually announce (in a
manner intended to provide notice to interested parties) the
following payment factors:
``(A) The benchmark amount for each MedicareAdvantage
payment area (as calculated under subsection (a)(4)) for the
year.
``(B) The factors to be used for adjusting payments under
the comprehensive risk adjustment methodology described in
subsection (a)(3)(B) with respect to each MedicareAdvantage
payment area for the year.
``(2) Advance notice of methodological changes.--At least
45 days before making the announcement under paragraph (1)
for a year, the Secretary shall--
``(A) provide for notice to MedicareAdvantage organizations
of proposed changes to be made in the methodology from the
methodology and assumptions used in the previous
announcement; and
``(B) provide such organizations with an opportunity to
comment on such proposed changes.
``(3) Explanation of assumptions.--In each announcement
made under paragraph (1), the Secretary shall include an
explanation of the assumptions and changes in
[[Page H6211]]
methodology used in the announcement in sufficient detail so
that MedicareAdvantage organizations can compute each payment
factor described in paragraph (1).
``(c) Calculation of Annual Medicare+Choice Capitation
Rates.--
``(1) In general.--For purposes of making payments under
this part for years before 2006 and for purposes of
calculating the annual Medicare+Choice capitation rates under
paragraph (7) beginning with such year, subject to paragraph
(6)(C), each annual Medicare+Choice capitation rate, for a
Medicare+Choice payment area before 2006 or a
MedicareAdvantage payment area beginning with such year for a
contract year consisting of a calendar year, is equal to the
largest of the amounts specified in the following
subparagraph (A), (B), or (C):
``(A) Blended capitation rate.--The sum of--
``(i) the area-specific percentage (as specified under
paragraph (2) for the year) of the annual area-specific
Medicare+Choice capitation rate for the MedicareAdvantage
payment area, as determined under paragraph (3) for the year;
and
``(ii) the national percentage (as specified under
paragraph (2) for the year) of the input-price-adjusted
annual national Medicare+Choice capitation rate, as
determined under paragraph (4) for the year,
multiplied by the budget neutrality adjustment factor
determined under paragraph (5).
``(B) Minimum amount.--12 multiplied by the following
amount:
``(i) For 1998, $367 (but not to exceed, in the case of an
area outside the 50 States and the District of Columbia, 150
percent of the annual per capita rate of payment for 1997
determined under section 1876(a)(1)(C) for the area).
``(ii) For 1999 and 2000, the minimum amount determined
under clause (i) or this clause, respectively, for the
preceding year, increased by the national per capita
Medicare+Choice growth percentage described in paragraph
(6)(A) applicable to 1999 or 2000, respectively.
``(iii)(I) Subject to subclause (II), for 2001, for any
area in a Metropolitan Statistical Area with a population of
more than 250,000, $525, and for any other area $475.
``(II) In the case of an area outside the 50 States and the
District of Columbia, the amount specified in this clause
shall not exceed 120 percent of the amount determined under
clause (ii) for such area for 2000.
``(iv) For 2002 through 2013, the minimum amount specified
in this clause (or clause (iii)) for the preceding year
increased by the national per capita Medicare+Choice growth
percentage, described in paragraph (6)(A) for that succeeding
year.
``(v) For 2014 and each succeeding year, the minimum amount
specified in this clause (or clause (iv)) for the preceding
year increased by the percentage increase in the Consumer
Price Index for all urban consumers (U.S. urban average) for
the 12-month period ending with June of the previous year.
``(C) Minimum percentage increase.--
``(i) For 1998, 102 percent of the annual per capita rate
of payment for 1997 determined under section 1876(a)(1)(C)
for the Medicare+Choice payment area.
``(ii) For 1999 and 2000, 102 percent of the annual
Medicare+Choice capitation rate under this paragraph for the
area for the previous year.
``(iii) For 2001, 103 percent of the annual Medicare+Choice
capitation rate under this paragraph for the area for 2000.
``(iv) For 2002 and each succeeding year, 102 percent of
the annual Medicare+Choice capitation rate under this
paragraph for the area for the previous year.
``(2) Area-specific and national percentages.--For purposes
of paragraph (1)(A)--
``(A) for 1998, the `area-specific percentage' is 90
percent and the `national percentage' is 10 percent;
``(B) for 1999, the `area-specific percentage' is 82
percent and the `national percentage' is 18 percent;
``(C) for 2000, the `area-specific percentage' is 74
percent and the `national percentage' is 26 percent;
``(D) for 2001, the `area-specific percentage' is 66
percent and the `national percentage' is 34 percent;
``(E) for 2002, the `area-specific percentage' is 58
percent and the `national percentage' is 42 percent; and
``(F) for a year after 2002, the `area-specific percentage'
is 50 percent and the `national percentage' is 50 percent.
``(3) Annual area-specific medicare+choice capitation
rate.--
``(A) In general.--For purposes of paragraph (1)(A),
subject to subparagraph (B), the annual area-specific
Medicare+Choice capitation rate for a Medicare+Choice payment
area--
``(i) for 1998 is, subject to subparagraph (D), the annual
per capita rate of payment for 1997 determined under section
1876(a)(1)(C) for the area, increased by the national per
capita Medicare+Choice growth percentage for 1998 (described
in paragraph (6)(A)); or
``(ii) for a subsequent year is the annual area-specific
Medicare+Choice capitation rate for the previous year
determined under this paragraph for the area, increased by
the national per capita Medicare+Choice growth percentage for
such subsequent year.
``(B) Removal of medical education from calculation of
adjusted average per capita cost.--
``(i) In general.--In determining the area-specific
Medicare+Choice capitation rate under subparagraph (A) for a
year (beginning with 1998), the annual per capita rate of
payment for 1997 determined under section 1876(a)(1)(C) shall
be adjusted to exclude from the rate the applicable percent
(specified in clause (ii)) of the payment adjustments
described in subparagraph (C).
``(ii) Applicable percent.--For purposes of clause (i), the
applicable percent for--
``(I) 1998 is 20 percent;
``(II) 1999 is 40 percent;
``(III) 2000 is 60 percent;
``(IV) 2001 is 80 percent; and
``(V) a succeeding year is 100 percent.
``(C) Payment adjustment.--
``(i) In general.--Subject to clause (ii), the payment
adjustments described in this subparagraph are payment
adjustments which the Secretary estimates were payable during
1997--
``(I) for the indirect costs of medical education under
section 1886(d)(5)(B); and
``(II) for direct graduate medical education costs under
section 1886(h).
``(ii) Treatment of payments covered under state hospital
reimbursement system.--To the extent that the Secretary
estimates that an annual per capita rate of payment for 1997
described in clause (i) reflects payments to hospitals
reimbursed under section 1814(b)(3), the Secretary shall
estimate a payment adjustment that is comparable to the
payment adjustment that would have been made under clause (i)
if the hospitals had not been reimbursed under such section.
``(D) Treatment of areas with highly variable payment
rates.--In the case of a Medicare+Choice payment area for
which the annual per capita rate of payment determined under
section 1876(a)(1)(C) for 1997 varies by more than 20 percent
from such rate for 1996, for purposes of this subsection the
Secretary may substitute for such rate for 1997 a rate that
is more representative of the costs of the enrollees in the
area.
``(4) Input-price-adjusted annual national medicare+choice
capitation rate.--
``(A) In general.--For purposes of paragraph (1)(A), the
input-price-adjusted annual national Medicare+Choice
capitation rate for a Medicare+Choice payment area for a year
is equal to the sum, for all the types of medicare services
(as classified by the Secretary), of the product (for each
such type of service) of--
``(i) the national standardized annual Medicare+Choice
capitation rate (determined under subparagraph (B)) for the
year;
``(ii) the proportion of such rate for the year which is
attributable to such type of services; and
``(iii) an index that reflects (for that year and that type
of services) the relative input price of such services in the
area compared to the national average input price of such
services.
In applying clause (iii), the Secretary may, subject to
subparagraph (C), apply those indices under this title that
are used in applying (or updating) national payment rates for
specific areas and localities.
``(B) National standardized annual medicare+choice
capitation rate.--In subparagraph (A)(i), the `national
standardized annual Medicare+Choice capitation rate' for a
year is equal to--
``(i) the sum (for all Medicare+Choice payment areas) of
the product of--
``(I) the annual area-specific Medicare+Choice capitation
rate for that year for the area under paragraph (3); and
``(II) the average number of medicare beneficiaries
residing in that area in the year, multiplied by the average
of the risk factor weights used to adjust payments under
subsection (a)(1)(A) for such beneficiaries in such area;
divided by
``(ii) the sum of the products described in clause (i)(II)
for all areas for that year.
``(5) Payment adjustment budget neutrality factor.--For
purposes of paragraph (1)(A), for each year, the Secretary
shall determine a budget neutrality adjustment factor so that
the aggregate of the payments under this part (other than
those attributable to subsections (a)(3)(C)(iii) and (i))
shall equal the aggregate payments that would have been made
under this part if payment were based entirely on area-
specific capitation rates.
``(6) National per capita medicare+choice growth percentage
defined.--
``(A) In general.--In this part, the `national per capita
Medicare+Choice growth percentage' for a year is the
percentage determined by the Secretary, by March 1st before
the beginning of the year involved, to reflect the
Secretary's estimate of the projected per capita rate of
growth in expenditures under this title for an individual
entitled to (or enrolled for) benefits under part A and
enrolled under part B, reduced by the number of percentage
points specified in subparagraph (B) for the year. Separate
determinations may be made for aged enrollees, disabled
enrollees, and enrollees with end-stage renal disease.
``(B) Adjustment.--The number of percentage points
specified in this subparagraph is--
``(i) for 1998, 0.8 percentage points;
``(ii) for 1999, 0.5 percentage points;
``(iii) for 2000, 0.5 percentage points;
``(iv) for 2001, 0.5 percentage points;
``(v) for 2002, 0.3 percentage points; and
``(vi) for a year after 2002, 0 percentage points.
``(C) Adjustment for over or under projection of national
per capita medicare+choice growth percentage.--Beginning with
rates calculated for 1999, before
[[Page H6212]]
computing rates for a year as described in paragraph (1), the
Secretary shall adjust all area-specific and national
Medicare+Choice capitation rates (and beginning in 2000, the
minimum amount) for the previous year for the differences
between the projections of the national per capita
Medicare+Choice growth percentage for that year and previous
years and the current estimate of such percentage for such
years.
``(7) Transition to medicareadvantage competition.--
``(A) In general.--For each year (beginning with 2006)
payments to MedicareAdvantage plans shall not be computed
under this subsection, but instead shall be based on the
payment amount determined under subsection (d).
``(B) Continued calculation of capitation rates.--For each
year (beginning with 2006) the Secretary shall calculate and
publish the annual Medicare+Choice capitation rates under
this subsection and shall use the annual Medicare+Choice
capitation rate determined under subsection (c)(1) for
purposes of determining the benchmark amount under subsection
(a)(4).
``(d) Secretary's Determination of Payment Amount.--
``(1) Review of plan bids.--The Secretary shall review each
plan bid submitted under section 1854(a) for the coverage of
benefits under the original medicare fee-for-service program
option to ensure that such bids are consistent with the
requirements under this part an are based on the assumptions
described in section 1854(a)(2)(A)(iii).
``(2) Determination of weighted service area benchmark
amounts.--The Secretary shall calculate a weighted service
area benchmark amount for the benefits under the original
medicare fee-for-service program option for each plan equal
to the weighted average of the benchmark amounts for benefits
under such original medicare fee-for-service program option
for the payment areas included in the service area of the
plan using the assumptions described in section
1854(a)(2)(A)(iii).
``(3) Comparison to benchmark.--The Secretary shall
determine the difference between each plan bid (as adjusted
under paragraph (1)) and the weighted service area benchmark
amount (as determined under paragraph (2)) for purposes of
determining--
``(A) the payment amount under paragraph (4); and
``(B) the additional benefits required and
MedicareAdvantage monthly basic beneficiary premiums.
``(4) Determination of payment amount for original medicare
fee-for-service benefits.--
``(A) In general.--Subject to subparagraph (B), the
Secretary shall determine the payment amount for
MedicareAdvantage plans for the benefits under the original
medicare fee-for-service program option as follows:
``(i) Bids that equal or exceed the benchmark.--In the case
of a plan bid that equals or exceeds the weighted service
area benchmark amount, the amount of each monthly payment to
a MedicareAdvantage organization with respect to each
individual enrolled in a plan shall be the weighted service
area benchmark amount.
``(ii) Bids below the benchmark.--In the case of a plan bid
that is less than the weighted service area benchmark amount,
the amount of each monthly payment to a MedicareAdvantage
organization with respect to each individual enrolled in a
plan shall be the weighted service area benchmark amount
reduced by the amount of any premium reduction elected by the
plan under section 1854(d)(1)(A)(i).
``(B) Application of comprehensive risk adjustment
methodology.--The Secretary shall adjust the amounts
determined under subparagraph (A) using the comprehensive
risk adjustment methodology applicable under subsection
(a)(3).
``(6) Adjustment for national coverage determinations and
legislative changes in benefits.--If the Secretary makes a
determination with respect to coverage under this title or
there is a change in benefits required to be provided under
this part that the Secretary projects will result in a
significant increase in the costs to MedicareAdvantage
organizations of providing benefits under contracts under
this part (for periods after any period described in section
1852(a)(5)), the Secretary shall appropriately adjust the
benchmark amounts or payment amounts (as determined by the
Secretary). Such projection and adjustment shall be based on
an analysis by the Secretary of the actuarial costs
associated with the new benefits.
``(7) Benefits under the original medicare fee-for-service
program option defined.--For purposes of this part, the term
`benefits under the original medicare fee-for-service program
option' means those items and services (other than hospice
care) for which benefits are available under parts A and B to
individuals entitled to, or enrolled for, benefits under part
A and enrolled under part B, with cost-sharing for those
services as required under parts A and B or an actuarially
equivalent level of cost-sharing as determined in this part.
``(e) MedicareAdvantage Payment Area Defined.--
``(1) In general.--In this part, except as provided in
paragraph (3), the term `MedicareAdvantage payment area'
means a county, or equivalent area specified by the
Secretary.
``(2) Rule for esrd beneficiaries.--In the case of
individuals who are determined to have end stage renal
disease, the MedicareAdvantage payment area shall be a State
or such other payment area as the Secretary specifies.
``(3) Geographic adjustment.--
``(A) In general.--Upon written request of the chief
executive officer of a State for a contract year (beginning
after 2005) made by not later than February 1 of the previous
year, the Secretary shall make a geographic adjustment to a
MedicareAdvantage payment area in the State otherwise
determined under paragraph (1)--
``(i) to a single statewide MedicareAdvantage payment area;
``(ii) to the metropolitan based system described in
subparagraph (C); or
``(iii) to consolidating into a single MedicareAdvantage
payment area noncontiguous counties (or equivalent areas
described in paragraph (1)) within a State.
Such adjustment shall be effective for payments for months
beginning with January of the year following the year in
which the request is received.
``(B) Budget neutrality adjustment.--In the case of a State
requesting an adjustment under this paragraph, the Secretary
shall initially (and annually thereafter) adjust the payment
rates otherwise established under this section for
MedicareAdvantage payment areas in the State in a manner so
that the aggregate of the payments under this section in the
State shall not exceed the aggregate payments that would have
been made under this section for MedicareAdvantage payment
areas in the State in the absence of the adjustment under
this paragraph.
``(C) Metropolitan based system.--The metropolitan based
system described in this subparagraph is one in which--
``(i) all the portions of each metropolitan statistical
area in the State or in the case of a consolidated
metropolitan statistical area, all of the portions of each
primary metropolitan statistical area within the consolidated
area within the State, are treated as a single
MedicareAdvantage payment area; and
``(ii) all areas in the State that do not fall within a
metropolitan statistical area are treated as a single
MedicareAdvantage payment area.
``(D) Areas.--In subparagraph (C), the terms `metropolitan
statistical area', `consolidated metropolitan statistical
area', and `primary metropolitan statistical area' mean any
area designated as such by the Secretary of Commerce.
``(f) Special Rules for Individuals Electing MSA Plans.--
``(1) In general.--If the amount of the MedicareAdvantage
monthly MSA premium (as defined in section 1854(b)(2)(D)) for
an MSA plan for a year is less than \1/12\ of the annual
Medicare+Choice capitation rate applied under this section
for the area and year involved, the Secretary shall deposit
an amount equal to 100 percent of such difference in a
MedicareAdvantage MSA established (and, if applicable,
designated) by the individual under paragraph (2).
``(2) Establishment and designation of MedicareAdvantage
medical savings account as requirement for payment of
contribution.--In the case of an individual who has elected
coverage under an MSA plan, no payment shall be made under
paragraph (1) on behalf of an individual for a month unless
the individual--
``(A) has established before the beginning of the month (or
by such other deadline as the Secretary may specify) a
MedicareAdvantage MSA (as defined in section 138(b)(2) of the
Internal Revenue Code of 1986); and
``(B) if the individual has established more than 1 such
MedicareAdvantage MSA, has designated 1 of such accounts as
the individual's MedicareAdvantage MSA for purposes of this
part.
Under rules under this section, such an individual may change
the designation of such account under subparagraph (B) for
purposes of this part.
``(3) Lump-sum deposit of medical savings account
contribution.--In the case of an individual electing an MSA
plan effective beginning with a month in a year, the amount
of the contribution to the MedicareAdvantage MSA on behalf of
the individual for that month and all successive months in
the year shall be deposited during that first month. In the
case of a termination of such an election as of a month
before the end of a year, the Secretary shall provide for a
procedure for the recovery of deposits attributable to the
remaining months in the year.
``(g) Payments From Trust Funds.--Except as provided in
section 1858A(c) (relating to payments for qualified
prescription drug coverage), the payment to a
MedicareAdvantage organization under this section for
individuals enrolled under this part with the organization
and payments to a MedicareAdvantage MSA under subsection
(e)(1) shall be made from the Federal Hospital Insurance
Trust Fund and the Federal Supplementary Medical Insurance
Trust Fund in such proportion as the Secretary determines
reflects the relative weight that benefits under part A and
under part B represents of the actuarial value of the total
benefits under this title. Monthly payments otherwise payable
under this section for October 2000 shall be paid on the
first business day of such month. Monthly payments otherwise
payable under this section for October 2001 shall be paid on
the last business day of September 2001. Monthly payments
otherwise payable under this section for October
[[Page H6213]]
2006 shall be paid on the first business day of October 2006.
``(h) Special Rule for Certain Inpatient Hospital Stays.--
In the case of an individual who is receiving inpatient
hospital services from a subsection (d) hospital (as defined
in section 1886(d)(1)(B)) as of the effective date of the
individual's--
``(1) election under this part of a MedicareAdvantage plan
offered by a MedicareAdvantage organization--
``(A) payment for such services until the date of the
individual's discharge shall be made under this title through
the MedicareAdvantage plan or the original medicare fee-for-
service program option (as the case may be) elected before
the election with such organization,
``(B) the elected organization shall not be financially
responsible for payment for such services until the date
after the date of the individual's discharge; and
``(C) the organization shall nonetheless be paid the full
amount otherwise payable to the organization under this part;
or
``(2) termination of election with respect to a
MedicareAdvantage organization under this part--
``(A) the organization shall be financially responsible for
payment for such services after such date and until the date
of the individual's discharge;
``(B) payment for such services during the stay shall not
be made under section 1886(d) or by any succeeding
MedicareAdvantage organization; and
``(C) the terminated organization shall not receive any
payment with respect to the individual under this part during
the period the individual is not enrolled.
``(i) Special Rule for Hospice Care.--
``(1) Information.--A contract under this part shall
require the MedicareAdvantage organization to inform each
individual enrolled under this part with a MedicareAdvantage
plan offered by the organization about the availability of
hospice care if--
``(A) a hospice program participating under this title is
located within the organization's service area; or
``(B) it is common practice to refer patients to hospice
programs outside such service area.
``(2) Payment.--If an individual who is enrolled with a
MedicareAdvantage organization under this part makes an
election under section 1812(d)(1) to receive hospice care
from a particular hospice program--
``(A) payment for the hospice care furnished to the
individual shall be made to the hospice program elected by
the individual by the Secretary;
``(B) payment for other services for which the individual
is eligible notwithstanding the individual's election of
hospice care under section 1812(d)(1), including services not
related to the individual's terminal illness, shall be made
by the Secretary to the MedicareAdvantage organization or the
provider or supplier of the service instead of payments
calculated under subsection (a); and
``(C) the Secretary shall continue to make monthly payments
to the MedicareAdvantage organization in an amount equal to
the value of the additional benefits required under section
1854(f)(1)(A).''.
SEC. 204. SUBMISSION OF BIDS; PREMIUMS.
Section 1854 (42 U.S.C. 1395w-24) is amended to read as
follows:
``submission of bids; premiums
``Sec. 1854. (a) Submission of Bids by MedicareAdvantage
Organizations.--
``(1) In general.--Not later than the second Monday in
September and except as provided in paragraph (3), each
MedicareAdvantage organization shall submit to the Secretary,
in such form and manner as the Secretary may specify, for
each MedicareAdvantage plan that the organization intends to
offer in a service area in the following year--
``(A) notice of such intent and information on the service
area of the plan;
``(B) the plan type for each plan;
``(C) if the MedicareAdvantage plan is a coordinated care
plan (as described in section 1851(a)(2)(A)) or a private
fee-for-service plan (as described in section 1851(a)(2)(C)),
the information described in paragraph (2) with respect to
each payment area;
``(D) the enrollment capacity (if any) in relation to the
plan and each payment area;
``(E) the expected mix, by health status, of enrolled
individuals; and
``(F) such other information as the Secretary may specify.
``(2) Information required for coordinated care plans and
private fee-for-service plans.--For a MedicareAdvantage plan
that is a coordinated care plan (as described in section
1851(a)(2)(A)) or a private fee-for-service plan (as
described in section 1851(a)(2)(C)), the information
described in this paragraph is as follows:
``(A) Information required with respect to benefits under
the original medicare fee-for-service program option.--
Information relating to the coverage of benefits under the
original medicare fee-for-service program option as follows:
``(i) The plan bid, which shall consist of a dollar amount
that represents the total amount that the plan is willing to
accept (not taking into account the application of the
comprehensive risk adjustment methodology under section
1853(a)(3)) for providing coverage of the benefits under the
original medicare fee-for-service program option to an
individual enrolled in the plan that resides in the service
area of the plan for a month.
``(ii) For the enhanced medical benefits package offered--
``(I) the adjusted community rate (as defined in subsection
(g)(3)) of the package;
``(II) the portion of the actuarial value of such benefits
package (if any) that will be applied toward satisfying the
requirement for additional benefits under subsection (g);
``(III) the MedicareAdvantage monthly beneficiary premium
for enhanced medical benefits (as defined in subsection
(b)(2)(C));
``(IV) a description of any cost-sharing;
``(V) a description of whether the amount of the unified
deductible has been lowered or the maximum limitations on
out-of-pocket expenses have been decreased (relative to the
levels used in calculating the plan bid);
``(VI) such other information as the Secretary considers
necessary.
``(iii) The assumptions that the MedicareAdvantage
organization used in preparing the plan bid with respect to
numbers, in each payment area, of enrolled individuals and
the mix, by health status, of such individuals.
``(B) Information required with respect to part d.--The
information required to be submitted by an eligible entity
under section 1860D-12, including the monthly premiums for
standard coverage and any other qualified prescription drug
coverage available to individuals enrolled under part D.
``(C) Determining plan costs included in plan bid.--For
purposes of submitting its plan bid under subparagraph (A)(i)
a MedicareAdvantage plan offered by a MedicareAdvantage
organization satisfies subparagraphs (A) and (C) of section
1852(a)(1) if the actuarial value of the deductibles,
coinsurance, and copayments applicable on average to
individuals enrolled in such plan under this part with
respect to benefits under the original medicare fee-for-
service program option on which that bid is based (ignoring
any reduction in cost-sharing offered by such plan as
enhanced medical benefits under paragraph (2)(A)(ii) or
required under clause (ii) or (iii) of subsection (g)(1)(C))
equals the amount specified in subsection (f)(1)(B).
``(3) Requirements for msa plans.--For an MSA plan
described in section 1851(a)(2)(B), the information described
in this paragraph is the information that such a plan would
have been required to submit under this part if the
Prescription Drug and Medicare Improvements Act of 2003 had
not been enacted.
``(4) Review.--
``(A) In general.--Subject to subparagraph (B), the
Secretary shall review the adjusted community rates (as
defined in section 1854(g)(3)), the amounts of the
MedicareAdvantage monthly basic premium and the
MedicareAdvantage monthly beneficiary premium for enhanced
medical benefits filed under this subsection and shall
approve or disapprove such rates and amounts so submitted.
The Secretary shall review the actuarial assumptions and data
used by the MedicareAdvantage organization with respect to
such rates and amounts so submitted to determine the
appropriateness of such assumptions and data.
``(B) MSA exception.--The Secretary shall not review,
approve, or disapprove the amounts submitted under paragraph
(3).
``(C) Clarification of authority regarding disapproval of
unreasonable beneficiary cost-sharing.--Under the authority
under subparagraph (A), the Secretary may disapprove the bid
if the Secretary determines that the deductibles,
coinsurance, or copayments applicable under the plan
discourage access to covered services or are likely to result
in favorable selection of MedicareAdvantage eligible
individuals.
``(5) Application of fehbp standard; prohibition on price
gouging.--Each bid amount submitted under paragraph (1) for a
MedicareAdvantage plan must reasonably and equitably reflect
the cost of benefits provided under that plan.
``(b) Monthly Premiums Charged.--
``(1) In general.--
``(A) Coordinated care and private fee-for-service plans.--
The monthly amount of the premium charged to an individual
enrolled in a MedicareAdvantage plan (other than an MSA plan)
offered by a MedicareAdvantage organization shall be equal to
the sum of the following:
``(i) The MedicareAdvantage monthly basic beneficiary
premium (if any).
``(ii) The MedicareAdvantage monthly beneficiary premium
for enhanced medical benefits (if any).
``(iii) The MedicareAdvantage monthly obligation for
qualified prescription drug coverage (if any).
``(B) MSA plans.--The rules under this section that would
have applied with respect to an MSA plan if the Prescription
Drug and Medicare Improvements Act of 2003 had not been
enacted shall continue to apply to MSA plans after the date
of enactment of such Act.
``(2) Premium terminology.--For purposes of this part:
``(A) Medicareadvantage monthly basic beneficiary
premium.--The term `MedicareAdvantage monthly basic
beneficiary premium' means, with respect to a
MedicareAdvantage plan, the amount required to be charged
under subsection (d)(2) for the plan.
``(B) Medicareadvantage monthly beneficiary obligation for
qualified prescription drug coverage.--The term
[[Page H6214]]
`MedicareAdvantage monthly beneficiary obligation for
qualified prescription drug coverage' means, with respect to
a MedicareAdvantage plan, the amount determined under section
1858A(d).
``(C) Medicareadvantage monthly beneficiary premium for
enhanced medical benefits.--The term `MedicareAdvantage
monthly beneficiary premium for enhanced medical benefits'
means, with respect to a MedicareAdvantage plan, the amount
required to be charged under subsection (f)(2) for the plan,
or, in the case of an MSA plan, the amount filed under
subsection (a)(3).
``(D) Medicareadvantage monthly msa premium.--The term
`MedicareAdvantage monthly MSA premium' means, with respect
to a MedicareAdvantage plan, the amount of such premium filed
under subsection (a)(3) for the plan.
``(c) Uniform Premium.--The MedicareAdvantage monthly basic
beneficiary premium, the MedicareAdvantage monthly
beneficiary obligation for qualified prescription drug
coverage, the MedicareAdvantage monthly beneficiary premium
for enhanced medical benefits, and the MedicareAdvantage
monthly MSA premium charged under subsection (b) of a
MedicareAdvantage organization under this part may not vary
among individuals enrolled in the plan.
``(d) Determination of Premium Reductions, Reduced Cost-
Sharing, Additional Benefits, and Beneficiary Premiums.--
``(1) Bids below the benchmark.--If the Secretary
determines under section 1853(d)(3) that the weighted service
area benchmark amount exceeds the plan bid, the Secretary
shall require the plan to provide additional benefits in
accordance with subsection (g).
``(2) Bids above the benchmark.--If the Secretary
determines under section 1853(d)(3) that the plan bid exceeds
the weighted service area benchmark amount (determined under
section 1853(d)(2)), the amount of such excess shall be the
MedicareAdvantage monthly basic beneficiary premium (as
defined in section 1854(b)(2)(A)).
``(e) Terms and Conditions of Imposing Premiums.--Each
MedicareAdvantage organization shall permit the payment of
any MedicareAdvantage monthly basic premium, the
MedicareAdvantage monthly beneficiary obligation for
qualified prescription drug coverage, and the
MedicareAdvantage monthly beneficiary premium for enhanced
medical benefits on a monthly basis, may terminate election
of individuals for a MedicareAdvantage plan for failure to
make premium payments only in accordance with section
1851(g)(3)(B)(i), and may not provide for cash or other
monetary rebates as an inducement for enrollment or otherwise
(other than as an additional benefit described in subsection
(g)(1)(C)(i)).
``(f) Limitation on Enrollee Liability.--
``(1) For benefits under the original medicare fee-for-
service program option.--The sum of--
``(A) the MedicareAdvantage monthly basic beneficiary
premium (multiplied by 12) and the actuarial value of the
deductibles, coinsurance, and copayments (determined on the
same basis as used in determining the plan's bid under
paragraph (2)(C)) applicable on average to individuals
enrolled under this part with a MedicareAdvantage plan
described in subparagraph (A) or (C) of section 1851(a)(2) of
an organization with respect to required benefits described
in section 1852(a)(1)(A); must equal
``(B) the actuarial value of the deductibles, coinsurance,
and copayments that would be applicable on average to
individuals who have elected to receive benefits under the
original medicare fee-for-service program option if such
individuals were not members of a MedicareAdvantage
organization for the year (adjusted as determined appropriate
by the Secretary to account for geographic differences and
for plan cost and utilization differences).
``(2) For enhanced medical benefits.--If the
MedicareAdvantage organization provides to its members
enrolled under this part in a MedicareAdvantage plan
described in subparagraph (A) or (C) of section 1851(a)(2)
with respect to enhanced medical benefits relating to
benefits under the original medicare fee-for-service program
option, the sum of the MedicareAdvantage monthly beneficiary
premium for enhanced medical benefits (multiplied by 12)
charged and the actuarial value of its deductibles,
coinsurance, and copayments charged with respect to such
benefits for a year must equal the adjusted community rate
(as defined in subsection (g)(3)) for such benefits for the
year minus the actuarial value of any additional benefits
pursuant to clause (ii), (iii), or (iv) of subsection
(g)(2)(C) that the plan specified under subsection
(a)(2)(i)(II).
``(3) Determination on other basis.--If the Secretary
determines that adequate data are not available to determine
the actuarial value under paragraph (1)(A) or (2), the
Secretary may determine such amount with respect to all
individuals in the same geographic area, the State, or in the
United States, eligible to enroll in the MedicareAdvantage
plan involved under this part or on the basis of other
appropriate data.
``(4) Special rule for private fee-for-service plans.--With
respect to a MedicareAdvantage private fee-for-service plan
(other than a plan that is an MSA plan), in no event may--
``(A) the actuarial value of the deductibles, coinsurance,
and copayments applicable on average to individuals enrolled
under this part with such a plan of an organization with
respect to required benefits described in subparagraphs (A),
(C), and (D) of section 1852(a)(1); exceed
``(B) the actuarial value of the deductibles, coinsurance,
and copayments that would be applicable on average to
individuals entitled to (or enrolled for) benefits under part
A and enrolled under part B if they were not members of a
MedicareAdvantage organization for the year.
``(g) Requirement for Additional Benefits.--
``(1) Requirement.--
``(A) In general.--Each MedicareAdvantage organization (in
relation to a MedicareAdvantage plan, other than an MSA plan,
it offers) shall provide that if there is an excess amount
(as defined in subparagraph (B)) for the plan for a contract
year, subject to the succeeding provisions of this
subsection, the organization shall provide to individuals
such additional benefits described in subparagraph (C) as the
organization may specify in a value which the Secretary
determines is at least equal to the adjusted excess amount
(as defined in subparagraph (D)).
``(B) Excess amount.--For purposes of this paragraph, the
term `excess amount' means, for an organization for a plan,
is 100 percent of the amount (if any) by which the weighted
service area benchmark amount (determined under section
1853(d)(2)) exceeds the plan bid (as adjusted under section
1853(d)(1)).
``(C) Additional benefits described.--The additional
benefits described in this subparagraph are as follows:
``(i) Subject to subparagraph (F), a monthly part B premium
reduction for individuals enrolled in the plan.
``(ii) Lowering the amount of the unified deductible and
decreasing the maximum limitations on out-of-pocket expenses
for individuals enrolled in the plan.
``(iii) A reduction in the actuarial value of plan cost-
sharing for plan enrollees.
``(iv) Subject to subparagraph (E), such additional
benefits as the organization may specify.
``(v) Contributing to the stabilization fund under
paragraph (2).
``(vi) Any combination of the reductions and benefits
described in clauses (i) through (v).
``(D) Adjusted excess amount.--For purposes of this
paragraph, the term `adjusted excess amount' means, for an
organization for a plan, is the excess amount reduced to
reflect any amount withheld and reserved for the organization
for the year under paragraph (2).
``(E) Rule for approval of medical and prescription drug
benefits.--An organization may not specify any additional
benefit that provides for the coverage of any prescription
drug (other than that relating to prescription drugs covered
under the original medicare fee-for-service program option).
``(F) Premium reductions.--
``(i) In general.--Subject to clause (ii), as part of
providing any additional benefits required under subparagraph
(A), a MedicareAdvantage organization may elect a reduction
in its payments under section 1853(a)(1)(A)(i) with respect
to a MedicareAdvantage plan and the Secretary shall apply
such reduction to reduce the premium under section 1839 of
each enrollee in such plan as provided in section 1840(i).
``(ii) Amount of reduction.--The amount of the reduction
under clause (i) with respect to any enrollee in a
MedicareAdvantage plan--
``(I) may not exceed 125 percent of the premium described
under section 1839(a)(3); and
``(II) shall apply uniformly to each enrollee of the
MedicareAdvantage plan to which such reduction applies.
``(G) Uniform application.--This paragraph shall be applied
uniformly for all enrollees for a plan.
``(H) Construction.--Nothing in this subsection shall be
construed as preventing a MedicareAdvantage organization from
providing enhanced medical benefits (described in section
1852(a)(3)) that are in addition to the health care benefits
otherwise required to be provided under this paragraph and
from imposing a premium for such enhanced medical benefits.
``(2) Stabilization fund.--A MedicareAdvantage organization
may provide that a part of the value of an excess amount
described in paragraph (1) be withheld and reserved in the
Federal Hospital Insurance Trust Fund and in the Federal
Supplementary Medical Insurance Trust Fund (in such
proportions as the Secretary determines to be appropriate) by
the Secretary for subsequent annual contract periods, to the
extent required to prevent undue fluctuations in the
additional benefits offered in those subsequent periods by
the organization in accordance with such paragraph. Any of
such value of the amount reserved which is not provided as
additional benefits described in paragraph (1)(A) to
individuals electing the MedicareAdvantage plan of the
organization in accordance with such paragraph prior to the
end of such periods, shall revert for the use of such Trust
Funds.
``(3) Adjusted community rate.--For purposes of this
subsection, subject to paragraph (4), the term `adjusted
community rate' for a service or services means, at the
election of a MedicareAdvantage organization, either--
[[Page H6215]]
``(A) the rate of payment for that service or services
which the Secretary annually determines would apply to an
individual electing a MedicareAdvantage plan under this part
if the rate of payment were determined under a `community
rating system' (as defined in section 1302(8) of the Public
Health Service Act, other than subparagraph (C)); or
``(B) such portion of the weighted aggregate premium, which
the Secretary annually estimates would apply to such an
individual, as the Secretary annually estimates is
attributable to that service or services,
but adjusted for differences between the utilization
characteristics of the individuals electing coverage under
this part and the utilization characteristics of the other
enrollees with the plan (or, if the Secretary finds that
adequate data are not available to adjust for those
differences, the differences between the utilization
characteristics of individuals selecting other
MedicareAdvantage coverage, or MedicareAdvantage eligible
individuals in the area, in the State, or in the United
States, eligible to elect MedicareAdvantage coverage under
this part and the utilization characteristics of the rest of
the population in the area, in the State, or in the United
States, respectively).
``(4) Determination based on insufficient data.--For
purposes of this subsection, if the Secretary finds that
there is insufficient enrollment experience to determine the
average amount of payments to be made under this part at the
beginning of a contract period or to determine (in the case
of a newly operated provider-sponsored organization or other
new organization) the adjusted community rate for the
organization, the Secretary may determine such an average
based on the enrollment experience of other contracts entered
into under this part and may determine such a rate using data
in the general commercial marketplace.
``(h) Prohibition of State Imposition of Premium Taxes.--No
State may impose a premium tax or similar tax with respect to
payments to MedicareAdvantage organizations under section
1853.
``(i) Permitting Use of Segments of Service Areas.--The
Secretary shall permit a MedicareAdvantage organization to
elect to apply the provisions of this section uniformly to
separate segments of a service area (rather than uniformly to
an entire service area) as long as such segments are composed
of 1 or more MedicareAdvantage payment areas.''.
(b) Study and Report on Clarification of Authority
Regarding Disapproval of Unreasonable Beneficiary Cost-
Sharing.--
(1) Study.--The Secretary, in consultation with
beneficiaries, consumer groups, employers, and
Medicare+Choice organizations, shall conduct a study to
determine the extent to which the cost-sharing structures
under Medicare+Choice plans under part C of title XVIII of
the Social Security Act discourage access to covered services
or discriminate based on the health status of Medicare+Choice
eligible individuals (as defined in section 1851(a)(3) of the
Social Security Act (42 U.S.C. 1395w-21(a)(3))).
(2) Report.--Not later than December 31, 2004, the
Secretary shall submit a report to Congress on the study
conducted under paragraph (1) together with recommendations
for such legislation and administrative actions as the
Secretary considers appropriate.
SEC. 205. SPECIAL RULES FOR PRESCRIPTION DRUG BENEFITS.
Part C of title XVIII (42 U.S.C. 1395w-21 et seq.) is
amended by inserting after section 1857 the following new
section:
``special rules for prescription drug benefits
``Sec. 1858A. (a) Availability.--
``(1) Plans required to provide qualified prescription drug
coverage to enrollees.--
``(A) In general.--Except as provided in subparagraph (B),
on and after January 1, 2006, a MedicareAdvantage
organization offering a MedicareAdvantage plan (except for an
MSA plan) shall make available qualified prescription drug
coverage that meets the requirements for such coverage under
this part and part D to each enrollee of the plan.
``(B) Private fee-for-service plans may, but are not
required to, provide qualified prescription drug coverage.--
Pursuant to section 1852(a)(2)(D), a private fee-for-service
plan may elect not to provide qualified prescription drug
coverage under part D to individuals residing in the area
served by the plan.
``(2) Reference to provision permitting additional
prescription drug coverage.--For the provisions of part D,
made applicable to this part pursuant to paragraph (1), that
permit a plan to make available qualified prescription drug
coverage that includes coverage of covered drugs that exceeds
the coverage required under paragraph (1) of section 1860D-6
in an area, but only if the MedicareAdvantage organization
offering the plan also offers a MedicareAdvantage plan in the
area that only provides the coverage that is required under
such paragraph (1), see paragraph (2) of such section.
``(3) Rule for approval of medical and prescription drug
benefits.--Pursuant to sections 1854(g)(1)(F) and
1852(a)(3)(D), a MedicareAdvantage organization offering a
MedicareAdvantage plan that provides qualified prescription
drug coverage may not make available coverage of any
prescription drugs (other than that relating to prescription
drugs covered under the original medicare fee-for-service
program option) to an enrollee as an additional benefit or as
an enhanced medical benefit.
``(b) Compliance With Additional Beneficiary Protections.--
With respect to the offering of qualified prescription drug
coverage by a MedicareAdvantage organization under a
MedicareAdvantage plan, the organization and plan shall meet
the requirements of section 1860D-5, including requirements
relating to information dissemination and grievance and
appeals, and such other requirements under part D that the
Secretary determines appropriate in the same manner as such
requirements apply to an eligible entity and a Medicare
Prescription Drug plan under part D. The Secretary shall
waive such requirements to the extent the Secretary
determines that such requirements duplicate requirements
otherwise applicable to the organization or the plan under
this part.
``(c) Payments for Prescription Drugs.--
``(1) Payment of full amount of premium to organizations
for qualified prescription drug coverage.--
``(A) In general.--For each year (beginning with 2006), the
Secretary shall pay to each MedicareAdvantage organization
offering a MedicareAdvantage plan that provides qualified
prescription drug coverage, an amount equal to the full
amount of the monthly premium submitted under section
1854(a)(2)(B) for the year, as adjusted using the risk
adjusters that apply to the standard prescription drug
coverage published under section 1860D-11.
``(B) Application of part d risk corridor, stabilization
reserve fund, and administrative expenses provisions.--The
provisions of subsections (b), (c), and (d) of section 1860D-
16 shall apply to a MedicareAdvantage organization offering a
MedicareAdvantage plan that provides qualified prescription
drug coverage and payments made to such organization under
subparagraph (A) in the same manner as such provisions apply
to an eligible entity offering a Medicare Prescription Drug
plan and payments made to such entity under subsection (a) of
section 1860D-16.
``(2) Payment from prescription drug account.--Payment made
to MedicareAdvantage organizations under this subsection
shall be made from the Prescription Drug Account in the
Federal Supplementary Medical Insurance Trust Fund under
section 1841.
``(d) Computation of MedicareAdvantage Monthly Beneficiary
Obligation for Qualified Prescription Drug Coverage.--In the
case of a MedicareAdvantage eligible individual receiving
qualified prescription drug coverage under a
MedicareAdvantage plan during a year after 2005, the
MedicareAdvantage monthly beneficiary obligation for
qualified prescription drug coverage of such individual in
the year shall be determined in the same manner as the
monthly beneficiary obligation is determined under section
1860D-17 for eligible beneficiaries enrolled in a Medicare
Prescription Drug plan, except that, for purposes of this
subparagraph, any reference to the monthly plan premium
approved by the Secretary under section 1860D-13 shall be
treated as a reference to the monthly premium for
qualified prescription drug coverage submitted by the
MedicareAdvantage organization offering the plan under
section 1854(a)(2)(A) and approved by the Secretary.
``(e) Collection of MedicareAdvantage Monthly Beneficiary
Obligation for Qualified Prescription Drug Coverage.--The
provisions of section 1860D-18, including subsection (b) of
such section, shall apply to the amount of the
MedicareAdvantage monthly beneficiary obligation for
qualified prescription drug coverage (as determined under
subsection (d)) required to be paid by a MedicareAdvantage
eligible individual enrolled in a MedicareAdvantage plan in
the same manner as such provisions apply to the amount of the
monthly beneficiary obligation required to be paid by an
eligible beneficiary enrolled in a Medicare Prescription Drug
plan under part D.
``(f) Availability of Premium Subsidy and Cost-Sharing
Reductions for Low-Income Enrollees and Reinsurance
Payments.--For provisions--
``(1) providing premium subsidies and cost-sharing
reductions for low-income individuals receiving qualified
prescription drug coverage through a MedicareAdvantage plan,
see section 1860D-19; and
``(2) providing a MedicareAdvantage organization with
reinsurance payments for certain expenses incurred in
providing qualified prescription drug coverage through a
MedicareAdvantage plan, see section 1860D-20.''.
(b) Treatment of Reduction for Purposes of Determining
Government Contribution Under Part B.--Section 1844(c) (42
U.S.C. 1395w) is amended by striking ``section
1854(f)(1)(E)'' and inserting ``section 1854(d)(1)(A)(i)''.
SEC. 206. FACILITATING EMPLOYER PARTICIPATION.
Section 1858(h) (as added by section 211) is amended by
inserting ``(including subsection (i) of such section)''
after ``section 1857''.
SEC. 207. ADMINISTRATION BY THE CENTER FOR MEDICARE CHOICES.
On and after January 1, 2006, the MedicareAdvantage program
under part C of title XVIII of the Social Security Act shall
be administered by the Center for Medicare Choices
established under section 1808 such title (as added by
section 301), and each reference to the Secretary made in
such part shall be deemed to be a reference to the
Administrator of the Center for Medicare Choices.
[[Page H6216]]
SEC. 208. CONFORMING AMENDMENTS.
(a) Organizational and Financial Requirements for
MedicareAdvantage Organizations; Provider-Sponsored
Organizations.--Section 1855 (42 U.S.C. 1395w-25) is
amended--
(1) in subsection (b), in the matter preceding paragraph
(1), by inserting ``subparagraphs (A), (B), and (D) of''
before ``section 1852(A)(1)''; and
(2) by striking ``Medicare+Choice'' and inserting
``MedicareAdvantage'' each place it appears.
(b) Establishment of PSO Standards.--Section 1856 (42
U.S.C. 1395w-26) is amended by striking ``Medicare+Choice''
and inserting ``MedicareAdvantage'' each place it appears.
(c) Contracts With MedicareAdvantage Organizations.--
Section 1857 (42 U.S.C. 1395w-27) is amended--
(1) in subsection (g)(1)--
(A) in subparagraph (B), by striking ``amount of the
Medicare+Choice monthly basic and supplemental beneficiary
premiums'' and inserting ``amounts of the MedicareAdvantage
monthly basic premium and MedicareAdvantage monthly
beneficiary premium for enhanced medical benefits'';
(B) in subparagraph (F), by striking ``or'' after the
semicolon at the end;
(C) in subparagraph (G), by adding ``or'' after the
semicolon at the end; and
(D) by inserting after subparagraph (G) the following new
subparagraph:
``(H)(i) charges any individual an amount in excess of the
MedicareAdvantage monthly beneficiary obligation for
qualified prescription drug coverage under section 1858A(d);
``(ii) provides coverage for prescription drugs that is not
qualified prescription drug coverage;
``(iii) offers prescription drug coverage, but does not
make standard prescription drug coverage available; or
``(iv) provides coverage for prescription drugs (other than
that relating to prescription drugs covered under the
original medicare fee-for-service program option described in
section 1851(a)(1)(A)(i)) as an enhanced medical benefit
under section 1852(a)(3)(D) or as an additional benefit under
section 1854(g)(1)(F),''; and
(2) by striking ``Medicare+Choice'' and inserting
``MedicareAdvantage'' each place it appears.
(d) Definitions; Miscellaneous Provisions.--Section 1859
(42 U.S.C. 1395w-28) is amended--
(1) by striking subsection (c) and inserting the following
new subsection:
``(c) Other References to Other Terms.--
``(1) Enhanced medical benefits.--The term `enhanced
medical benefits' is defined in section 1852(a)(3)(E).
``(2) Medicareadvantage eligible individual.--The term
`MedicareAdvantage eligible individual' is defined in section
1851(a)(3).
``(3) Medicareadvantage payment area.--The term
`MedicareAdvantage payment area' is defined in section
1853(d).
``(4) National per capita medicare+choice growth
percentage.--The `national per capita Medicare+Choice growth
percentage' is defined in section 1853(c)(6).
``(5) Medicareadvantage monthly basic beneficiary premium;
medicareadvantage monthly beneficiary obligation for
qualified prescription drug coverage; medicareadvantage
monthly beneficiary premium for enhanced medical benefits.--
The terms `MedicareAdvantage monthly basic beneficiary
premium', `MedicareAdvantage monthly beneficiary obligation
for qualified prescription drug coverage', and
`MedicareAdvantage monthly beneficiary premium for enhanced
medical benefits' are defined in section 1854(b)(2).
``(6) Qualified prescription drug coverage.--The term
`qualified prescription drug coverage' has the meaning given
such term in section 1860D(9).
``(7) Standard prescription drug coverage.--The term
`standard prescription drug coverage' has the meaning given
such term in section 1860D(10).''; and
(2) by striking ``Medicare+Choice'' and inserting
``MedicareAdvantage'' each place it appears.
(e) Conforming Amendments Effective Before 2006.--
(1) Extension of MSAs.--Section 1851(b)(4) (42 U.S.C.
1395w-21(b)(4)) is amended by striking ``January 1, 2003''
and inserting ``January 1, 2004''.
(2) Continuous open enrollment and disenrollment through
2005.--Section 1851(e) of the Social Security Act (42 U.S.C.
1395w-21(e)) is amended--
(A) in paragraph (2)(A), by striking ``through 2004'' and
``December 31,2004'' and inserting ``through 2005'' and
``December 31, 2005'', respectively;
(B) in the heading of paragraph (2)(B), by striking
``during 2005'' and inserting ``during 2006'';
(C) in paragraphs (2)(B)(i) and (2)(C)(i), by striking
``2005'' and inserting ``2006'' each place it appears;
(D) in paragraph (2)(D), by striking ``2004'' and inserting
``2005''; and
(E) in paragraph (4), by striking ``2005'' and inserting
``2006'' each place it appears.
(3) Effective date.--The amendments made by this subsection
shall take effect on the date of enactment of this Act.
(e) Other Conforming Amendments.--
(1) Conforming medicare cross-references.--
(A) Section 1839(a)(2) (42 U.S.C. 1395r(a)(2)) is amended
by striking ``section 1854(f)(1)(E)'' and inserting ``section
1854(g)(1)(C)(i)''.
(B) Section 1840(i) (42 U.S.C. 1395s(i)) is amended by
striking ``section 1854(f)(1)(E)'' and inserting ``section
1854(g)(1)(C)(i)''.
(C) Section 1844(c) (42 U.S.C. 1395w(c)) is amended by
striking ``section 1854(f)(1)(E)'' and inserting ``section
1854(g)(1)(C)(i)''.
(D) Section 1876(k)(3)(A) (42 U.S.C. 1395mm(k)(3)(A)) is
amended by inserting ``(as in effect immediately before the
enactment of the Prescription Drug and Medicare Improvements
Act of 2003)'' after section 1853(a).
(F) Section 1876(k)(4) (42 U.S.C. 1395mm(k)(4)(A)) is
amended--
(i) in subparagraph (A), by striking ``section
1853(a)(3)(B)'' and inserting ``section 1853(a)(3)(D)''; and
(ii) in subparagraph (B), by striking ``section 1854(g)''
and inserting ``section 1854(h)''.
(G) Section 1876(k)(4)(C) (42 U.S.C. 1395mm(k)(4)(C)) in
amended by inserting ``(as in effect immediately before the
enactment of the Prescription Drug and Medicare Improvements
Act of 2003)'' after ``section 1851(e)(6)''.
(H) Section 1894(d) (42 U.S.C. 1395eee(d)) is amended by
adding at the end the following new paragraph:
``(3) Application of provisions.--For purposes of
paragraphs (1) and (2), the references to section 1853 and
subsection (a)(2) of such section in such paragraphs shall be
deemed to be references to those provisions as in effect
immediately before the enactment of the Prescription Drug and
Medicare Improvements Act of 2003.''.
(2) Conforming medicare terminology.--Title XVIII (42
U.S.C. 1395 et seq.), except for part C of such title (42
U.S.C. 1395w-21 et seq.), and title XIX (42 U.S.C. 1396 et
seq.) are each amended by striking ``Medicare+Choice'' and
inserting ``MedicareAdvantage'' each place it appears.
SEC. 209. EFFECTIVE DATE.
(a) In General.--Except as provided in section 208(d)(3)
and subsection (b), the amendments made by this title shall
apply with respect to plan years beginning on and after
January 1, 2006.
(b) MedicareAdvantage MSA Plans.--Notwithstanding any
provision of this title, the Secretary shall apply the
payment and other rules that apply with respect to an MSA
plan described in section 1851(a)(2)(B) of the Social
Security Act (42 U.S.C. 1395w-21(a)(2)(B)) as if this title
had not been enacted.
Subtitle B--Preferred Provider Organizations
SEC. 211. ESTABLISHMENT OF MEDICAREADVANTAGE PREFERRED
PROVIDER PROGRAM OPTION.
(a) Establishment of Preferred Provider Program Option.--
Section 1851(a)(2) is amended by adding at the end the
following new subparagraph:
``(D) Preferred provider organization plans.--A
MedicareAdvantage preferred provider organization plan under
the program established under section 1858.''.
(b) Program specifications.--Part C of title XVIII (42
U.S.C. 1395w-21 et seq.) is amended by inserting after
section 1857 the following new section:
``preferred provider organizations
``Sec. 1858. (a) Establishment of Program.--
``(1) In general.--Beginning on January 1, 2006, there is
established a preferred provider program under which
preferred provider organization plans offered by preferred
provider organizations are offered to MedicareAdvantage
eligible individuals in preferred provider regions.
``(2) Definitions.--
``(A) Preferred provider organization.--The term `preferred
provider organization' means an entity with a contract under
section 1857 that meets the requirements of this section
applicable with respect to preferred provider organizations.
``(B) Preferred provider organization plan.--The term
`preferred provider organization plan' means a
MedicareAdvantage plan that--
``(i) has a network of providers that have agreed to a
contractually specified reimbursement for covered benefits
with the organization offering the plan;
``(ii) provides for reimbursement for all covered benefits
regardless of whether such benefits are provided within such
network of providers; and
``(iii) is offered by a preferred provider organization.
``(C) Preferred provider region.--The term `preferred
provider region' means--
``(i) a region established under paragraph (3); and
``(ii) a region that consists of the entire United States.
``(3) Preferred provider regions.--For purposes of this
part the Secretary shall establish preferred provider regions
as follows:
``(A) There shall be at least 10 regions.
``(B) Each region must include at least 1 State.
``(C) The Secretary may not divide States so that portions
of the State are in different regions.
``(D) To the extent possible, the Secretary shall include
multistate metropolitan statistical areas in a single region.
The Secretary may divide metropolitan statistical areas where
it is necessary to establish regions of such size and
geography as to maximize the participation of preferred
provider organization plans.
``(E) The Secretary may conform the preferred provider
regions to the service areas established under section 1860D-
10.
[[Page H6217]]
``(b) Eligibility, Election, and Enrollment; Benefits and
Beneficiary Protections.--
``(1) In general.--Except as provided in the succeeding
provisions of this subsection, the provisions of sections
1851 and 1852 that apply with respect to coordinated care
plans shall apply to preferred provider organization plans
offered by a preferred provider organization.
``(2) Service area.--The service area of a preferred
provider organization plan shall be a preferred provider
region.
``(3) Availability.--Each preferred provider organization
plan must be offered to each MedicareAdvantage eligible
individual who resides in the service area of the plan.
``(4) Authority to prohibit risk selection.--The provisions
of section 1852(a)(6) shall apply to preferred provider
organization plans.
``(5) Assuring access to services in preferred provider
organization plans.--
``(A) In general.--In addition to any other requirements
under this section, in the case of a preferred provider
organization plan, the organization offering the plan must
demonstrate to the Secretary that the organization has
sufficient number and range of health care professionals and
providers willing to provide services under the terms of the
plan.
``(B) Determination of sufficient access.--The Secretary
shall find that an organization has met the requirement under
subparagraph (A) with respect to any category of health care
professional or provider if, with respect to that category of
provider the plan has contracts or agreements with a
sufficient number and range of providers within such category
to provide covered services under the terms of the plan.
``(C) Construction.--Subparagraph (B) shall not be
construed as restricting the persons from whom enrollees
under such a plan may obtain covered benefits.
``(c) Payments to Preferred Provider Organizations.--
``(1) Payments to organizations.--
``(A) Monthly payments.--
``(i) In general.--Under a contract under section 1857 and
subject to paragraph (5), subsection (e), and section
1859(e)(4), the Secretary shall make, to each preferred
provider organization, with respect to coverage of an
individual for a month under this part in a preferred
provider region, separate monthly payments with respect to--
``(I) benefits under the original medicare fee-for-service
program under parts A and B in accordance with paragraph (4);
and
``(II) benefits under the voluntary prescription drug
program under part D in accordance with section 1858A and the
other provisions of this part.
``(ii) Special rule for end-stage renal disease.--The
Secretary shall establish separate rates of payment
applicable with respect to classes of individuals determined
to have end-stage renal disease and enrolled in a preferred
provider organization plan under this clause that are similar
to the separate rates of payment described in section
1853(a)(1)(B).
``(B) Adjustment to reflect number of enrollees.--The
Secretary may retroactively adjust the amount of payment
under this paragraph in a manner that is similar to the
manner in which payment amounts may be retroactively adjusted
under section 1853(a)(2).
``(C) Comprehensive risk adjustment methodology.--The
Secretary shall apply the comprehensive risk adjustment
methodology described in section 1853(a)(3)(B) to 100 percent
of the amount of payments to plans under paragraph
(4)(D)(ii).
``(D) Adjustment for spending variations within a region.--
The Secretary shall establish a methodology for adjusting the
amount of payments to plans under paragraph (4)(D)(ii) that
achieves the same objective as the adjustment described in
paragraph 1853(a)(2)(C).
``(2) Annual calculation of benchmark amounts for preferred
provider regions.--For each year (beginning in 2006), the
Secretary shall calculate a benchmark amount for each
preferred provider region for each month for such year with
respect to coverage of the benefits available under the
original medicare fee-for-service program option equal to the
average of each benchmark amount calculated under section
1853(a)(4) for each MedicareAdvantage payment area for the
year within such region, weighted by the number of
MedicareAdvantage eligible individuals residing in each such
payment area for the year.
``(3) Annual announcement of payment factors.--
``(A) Annual announcement.--Beginning in 2005, at the same
time as the Secretary publishes the risk adjusters under
section 1860D-11, the Secretary shall annually announce (in a
manner intended to provide notice to interested parties) the
following payment factors:
``(i) The benchmark amount for each preferred provider
region (as calculated under paragraph (2)(A)) for the year.
``(ii) The factors to be used for adjusting payments
described under--
``(I) the comprehensive risk adjustment methodology
described in paragraph (1)(C) with respect to each preferred
provider region for the year; and
``(II) the methodology used for adjustment for geographic
variations within such region established under paragraph
(1)(D).
``(B) Advance notice of methodological changes.--At least
45 days before making the announcement under subparagraph (A)
for a year, the Secretary shall--
``(i) provide for notice to preferred provider
organizations of proposed changes to be made in the
methodology from the methodology and assumptions used in the
previous announcement; and
``(ii) provide such organizations with an opportunity to
comment on such proposed changes.
``(C) Explanation of assumptions.--In each announcement
made under subparagraph (A), the Secretary shall include an
explanation of the assumptions and changes in methodology
used in the announcement in sufficient detail so that
preferred provider organizations can compute each payment
factor described in such subparagraph.
``(4) Secretary's determination of payment amount for
benefits under the original medicare fee-for-service
program.--The Secretary shall determine the payment amount
for plans as follows:
``(A) Review of plan bids.--The Secretary shall review each
plan bid submitted under subsection (d)(1) for the coverage
of benefits under the original medicare fee-for-service
program option to ensure that such bids are consistent with
the requirements under this part and are based on the
assumptions described in section 1854(a)(2)(A)(iii) that the
plan used with respect to numbers of enrolled individuals.
``(B) Determination of preferred provider regional
benchmark amounts.--The Secretary shall calculate a preferred
provider regional benchmark amount for that plan for the
benefits under the original medicare fee-for-service program
option for each plan equal to the regional benchmark adjusted
by using the assumptions described in section
1854(a)(2)(A)(iii) that the plan used with respect to numbers
of enrolled individuals.
``(C) Comparison to benchmark.--The Secretary shall
determine the difference between each plan bid (as adjusted
under subparagraph (A)) and the preferred provider regional
benchmark amount (as determined under subparagraph (B)) for
purposes of determining--
``(i) the payment amount under subparagraph (D); and
``(ii) the additional benefits required and
MedicareAdvantage monthly basic beneficiary premiums.
``(D) Determination of payment amount.--
``(i) In general.--Subject to clause (ii), the Secretary
shall determine the payment amount to a preferred provider
organization for a preferred provider organization plan as
follows:
``(I) Bids that equal or exceed the benchmark.--In the case
of a plan bid that equals or exceeds the preferred provider
regional benchmark amount, the amount of each monthly payment
to the organization with respect to each individual enrolled
in a plan shall be the preferred provider regional benchmark
amount.
``(II) Bids below the benchmark.--In the case of a plan bid
that is less than the preferred provider regional benchmark
amount, the amount of each monthly payment to the
organization with respect to each individual enrolled in a
plan shall be the preferred provider regional benchmark
amount reduced by the amount of any premium reduction elected
by the plan under section 1854(d)(1)(A)(i).
``(ii) Application of adjustment methodologies.--The
Secretary shall adjust the amounts determined under
subparagraph (A) using the factors described in paragraph
(3)(A)(ii).
``(E) Factors used in adjusting bids and benchmarks for
preferred provider organizations and in determining enrollee
premiums.--Subject to subparagraph (F), in addition to the
factors used to adjust payments to plans described in section
1853(d)(6), the Secretary shall use the adjustment for
geographic variation within the region established under
paragraph (1)(D).
``(F) Adjustment for national coverage determinations and
legislative changes in benefits.--The Secretary shall provide
for adjustments for national coverage determinations and
legislative changes in benefits applicable with respect to
preferred provider organizations in the same manner as the
Secretary provides for adjustments under section 1853(d)(7).
``(5) Payments from trust fund.--The payment to a preferred
provider organization under this section shall be made from
the Federal Hospital Insurance Trust Fund and the Federal
Supplementary Medical Insurance Trust Fund in a manner
similar to the manner described in section 1853(g).
``(6) Special rule for certain inpatient hospital stays.--
Rules similar to the rules applicable under section 1853(h)
shall apply with respect preferred provider organizations.
``(7) Special rule for hospice care.--Rules similar to the
rules applicable under section 1853(i) shall apply with
respect to preferred provider organizations.
``(d) Submission of Bids by PPOs; Premiums.--
``(1) Submission of bids by preferred provider
organizations.--
``(A) In general.--For the requirements on submissions by
MedicareAdvantage preferred provider organization plans, see
section 1854(a)(1).
[[Page H6218]]
``(B) Uniform premiums.--Each bid amount submitted under
subparagraph (A) for a preferred provider organization plan
in a preferred provider region may not vary among
MedicareAdvantage eligible individuals residing in such
preferred provider region.
``(C) Application of fehbp standard; prohibition on price
gouging.--Each bid amount submitted under subparagraph (A)
for a preferred provider organization plan must reasonably
and equitably reflect the cost of benefits provided under
that plan.
``(D) Review.--The Secretary shall review the adjusted
community rates (as defined in section 1854(g)(3)), the
amounts of the MedicareAdvantage monthly basic premium and
the MedicareAdvantage monthly beneficiary premium for
enhanced medical benefits filed under this paragraph and
shall approve or disapprove such rates and amounts so
submitted. The Secretary shall review the actuarial
assumptions and data used by the preferred provider
organization with respect to such rates and amounts so
submitted to determine the appropriateness of such
assumptions and data.
``(E) Authority to limit number of plans in a region.--If
there are bids for more than 3 preferred provider
organization plans in a preferred provider region, the
Secretary shall accept only the 3 lowest-cost credible bids
for that region that meet or exceed the quality and minimum
standards applicable under this section.
``(2) Monthly premiums charged.--The amount of the monthly
premium charged to an individual enrolled in a preferred
provider organization plan offered by a preferred provider
organization shall be equal to the sum of the following:
``(A) The MedicareAdvantage monthly basic beneficiary
premium, as defined in section 1854(b)(2)(A) (if any).
``(B) The MedicareAdvantage monthly beneficiary premium for
enhanced medical benefits, as defined in section
1854(b)(2)(C) (if any).
``(C) The MedicareAdvantage monthly obligation for
qualified prescription drug coverage, as defined in section
1854(b)(2)(B) (if any).
``(3) Determination of premium reductions, reduced cost-
sharing, additional benefits, and beneficiary premiums.--The
rules for determining premium reductions, reduced cost-
sharing, additional benefits, and beneficiary premiums under
section 1854(d) shall apply with respect to preferred
provider organizations.
``(4) Prohibition of segmenting preferred provider
regions.--The Secretary may not permit a preferred provider
organization to elect to apply the provisions of this section
uniformly to separate segments of a preferred provider region
(rather than uniformly to an entire preferred provider
region).
``(e) Portion of Total Payments to an Organization Subject
to Risk for 2 Years.--
``(1) Notification of spending under the plan.--
``(A) In general.--For 2007 and 2008, the preferred
provider organization offering a preferred provider
organization plan shall notify the Secretary of the total
amount of costs that the organization incurred in providing
benefits covered under parts A and B of the original medicare
fee-for-service program for all enrollees under the plan in
the previous year.
``(B) Certain expenses not included.--The total amount of
costs specified in subparagraph (A) may not include--
``(i) subject to subparagraph (C), administrative expenses
incurred in providing the benefits described in such
subparagraph; or
``(ii) amounts expended on providing enhanced medical
benefits under section 1852(a)(3)(D).
``(C) Establishment of allowable administrative expenses.--
For purposes of applying subparagraph (B)(i), the
administrative expenses incurred in providing benefits
described in subparagraph (A) under a preferred provider
organization plan may not exceed an amount determined
appropriate by the Administrator.
``(2) Adjustment of payment.--
``(A) No adjustment if costs within risk corridor.--If the
total amount of costs specified in paragraph (1)(A) for the
plan for the year are not more than the first threshold upper
limit of the risk corridor (specified in paragraph
(3)(A)(iii)) and are not less than the first threshold lower
limit of the risk corridor (specified in paragraph (3)(A)(i))
for the plan for the year, then no additional payments shall
be made by the Secretary and no reduced payments shall be
made to the preferred provider organization offering the
plan.
``(B) Increase in payment if costs above upper limit of
risk corridor.--
``(i) In general.--If the total amount of costs specified
in paragraph (1)(A) for the plan for the year are more than
the first threshold upper limit of the risk corridor for the
plan for the year, then the Secretary shall increase the
total of the monthly payments made to the preferred provider
organization offering the plan for the year under subsection
(c)(1)(A) by an amount equal to the sum of--
``(I) 50 percent of the amount of such total costs which
are more than such first threshold upper limit of the risk
corridor and not more than the second threshold upper limit
of the risk corridor for the plan for the year (as specified
under paragraph (3)(A)(iv)); and
``(II) 90 percent of the amount of such total costs which
are more than such second threshold upper limit of the risk
corridor.
``(C) Reduction in payment if costs below lower limit of
risk corridor.--If the total amount of costs specified in
paragraph (1)(A) for the plan for the year are less than the
first threshold lower limit of the risk corridor for the plan
for the year, then the Secretary shall reduce the total of
the monthly payments made to the preferred provider
organization offering the plan for the year under subsection
(c)(1)(A) by an amount (or otherwise recover from the plan an
amount) equal to--
``(i) 50 percent of the amount of such total costs which
are less than such first threshold lower limit of the risk
corridor and not less than the second threshold lower limit
of the risk corridor for the plan for the year (as specified
under paragraph (3)(A)(ii)); and
``(ii) 90 percent of the amount of such total costs which
are less than such second threshold lower limit of the risk
corridor.
``(3) Establishment of risk corridors.--
``(A) In general.--For 2006 and 2007, the Secretary shall
establish a risk corridor for each preferred provider
organization plan. The risk corridor for a plan for a year
shall be equal to a range as follows:
``(i) First threshold lower limit.--The first threshold
lower limit of such corridor shall be equal to--
``(I) the target amount described in subparagraph (B) for
the plan; minus
``(II) an amount equal to 5 percent of such target amount.
``(ii) Second threshold lower limit.--The second threshold
lower limit of such corridor shall be equal to--
``(I) the target amount described in subparagraph (B) for
the plan; minus
``(II) an amount equal to 10 percent of such target amount.
``(iii) First threshold upper limit.--The first threshold
upper limit of such corridor shall be equal to the sum of--
``(I) such target amount; and
``(II) the amount described in clause (i)(II).
``(iv) Second threshold upper limit.--The second threshold
upper limit of such corridor shall be equal to the sum of--
``(I) such target amount; and
``(II) the amount described in clause (ii)(II).
``(B) Target amount described.--The target amount described
in this paragraph is, with respect to a preferred provider
organization plan offered by a preferred provider
organization in a year, an amount equal to the sum of--
``(i) the total monthly payments made to the organization
for enrollees in the plan for the year under subsection
(c)(1)(A); and
``(ii) the total MedicareAdvantage basic beneficiary
premiums collected for such enrollees for the year under
subsection (d)(2)(A).
``(4) Plans at risk for entire amount of enhanced medical
benefits.--A preferred provider organization that offers a
preferred provider organization plan that provides enhanced
medial benefits under section 1852(a)(3)(D) shall be at full
financial risk for the provision of such benefits.
``(5) No effect on eligible beneficiaries.--No change in
payments made by reason of this subsection shall affect the
amount of the MedicareAdvantage basic beneficiary premium
that a beneficiary is otherwise required to pay under the
plan for the year under subsection (d)(2)(A).
``(6) Disclosure of information.--The provisions of section
1860D-16(b)(7), including subparagraph (B) of such section,
shall apply to a preferred provider organization and a
preferred provider organization plan in the same manner as
such provisions apply to an eligible entity and a Medicare
Prescription Drug plan under part D.
``(f) Organizational and Financial Requirements for
Preferred Provider Organizations.--A preferred provider
organization shall be organized and licensed under State law
as a risk-bearing entity eligible to offer health insurance
or health benefits coverage in each State within the
preferred provider region in which it offers a preferred
provider organization plan.
``(g) Inapplicability of Provider-Sponsored Organization
Solvency Standards.--The requirements of section 1856 shall
not apply with respect to preferred provider organizations.
``(h) Contracts With Preferred Provider Organizations.--The
provisions of section 1857 shall apply to a preferred
provider organization plan offered by a preferred provider
organization under this section.''.
(c) Preferred Provider Terminology Defined.--Section
1859(a) is amended by adding at the end the following new
paragraph:
``(3) Preferred provider organization; preferred provider
organization plan; preferred provider region.--The terms
`preferred provider organization', `preferred provider
organization plan', and `preferred provider region' have the
meaning given such terms in section 1858(a)(2).''.
Subtitle C--Other Managed Care Reforms
SEC. 221. EXTENSION OF REASONABLE COST CONTRACTS.
(a) Five-Year Extension.--Section 1876(h)(5)(C) (42 U.S.C.
1395mm(h)(5)(C)) is amended by striking ``2004'' and
inserting ``2009''.
(b) Application of Certain Medicare+Choice Requirements to
Cost Contracts Extended or Renewed After 2003.--Section
1876(h) (42 U.S.C. 1395mm(h)(5)), as amended by subsection
(a), is amended--
[[Page H6219]]
(1) by redesignating paragraph (5) as paragraph (6); and
(2) by inserting after paragraph (4) the following new
paragraph:
``(5) Any reasonable cost reimbursement contract with an
eligible organization under this subsection that is extended
or renewed on or after the date of enactment of the
Prescription Drug and Medicare Improvements Act of 2003 for
plan years beginning on or after January 1, 2004, shall
provide that the following provisions of the Medicare+Choice
program under part C (and, on and after January 1, 2006, the
provisions of the MedicareAdvantage program under such part)
shall apply to such organization and such contract in a
substantially similar manner as such provisions apply to
Medicare+Choice organizations and Medicare+Choice plans (or,
on and after January 1, 2006, MedicareAdvantage organizations
and MedicareAdvantage plans, respectively) under such part:
``(A) Paragraph (1) of section 1852(e) (relating to the
requirement of having an ongoing quality assurance program)
and paragraph (2)(B) of such section (relating to the
required elements for such a program).
``(B) Section 1852(j)(4) (relating to limitations on
physician incentive plans).
``(C) Section 1854(c) (relating to the requirement of
uniform premiums among individuals enrolled in the plan).
``(D) Section 1854(g), or, on and after January 1, 2006,
section 1854(h) (relating to restrictions on imposition of
premium taxes with respect to payments to organizations).
``(E) Section 1856(b) (regarding compliance with the
standards established by regulation pursuant to such section,
including the provisions of paragraph (3) of such section
relating to relation to State laws).
``(F) Section 1852(a)(3)(A) (regarding the authority of
organizations to include supplemental health care benefits
and, on and after January 1, 2006, enhanced medical benefits
under the plan subject to the approval of the Secretary).
``(G) The provisions of part C relating to timelines for
benefit filings, contract renewal, and beneficiary
notification.
``(H) Section 1854(e), or, on and after January 1, 2006,
section 1854(f) (relating to proposed cost-sharing under the
contract being subject to review by the Secretary).''.
(c) Permitting dedicated group practice health maintenance
organizations to participate in the medicare cost contract
program.--Section 1876(h)(6) of the Social Security Act (42
U.S.C. 1395mm(h)(6)), as redesignated and amended by
subsections (a) and (b), is amended--
(1) in subparagraph (A), by striking ``After the date of
the enactment'' and inserting ``Except as provided in
subparagraph (C), after the date of the enactment'';
(2) in subparagraph (B), by striking ``subparagraph (C)''
and inserting ``subparagraph (D)'';
(3) by redesignating subparagraph (C) as subparagraph (D);
and
(4) by inserting after subparagraph (B), the following new
subparagraph:
``(C) Subject to paragraph (5) and subparagraph (D), the
Secretary shall approve an application to enter into a
reasonable cost contract under this section if--
``(i) the application is submitted to the Secretary by a
health maintenance organization (as defined in section
1301(a) of the Public Health Service Act) that, as of January
1, 2004, and except as provided in section 1301(b)(3)(B) of
such Act, provides at least 85 percent of the services of a
physician which are provided as basic health services through
a medical group (or groups), as defined in section 1302(4) of
such Act; and
``(ii) the Secretary determines that the organization meets
the requirements applicable to such organizations and
contracts under this section.''.
SEC. 222. 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-
28(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-28) 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, 2008, the plan may restrict
the enrollment of individuals under the plan to individuals
who are within 1 or more classes of special needs
beneficiaries.''.
(d) Report to Congress.--Not later than December 31, 2006,
the Secretary 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 on the date of enactment of
this Act.
(2) Deadline for issuance of requirements for special needs
beneficiaries; transition.--No later than 1 year after the
date of enactment of this Act, the Secretary 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. 223. PAYMENT BY PACE PROVIDERS FOR MEDICARE AND MEDICAID
SERVICES FURNISHED BY NONCONTRACT PROVIDERS.
(a) Medicare Services.--
(1) Medicare services furnished by providers of services.--
Section 1866(a)(1)(O) (42 U.S.C. 1395cc(a)(1)(O)) is
amended--
(A) by striking ``part C or'' and inserting ``part C, with
a PACE provider under section 1894 or 1934, or'';
(B) by striking ``(i)'';
(C) by striking ``and (ii)''; and
(D) by striking ``members of the organization'' and
inserting ``members of the organization or PACE program
eligible individuals enrolled with the PACE provider,''.
(2) Medicare services furnished by physicians and other
entities.--Section 1894(b) (42 U.S.C. 1395eee(b)) is amended
by adding at the end the following new paragraphs:
``(3) Treatment of medicare services furnished by
noncontract physicians and other entities.--
``(A) Application of medicare+choice requirement with
respect to medicare services furnished by noncontract
physicians and other entities.--Section 1852(k)(1) (relating
to limitations on balance billing against Medicare+Choice
organizations for noncontract physicians and other entities
with respect to services covered under this title) shall
apply to PACE providers, PACE program eligible individuals
enrolled with such PACE providers, and physicians and other
entities that do not have a contract establishing payment
amounts for services furnished to such an individual in the
same manner as such section applies to Medicare+Choice
organizations, individuals enrolled with such organizations,
and physicians and other entities referred to in such
section.
``(B) Reference to related provision for noncontract
providers of services.--For the provision relating to
limitations on balance billing against PACE providers for
services covered under this title furnished by noncontract
providers of services, see section 1866(a)(1)(O).
``(4) Reference to related provision for services covered
under title xix but not under this title.--For provisions
relating to limitations on payments to providers
participating under the State plan under title XIX that do
not have a contract with a PACE provider establishing payment
amounts for services covered under such plan (but not under
this title) when such services are furnished to enrollees of
that PACE provider, see section 1902(a)(66).''.
(b) Medicaid Services.--
(1) Requirement under state plan.--Section 1902(a) (42
U.S.C. 1396a(a)) is amended--
(A) in paragraph (64), by striking ``and'' at the end;
(B) in paragraph (65), by striking the period at the end
and inserting ``; and''; and
(C) by inserting after paragraph (65) the following new
paragraph:
``(66) provide, with respect to services covered under the
State plan (but not under title XVIII) that are furnished to
a PACE program eligible individual enrolled with a PACE
provider by a provider participating under the State plan
that does not have a contract with the PACE provider that
establishes payment amounts for such services, that such
participating provider may not require the PACE provider to
pay the participating provider an amount greater than the
amount that would otherwise be payable for the service to the
participating provider under the State plan for the State
where the PACE provider is located (in accordance with
regulations issued by the Secretary).''.
(2) Reference in medicaid statute.--Section 1934(b) (42
U.S.C. 1396u-4(b)) is amended by adding at the end the
following new paragraphs:
``(3) Treatment of medicare services furnished by
noncontract physicians and other entities.--
``(A) Application of medicare+choice requirement with
respect to medicare services furnished by noncontract
physicians and other entities.--Section 1852(k)(1) (relating
to limitations on balance billing against Medicare+Choice
organizations for
[[Page H6220]]
noncontract physicians and other entities with respect to
services covered under title XVIII) shall apply to PACE
providers, PACE program eligible individuals enrolled with
such PACE providers, and physicians and other entities that
do not have a contract establishing payment amounts for
services furnished to such an individual in the same manner
as such section applies to Medicare+Choice organizations,
individuals enrolled with such organizations, and physicians
and other entities referred to in such section.
``(B) Reference to related provision for noncontract
providers of services.--For the provision relating to
limitations on balance billing against PACE providers for
services covered under title XVIII furnished by noncontract
providers of services, see section 1866(a)(1)(O).
``(4) Reference to related provision for services covered
under this title but not under title xviii.--For provisions
relating to limitations on payments to providers
participating under the State plan under this title that do
not have a contract with a PACE provider establishing payment
amounts for services covered under such plan (but not under
title XVIII) when such services are furnished to enrollees of
that PACE provider, see section 1902(a)(66).''.
(c) Effective Date.--The amendments made by this section
shall apply to services furnished on or after January 1,
2004.
SEC. 224. INSTITUTE OF MEDICINE EVALUATION AND REPORT ON
HEALTH CARE PERFORMANCE MEASURES.
(a) Evaluation.--
(1) In general.--Not later than the date that is 2 months
after the date of enactment of this Act, the Secretary of
Health and Human Services shall enter into an arrangement
under which the Institute of Medicine of the National Academy
of Sciences (in this section referred to as the
``Institute'') shall conduct an evaluation of leading health
care performance measures and options to implement policies
that align performance with payment under the medicare
program under title XVIII of the Social Security Act (42
U.S.C. 1395 et seq.).
(2) Specific matters evaluated.--In conducting the
evaluation under paragraph (1), the Institute shall--
(A) catalogue, review, and evaluate the validity of leading
health care performance measures;
(B) catalogue and evaluate the success and utility of
alternative performance incentive programs in public or
private sector settings; and
(C) identify and prioritize options to implement policies
that align performance with payment under the medicare
program that indicate--
(i) the performance measurement set to be used and how that
measurement set will be updated;
(ii) the payment policy that will reward performance; and
(iii) the key implementation issues (such as data and
information technology requirements) that must be addressed.
(3) Scope of health care performance measures.--The health
care performance measures described in paragraph (2)(A) shall
encompass a variety of perspectives, including physicians,
hospitals, health plans, purchasers, and consumers.
(4) Consultation with medpac.--In evaluating the matters
described in paragraph (2)(C), the Institute shall consult
with the Medicare Payment Advisory Commission established
under section 1805 of the Social Security Act (42 U.S.C.
1395b-6).
(b) Report.--Not later than the date that is 18 months
after the date of enactment of this Act, the Institute shall
submit to the Secretary of Health and Human Services, the
Committees on Ways and Means and Energy and Commerce of the
House of Representatives, and the Committee on Finance of the
Senate a report on the evaluation conducted under subsection
(a)(1) describing the findings of such evaluation and
recommendations for an overall strategy and approach for
aligning payment with performance in the original medicare
fee-for-service program under parts A and B of title XVIII of
the Social Security Act, the Medicare+Choice program under
part C of such title, and any other programs under such title
XVIII.
(c) Authorization of Appropriations.--There are authorized
to be appropriated $1,000,000 for purposes of conducting the
evaluation and preparing the report required by this section.
SEC. 225. EXPANDING THE WORK OF MEDICARE QUALITY IMPROVEMENT
ORGANIZATIONS TO INCLUDE PARTS C AND D.
(a) Application to Medicare Managed Care and Prescription
Drug Coverage.--Section 1154(a)(1) (42 U.S.C. 1320c-3(a)(1))
is amended by inserting ``, Medicare+Choice organizations and
MedicareAdvantage organizations under part C, and
prescription drug card sponsors and eligible entities under
part D'' after ``under section 1876''.
(b) Prescription Drug Therapy Quality Improvement.--Section
1154(a) (42 U.S.C. 1320c-3(a)) is amended by adding at the
end the following new paragraph:
``(17) The organization shall execute its responsibilities
under subparagraphs (A) and (B) of paragraph (1) by offering
to providers, practitioners, prescription drug card sponsors
and eligible entities under part D, and Medicare+Choice and
MedicareAdvantage plans under part C quality improvement
assistance pertaining to prescription drug therapy. For
purposes of this part and title XVIII, the functions
described in this paragraph shall be treated as a review
function.''.
(c) Effective Date.--The amendments made by this section
shall apply on and after January 1, 2004.
TITLE III--CENTER FOR MEDICARE CHOICES
SEC. 301. ESTABLISHMENT OF THE CENTER FOR MEDICARE CHOICES.
(a) In General.--Title XVIII (42 U.S.C. 1395 et seq.), as
amended by section 111, is amended by inserting after 1806
the following new section:
``establishment of the center for medicare choices
``Sec. 1808. (a) Establishment.--By not later than March 1,
2004, the Secretary shall establish within the Department of
Health and Human Services the Center for Medicare Choices,
which shall be separate from the Centers for Medicare &
Medicaid Services.
``(b) Administrator and Deputy Administrator.--
``(1) Administrator.--
``(A) In general.--The Center for Medicare Choices shall be
headed by an Administrator (in this section referred to as
the `Administrator') who shall be appointed by the President,
by and with the advice and consent of the Senate. The
Administrator shall report directly to the Secretary.
``(B) Compensation.--The Administrator shall be paid at the
rate of basic pay payable for level III of the Executive
Schedule under section 5314 of title 5, United States Code.
``(C) Term of office.--The Administrator shall be appointed
for a term of 5 years. In any case in which a successor does
not take office at the end of an Administrator's term of
office, that Administrator may continue in office until the
entry upon office of such a successor. An Administrator
appointed to a term of office after the commencement of such
term may serve under such appointment only for the remainder
of such term.
``(D) General authority.--The Administrator shall be
responsible for the exercise of all powers and the discharge
of all duties of the Center for Medicare Choices, and shall
have authority and control over all personnel and activities
thereof.
``(E) Rulemaking authority.--The Administrator may
prescribe such rules and regulations as the Administrator
determines necessary or appropriate to carry out the
functions of the Center for Medicare Choices. The regulations
prescribed by the Administrator shall be subject to the
rulemaking procedures established under section 553 of title
5, United States Code.
``(F) Authority to establish organizational units.--The
Administrator may establish, alter, consolidate, or
discontinue such organizational units or components within
the Center for Medicare Choices as the Administrator
considers necessary or appropriate, except that this
subparagraph shall not apply with respect to any unit,
component, or provision provided for by this section.
``(G) Authority to delegate.--The Administrator may assign
duties, and delegate, or authorize successive redelegations
of, authority to act and to render decisions, to such
officers and employees of the Center for Medicare Choices as
the Administrator may find necessary. Within the limitations
of such delegations, redelegations, or assignments, all
official acts and decisions of such officers and employees
shall have the same force and effect as though performed or
rendered by the Administrator.
``(2) Deputy administrator.--
``(A) In general.--There shall be a Deputy Administrator of
the Center for Medicare Choices who shall be appointed by the
Administrator.
``(B) Compensation.--The Deputy Administrator shall be paid
at the rate of basic pay payable for level IV of the
Executive Schedule under section 5315 of title 5, United
States Code.
``(C) Term of office.--The Deputy Administrator shall be
appointed for a term of 5 years. In any case in which a
successor does not take office at the end of a Deputy
Administrator's term of office, such Deputy Administrator may
continue in office until the entry upon office of such a
successor. A Deputy Administrator appointed to a term of
office after the commencement of such term may serve under
such appointment only for the remainder of such term.
``(D) Duties.--The Deputy Administrator shall perform such
duties and exercise such powers as the Administrator shall
from time to time assign or delegate. The Deputy
Administrator shall be the Acting Administrator of the Center
for Medicare Choices during the absence or disability of the
Administrator and, unless the President designates another
officer of the Government as Acting Administrator, in the
event of a vacancy in the office of the Administrator.
``(3) Secretarial coordination of program administration.--
The Secretary shall ensure appropriate coordination between
the Administrator and the Administrator of the Centers for
Medicare & Medicaid Services in carrying out the programs
under this title.
``(c) Duties; Administrative Provisions.--
``(1) Duties.--
``(A) General duties.--The Administrator shall carry out
parts C and D, including--
``(i) negotiating, entering into, and enforcing, contracts
with plans for the offering of MedicareAdvantage plans under
part C, including the offering of qualified prescription drug
coverage under such plans; and
``(ii) negotiating, entering into, and enforcing, contracts
with eligible entities for the
[[Page H6221]]
offering of Medicare Prescription Drug plans under part D.
``(B) Other duties.--The Administrator shall carry out any
duty provided for under part C or D, including duties
relating to--
``(i) reasonable cost contracts with eligible organizations
under section 1876(h); and
``(ii) demonstration projects carried out in part or in
whole under such parts, including the demonstration project
carried out through a MedicareAdvantage (formerly
Medicare+Choice) project that demonstrates the application of
capitation payment rates for frail elderly medicare
beneficiaries through the use of an interdisciplinary team
and through the provision of primary care services to such
beneficiaries by means of such a team at the nursing facility
involved.
``(C) Noninterference.--In order to promote competition
under parts C and D, the Administrator, in carrying out the
duties required under this section, may not, to the extent
possible, interfere in any way with negotiations between
eligible entities, MedicareAdvantage organizations,
hospitals, physicians, other entities or individuals
furnishing items and services under this title (including
contractors for such items and services), and drug
manufacturers, wholesalers, or other suppliers of covered
drugs
``(D) Annual reports.--Not later than March 31 of each
year, the Administrator shall submit to Congress and the
President a report on the administration of the voluntary
prescription drug delivery program under this part during the
previous fiscal year.
``(2) Management staff.--
``(A) In general.--The Administrator, with the approval of
the Secretary, may employ, such management staff as
determined appropriate. Any such manager shall be required to
have demonstrated, by their education and experience (either
in the public or private sector), superior expertise in the
following areas:
``(i) The review, negotiation, and administration of health
care contracts.
``(ii) The design of health care benefit plans.
``(iii) Actuarial sciences.
``(iv) Compliance with health plan contracts.
``(v) Consumer education and decision making.
``(B) Compensation.--
``(i) In general.--Subject to clause (ii), the
Administrator shall establish the rate of pay for an
individual employed under subparagraph (A).
``(ii) Maximum rate.--In no case may the rate of
compensation determined under clause (i) exceed the highest
rate of basic pay for the Senior Executive Service under
section 5382(b) of title 5, United States Code.
``(3) Redelegation of certain functions of the centers for
medicare & medicaid services.--
``(A) In general.--The Secretary, the Administrator of the
Center for Medicare Choices, and the Administrator of the
Centers for Medicare & Medicaid Services shall establish an
appropriate transition of responsibility in order to
redelegate the administration of part C from the Secretary
and the Administrator of the Centers for Medicare & Medicaid
Services to the Administrator of the Center for Medicare
Choices as is appropriate to carry out the purposes of this
section.
``(B) Transfer of data and information.--The Secretary
shall ensure that the Administrator of the Centers for
Medicare & Medicaid Services transfers to the Administrator
such information and data in the possession of the
Administrator of the Centers for Medicare & Medicaid Services
as the Administrator requires to carry out the duties
described in paragraph (1).
``(C) Construction.--Insofar as a responsibility of the
Secretary or the Administrator of the Centers for Medicare &
Medicaid Services is redelegated to the Administrator under
this section, any reference to the Secretary or the
Administrator of the Centers for Medicare & Medicaid Services
in this title or title XI with respect to such responsibility
is deemed to be a reference to the Administrator.
``(d) Office of Beneficiary Assistance.--
``(1) Establishment.--The Secretary shall establish within
the Center for Medicare Choices an Office of Beneficiary
Assistance to carry out functions relating to medicare
beneficiaries under this title, including making
determinations of eligibility of individuals for benefits
under this title, providing for enrollment of medicare
beneficiaries under this title, and the functions described
in paragraph (2). The Office shall be a separate operating
division within the Center for Medicare Choices.
``(2) Dissemination of information on benefits and appeals
rights.--
``(A) Dissemination of benefits information.--The Office of
Beneficiary Assistance shall disseminate to medicare
beneficiaries, by mail, by posting on the Internet site of
the Center for Medicare Choices, and through the toll-free
telephone number provided for under section 1804(b),
information with respect to the following:
``(i) Benefits, and limitations on payment (including cost-
sharing, stop-loss provisions, and formulary restrictions)
under parts C and D.
``(ii) Benefits, and limitations on payment under parts A,
and B, including information on medicare supplemental
policies under section 1882.
``(iii) Other areas determined to be appropriate by the
Administrator.
Such information shall be presented in a manner so that
medicare beneficiaries may compare benefits under parts A, B,
and D, and medicare supplemental policies with benefits under
MedicareAdvantage plans under part C.
``(B) Dissemination of appeals rights information.--The
Office of Beneficiary Assistance shall disseminate to
medicare beneficiaries in the manner provided under
subparagraph (A) a description of procedural rights
(including grievance and appeals procedures) of beneficiaries
under the original medicare fee-for-service program under
parts A and B, the MedicareAdvantage program under part C,
and the voluntary prescription drug delivery program under
part D.
``(3) Medicare ombudsman.--
``(A) In general.--Within the Office of Beneficiary
Assistance, there shall be a Medicare Ombudsman, appointed by
the Secretary from among individuals with expertise and
experience in the fields of health care and advocacy, to
carry out the duties described in subparagraph (B).
``(B) Duties.--The Medicare Ombudsman shall--
``(i) receive complaints, grievances, and requests for
information submitted by a medicare beneficiary, with respect
to any aspect of the medicare program;
``(ii) provide assistance with respect to complaints,
grievances, and requests referred to in clause (i),
including--
``(I) assistance in collecting relevant information for
such beneficiaries, to seek an appeal of a decision or
determination made by a fiscal intermediary, carrier,
MedicareAdvantage organization, an eligible entity under part
D, or the Secretary; and
``(II) assistance to such beneficiaries with any problems
arising from disenrollment from a MedicareAdvantage plan
under part C or a prescription drug plan under part D; and
``(iii) submit annual reports to Congress, the Secretary,
and the Medicare Competitive Policy Advisory Board describing
the activities of the Office, and including such
recommendations for improvement in the administration of this
title as the Ombudsman determines appropriate.
``(C) Coordination with state ombudsman programs and
consumer organizations.--The Medicare Ombudsman shall, to the
extent appropriate, coordinate with State medical Ombudsman
programs, and with State- and community-based consumer
organizations, to--
``(i) provide information about the medicare program; and
``(ii) conduct outreach to educate medicare beneficiaries
with respect to manners in which problems under the medicare
program may be resolved or avoided.
``(e) Medicare Competitive Policy Advisory Board.--
``(1) Establishment.--There is established within the
Center for Medicare Choices the Medicare Competitive Policy
Advisory Board (in this section referred to as the `Board').
The Board shall advise, consult with, and make
recommendations to the Administrator with respect to the
administration of parts C and D, including the review of
payment policies under such parts.
``(2) Reports.--
``(A) In general.--With respect to matters of the
administration of parts C and D, the Board shall submit to
Congress and to the Administrator such reports as the Board
determines appropriate. Each such report may contain such
recommendations as the Board determines appropriate for
legislative or administrative changes to improve the
administration of such parts, including the stability and
solvency of the programs under such parts and the topics
described in subparagraph (B). Each such report shall be
published in the Federal Register.
``(B) Topics described.--Reports required under
subparagraph (A) may include the following topics:
``(i) Fostering competition.--Recommendations or proposals
to increase competition under parts C and D for services
furnished to medicare beneficiaries.
``(ii) Education and enrollment.--Recommendations for the
improvement of efforts to provide medicare beneficiaries
information and education on the program under this title,
and specifically parts C and D, and the program for
enrollment under the title.
``(iii) Quality.--Recommendations on ways to improve the
quality of benefits provided under plans under parts C and D.
``(iv) Disease management programs.--Recommendations on the
incorporation of disease management programs under parts C
and D.
``(v) Rural access.--Recommendations to improve competition
and access to plans under parts C and D in rural areas.
``(C) Maintaining independence of board.--The Board shall
directly submit to Congress reports required under
subparagraph (A). No officer or agency of the United States
may require the Board to submit to any officer or agency of
the United States for approval, comments, or review, prior to
the submission to Congress of such reports.
``(3) Duty of administrator.--With respect to any report
submitted by the Board under paragraph (2)(A), not later than
90 days after the report is submitted, the Administrator
shall submit to Congress and the President an analysis of
recommendations made by the Board in such report. Each such
analysis shall be published in the Federal Register.
``(4) Membership.--
[[Page H6222]]
``(A) Appointment.--Subject to the succeeding provisions of
this paragraph, the Board shall consist of 7 members to be
appointed as follows:
``(i) Three members shall be appointed by the President.
``(ii) Two members shall be appointed by the Speaker of the
House of Representatives, with the advice of the chairman and
the ranking minority member of the Committees on Ways and
Means and on Energy and Commerce of the House of
Representatives.
``(iii) Two members shall be appointed by the President pro
tempore of the Senate with the advice of the chairman and the
ranking minority member of the Committee on Finance of the
Senate.
``(B) Qualifications.--The members shall be chosen on the
basis of their integrity, impartiality, and good judgment,
and shall be individuals who are, by reason of their
education and experience in health care benefits management,
exceptionally qualified to perform the duties of members of
the Board.
``(C) Prohibition on inclusion of federal employees.--No
officer or employee of the United States may serve as a
member of the Board.
``(5) Compensation.--Members of the Board shall receive,
for each day (including travel time) they are engaged in the
performance of the functions of the Board, compensation at
rates not to exceed the daily equivalent to the annual rate
in effect for level IV of the Executive Schedule under
section 5315 of title 5, United States Code.
``(6) Terms of office.--
``(A) In general.--The term of office of members of the
Board shall be 3 years.
``(B) Terms of initial appointees.--As designated by the
President at the time of appointment, of the members first
appointed--
``(i) one shall be appointed for a term of 1 year;
``(ii) three shall be appointed for terms of 2 years; and
``(iii) three shall be appointed for terms of 3 years.
``(C) Reappointments.--Any person appointed as a member of
the Board may not serve for more than 8 years.
``(D) Vacancy.--Any member appointed to fill a vacancy
occurring before the expiration of the term for which the
member's predecessor was appointed shall be appointed only
for the remainder of that term. A member may serve after the
expiration of that member's term until a successor has
taken office. A vacancy in the Board shall be filled in
the manner in which the original appointment was made.
``(7) Chair.--The Chair of the Board shall be elected by
the members. The term of office of the Chair shall be 3
years.
``(8) Meetings.--The Board shall meet at the call of the
Chair, but in no event less than 3 times during each fiscal
year.
``(9) Director and staff.--
``(A) Appointment of director.--The Board shall have a
Director who shall be appointed by the Chair.
``(B) In general.--With the approval of the Board, the
Director may appoint such additional personnel as the
Director considers appropriate.
``(C) Assistance from the administrator.--The Administrator
shall make available to the Board such information and other
assistance as it may require to carry out its functions.
``(10) Contract authority.--The Board may contract with and
compensate government and private agencies or persons to
carry out its duties under this subsection, without regard to
section 3709 of the Revised Statutes (41 U.S.C. 5).
``(f) Funding.--There is authorized to be appropriated, in
appropriate part from the Federal Hospital Insurance Trust
Fund and from the Federal Supplementary Medical Insurance
Trust Fund (including the Prescription Drug Account), such
sums as are necessary to carry out this section.''.
(b) Use of Central, Toll-Free Number (1-800-MEDICARE).--
Section 1804(b) (42 U.S.C. 1395b-2(b)) is amended by adding
at the end the following: ``By not later than 1 year after
the date of the enactment of the Prescription Drug and
Medicare Improvement Act of 2003, 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.''.
SEC. 302. MISCELLANEOUS ADMINISTRATIVE PROVISIONS.
(a) Administrator as Member and Co-Secretary of the Board
of Trustees of the Medicare Trust Funds.--The fifth sentence
of sections 1817(b) and 1841(b) (42 U.S.C. 1395i(b),
1395t(b)) are each amended by striking ``shall serve as the
Secretary'' and inserting ``and the Administrator of the
Center for Medicare Choices shall serve as the Co-
Secretaries''.
(b) Increase in Grade to Executive Level III for the
Administrator of the Centers for Medicare & Medicaid
Services.--
(1) In general.--Section 5314 of title 5, United States
Code, is amended by adding at the end the following:
``Administrator of the Centers for Medicare & Medicaid
Services.''.
(2) Conforming amendment.--Section 5315 of such title is
amended by striking ``Administrator of the Health Care
Financing Administration.''.
(3) Effective date.--The amendments made by this subsection
take effect on March 1, 2004.
TITLE IV--MEDICARE FEE-FOR-SERVICE IMPROVEMENTS
Subtitle A--Provisions Relating to Part A
SEC. 401. EQUALIZING URBAN AND RURAL STANDARDIZED PAYMENT
AMOUNTS UNDER THE MEDICARE INPATIENT HOSPITAL
PROSPECTIVE PAYMENT SYSTEM.
(a) In General.--Section 1886(d)(3)(A)(iv) (42 U.S.C.
1395ww(d)(3)(A)(iv)) is amended--
(1) by striking ``(iv) For discharges'' and inserting
``(iv)(I) Subject to the succeeding provisions of this
clause, for discharges''; and
(2) by adding at the end the following new subclauses:
``(II) For discharges occurring during fiscal year 2004,
the operating standardized amount for hospitals located other
than in a large urban area shall be increased by \1/2\ of the
difference between the operating standardized amount
determined under subclause (I) for hospitals located in large
urban areas for such fiscal year and such amount determined
(without regard to this subclause) for other hospitals for
such fiscal year.
``(III) For discharges occurring in a fiscal year beginning
with fiscal year 2005, the Secretary shall compute an
operating standardized amount for hospitals located in any
area within the United States and within each region equal to
the operating standardized amount computed for the previous
fiscal year under this subparagraph for hospitals located in
a large urban area (or, beginning with fiscal year 2006,
applicable for all hospitals in the previous fiscal year)
increased by the applicable percentage increase under
subsection (b)(3)(B)(i) for the fiscal year involved.''.
(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 which is'';
(C) in clause (i)--
(i) in the matter preceding subclause (I), by inserting
``for fiscal years before fiscal year 2005,'' 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 2005,'' 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 2004,
for hospitals located in all areas, to the product of--
``(I) the applicable operating 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. 402. 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 `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 Prescription Drug and Medicare Improvement Act of 2003
had not been enacted.''.
SEC. 403. 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:
[[Page H6223]]
``(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. 404. 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, 2003, 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, 2003,'' after
``April 1, 2001,''; and
(II) by inserting ``or, for discharges occurring on or
after October 1, 2003, 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, 2003,'' after
``April 1, 2001,''; and
(II) by inserting ``or, for discharges occurring on or
after October 1, 2003, 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, 2003,'' after
``April 1, 2001,''; and
(II) by inserting ``or, for discharges occurring on or
after October 1, 2003, 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, 2003,'' after
``April 1, 2001,''; and
(II) by inserting ``or, for discharges occurring on or
after October 1, 2003, 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, 2003,'' after
``April 1, 2001,''; and
(II) by inserting ``or, for discharges occurring on or
after October 1, 2003, is equal to the percent determined in
accordance with the applicable formula described in clause
(vii)'' after ``clause (x)'';
(B) in clause (viii), by striking ``The formula'' and
inserting ``For discharges occurring before October 1, 2003,
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,
2003.
SEC. 405. CRITICAL ACCESS HOSPITAL (CAH) IMPROVEMENTS.
(a) Permitting CAHs To Allocate Swing Beds and Acute Care
Inpatient Beds Subject to a Total Limit of 25 Beds.--
(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, 2003.
(b) 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,
2004.
(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).
(c) 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 amendments made by paragraph (1)
shall apply to costs incurred for services provided on or
after January 1, 2004.
(d) Authorization of Periodic Interim Payment (PIP).--
(1) In general.--Section 1815(e)(2) (42 U.S.C. 1395g(e)(2))
is amended--
(A) in subparagraph (C), by striking ``and'' after the
semicolon at the end;
(B) in subparagraph (D), by adding ``and'' after the
semicolon at the end; and
(C) by inserting after subparagraph (D) the following new
subparagraph:
``(E) inpatient critical access hospital services;''.
(2) Effective date.--The amendments made by paragraph (1)
shall apply to payments for inpatient critical access
facility services furnished on or after January 1, 2004.
(e) Exclusion of New CAHs From PPS Hospital Wage Index
Calculation.--Section 1886(d)(3)(E)(i) (42 U.S.C.
1395ww(d)(3)(E)(i)), as amended by section 402, is amended by
inserting after the first sentence the following new
sentence: ``In calculating the hospital wage levels under the
preceding sentence applicable with respect to cost reporting
periods beginning on or after January 1, 2003, the Secretary
shall exclude the wage levels of any facility that became a
critical access hospital prior to the cost reporting period
for which such hospital wage levels are calculated.''.
(f) Provisions Related to Certain Rural Grants.--
(1) Small rural hospital improvement program.--Section
1820(g) (42 U.S.C. 1395i-4(g)) is amended--
(A) by redesignating paragraph (3)(F) as paragraph (5) and
redesignating and indenting appropriately; and
(B) by inserting after paragraph (3) the following new
paragraph:
``(4) Small rural hospital improvement program.--
``(A) Grants to hospitals.--The Secretary may award grants
to hospitals that have submitted applications in accordance
with subparagraph (B) to assist eligible small rural
hospitals (as defined in paragraph (3)(B)) in meeting the
costs of reducing medical errors, increasing patient safety,
protecting patient privacy, and improving hospital quality
and performance.
``(B) Application.--A hospital seeking a grant under this
paragraph shall submit an application to the Secretary on or
before such date and in such form and manner as the Secretary
specifies.
``(C) Amount of grant.--A grant to a hospital under this
paragraph may not exceed $50,000.
``(D) Use of funds.--A hospital receiving a grant under
this paragraph may use the funds for the purchase of computer
software and hardware, the education and training of hospital
staff, and obtaining technical assistance.''.
(2) Authorization for appropriations.--Section 1820(j) (42
U.S.C. 1395i-4(j)) is amended to read as follows:
[[Page H6224]]
``(j) Authorization of Appropriations.--
``(1) HI trust fund.--There are authorized to be
appropriated from the Federal Hospital Insurance Trust Fund
for making grants to all States under--
``(A) subsection (g), $25,000,000 in each of the fiscal
years 1998 through 2002; and
``(B) paragraphs (1) and (2) of subsection (g), $40,000,000
in each of the fiscal years 2004 through 2008.
``(2) General revenues.--There are authorized to be
appropriated from amounts in the Treasury not otherwise
appropriated for making grants to all States under subsection
(g)(4), $25,000,000 in each of the fiscal years 2004 through
2008.''.
(3) Requirement that states awarded grants consult with the
state hospital association and rural hospitals on the most
appropriate ways to use such grants.--
(A) In general.--Section 1820(g) (42 U.S.C. 1395i-4(g)), as
amended by paragraph (1), is amended by adding at the end the
following new paragraph:
``(6) Required consultation for states awarded grants.--A
State awarded a grant under paragraph (1) or (2) shall
consult with the hospital association of such State and rural
hospitals located in such State on the most appropriate ways
to use the funds under such grant.''.
(B) Effective date and application.--The amendment made by
subparagraph (A) shall take effect on the date of enactment
of this Act and shall apply to grants awarded on or after
such date and to grants awarded prior to such date to the
extent that funds under such grants have not been obligated
as of such date.
SEC. 406. 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 October 1,
2003.
SEC. 407. SERVICES PROVIDED TO HOSPICE PATIENTS BY NURSE
PRACTITIONERS, CLINICAL NURSE SPECIALISTS, AND
PHYSICIAN ASSISTANTS.
(a) In general.--Section 1812(d)(2)(A) (42 U.S.C.
1395d(d)(2)(A) in the matter following clause (i)(II), is
amended--
(1) by inserting ``or services described in section
1861(s)(2)(K)'' after ``except that clause (i) shall not
apply to physicians' services''; and
(2) by inserting ``, or by a physician assistant, nurse
practitioner, or clinical nurse specialist whom is not an
employee of the hospice program, and who the individual
identifies as the health care provider having the most
significant role in the determination and delivery of medical
care to the individual at the time the individual makes an
election to receive hospice care,'' after the ``(if not an
employee of the hospice program)''.
(b) Effective Date.--The amendments made by subsection (a)
shall apply to hospice care furnished on or after October 1,
2003.
SEC. 408. AUTHORITY TO INCLUDE COSTS OF TRAINING OF
PSYCHOLOGISTS IN PAYMENTS TO HOSPITALS UNDER
MEDICARE.
Effective for cost reporting periods beginning on or after
October 1, 2004, for purposes of payments to hospitals under
the medicare program under title XVIII of the Social Security
Act for costs of approved educational activities (as defined
in section 413.85 of title 42 of the Code of Federal
Regulations), such approved educational activities shall
include professional educational training programs,
recognized by the Secretary, for psychologists.
SEC. 409. REVISION OF 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) between October 1, 1987, and September 30, 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,
2004, the applicable Puerto Rico percentage is 50 percent and
the applicable Federal percentage is 50 percent;
``(iii) on or after October 1, 2004, and before October 1,
2009, the applicable Puerto Rico percentage is 0 percent and
the applicable Federal percentage is 100 percent; and
``(iv) on or after October 1, 2009, the applicable Puerto
Rico percentage is 50 percent and the applicable Federal
percentage is 50 percent.''.
SEC. 410. AUTHORITY REGARDING GERIATRIC FELLOWSHIPS.
The Secretary shall have the authority to clarify that
geriatric training programs are eligible for 2 years of
fellowship support for purposes of making payments for direct
graduate medical education under subsection (h) of section
1886 of the Social Security Act (42 U.S.C. 1395ww) and
indirect medical education under subsection (d)(5)(B) of such
section on or after October 1, 2003.
SEC. 411. CLARIFICATION OF CONGRESSIONAL INTENT REGARDING THE
COUNTING OF RESIDENTS IN A NONPROVIDER SETTING
AND A TECHNICAL AMENDMENT REGARDING THE 3-YEAR
ROLLING AVERAGE AND THE IME RATIO.
(a) Clarification of Requirements for Counting Residents
Training in Nonprovider Setting.--
(1) D-GME.--Section 1886(h)(4)(E) (42 U.S.C.
1395ww(h)(4)(E)) is amended by adding at the end the
following new sentence: For purposes of the preceding
sentence time shall only be counted from the effective date
of a written agreement between the hospital and the entity
owning or operating a nonprovider setting. The effective date
of such written agreement shall be determined in accordance
with generally accepted accounting principles. All, or
substantially all, of the costs for the training program in
that setting shall be defined as the residents' stipends and
benefits and other costs, if any, as determined by the
parties.''.
(2) IME.--Section 1886(d)(5)(B)(iv) (42 U.S.C.
1395ww(d)(5)(B)(iv)) is amended by adding at the end the
following new sentence: For purposes of the preceding
sentence time shall only be counted from the effective date
of a written agreement between the hospital and the entity
owning or operating a nonprovider setting. The effective date
of such written agreement shall be determined in accordance
with generally accepted accounting principles. All, or
substantially all, of the costs for the training program in
that setting shall be defined as the residents' stipends and
benefits and other costs, if any, as determined by the
parties.''.
(b) Limiting One-Year Lag in the Indirect Medical Education
(IME) Ratio and Three-Year Rolling Average in Resident Count
for IME and for Direct Graduate Medical Education (D-GME) To
Medical Residency Programs.--
(1) IME ratio and ime rolling average.--Section
1886(d)(5)(B)(vi) of the Social Security Act (42 U.S.C.
1395ww(d)(5)(B)(vi)) is amended by adding at the end the
following new sentence: ``For cost reporting periods
beginning during fiscal years beginning on or after October
1, 2003, subclauses (I) and (II) shall be applied only with
respect to a hospital's approved medical residency training
programs in the fields of allopathic and osteopathic
medicine.''.
(2) D-GME rolling average.--Section 1886(h)(4)(G) of the
Social Security Act (42 U.S.C. 1395ww(h)(4)(G)) is amended by
adding at the end the following new clause:
``(iv) Application for fiscal year 2004 and subsequent
years.--For cost reporting periods beginning during fiscal
years beginning on or after October 1, 2003, clauses (i)
through (iii) shall be applied only with respect to a
hospital's approved medical residency training program in the
fields of allopathic and osteopathic medicine.''.
SEC. 412. LIMITATION ON CHARGES FOR INPATIENT HOSPITAL
CONTRACT HEALTH SERVICES PROVIDED TO INDIANS BY
MEDICARE PARTICIPATING HOSPITALS.
(a) In General.--Section 1866(a)(1) (42 U.S.C.
1395cc(a)(1)) is amended--
(1) in subparagraph (R), by striking ``and'' at the end;
(2) in subparagraph (S), by striking the period and
inserting ``, and''; and
(3) by adding at the end the following new subparagraph:
``(T) in the case of hospitals which furnish inpatient
hospital services for which payment may be made under this
title, to be a participating provider of medical care--
``(i) under the contract health services program funded by
the Indian Health Service and operated by the Indian Health
Service,
[[Page H6225]]
an Indian tribe, or tribal organization (as those terms are
defined in section 4 of the Indian Health Care Improvement
Act), with respect to items and services that are covered
under such program and furnished to an individual eligible
for such items and services under such program; and
``(ii) under a program funded by the Indian Health Service
and operated by an urban Indian organization with respect to
the purchase of items and services for an eligible urban
Indian (as those terms are defined in such section 4),
in accordance with regulations promulgated by the Secretary
regarding admission practices, payment methodology, and rates
of payment (including the acceptance of no more than such
payment rate as payment in full for such items and
services).''.
(b) Effective Date.--The amendments made by this section
shall apply as of a date specified by the Secretary of Health
and Human Services (but in no case later than 6 months after
the date of enactment of this Act) to medicare participation
agreements in effect (or entered into) on or after such date.
SEC. 413. GAO STUDY AND REPORT ON APPROPRIATENESS OF PAYMENTS
UNDER THE PROSPECTIVE PAYMENT SYSTEM FOR
INPATIENT HOSPITAL SERVICES.
(a) Study.--The Comptroller General of the United States,
using the most current data available, shall conduct a study
to determine--
(1) the appropriate level and distribution of payments in
relation to costs under the prospective payment system under
section 1886 of the Social Security Act (42 U.S.C. 1395ww)
for inpatient hospital services furnished by subsection (d)
hospitals (as defined in subsection (d)(1)(B) of such
section); and
(2) whether there is a need to adjust such payments under
such system to reflect legitimate differences in costs across
different geographic areas, kinds of hospitals, and types of
cases.
(b) Report.--Not later than 24 months after the date of
enactment of this Act, the Comptroller General of the United
States shall submit to Congress a report on the study
conducted under subsection (a) together with such
recommendations for legislative and administrative action as
the Comptroller General determines appropriate.
Subtitle B--Provisions Relating to Part B
SEC. 421. 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. 422. MEDICARE INCENTIVE PAYMENT PROGRAM IMPROVEMENTS.
(a) Procedures for Secretary, and Not Physicians, To
Determine When Bonus Payments Under Medicare Incentive
Payment Program Should Be Made.--Section 1833(m) (42 U.S.C.
1395l(m)) is amended--
(1) by inserting ``(1)'' after ``(m)''; and
(2) by adding at the end the following new paragraph:
``(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).''.
(b) Educational Program Regarding the Medicare Incentive
Payment Program.--The Secretary shall establish and implement
an ongoing educational program to provide education to
physicians under the medicare program on the medicare
incentive payment program under section 1833(m) of the Social
Security Act (42 U.S.C. 1395l(m)).
(c) Ongoing GAO Study and Annual Report on the Medicare
Incentive Payment Program.--
(1) Ongoing study.--The Comptroller General of the United
States shall conduct an ongoing study on the medicare
incentive payment program under section 1833(m) of the Social
Security Act (42 U.S.C. 1395l(m)). Such study shall focus on
whether such program increases the access of medicare
beneficiaries who reside in an area that is designated (under
section 332(a)(1)(A) of the Public Health Service Act (42
U.S.C. 254e(a)(1)(A))) as a health professional shortage area
to physicians' services under the medicare program.
(2) Annual reports.--Not later than 1 year after the date
of enactment of this Act, and annually thereafter, the
Comptroller General of the United States shall submit to
Congress a report on the study conducted under paragraph (1),
together with recommendations as the Comptroller General
considers appropriate.
SEC. 423. INCREASE IN RENAL DIALYSIS COMPOSITE RATE.
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 2005 and 2006,
the composite rate for such services shall be increased by
1.6 percent under section 1881(b)(12) of such Act (42 U.S.C.
1395rr(b)(7)), as added by section 433(b)(5).
SEC. 424. EXTENSION OF HOLD HARMLESS PROVISIONS FOR SMALL
RURAL HOSPITALS AND TREATMENT OF CERTAIN SOLE
COMMUNITY HOSPITALS TO LIMIT DECLINE IN PAYMENT
UNDER THE OPD PPS.
(a) Small Rural Hospitals.--Section 1833(t)(7)(D)(i) (42
U.S.C. 1395l(t)(7)(D)(i)) is amended by striking ``2004'' and
inserting ``2006''.
(b) Sole community hospitals.--Section 1833(t)(7)(D) (42
U.S.C. 1395l(t)(7)(D)) is amended by adding at the end the
following:
``(iii) Temporary treatment for sole community hospitals
.--In the case of a sole community hospital (as defined in
section 1886(d)(5)(D)(iii)) located in a rural area, for
covered OPD services furnished in 2004, 2005, or 2006, for
which the PPS amount is less than the pre-BBA amount, the
amount of payment under this subsection shall be increased by
the amount of such difference.''.
SEC. 425. INCREASE IN PAYMENTS FOR CERTAIN SERVICES FURNISHED
BY SMALL RURAL AND SOLE COMMUNITY HOSPITALS
UNDER MEDICARE PROSPECTIVE PAYMENT SYSTEM FOR
HOSPITAL OUTPATIENT DEPARTMENT SERVICES.
(a) Increase.--
(1) In general.--In the case of an applicable covered OPD
service (as defined in paragraph (2)) that is furnished by a
hospital described in clause (i) or (iii) of paragraph (7)(D)
of section 1833(t) of the Social Security Act (42 U.S.C.
1395l(t)), as amended by section 424, on or after January 1,
2004, and before January 1, 2008, the Secretary shall
increase the medicare OPD fee schedule amount (as determined
under paragraph (4)(A) of such section) that is applicable
for such service in that year (determined without regard to
any increase under this section in a previous year) by 5
percent.
(2) Applicable covered opd services defined.--For purposes
of this section, the term ``applicable covered OPD service''
means a covered clinic or emergency room visit that is
classified within the groups of covered OPD services (as
defined in paragraph (1)(B) of section 1833(t) of the Social
Security Act (42 U.S.C. 1395l(t))) established under
paragraph (2)(B) of such section.
(b) No Effect on Copayment Amount.--The Secretary shall
compute the copayment amount for applicable covered OPD
services under section 1833(t)(8)(A) of the Social Security
Act (42 U.S.C. 1395l(t)(8)(A)) as if this section had not
been enacted.
(c) No Effect on Increase Under Hold Harmless or Outlier
Provisions.--The Secretary shall apply the temporary hold
harmless provision under clause (i) and (iii) of paragraph
(7)(D) of section 1833(t) of the Social Security Act (42
U.S.C. 1395l(t)) and the outlier provision under paragraph
(5) of such section as if this section had not been enacted.
(d) Waiving Budget Neutrality and No Revision or
Adjustments.--The Secretary shall not make any revision or
adjustment under subparagraph (A), (B), or (C) of section
1833(t)(9) of the Social Security Act (42 U.S.C. 1395l(t)(9))
because of the application of subsection (a)(1).
(e) No Effect on Payments After Increase Period Ends.--The
Secretary shall not take into account any payment increase
provided under subsection (a)(1) in determining payments for
covered OPD services (as defined in paragraph (1)(B) of
section 1833(t) of the Social Security Act (42 U.S.C.
1395l(t))) under such section that are furnished after
January 1, 2008.
(f) Technical Amendment.--Section 1833(t)(2)(B) (42 U.S.C.
1395l(t)(2)(B)) is amended by inserting ``(and periodically
revise such groups pursuant to paragraph (9)(A))'' after
``establish groups''.
SEC. 426. INCREASE FOR GROUND AMBULANCE SERVICES FURNISHED IN
A RURAL AREA.
Section 1834(l) (42 U.S.C. 1395m(l)), as amended by section
405(b)(2), is amended by adding at the end the following new
paragraph:
``(10) Temporary increase for ground ambulance services
furnished in a rural area.--
``(A) In general.--Notwithstanding any other provision of
this subsection, in the case of ground ambulance services
furnished on or after January 1, 2004, and before January 1,
2008, for which the transportation originates in a rural area
described in paragraph (9) or in a rural census tract
described in such paragraph, the fee schedule established
under this section, with respect to both the payment rate for
service and the payment rate for mileage, shall provide that
[[Page H6226]]
such rates otherwise established, after application of any
increase under such paragraph, shall be increased by 5
percent.
``(B) Application of increased payments after 2007.--The
increased payments under subparagraph (A) shall not be taken
into account in calculating payments for services furnished
on or after the period specified in such subparagraph.''.
SEC. 427. ENSURING APPROPRIATE COVERAGE OF AIR AMBULANCE
SERVICES UNDER AMBULANCE FEE SCHEDULE.
(a) Coverage.--Section 1834(l) (42 U.S.C. 1395m(l)), as
amended by section 426, is amended by adding at the end the
following new paragraph:
``(11) Ensuring appropriate coverage of air ambulance
services.--
``(A) In general.--The regulations described in section
1861(s)(7) shall ensure that air ambulance services (as
defined in subparagraph (C)) are reimbursed under this
subsection at the air ambulance rate if the air ambulance
service--
``(i) is medically necessary based on the health condition
of the individual being transported at or immediately prior
to the time of the transport; and
``(ii) complies with equipment and crew requirements
established by the Secretary.
``(B) Medically necessary.--An air ambulance service shall
be considered to be medically necessary for purposes of
subparagraph (A)(i) if such service is requested--
``(i) by a physician or a hospital in accordance with the
physician's or hospital's responsibilities under section 1867
(commonly known as the Emergency Medical Treatment and Active
Labor Act);
``(ii) as a result of a protocol established by a State or
regional emergency medical service (EMS) agency;
``(iii) by a physician, nurse practitioner, physician
assistant, registered nurse, or emergency medical responder
who reasonably determines or certifies that the patient's
condition is such that the time needed to transport the
individual by land or the lack of an appropriate ground
ambulance, significantly increases the medical risks for the
individual; or
``(iv) by a Federal or State agency to relocate patients
following a natural disaster, an act of war, or a terrorist
attack.
``(C) Air ambulance services defined.--For purposes of this
paragraph, the term `air ambulance service' means fixed wing
and rotary wing air ambulance services.''.
(b) Conforming Amendment.--Section 1861(s)(7) (42 U.S.C.
1395x(s)(7)) is amended by inserting ``, subject to section
1834(l)(11),'' after ``but''.
(c) Effective Date.--The amendments made by this section
shall apply to services furnished on or after January 1,
2004.
SEC. 428. 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:
(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. 429. IMPROVEMENT IN RURAL HEALTH CLINIC REIMBURSEMENT.
Section 1833(f) (42 U.S.C. 1395l(f)) is amended--
(1) in paragraph (1), by striking ``, and'' at the end and
inserting a semicolon;
(2) in paragraph (2)--
(A) by striking ``in a subsequent year'' and inserting ``in
1989 through 2003''; and
(B) by striking the period at the end and inserting a
semicolon; and
(3) by adding at the end the following new paragraphs:
``(3) in 2004, at $80 per visit; and
``(4) in a subsequent year, at the limit established under
this subsection for the previous year increased by the
percentage increase in the MEI (as so defined) applicable to
primary care services (as so defined) furnished as of the
first day of that year.''.
SEC. 430. ELIMINATION OF CONSOLIDATED BILLING FOR CERTAIN
SERVICES UNDER THE MEDICARE PPS FOR SKILLED
NURSING FACILITY SERVICES.
(a) Certain Rural Health Clinic and Federally Qualified
Health Center Services.--Section 1888(e) (42 U.S.C.
1395yy(e)) is amended--
(1) in paragraph (2)(A)(i)(II), by striking ``clauses (ii)
and (iii)'' and inserting ``clauses (ii), (iii), and (iv)'';
and
(2) by adding at the end of paragraph (2)(A) 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
furnished by a physician or practitioner not affiliated with
a rural health clinic or a Federally qualified health
center.''.
(b) Certain Services Furnished by an Entity Jointly Owned
by Hospitals and Critical Access Hospitals.--For purposes of
applying section 411.15(p)-(3)(iii) of title 42 of the Code
of Federal Regulations, the Secretary shall treat an entity
that is 100 percent owned as a joint venture by 2 Medicare-
participating hospitals or critical access hospitals as a
Medicare-participating hospital or a critical access
hospital.
(c) Technical Amendments.--Sections 1842(b)(6)(E) and
1866(a)(1)(H)(ii) (42 U.S.C. 1395u(b)(6)(E);
1395cc(a)(1)(H)(ii)) are each amended by striking ``section
1888(e)(2)(A)(ii)'' and inserting ``clauses (ii), (iii), and
(iv) of section 1888(e)(2)(A)''.
(d) Effective Date.--The amendments made by this section
and the provision of subsection (b) shall apply to services
furnished on or after January 1, 2004.
SEC. 431. FREEZE IN PAYMENTS FOR CERTAIN ITEMS OF DURABLE
MEDICAL EQUIPMENT AND CERTAIN ORTHOTICS;
ESTABLISHMENT OF QUALITY STANDARDS AND
ACCREDITATION REQUIREMENTS FOR DME PROVIDERS.
(a) Freeze for DME.--Section 1834(a)(14) (42 U.S.C.
1395m(a)(14)) is amended--
(1) in subparagraph (E), by striking ``and'' at the end;
(2) in subparagraph (F)--
(A) by striking ``a subsequent year'' and inserting
``2003''; and
(B) by striking ``the previous year.'' and inserting
``2002;''; and
(3) by adding at the end the following new subparagraphs:
``(G) for each of the years 2004 through 2010--
``(i) in the case of class III medical devices described in
section 513(a)(1)(C) of the Federal Food, Drug, and Cosmetic
Act (21 U.S.C. 360(c)(1)(C)), the percentage increase
described in subparagraph (B) for the year involved; and
``(ii) in the case of covered items not described in clause
(i), 0 percentage points; and
``(H) for a subsequent year, the percentage increase
described in subparagraph (B) for the year involved.''.
(b) Freeze for Off-the-Shelf Orthotics.--Section
1834(h)(4)(A) of the Social Security Act (42 U.S.C.
1395m(h)(4)(A)) is amended--
(1) in clause (vii), by striking ``and'' at the end;
(2) in clause (viii), by striking ``a subsequent year'' and
inserting ``2003''; and
(3) by adding at the end the following new clauses:
``(ix) for each of the years 2004 through 2010--
``(I) in the case of orthotics that have not been custom-
fabricated, 0 percent; and
``(II) in the case of prosthetics, prosthetic devices, and
custom-fabricated orthotics, the percentage increase
described in clause (viii) for the year involved; and
``(x) for 2011 and each subsequent year, the percentage
increase described in clause (viii) for the year involved;''.
(c) Establishment of Quality Standards and Accreditation
Requirements for Durable Medical Equipment Providers.--
Section 1834(a) (42 U.S.C. 1395m(a)) is amended--
(1) by redesignating paragraph (17), as added by section
4551(c)(1) of the Balanced Budget Act of 1997 (111 Stat.
458), as paragraph (19); and
(2) by adding at the end the following new paragraph:
``(20) Identification of quality standards.--
``(A) In general.--Subject to subparagraph (C), the
Secretary shall establish and implement quality standards for
providers of durable medical equipment throughout the United
States that are developed by recognized independent
accreditation organizations (as designated under subparagraph
(B)(i)) and with which such providers shall be required to
comply in order to--
``(i) participate in the program under this title;
``(ii) furnish any item or service described in
subparagraph (D) for which payment is made under this part;
and
``(iii) receive or retain a provider or supplier number
used to submit claims for reimbursement for any item or
service described in subparagraph (D) for which payment may
be made under this title.
``(B) Designation of independent accreditation
organizations.--
``(i) In general.--Not later that the date that is 6 months
after the date of enactment of the Prescription Drug and
Medicare Improvement Act of 2003, the Secretary shall
designate independent accreditation organizations for
purposes of subparagraph (A).
``(ii) Consultation.--In determining which independent
accreditation organizations to designate under clause (i),
the Secretary shall consult with an expert outside advisory
panel composed of an appropriate selection of representatives
of physicians, practitioners, suppliers, and manufacturers to
review (and advise the Secretary concerning) selection of
accrediting organizations and the quality standards of such
organizations.
``(C) Quality standards.--The quality standards described
in subparagraph (A) may not be less stringent than the
quality standards that would otherwise apply if this
paragraph did not apply and shall include consumer services
standards.
[[Page H6227]]
``(D) Items and services described.--The items and services
described in this subparagraph are covered items (as defined
in paragraph (13)) for which payment may otherwise be made
under this subsection, other than items used in infusion, and
inhalation drugs used in conjunction with durable medical
equipment.
``(E) Phased-in implementation.--The application of the
quality standards described in subparagraph (A) shall be
phased-in over a period that does not exceed 3 years.''.
SEC. 432. APPLICATION OF COINSURANCE AND DEDUCTIBLE FOR
CLINICAL DIAGNOSTIC LABORATORY TESTS.
(a) Coinsurance.--
(1) In general.--Section 1833(a) (42 U.S.C. 1395l(a)) is
amended--
(A) in paragraph (1)(D)(i), by striking ``(or 100 percent,
in the case of such tests for which payment is made on an
assignment-related basis)''; and
(B) in paragraph (2)(D)(i), by striking ``(or 100 percent,
in the case of such tests for which payment is made on an
assignment-related basis or to a provider having an agreement
under section 1866)''.
(2) Conforming amendment.--The third sentence of section
1866(a)(2)(A) of the Social Security Act (42 U.S.C.
1395cc(a)(2)(A) is amended by striking ``and with respect to
clinical diagnostic laboratory tests for which payment is
made under part B''.
(b) Deductible.--Section 1833(b) of the Social Security Act
(42 U.S.C. 1395l(b)) is amended--
(1) by striking paragraph (3); and
(2) by redesignating paragraphs (4), (5), and (6) as
paragraphs (3), (4), and (5), respectively.
(c) Effective Date.--The amendments made by this section
shall apply to tests furnished on or after January 1, 2004.
SEC. 433. BASING MEDICARE PAYMENTS FOR COVERED OUTPATIENT
DRUGS ON MARKET PRICES.
(a) Medicare Market Based Payment Amount.--Section 1842(o)
(42 U.S.C. 1395u(o)) is amended--
(1) in paragraph (1), by striking ``equal to 95 percent of
the average wholesale price.'' and inserting ``equal to--
``(A) in the case of a drug or biological furnished prior
to January 1, 2004, 95 percent of the average wholesale
price; and
``(B) in the case of a drug or biological furnished on or
after January 1, 2004, the payment amount specified in--
``(i) in the case of such a drug or biological that is
first available for payment under this part on or before
April 1, 2003, paragraph (4); and
``(ii) in the case of such a drug or biological that is
first available for payment under this part after such date,
paragraph (5).''; and
(2) by adding at the end the following new paragraphs:
``(4)(A) Subject to subparagraph (C), the payment amount
specified in this paragraph for a year for a drug or
biological is an amount equal to the lesser of--
``(i) the average wholesale price for the drug or
biological; or
``(ii) the amount determined under subparagraph (B)
``(B)(i) Subject to clause (ii), the amount determined
under this subparagraph is an amount equal to--
``(I) in the case of a drug or biological furnished in
2004, 85 percent of the average wholesale price for the drug
or biological (determined as of April 1, 2003); and
``(II) in the case of a drug or biological furnished in
2005 or a subsequent year, the amount determined under this
subparagraph for the previous year increased by the
percentage increase in the consumer price index for medical
care for the 12-month period ending with June of the previous
year.
``(ii) In the case of a vaccine described in subparagraph
(A) or (B) of section 1861(s)(10), the amount determined
under this subparagraph is an amount equal to the average
wholesale price for the drug or biological.
``(C)(i) The Secretary shall establish a process under
which the Secretary determines, for such drugs or biologicals
as the Secretary determines appropriate, whether the widely
available market price to physicians or suppliers for the
drug or biological furnished in a year is different from the
payment amount established under subparagraph (B) for the
year. Such determination shall be based on the information
described in clause (ii) as the Secretary determines
appropriate.
``(ii) The information described in this clause is the
following information:
``(I) Any report on drug or biological market prices by the
Inspector General of the Department of Health and Human
Services or the Comptroller General of the United States that
is made available after December 31, 1999.
``(II) A review of drug or biological market prices by the
Secretary, which may include information on such market
prices from insurers, private health plans, manufacturers,
wholesalers, distributors, physician supply houses, specialty
pharmacies, group purchasing arrangements, physicians,
suppliers, or any other source the Secretary determines
appropriate.
``(III) Data and information submitted by the manufacturer
of the drug or biological or by another entity.
``(IV) Other data and information as determined appropriate
by the Secretary.
``(iii) If the Secretary makes a determination under clause
(i) with respect to the widely available market price for a
drug or biological for a year, the following provisions shall
apply:
``(I) Subject to clause (iv), the amount determined under
this subparagraph shall be substituted for the amount
determined under subparagraph (B) for purposes of applying
subparagraph (A)(ii)(I) for the year and all subsequent
years.
``(II) The Secretary may make subsequent determinations
under clause (i) with respect to the widely available market
price for the drug or biological.
``(III) If the Secretary does not make a subsequent
determination under clause (i) with respect to the widely
available market price for the drug or biological for a year,
the amount determined under this subparagraph shall be an
amount equal to the amount determined under this subparagraph
for the previous year increased by the percentage increase
described in subparagraph (B)(i)(II) for the year involved.
``(iv) If the first determination made under clause (i)
with respect to the widely available market price for a drug
or biological would result in a payment amount in a year that
is more than 15 percent less than the amount determined under
subparagraph (B) for the drug or biological for the previous
year (or, for 2004, the payment amount determined under
paragraph (1)(A), determined as of April 1, 2003), the
Secretary shall provide for a transition to the amount
determined under clause (i) so that the payment amount is
reduced in annual increments equal to 15 percent of the
payment amount in such previous year until the payment amount
is equal to the amount determined under clause (i), as
increased each year by the percentage increase described in
subparagraph (B)(i)(II) for the year. The preceding sentence
shall not apply to a drug or biological where a generic
version of the drug or biological first enters the market on
or after January 1, 2004 (even if the generic version of the
drug or biological is not marketed under the chemical name of
such drug or biological).
``(5) In the case of a drug or biological that is first
available for payment under this part after April 1, 2003,
the following rules shall apply:
``(A) As a condition of obtaining a code to report such new
drug or biological and to receive payment under this part, a
manufacturer shall provide the Secretary (in a time, manner,
and form approved by the Secretary) with data and information
on prices at which the manufacturer estimates physicians and
suppliers will be able to routinely obtain the drug or
biological in the market during the first year that the drug
or biological is available for payment under this part and
such additional information that the manufacturer determines
appropriate.
``(B) During the year that the drug or biological is first
available for payment under this part, the manufacturer of
the drug or biological shall provide the Secretary (in a
time, manner, and form approved by the Secretary) with
updated information on the actual market prices paid by such
physicians or suppliers for the drug or biological in the
year.
``(C) The amount specified in this paragraph for a drug or
biological for the year described in subparagraph (B) is
equal to an amount determined by the Secretary based on the
information provided under subparagraph (A) and other
information that the Secretary determines appropriate.
``(D) The amount specified in this paragraph for a drug or
biological for the year after the year described in
subparagraph (B) is equal to an amount determined by the
Secretary based on the information provided under
subparagraph (B) and other information that the Secretary
determines appropriate.
``(E) The amount specified in this paragraph for a drug or
biological for the year beginning after the year described in
subparagraph (D) and each subsequent year is equal to the
lesser of--
``(i) the average wholesale price for the drug or
biological; or
``(ii) the amount determined--
``(I) by the Secretary under paragraph (4)(C)(i) with
respect to the widely available market price for the drug or
biological for the year, if such paragraph was applied by
substituting `the payment determined under paragraph
(5)(E)(ii)(II) for the year' for `established under
subparagraph (B) for the year'; and
``(II) if no determination described in subclause (I) is
made for the drug or biological for the year, under this
subparagraph with respect to the drug or biological for the
previous year increased by the percentage increase described
in paragraph (4)(B)(i)(II) for the year involved.''.
(b) Adjustments to Payment Amounts for Administration of
Drugs and Biologicals.--
(1) Adjustment in physician practice expense relative value
units.--Section 1848(c)(2) (42 U.S.C. 1395w-4(c)(2)) is
amended--
(A) in subparagraph (B)--
(i) in clause (ii)(II), by striking ``The adjustments'' and
inserting ``Subject to clause (iv), the adjustments''; and
(ii) by adding at the end the following new clause:
``(iv) Exemption from budget neutrality in 2004.--Any
additional expenditures under this part that are attributable
to subparagraph (H) shall not be taken into account in
applying clause (ii)(II) for 2004.''; and
(B) by adding at the end the following new subparagraph:
[[Page H6228]]
``(H) Adjustments in practice expense relative value units
for drug administration services for 2004.--In establishing
the physician fee schedule under subsection (b) with respect
to payments for services furnished in 2004, the Secretary
shall, in determining practice expense relative value units
under this subsection, utilize a survey submitted to the
Secretary as of January 1, 2003, by a physician specialty
organization pursuant to section 212 of the Medicare,
Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 if
the survey--
``(i) covers practice expenses for oncology administration
services; and
``(ii) meets criteria established by the Secretary for
acceptance of such surveys.''.
(2) Payment for multiple chemotherapy agents furnished on a
single day through the push technique.--
(A) Review of policy.--The Secretary shall review the
policy, as in effect on the date of enactment of this Act,
with respect to payment under section 1848 of the Social
Security Act (42 U.S.C. 1395w-4) for the administration of
more than 1 anticancer chemotherapeutic agent to an
individual on a single day through the push technique.
(B) Modification of policy.--After conducting the review
under subparagraph (A), the Secretary shall modify such
payment policy if the Secretary determines such modification
to be appropriate.
(C) Exemption from budget neutrality under physician fee
schedule.--If the Secretary modifies such payment policy
pursuant to subparagraph (B), any increased expenditures
under title XVIII of the Social Security Act resulting from
such modification shall be treated as additional expenditures
attributable to subparagraph (H) of section 1848(c)(2) of the
Social Security Act (42 U.S.C. 1395w-4(c)(2)), as added by
paragraph (1)(B), for purposes of applying the exemption to
budget neutrality under subparagraph (B)(iv) of such section,
as added by paragraph (1)(A).
(3) Treatment of other services currently in the
nonphysician work pool.--The Secretary shall make adjustments
to the nonphysician work pool methodology (as such term is
used in the final rule promulgated by the Secretary in the
Federal Register on December 31, 2002 (67 Fed. Reg. 251)),
for the determination of practice expense relative value
units under the physician fee schedule under section
1848(c)(2)(C)(ii) of the Social Security Act (42 U.S.C.
1395w-4(c)(2)(C)(ii)), so that the practice expense relative
value units for services determined under such methodology
are not disproportionately reduced relative to the practice
expense relative value units of services not determined under
such methodology, as a result of the amendments to such Act
made by paragraph (1).
(4) Administration of blood clotting factors.--Section
1842(o) (42 U.S.C. 1395u(o)), as amended by subsection
(a)(2), is amended by adding at the end the following new
paragraph:
``(6)(A) Subject to subparagraph (B), in the case of
clotting factors furnished on or after January 1, 2004, the
Secretary shall, after reviewing the January 2003 report to
Congress by the Comptroller General of the United States
entitled `Payment for Blood Clotting Factor Exceeds Providers
Acquisition Cost' (GAO-03-184), provide for a separate
payment for the administration of such blood clotting factors
in an amount that the Secretary determines to be appropriate.
``(B) In determining the separate payment amount under
subparagraph (A) for blood clotting factors furnished in
2004, the Secretary shall ensure that the total amount of
payments under this part (as estimated by the Secretary) for
such factors under paragraphs (4) and (5) and such separate
payments for such factors does not exceed the total amount of
payments that would have been made for such factors under
this part (as estimated by the Secretary) if the amendments
made by section 433 of the Prescription Drug and Medicare
Improvement Act of 2003 had not been enacted.
``(C) The separate payment amount under this subparagraph
for blood clotting factors furnished in 2005 or a subsequent
year shall be equal to the separate payment amount determined
under this paragraph for the previous year increased by the
percentage increase described in paragraph (4)(B)(i)(II) for
the year involved.''.
(5) Increase in composite rate for end stage renal disease
facilities.--Section 1881(b) (42 U.S.C. 1395rr(b) is
amended--
(A) in paragraph (7), by adding at the end the following
new sentence: ``In the case of dialysis services furnished in
2004 or a subsequent year, the composite rate for such
services shall be determined under paragraph (12).''; and
(B) by adding at the end the following new paragraph:
``(12)(A) In the case of dialysis services furnished during
2004, the composite rate for such services shall be the
composite rate that would otherwise apply under paragraph (7)
for the year increased by an amount to ensure (as estimated
by the Secretary) that--
``(i) the sum of the total amount of--
``(I) the composite rate payments for such services for the
year, as increased under this paragraph; and
``(II) the payments for drugs and biologicals (other than
erythropoetin) furnished in connection with the furnishing of
renal dialysis services and separately billed by renal
dialysis facilities under paragraphs (4) and (5) of section
1842(o) for the year; is equal to
``(ii) the sum of the total amount of the composite rate
payments under paragraph (7) for the year and the payments
for the separately billed drugs and biologicals described in
clause (i)(II) that would have been made if the amendments
made by section 433 of the Prescription Drug and Medicare
Improvement Act of 2003 had not been enacted.
``(B) Subject to subparagraph (E), in the case of dialysis
services furnished in 2005, the composite rate for such
services shall be an amount equal to the composite rate
established under subparagraph (A), increased by 0.05 percent
and further increased pursuant to section 423 of the
Prescription Drug and Medicare Improvement Act of 2003.
``(C) Subject to subparagraph (E), in the case of dialysis
services furnished in 2006, the composite rate for such
services shall be an amount equal to the composite rate
established under subparagraph (B), increased by 0.05
percent.
``(D) Subject to subparagraph (E), in the case of dialysis
services furnished in 2007 or a subsequent year, the
composite rate for such services shall be an amount equal to
the composite rate established under this paragraph for the
previous year (determined as if such section 423 had not been
enacted), increased by 0.05 percent.
``(E) If the Secretary implements a reduction in the
payment amount under paragraph (4)(C) or (5) for a drug or
biological described in subparagraph (A)(i)(II) for a year
after 2004, the Secretary shall, as estimated by the
Secretary--
``(i) increase the composite rate for dialysis services
furnished in such year in the same manner that the composite
rate for such services for 2004 was increased under
subparagraph (A); and
``(ii) increase the percentage increase under subparagraph
(C) or (D) (as applicable) for years after the year described
in clause (i) to ensure that such increased percentage would
result in expenditures equal to the sum of the total
composite rate payments for such services for such years and
the total payments for drugs and biologicals described in
subparagraph (A)(i)(II) is equal to the sum of the total
amount of the composite rate payments under this paragraph
for such years and the payments for the drugs and biologicals
described in subparagraph (A)(i)(II) that would have been
made if the reduction in payment amount described in
subparagraph had not been made.
``(F) There shall be no administrative or judicial review
under section 1869, section 1878, or otherwise, of
determinations of payment amounts, methods, or adjustments
under this paragraph.''.
(6) Home infusion drugs.--Section 1842(o) (42 U.S.C.
1395u(o)), as amended by subsection (a)(2) and paragraph (4),
is amended by adding at the end the following new paragraph:
``(7)(A) Subject to subparagraph (B), in the case of
infusion drugs and biologicals furnished through an item of
durable medical equipment covered under section 1861(n) on or
after January 1, 2004, the Secretary may make separate
payments for furnishing such drugs and biologicals in an
amount determined by the Secretary if the Secretary
determines such separate payment to be appropriate.
``(B) In determining the amount of any separate payment
under subparagraph (A) for a year, the Secretary shall ensure
that the total amount of payments under this part for such
infusion drugs and biologicals for the year and such separate
payments for the year does not exceed the total amount of
payments that would have been made under this part for the
year for such infusion drugs and biologicals if section 433
of the Prescription Drug and Medicare Improvement Act of 2003
had not been enacted.''.
(7) Inhalation drugs.--Section 1842(o) (42 U.S.C.
1395u(o)), as amended by subsection (a)(2) and paragraphs (4)
and (6), is amended by adding at the end the following new
paragraph:
``(8)(A) Subject to subparagraph (B), in the case of
inhalation drugs and biologicals furnished through durable
medical equipment covered under section 1861(n) on or after
January 1, 2004, the Secretary may increase payments for such
equipment under section 1834(a) and may make separate
payments for furnishing such drugs and biologicals if the
Secretary determines such increased or separate payments are
necessary to appropriately furnish such equipment and drugs
and biologicals to beneficiaries.
``(B) The total amount of any increased payments and
separate payments under subparagraph (A) for a year may not
exceed an amount equal to 10 percent of the amount (as
estimated by the Secretary) by which--
``(i) the total amount of payments that would have been
made for such drugs and biologicals for the year if section
433 of the Prescription Drug and Medicare Improvement Act of
2003 had not been enacted; exceeds
``(ii) the total amount of payments for such drugs and
biologicals under paragraphs (4) and (5).''.
(8) Pharmacy dispensing fee for certain drugs and
biologicals.--Section 1842(o)(2) (42 U.S.C. 1395u(o)(2)) is
amended to read as follows:
``(2) If payment for a drug or biological is made to a
licensed pharmacy approved to dispense drugs or biologicals
under this part, the Secretary--
``(A) in the case of an immunosuppressive drug described in
subparagraph (J) of section 1861(s)(2) and an oral drug
described in subparagraph (Q) or (T) of such section, shall
[[Page H6229]]
pay a dispensing fee determined appropriate by the Secretary
(less the applicable deductible and coinsurance amounts) to
the pharmacy; and
``(B) in the case of a drug or biological not described in
subparagraph (A), may pay a dispensing fee determined
appropriate by the Secretary (less the applicable deductible
and coinsurance amounts) to the pharmacy.''.
(9) Payment for Chemotherapy Drugs Purchased but not
Administered by Physicians.--Section 1842(o) (42 U.S.C.
1395u(o)), as amended by subsection (a)(2) and paragraphs
(4), (6) and (7), is amended by adding at the end the
following new paragraph:
``(9)(A) Subject to subparagraph (B), the Secretary may
increase (in an amount determined appropriate) the amount of
payments to physicians for anticancer chemotherapeutic drugs
or biologicals that would otherwise be made under this part
in order to compensate such physicians for anticancer
chemotherapeutic drugs or biologicals that are purchased by
physicians with a reasonable intent to administer to an
individual enrolled under this part but which cannot be
administered to such individual despite the reasonable
efforts of the physician.
``(B) The total amount of increased payments made under
subparagraph (A) in a year (as estimated by the Secretary)
may not exceed an amount equal to 1 percent of the total
amount of payments made under paragraphs (4) and (5) for such
anticancer chemotherapeutic drugs or biologicals furnished by
physicians in such year (as estimated by the Secretary).''.
(c) Linkage of Revised Drug Payments and Increases for Drug
Administration.--The Secretary shall not implement the
revisions in payment amounts for a category of drug or
biological as a result of the amendments made by subsection
(a) unless the Secretary concurrently implements the
adjustments to payment amounts for administration of such
category of drug or biological for which the Secretary is
required to make an adjustment, as specified in the
amendments made by, and provisions of, subsection (b).
(d) Prohibition of Administrative and Judicial Review.--
(1) Drugs.--Section 1842(o) (42 U.S.C. 1395u(o)), as
amended by subsection (a)(2) and paragraphs (4), (6), (7),
and (9) of subsection (b), is amended by adding at the end
the following new paragraph:
``(10) There shall be no administrative or judicial review
under section 1869, section 1878, or otherwise, of
determinations of payment amounts, methods, or adjustments
under paragraph (2) or paragraphs (4) through (9).''.
(2) Physician fee schedule.--Section 1848(i)(1) (42 U.S.C.
1395w-4(i)(1)) is amended--
(A) in subparagraph (D), by striking ``and'' at the end;
(B) in subparagraph (E), by striking the period at the end
and inserting ``, and''; and
(C) by adding at the end the following new subparagraph:
``(F) adjustments in practice expense relative value units
under subsection (c)(2)(H).''.
(3) Multiple chemotherapy agents and other services
currently on the non-physician work pool.--There shall be no
administrative or judicial review under section 1869, section
1878, or otherwise, of determinations of payment amounts,
methods, or adjustments under paragraphs (2) and (3) of
subsection (b).
(e) Studies and Reports.--
(1) GAO study and report on beneficiary access to drugs and
biologicals.--
(A) Study.--The Comptroller General of the United States
shall conduct a study that examines the impact the provisions
of, and the amendments made by, this section have on access
by medicare beneficiaries to drugs and biologicals covered
under the medicare program.
(B) Report.--Not later than January 1, 2006, the
Comptroller General shall submit a report to Congress on the
study conducted under subparagraph (A) together with such
recommendations as the Comptroller General determines to be
appropriate.
(2) Study and report by the hhs inspector general on market
prices of drugs and biologicals.--
(A) Study.--The Inspector General of the Department of
Health and Human Services shall conduct 1 or more studies
that--
(i) examine the market prices that drugs and biologicals
covered under the medicare program are widely available to
physicians and suppliers; and
(ii) compare such widely available market prices to the
payment amount for such drugs and biologicals under section
1842(o) of the Social Security Act (42 U.S.C. 1395u(o).
(B) Requirement.--In conducting the study under
subparagraph (A), the Inspector General shall focus on those
drugs and biologicals that represent the largest portions of
expenditures under the medicare program for drugs and
biologicals.
(C) Report.--The Inspector General shall prepare a report
on any study conducted under subparagraph (A).
SEC. 434. INDEXING PART B DEDUCTIBLE TO INFLATION.
The first sentence of section 1833(b) (42 U.S.C. 1395l(b))
is amended by striking ``and $100 for 1991 and subsequent
years'' and inserting the following: ``, $100 for 1991
through 2005, $125 for 2006, and for 2007 and thereafter, the
amount in effect for the previous year, increase by the
percentage increase in the consumer price index for all urban
consumers (U.S. city average) for the 12-month period ending
with June of the previous year, rounded to the nearest
dollar''.
SEC. 435. REVISIONS TO REASSIGNMENT PROVISIONS.
(a) In General.--Section 1842(b)(6)(A)(ii) (42 U.S.C.
1395u(b)(6)(A)(ii)) is amended to read as follows: ``(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
such arrangement such entity submits the bill for such
service and such arrangement meets such 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 as described in clause
(A)'' and inserting ``except to an employer or entity as
described in subparagraph (A)''.
(c) Effective Date.--The amendments made by this section
shall apply to payments made on or after the date of
enactment of this Act.
SEC. 436. EXTENSION OF TREATMENT OF CERTAIN PHYSICIAN
PATHOLOGY SERVICES UNDER MEDICARE.
Section 542(c) of BIPA (114 Stat. 2763A-551) is amended by
inserting ``, and for services furnished during 2004 or
2005'' before the period at the end.
SEC. 437. ADEQUATE REIMBURSEMENT FOR OUTPATIENT PHARMACY
THERAPY UNDER THE HOSPITAL OUTPATIENT PPS.
(a) Special Rules for Drugs and Biologicals.--Section
1833(t) (42 U.S.C. 1395(t)) is amended--
(1) by redesignating paragraph (13) as paragraph (14); and
(2) by inserting after paragraph (12) the following new
paragraph:
``(13) Special rules for certain drugs and biologicals.--
``(A) Before 2007.--
``(i) In general.--Notwithstanding paragraph (6), but
subject to clause (ii), with respect to a separately payable
drug or biological described in subparagraph (D) furnished on
or after January 1, 2005, and before January 1, 2007,
hospitals shall be reimbursed as follows:
``(I) Drugs and biologicals furnished as part of a current
opd service.--The amount of payment for a drug or biological
described in subparagraph (D) provided as a part of a service
that was a covered OPD service on May 1, 2003, shall be the
applicable percentage (as defined in subparagraph (C)) of the
average wholesale price for the drug or biological that would
have been determined under section 1842(o) on such date.
``(II) Drugs and biologicals furnished as part of other opd
services.--The amount of payment for a drug or biological
described in subparagraph (D) provided as part of any other
covered OPD service shall be the applicable percentage (as
defined in subparagraph (C)) of the average wholesale price
that would have been determined under section 1842(o) on May
1, 2003, if payment for such a drug or biological could have
been made under this part on that date.
``(ii) Update for 2006.--For 2006, the amounts determined
under clauses (i) and (ii) shall be the amount established
for 2005 increased by the percentage increase in the Consumer
Price Index for all urban consumers (U.S. urban average) for
the 12-month period ending with June of the previous year.
``(B) After 2007.--
``(i) Ongoing study and reports on adequate
reimbursements.--
``(I) Study.--The Secretary shall contract with an eligible
organization (as defined in subclause (IV)) to conduct a
study to determine the hospital acquisition and handling
costs for each individual drug or biological described in
subparagraph (D).
``(II) Study requirements.--The study conducted under
subclause (I) shall--
``(aa) be accurate to within 3 percent of true mean
hospital acquisition and handling costs for each drug and
biological at the 95 percent confidence level;
``(bb) begin not later than January 1, 2005; and
``(cc) be updated annually for changes in hospital costs
and the addition of newly marketed products.
``(III) Reports.--Not later than January 1 of each year
(beginning with 2006), the Secretary shall submit to Congress
a report on the study conducted under clause (i) together
with recommendations for such legislative or administrative
action as the Secretary determines to be appropriate.
``(IV) Eligible organization defined.--In this clause, the
term `eligible organization' means a private, nonprofit
organization within the meaning of section 501(c) of the
Internal Revenue Code.
``(ii) Establishment of payment methodology.--
Notwithstanding paragraph (6), the Secretary, in establishing
a payment methodology on or after the date of enactment of
the Prescription Drug and Medicare Improvement Act of 2003,
shall take into consideration the findings of the study
conducted under clause (i)(I) in determining payment amounts
for each drug and biological provided as part of a covered
OPD service furnished on or after January 1, 2007.
``(C) Applicable percentage defined.--In this paragraph,
the term `applicable percentage' means--
[[Page H6230]]
``(i) with respect to a biological product (approved under
a biologics license application under section 351 of the
Public Health Service Act), a single source drug (as defined
in section 1927(k)(7)(A)(iv)), or an orphan product
designated under section 526 of the Food, Drug, and Cosmetic
Act to which the prospective payment system established under
this subsection did not apply under the final rule for 2003
payments under such system, 94 percent;
``(ii) with respect to an innovator multiple source drug
(as defined in section 1927(k)(7)(A)(ii)), 91 percent; and
``(iii) with respect to a noninnovator multiple source drug
(as defined in as defined in section 1927(k)(7)(A)(iii)), 71
percent.
``(D) Drugs and biologicals described.--A drug or
biological described in this paragraph is any drug or
biological--
``(i) for which the amount of payment was determined under
paragraph (6) prior to January 1, 2005;
``(ii) which is assigned to a drug specific ambulatory
payment classification on or after the date of enactment of
the Prescription Drug and Medicare Improvement Act of 2003;
and
``(iii) that would have been reimbursed under paragraph (6)
but for the application of this paragraph.''.
(b) Exceptions to budget neutrality requirement.--Section
1833(t)(9)(B) (42 U.S.C. 1395l(t)(9)(B)) is amended by adding
at the end the following: ``In determining the budget
neutrality adjustment required by the preceding sentence for
fiscal years 2005 and 2006, the Secretary shall not take into
account any expenditures that would not have been made but
for the application of paragraph (13).''.
SEC. 438. LIMITATION OF APPLICATION OF FUNCTIONAL EQUIVALENCE
STANDARD.
Section 1833(t)(6) (42 U.S.C. 1395l(t)(6)) is amended by
adding at the end the following new subparagraph:
``(F) Limitation of application of functional equivalence
standard.--
``(i) In general.--The Secretary may not publish
regulations that apply a functional equivalence standard to a
drug or biological under this paragraph.
``(ii) Application.--Paragraph (1) shall apply to the
application of a functional equivalence standard to a drug or
biological on or after the date of enactment of the
Prescription Drug and Medicare Improvement Act of 2003
unless--
``(I) such application was being made to such drug or
biological prior to such date of enactment; and
``(II) the Secretary applies such standard to such drug or
biological only for the purpose of determining eligibility of
such drug or biological for additional payments under this
paragraph and not for the purpose of any other payments under
this title.
``(iii) Rule of construction.--Nothing in this subparagraph
shall be construed to effect the Secretary's authority to
deem a particular drug to be identical to another drug if the
2 products are pharmaceutically equivalent and bioequvalent,
as determined by the Commissioner of Food and Drugs.
SEC. 439. MEDICARE COVERAGE OF ROUTINE COSTS ASSOCIATED WITH
CERTAIN CLINICAL TRIALS.
(a) 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.
(b) Rule of Construction.--Nothing in this section 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 subsection (a)).
(c) Effective Date.--This section shall apply to clinical
trials begun on or after January 1, 2005.
SEC. 440. 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 2002, 2003, 2004, or 2005 and
who demonstrates to the Secretary before December 31, 2005,
that the individual is a covered beneficiary (as defined in
section 1072(5) of title 10, United States Code). The
Secretary 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
2005. The Secretary shall establish a method for providing
rebates of premium penalties paid for months on or after
January 2005 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 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 shall provide for a
special enrollment period during which the individual may
enroll under such part. Such period shall begin 1 year after
the date of the enactment of this Act and shall end on
December 31, 2005.
(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. 441. DEMONSTRATION OF COVERAGE OF CHIROPRACTIC SERVICES
UNDER MEDICARE.
(a) Definitions.--In this section:
(1) Chiropractic services.--The term ``chiropractic
services'' has the meaning given that term by the Secretary
for purposes of the demonstration projects, but shall
include, at a minimum--
(A) care for neuromusculoskeletal conditions typical among
eligible beneficiaries; and
(B) diagnostic and other services that a chiropractor is
legally authorized to perform by the State or jurisdiction in
which such treatment is provided.
(2) Demonstration project.--The term ``demonstration
project'' means a demonstration project established by the
Secretary under subsection (b)(1).
(3) Eligible beneficiary.--The term ``eligible
beneficiary'' means an individual who is enrolled under part
B of the medicare program.
(4) Medicare program.--The term ``medicare program'' means
the health benefits program under title XVIII of the Social
Security Act (42 U.S.C. 1395 et seq.).
(b) Demonstration of Coverage of Chiropractic Services
Under Medicare.--
(1) Establishment.--The Secretary shall establish
demonstration projects in accordance with the provisions of
this section for the purpose of evaluating the feasibility
and advisability of covering chiropractic services under the
medicare program (in addition to the coverage provided for
services consisting of treatment by means of manual
manipulation of the spine to correct a subluxation described
in section 1861(r)(5) of the Social Security Act (42 U.S.C.
1395x(r)(5))).
(2) No physician approval required.--In establishing the
demonstration projects, the Secretary shall ensure that an
eligible beneficiary who participates in a demonstration
project, including an eligible beneficiary who is enrolled
for coverage under a Medicare+Choice plan (or, on and after
January 1, 2006, under a MedicareAdvantage plan), is not
required to receive approval from a physician or other health
care provider in order to receive a chiropractic service
under a demonstration project.
(3) Consultation.--In establishing the demonstration
projects, the Secretary shall consult with chiropractors,
organizations representing chiropractors, eligible
beneficiaries, and organizations representing eligible
beneficiaries.
(4) Participation.--Any eligible beneficiary may
participate in the demonstration projects on a voluntary
basis.
(c) Conduct of Demonstration Projects.--
(1) Demonstration sites.--
(A) Selection of demonstration sites.--The Secretary shall
conduct demonstration projects at 6 demonstration sites.
(B) Geographic diversity.--Of the sites described in
subparagraph (A)--
(i) 3 shall be in rural areas; and
(ii) 3 shall be in urban areas.
(C) Sites located in hpsas.--At least 1 site described in
clause (i) of subparagraph (B) and at least 1 site described
in clause (ii) of such subparagraph shall be located in an
area that is designated under section 332(a)(1)(A) of the
Public Health Service Act (42 U.S.C. 254e(a)(1)(A)) as a
health professional shortage area.
(2) Implementation; duration.--
(A) Implementation.--The Secretary shall not implement the
demonstration projects before October 1, 2004.
(B) Duration.--The Secretary shall complete the
demonstration projects by the date that is 3 years after the
date on which the first demonstration project is implemented.
(d) Evaluation and Report.--
(1) Evaluation.--The Secretary shall conduct an evaluation
of the demonstration projects--
(A) to determine whether eligible beneficiaries who use
chiropractic services use a lesser overall amount of items
and services for which payment is made under the medicare
program than eligible beneficiaries who do not use such
services;
(B) to determine the cost of providing payment for
chiropractic services under the medicare program;
(C) to determine the satisfaction of eligible beneficiaries
participating in the demonstration projects and the quality
of care received by such beneficiaries; and
(D) to evaluate such other matters as the Secretary
determines is appropriate.
(2) Report.--Not later than the date that is 1 year after
the date on which the demonstration projects conclude, the
Secretary
[[Page H6231]]
shall submit to Congress a report on the evaluation conducted
under paragraph (1) together with such recommendations for
legislation or administrative action as the Secretary
determines is appropriate.
(e) Waiver of Medicare Requirements.--The Secretary shall
waive compliance with such requirements of the medicare
program to the extent and for the period the Secretary finds
necessary to conduct the demonstration projects.
(f) Funding.--
(1) Demonstration projects.--
(A) In general.--Subject to subparagraph (B) and paragraph
(2), the Secretary shall provide for the transfer from the
Federal Supplementary Insurance Trust Fund under section 1841
of the Social Security Act (42 U.S.C. 1395t) of such funds as
are necessary for the costs of carrying out the demonstration
projects under this section.
(B) Limitation.--In conducting the demonstration projects
under this section, the Secretary shall ensure that the
aggregate payments made by the Secretary under the medicare
program do not exceed the amount which the Secretary would
have paid under the medicare program if the demonstration
projects under this section were not implemented.
(2) Evaluation and report.--There are authorized to be
appropriated such sums as are necessary for the purpose of
developing and submitting the report to Congress under
subsection (d).
SEC. 442. MEDICARE HEALTH CARE QUALITY DEMONSTRATION
PROGRAMS.
Title XVIII (42 U.S.C. 1395 et seq.) is amended by
inserting after section 1866B the following new section:
``health care quality demonstration program
``Sec. 1866C. (a) Definitions.--In this section:
``(1) Beneficiary.--The term `beneficiary' means a
beneficiary who is enrolled in the original medicare fee-for-
service program under parts A and B or a beneficiary in a
staff model or dedicated group model health maintenance
organization under the Medicare+Choice program (or, on and
after January 1, 2006, under the MedicareAdvantage program)
under part C.
``(2) Health care group.--
``(A) In general.--The term `health care group' means--
``(i) a group of physicians that is organized at least in
part for the purpose of providing physician's services under
this title;
``(ii) an integrated health care delivery system that
delivers care through coordinated hospitals, clinics, home
health agencies, ambulatory surgery centers, skilled nursing
facilities, rehabilitation facilities and clinics, and
employed, independent, or contracted physicians; or
``(iii) an organization representing regional coalitions of
groups or systems described in clause (i) or (ii).
``(B) Inclusion.--As the Secretary determines appropriate,
a health care group may include a hospital or any other
individual or entity furnishing items or services for which
payment may be made under this title that is affiliated with
the health care group under an arrangement structured so that
such hospital, individual, or entity participates in a
demonstration project under this section.
``(3) Physician.--Except as otherwise provided for by the
Secretary, the term `physician' means any individual who
furnishes services that may be paid for as physicians'
services under this title.
``(b) Demonstration Projects.--The Secretary shall
establish a 5-year demonstration program under which the
Secretary shall approve demonstration projects that examine
health delivery factors that encourage the delivery of
improved quality in patient care, including--
``(1) the provision of incentives to improve the safety of
care provided to beneficiaries;
``(2) the appropriate use of best practice guidelines by
providers and services by beneficiaries;
``(3) reduced scientific uncertainty in the delivery of
care through the examination of variations in the utilization
and allocation of services, and outcomes measurement and
research;
``(4) encourage shared decision making between providers
and patients;
``(5) the provision of incentives for improving the quality
and safety of care and achieving the efficient allocation of
resources;
``(6) the appropriate use of culturally and ethnically
sensitive health care delivery; and
``(7) the financial effects on the health care marketplace
of altering the incentives for care delivery and changing the
allocation of resources.
``(c) Administration by Contract.--
``(1) In general.--Except as otherwise provided in this
section, the Secretary may administer the demonstration
program established under this section in a manner that is
similar to the manner in which the demonstration program
established under section 1866A is administered in accordance
with section 1866B.
``(2) Alternative payment systems.--A health care group
that receives assistance under this section may, with respect
to the demonstration project to be carried out with such
assistance, include proposals for the use of alternative
payment systems for items and services provided to
beneficiaries by the group that are designed to--
``(A) encourage the delivery of high quality care while
accomplishing the objectives described in subsection (b); and
``(B) streamline documentation and reporting requirements
otherwise required under this title.
``(3) Benefits.--A health care group that receives
assistance under this section may, with respect to the
demonstration project to be carried out with such assistance,
include modifications to the package of benefits available
under the traditional fee-for-service program under parts A
and B or the package of benefits available through a staff
model or a dedicated group model health maintenance
organization under part C. The criteria employed under the
demonstration program under this section to evaluate outcomes
and determine best practice guidelines and incentives shall
not be used as a basis for the denial of medicare benefits
under the demonstration program to patients against their
wishes (or if the patient is incompetent, against the wishes
of the patient's surrogate) on the basis of the patient's age
or expected length of life or of the patient's present or
predicted disability, degree of medical dependency, or
quality of life.
``(d) Eligibility Criteria.--To be eligible to receive
assistance under this section, an entity shall--
``(1) be a health care group;
``(2) meet quality standards established by the Secretary,
including--
``(A) the implementation of continuous quality improvement
mechanisms that are aimed at integrating community-based
support services, primary care, and referral care;
``(B) the implementation of activities to increase the
delivery of effective care to beneficiaries;
``(C) encouraging patient participation in preference-based
decisions;
``(D) the implementation of activities to encourage the
coordination and integration of medical service delivery; and
``(E) the implementation of activities to measure and
document the financial impact on the health care marketplace
of altering the incentives of health care delivery and
changing the allocation of resources; and
``(3) meet such other requirements as the Secretary may
establish.
``(e) Waiver Authority.--The Secretary may waive such
requirements of titles XI and XVIII as may be necessary to
carry out the purposes of the demonstration program
established under this section.
``(f) Budget Neutrality.--With respect to the 5-year period
of the demonstration program under subsection (b), the
aggregate expenditures under this title for such period shall
not exceed the aggregate expenditures that would have been
expended under this title if the program established under
this section had not been implemented.
``(g) Notice Requirements.--In the case of an individual
that receives health care items or services under a
demonstration program carried out under this section, the
Secretary shall ensure that such individual is notified of
any waivers of coverage or payment rules that are applicable
to such individual under this title as a result of the
participation of the individual in such program.
``(h) Participation and Support by Federal Agencies.--In
carrying out the demonstration program under this section,
the Secretary may direct--
``(1) the Director of the National Institutes of Health to
expand the efforts of the Institutes to evaluate current
medical technologies and improve the foundation for evidence-
based practice;
``(2) the Administrator of the Agency for Healthcare
Research and Quality to, where possible and appropriate, use
the program under this section as a laboratory for the study
of quality improvement strategies and to evaluate, monitor,
and disseminate information relevant to such program; and
``(3) the Administrator of the Centers for Medicare &
Medicaid Services and the Administrator of the Center for
Medicare Choices to support linkages of relevant medicare
data to registry information from participating health care
groups for the beneficiary populations served by the
participating groups, for analysis supporting the purposes of
the demonstration program, consistent with the applicable
provisions of the Health Insurance Portability and
Accountability Act of 1996.
``(i) Implementation.--The Secretary shall not implement
the demonstration program before October 1, 2004.''.
SEC. 443. MEDICARE COMPLEX CLINICAL CARE MANAGEMENT PAYMENT
DEMONSTRATION.
(a) Establishment.--
(1) In general.--The Secretary shall establish a
demonstration program to make the medicare program more
responsive to needs of eligible beneficiaries by promoting
continuity of care, helping stabilize medical conditions,
preventing or minimizing acute exacerbations of chronic
conditions, and reducing adverse health outcomes, such as
adverse drug interactions related to polypharmacy.
(2) Sites.--The Secretary shall designate 6 sites at which
to conduct the demonstration program under this section, of
which at least 3 shall be in an urban area and at least 1
shall be in a rural area. One of the sites shall be located
in the State of Arkansas.
(3) Duration.--The Secretary shall conduct the
demonstration program under this section for a 3-year period.
(4) Implementation.--The Secretary shall not implement the
demonstration program before October 1, 2004.
[[Page H6232]]
(b) Participants.--Any eligible beneficiary who resides in
an area designated by the Secretary as a demonstration site
under subsection (a)(2) may participate in the demonstration
program under this section if such beneficiary identifies a
principal care physician who agrees to manage the complex
clinical care of the eligible beneficiary under the
demonstration program.
(c) Principal Care Physician Responsibilities.--The
Secretary shall enter into an agreement with each principal
care physician who agrees to manage the complex clinical care
of an eligible beneficiary under subsection (b) under which
the principal care physician shall--
(1) serve as the primary contact of the eligible
beneficiary in accessing items and services for which payment
may be made under the medicare program;
(2) maintain medical information related to care provided
by other health care providers who provide health care items
and services to the eligible beneficiary, including clinical
reports, medication and treatments prescribed by other
physicians, hospital and hospital outpatient services,
skilled nursing home care, home health care, and medical
equipment services;
(3) monitor and advocate for the continuity of care of the
eligible beneficiary and the use of evidence-based
guidelines;
(4) promote self-care and family caregiver involvement
where appropriate;
(5) have appropriate staffing arrangements to conduct
patient self-management and other care coordination
activities as specified by the Secretary;
(6) refer the eligible beneficiary to community services
organizations and coordinate the services of such
organizations with the care provided by health care
providers; and
(7) meet such other complex care management requirements as
the Secretary may specify.
(d) Complex Clinical Care Management Fee.--
(1) Payment.--Under an agreement entered into under
subsection (c), the Secretary shall pay to each principal
care physician, on behalf of each eligible beneficiary under
the care of that physician, the complex clinical care
management fee developed by the Secretary under paragraph
(2).
(2) Development of fee.--The Secretary shall develop a
complex care management fee under this paragraph that is paid
on a monthly basis and which shall be payment in full for all
the functions performed by the principal care physician under
the demonstration program, including any functions performed
by other qualified practitioners acting on behalf of the
physician, appropriate staff under the supervision of the
physician, and any other person under a contract with the
physician, including any person who conducts patient self-
management and caregiver education under subsection (c)(4).
(e) Funding.--
(1) In general.--The Secretary shall provide for the
transfer from the Federal Supplementary Insurance Trust Fund
established under section 1841 of the Social Security Act (42
U.S.C. 1395t) of such funds as are necessary for the costs of
carrying out the demonstration program under this section.
(2) Budget neutrality.--In conducting the demonstration
program under this section, the Secretary shall ensure that
the aggregate payments made by the Secretary do not exceed
the amount which the Secretary would have paid if the
demonstration program under this section was not implemented.
(f) Waiver Authority.--The Secretary may waive such
requirements of titles XI and XVIII of the Social Security
Act (42 U.S.C. 1301 et seq.; 1395 et seq.) as may be
necessary for the purpose of carrying out the demonstration
program under this section.
(g) Report.--Not later than 6 months after the completion
of the demonstration program under this section, the
Secretary shall submit to Congress a report on such program,
together with recommendations for such legislation and
administrative action as the Secretary determines to be
appropriate.
(h) Definitions.--In this section:
(1) Activity of daily living.--The term ``activity of daily
living'' means eating, toiling, transferring, bathing,
dressing, and continence.
(2) Chronic condition.--The term ``chronic condition''
means a biological, physical, or mental condition that is
likely to last a year or more, for which there is no known
cure, for which there is a need for ongoing medical care, and
which may affect an individual's ability to carry out
activities of daily living or instrumental activities of
daily living, or both.
(3) Eligible beneficiary.--The term ``eligible
beneficiary'' means any individual who--
(A) is enrolled for benefits under part B of the medicare
program;
(B) has at least 4 complex medical conditions (one of which
may be cognitive impairment); and
(C) has--
(i) an inability to self-manage their care; or
(ii) a functional limitation defined as an impairment in 1
or more activity of daily living or instrumental activity of
daily living.
(4) Instrumental activity of daily living.--The term
``instrumental activity of daily living'' means meal
preparation, shopping, housekeeping, laundry, money
management, telephone use, and transportation use.
(5) Medicare program.--The term ``medicare program'' means
the health care program under title XVIII of the Social
Security Act (42 U.S.C. 1395 et seq.).
(6) Principal care physician.--The term ``principal care
physician'' means the physician with primary responsibility
for overall coordination of the care of an eligible
beneficiary (as specified in a written plan of care) who may
be a primary care physician or a specialist.
SEC. 444. MEDICARE FEE-FOR-SERVICE CARE COORDINATION
DEMONSTRATION PROGRAM.
(a) Establishment.--
(1) In general.--The Secretary shall establish a
demonstration program to contract with qualified care
management organizations to provide health risk assessment
and care management services to eligible beneficiaries who
receive care under the original medicare fee-for-service
program under parts A and B of title XVIII of the Social
Security Act to eligible beneficiaries.
(2) Sites.--The Secretary shall designate 6 sites at which
to conduct the demonstration program under this section. In
selecting sites under this paragraph, the Secretary shall
give preference to sites located in rural areas.
(3) Duration.--The Secretary shall conduct the
demonstration program under this section for a 5-year period.
(4) Implementation.--The Secretary shall not implement the
demonstration program before October 1, 2004.
(b) Participants.--Any eligible beneficiary who resides in
an area designated by the Secretary as a demonstration site
under subsection (a)(2) may participate in the demonstration
program under this section if such beneficiary identifies a
care management organization who agrees to furnish care
management services to the eligible beneficiary under the
demonstration program.
(c) Contracts With CMOs.--
(1) In general.--The Secretary shall enter into a contract
with care management organizations to provide care management
services to eligible beneficiaries residing in the area
served by the care management organization.
(2) Cancellation.--The Secretary may cancel a contract
entered into under paragraph (1) if the care management
organization does not meet negotiated savings or quality
outcomes targets for the year.
(3) Number of cmos.--The Secretary may contract with more
than 1 care management organization in a geographic area.
(d) Payment to CMOs.--
(1) Payment.--Under an contract entered into under
subsection (c), the Secretary shall pay care management
organizations a fee for which the care management
organization is partially at risk based on bids submitted by
care management organizations.
(2) Portion of payment at risk.--The Secretary shall
establish a benchmark for quality and cost against which the
results of the care management organization are to be
measured. The Secretary may not pay a care management
organization the portion of the fee described in paragraph
(1) that is at risk unless the Secretary determines that the
care management organization has met the agreed upon savings
and outcomes targets for the year.
(e) Funding.--
(1) In general.--The Secretary shall provide for the
transfer from the Federal Hospital Insurance Trust Fund under
section 1817 of the Social Security Act (42 U.S.C. 1395i) and
the Federal Supplementary Insurance Trust Fund established
under section 1841 of such Act (42 U.S.C. 1395t), in such
proportion as the Secretary determines to be appropriate, of
such funds as are necessary for the costs of carrying out the
demonstration program under this section.
(2) Budget neutrality.--In conducting the demonstration
program under this section, the Secretary shall ensure that
the aggregate payments made by the Secretary do not exceed
the amount which the Secretary would have paid if the
demonstration program under this section was not implemented.
(f) Waiver Authority.--
(1) In general.--The Secretary may waive such requirements
of titles XI and XVIII of the Social Security Act (42 U.S.C.
1301 et seq.; 1395 et seq.) as may be necessary for the
purpose of carrying out the demonstration program under this
section.
(2) Waiver of medigap preemptions.--The Secretary shall
waive any provision of section 1882 of the Social Security
Act that would prevent an insurance carrier described in
subsection (h)(3)(D) from participating in the demonstration
program under this section.
(g) Report.--Not later than 6 months after the completion
of the demonstration program under this section, the
Secretary shall submit to Congress a report on such program,
together with recommendations for such legislation and
administrative action as the Secretary determines to be
appropriate.
(h) Definitions.--In this section:
(1) Care management services.--The term ``care management
services'' means services that are furnished to an eligible
beneficiary (as defined in paragraph (2)) by a care
management organization (as defined in paragraph (3)) in
accordance with guidelines established by the Secretary that
are consistent with guidelines established by the American
Geriatrics Society.
[[Page H6233]]
(2) Eligible beneficiary.--The term ``eligible
beneficiary'' means an individual who is--
(A) entitled to (or enrolled for) benefits under part A and
enrolled for benefits under part B of the Social Security Act
(42 U.S.C. 1395c et seq.; 1395j et seq.);
(B) not enrolled with a Medicare+Choice plan or a
MedicareAdvantage plan under part C; and
(C) at high-risk (as defined by the Secretary, but
including eligible beneficiaries with multiple sclerosis or
another disabling chronic condition, eligible beneficiaries
residing in a nursing home or at risk for nursing home
placement, or eligible beneficiaries eligible for assistance
under a State plan under title XIX).
(3) Care management organization.--The term ``care
management organization'' means an organization that meets
such qualifications as the Secretary may specify and includes
any of the following:
(A) A physician group practice, hospital, home health
agency, or hospice program.
(B) A disease management organization.
(C) A Medicare+Choice or MedicareAdvantage organization.
(D) Insurance carriers offering medicare supplemental
policies under section 1882 of the Social Security Act (42
U.S.C. 1395ss).
(E) Such other entity as the Secretary determines to be
appropriate.
SEC. 445. 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;
(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;
(4) an evaluation of whether there is a sound economic
basis for the implementation of the adjustment under
subparagraphs (E) and (F) of section 1848(e)(1) of the Social
Security Act (42 U.S.C. 1395w-4(e)(1)), as added by section
421, in those areas in which the adjustment applies;
(5) an evaluation of the effect of such adjustment on
physician location and retention in areas affected by such
adjustment, taking into account--
(A) differences in recruitment costs and retention rates
for physicians, including specialists, between large urban
areas and other areas; and
(B) the mobility of physicians, including specialists, over
the last decade; and
(6) an evaluation of appropriateness of extending such
adjustment or making such adjustment permanent.
(b) Report.--Not later than 1 year after the date of
enactment of this Act, the Comptroller General of the United
States 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).
Subtitle C--Provisions Relating to Parts A and B
SEC. 451. 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))) on or after October 1, 2003, and before
October 1, 2005, the Secretary shall increase the payment
amount otherwise made under section 1895 of such Act (42
U.S.C. 1395fff ) for such services by 5 percent.
(b) Waiving Budget Neutrality.--The Secretary shall not
reduce the standard prospective payment amount (or amounts)
under section 1895 of the Social Security Act (42 U.S.C.
1395fff ) applicable to home health services furnished during
a period to offset the increase in payments resulting from
the application of subsection (a).
(c) No Effect on Subsequent Periods.--The payment increase
provided under subsection (a) for a period under such
subsection--
(1) shall not apply to episodes and visits ending after
such period; and
(2) shall not be taken into account in calculating the
payment amounts applicable for episodes and visits occurring
after such period.
SEC. 452. LIMITATION ON REDUCTION IN AREA WAGE ADJUSTMENT
FACTORS UNDER THE PROSPECTIVE PAYMENT SYSTEM
FOR HOME HEALTH SERVICES.
Section 1895(b)(4)(C) (42 U.S.C. 1395fff(b)(4)(C)) is
amended--
(1) by striking ``factors.--The Secretary'' and inserting
``factors.--
``(i) In general.--Subject to clause (ii), the Secretary'';
and
(2) by adding at the end the following new clause:
``(ii) Limitation on reduction in fiscal year 2005 and
2006.--For fiscal years 2004, 2005, and 2006, the area wage
adjustment factor applicable to home health services
furnished in an area in the fiscal year may not be more that
3 percent less than the area wage adjustment factor
applicable to home health services for the area for the
previous year.''.
SEC. 453. CLARIFICATIONS TO CERTAIN EXCEPTIONS TO MEDICARE
LIMITS ON PHYSICIAN REFERRALS.
(a) Limits on Physician Referrals.--
(1) Ownership and investment interests in whole
hospitals.--
(A) In general.--Section 1877(d)(3) (42 U.S.C.
1395nn(d)(3)) is amended--
(i) by striking ``and'' at the end of subparagraph (A); and
(ii) 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''.
(B) 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.''.
(2) Ownership and investment interests in a rural
provider.--Section 1877(d)(2) (42 U.S.C. 1395nn(d)(2)) is
amended to read as follows:
``(2) Rural providers.--In the case of designated health
services furnished in a rural area (as defined in section
1886(d)(2)(D)) by an entity, if--
``(A) substantially all of the designated health services
furnished by the entity are furnished to individuals residing
in such a rural area;
``(B) the entity is not a specialty hospital (as defined in
subsection (h)(7)); and
``(C) the Secretary determines, with respect to such
entity, that such services would not be available in such
area but for the ownership or investment interest.''.
(b) Effective Date.--Subject to paragraph (2), 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)(1)(B), 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.
SEC. 454. DEMONSTRATION PROGRAM FOR SUBSTITUTE ADULT DAY
SERVICES.
(a) Establishment.--The Secretary shall establish a
demonstration program (in this section referred to as the
``demonstration program'') under which the Secretary provides
eligible medicare beneficiaries with coverage under the
medicare program of substitute adult day services furnished
by an adult day services facility.
(b) Payment Rate for Substitute Adult Day Services.--
(1) Payment rate.--For purposes of making payments to an
adult day services facility for substitute adult day services
under the demonstration program, the following rules shall
apply:
(A) Estimation of payment amount.--The Secretary shall
estimate the amount that would otherwise be payable to a home
health agency under section 1895 of the Social Security Act
(42 U.S.C. 1395fff) for all home health services described in
subsection (i)(4)(B)(i) under the plan of care.
(B) Amount of payment.--Subject to paragraph (3)(B), the
total amount payable for substitute adult day services under
the plan of care is equal to 95 percent of the amount
estimated to be payable under subparagraph (A).
(2) Limitation on balance billing.--Under the demonstration
program, an adult day services facility shall accept as
payment in full for substitute adult day services (including
those services described in clauses (ii) through (iv) of
subsection (i)(4)(B)) furnished
[[Page H6234]]
by the facility to an eligible medicare beneficiary the
amount of payment provided under the demonstration program
for home health services consisting of substitute adult
services.
(3) Adjustment in case of overutilization of substitute
adult day services to ensure budget neutrality.--The
Secretary shall monitor the expenditures under the
demonstration program and under title XVIII of the Social
Security Act for home health services. If the Secretary
estimates that the total expenditures under the demonstration
program and under such title XVIII for home health services
for a period determined by the Secretary exceed expenditures
that would have been made under such title XVIII for home
health services for such period if the demonstration program
had not been conducted, the Secretary shall adjust the rate
of payment to adult day services facilities under paragraph
(1)(B) in order to eliminate such excess.
(c) Demonstration Program Sites.--The demonstration program
shall be conducted in not more than 3 sites selected by the
Secretary.
(d) Duration; Implementation.--
(1) Duration.--The Secretary shall conduct the
demonstration program for a period of 3 years.
(2) Implementation.--The Secretary may not implement the
demonstration program before October 1, 2004.
(e) Voluntary Participation.--Participation of eligible
medicare beneficiaries in the demonstration program shall be
voluntary.
(f) Waiver Authority.--
(1) In general.--Except as provided in paragraph (2), the
Secretary may waive such requirements of titles XI and XVIII
of the Social Security Act (42 U.S.C. 1301 et seq.; 1395 et
seq.) as may be necessary for the purposes of carrying out
the demonstration program.
(2) May not waive eligibility requirements for home health
services.--The Secretary may not waive the beneficiary
eligibility requirements for home health services under title
XVIII of the Social Security Act.
(g) Evaluation and Report.--
(1) Evaluation.--The Secretary shall conduct an evaluation
of the clinical and cost effectiveness of the demonstration
program.
(2) Report.--Not later than 30 months after the
commencement of the demonstration program, the Secretary
shall submit to Congress a report on the evaluation conducted
under paragraph (1) and shall include in the report the
following:
(A) An analysis of the patient outcomes and costs of
furnishing care to the eligible medicare beneficiaries
participating in the demonstration program as compared to
such outcomes and costs to such beneficiaries receiving only
home health services under title XVIII of the Social Security
Act for the same health conditions.
(B) Such recommendations regarding the extension,
expansion, or termination of the program as the Secretary
determines appropriate.
(i) Definitions.--In this section:
(1) Adult day services facility.--
(A) In general.--Except as provided in subparagraphs (B)
and (C), the term ``adult day services facility'' means a
public agency or private organization, or a subdivision of
such an agency or organization, that--
(i) is engaged in providing skilled nursing services and
other therapeutic services directly or under arrangement with
a home health agency;
(ii) provides the items and services described in paragraph
(4)(B); and
(iii) meets the requirements of paragraphs (2) through (8)
of subsection (o).
(B) Inclusion.--Notwithstanding subparagraph (A), the term
``adult day services facility'' shall include a home health
agency in which the items and services described in clauses
(ii) through (iv) of paragraph (4)(B) are provided--
(i) by an adult day services program that is licensed or
certified by a State, or accredited, to furnish such items
and services in the State; and
(ii) under arrangements with that program made by such
agency.
(C) Waiver of surety bond.--The Secretary may waive the
requirement of a surety bond under section 1861(o)(7) of the
Social Security Act (42 U.S.C. 1395x(o)(7)) in the case of an
agency or organization that provides a comparable surety bond
under State law.
(2) Eligible medicare beneficiary.--The term ``eligible
medicare beneficiary'' means an individual eligible for home
health services under title XVIII of the Social Security Act.
(3) 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)).
(4) Substitute adult day services.--
(A) In general.--The term ``substitute adult day services''
means the items and services described in subparagraph (B)
that are furnished to an individual by an adult day services
facility as a part of a plan under section 1861(m) of the
Social Security Act (42 U.S.C. 1395x(m)) that substitutes
such services for some or all of the items and services
described in subparagraph (B)(i) furnished by a home health
agency under the plan, as determined by the physician
establishing the plan.
(B) Items and services described.--The items and services
described in this subparagraph are the following items and
services:
(i) Items and services described in paragraphs (1) through
(7) of such section 1861(m).
(ii) Meals.
(iii) A program of supervised activities designed to
promote physical and mental health and furnished to the
individual by the adult day services facility in a group
setting for a period of not fewer than 4 and not greater than
12 hours per day.
(iv) A medication management program (as defined in
subparagraph (C)).
(C) Medication management program.--For purposes of
subparagraph (B)(iv), the term ``medication management
program'' means a program of services, including medicine
screening and patient and health care provider education
programs, that provides services to minimize--
(i) unnecessary or inappropriate use of prescription drugs;
and
(ii) adverse events due to unintended prescription drug-to-
drug interactions.
SEC. 455. MEDICARE SECONDARY PAYOR (MSP) PROVISIONS.
(a) Technical Amendment Concerning Secretary's Authority to
Make Conditional Payment When Certain Primary Plans Do Not
Pay Promptly.--
(1) In general.--Section 1862(b)(2) (42 U.S.C. 1395y(b)(2))
is amended--
(A) in subparagraph (A)(ii), by striking ``promptly (as
determined in accordance with regulations)'';
(B) in subparagraph (B)--
(i) by redesignating clauses (i) through (iii) as clauses
(ii) through (iv), respectively; and
(ii) by inserting before clause (ii), as so redesignated,
the following new clause:
``(i) Authority to make conditional payment.--The Secretary
may make payment under this title with respect to an item or
service if a primary plan described in subparagraph (A)(ii)
has not made or cannot reasonably be expected to make payment
with respect to such item or service promptly (as determined
in accordance with regulations). Any such payment by the
Secretary shall be conditioned on reimbursement to the
appropriate Trust Fund in accordance with the succeeding
provisions of this subsection.''.
(2) Effective date.--The amendments made by paragraph (1)
shall be effective as if included in the enactment of title
III of the Medicare and Medicaid Budget Reconciliation
Amendments of 1984 (Public Law 98-369).
(b) Clarifying Amendments to Conditional Payment
Provisions.--Section 1862(b)(2) (42 U.S.C. 1395y(b)(2)) is
further amended--
(1) in subparagraph (A), in the matter following clause
(ii), by inserting the following sentence at the end: ``An
entity that engages in a business, trade, or profession shall
be deemed to have a self-insured plan if it carries its own
risk (whether by a failure to obtain insurance, or otherwise)
in whole or in part.'';
(2) in subparagraph (B)(ii), as redesignated by subsection
(a)(2)(B)--
(A) by striking the first sentence and inserting the
following: ``A primary plan, and an entity that receives
payment from a primary plan, shall reimburse the appropriate
Trust Fund for any payment made by the Secretary under this
title with respect to an item or service if it is
demonstrated that such primary plan has or had a
responsibility to make payment with respect to such item or
service. A primary plan's responsibility for such payment may
be demonstrated by a judgment, a payment conditioned upon the
recipient's compromise, waiver, or release (whether or not
there is a determination or admission of liability) of
payment for items or services included in a claim against the
primary plan or the primary plan's insured, or by other
means.''; and
(B) in the final sentence, by striking ``on the date such
notice or other information is received'' and inserting ``on
the date notice of, or information related to, a primary
plan's responsibility for such payment or other information
is received''; and
(3) in subparagraph (B)(iii), as redesignated by subsection
(a)(2)(B), by striking the first sentence and inserting the
following: ``In order to recover payment made under this
title for an item or service, the United States may bring an
action against any or all entities that are or were required
or responsible (directly, as an insurer or self-insurer, as a
third-party administrator, as an employer that sponsors or
contributes to a group health plan, or large group health
plan, or otherwise) to make payment with respect to the same
item or service (or any portion thereof) under a primary
plan. The United States may, in accordance with paragraph
(3)(A) collect double damages against any such entity. In
addition, the United States may recover under this clause
from any entity that has received payment from a primary plan
or from the proceeds of a primary plan's payment to any
entity.''.
(c) Clerical Amendments.--Section 1862(b) (42 U.S.C.
1395y(b)) is amended--
(1) in paragraph (1)(A), by moving the indentation of
clauses (ii) through (v) 2 ems to the left; and
(2) in paragraph (3)(A), by striking ``such'' before
``paragraphs''.
[[Page H6235]]
TITLE V--MEDICARE APPEALS, REGULATORY, AND CONTRACTING IMPROVEMENTS
Subtitle A--Regulatory Reform
SEC. 501. RULES FOR THE PUBLICATION OF A FINAL REGULATION
BASED ON THE PREVIOUS PUBLICATION OF AN INTERIM
FINAL REGULATION.
(a) In General.--Section 1871(a) (42 U.S.C. 1395hh(a)) is
amended by adding at the end the following new paragraph:
``(3)(A) With respect to the publication of a final
regulation based on the previous publication of an interim
final regulation--
``(i) subject to subparagraph (B), the Secretary shall
publish the final regulation within the 12-month period that
begins on the date of publication of the interim final
regulation;
``(ii) if a final regulation is not published by the
deadline established under this paragraph, the interim final
regulation shall not continue in effect unless the Secretary
publishes a notice described in subparagraph (B) by such
deadline; and
``(iii) the final regulation shall include responses to
comments submitted in response to the interim final
regulation.
``(B) If the Secretary determines before the deadline
otherwise established in this paragraph that there is good
cause, specified in a notice published before such deadline,
for delaying the deadline otherwise applicable under this
paragraph, the deadline otherwise established under this
paragraph shall be extended for such period (not to exceed 12
months) as the Secretary specifies in such notice.''.
(b) Effective Date.--The amendment made by subsection (a)
shall take effect on the date of enactment of this Act and
shall apply to interim final regulations published on or
after such date.
(c) Status of Pending Interim Final Regulations.--Not later
than 6 months after the date of enactment of this Act, the
Secretary shall publish a notice in the Federal Register that
provides the status of each interim final regulation that was
published on or before the date of enactment of this Act and
for which no final regulation has been published. Such notice
shall include the date by which the Secretary plans to
publish the final regulation that is based on the interim
final regulation.
SEC. 502. COMPLIANCE WITH CHANGES IN REGULATIONS AND
POLICIES.
(a) No Retroactive Application of Substantive Changes.--
(1) In general.--Section 1871 (42 U.S.C. 1395hh) is amended
by adding at the end the following new subsection:
``(d)(1)(A) A substantive change in regulations, manual
instructions, interpretative rules, statements of policy, or
guidelines of general applicability under this title shall
not be applied (by extrapolation or otherwise) retroactively
to items and services furnished before the effective date of
the change, unless the Secretary determines that--
``(i) such retroactive application is necessary to comply
with statutory requirements; or
``(ii) failure to apply the change retroactively would be
contrary to the public interest.''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply to substantive changes issued on or after the
date of enactment of this Act.
(b) Timeline for Compliance With Substantive Changes After
Notice.--
(1) In general.--Section 1871(d)(1), as added by subsection
(a), is amended by adding at the end the following:
``(B) A compliance action may be made against a provider of
services, physician, practitioner, or other supplier with
respect to noncompliance with such a substantive change only
for items and services furnished on or after the effective
date of the change.
``(C)(i) Except as provided in clause (ii), a substantive
change may not take effect before the date that is 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 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.''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply to compliance actions undertaken on or after the
date of enactment of this Act.
SEC. 503. REPORT ON LEGAL AND REGULATORY INCONSISTENCIES.
Section 1871 (42 U.S.C. 1395hh), as amended by section
502(a)(1), is amended by adding at the end the following new
subsection:
``(e)(1) Not later than 2 years after the date of enactment
of this subsection, and every 3 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 beneficiaries, providers of
services, physicians, practitioners, and other suppliers with
respect to such areas of inconsistency and conflict; and
``(B) information from medicare contractors that tracks the
nature of all communications and correspondence.
``(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--Appeals Process Reform
SEC. 511. SUBMISSION OF PLAN FOR TRANSFER OF RESPONSIBILITY
FOR MEDICARE APPEALS.
(a) Submission of Transition Plan.--
(1) In general.--Not later than April 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) Contents.--The plan shall include information on the
following:
(A) Workload.--The number of such administrative law judges
and support staff required now and in the future to hear and
decide such cases in a timely manner, taking into account the
current and anticipated claims volume, appeals, number of
beneficiaries, and statutory changes.
(B) Cost projections and financing.--Funding levels
required for fiscal year 2005 and subsequent fiscal years to
carry out the functions transferred under the plan and how
such transfer should be financed.
(C) Transition timetable.--A timetable for the transition.
(D) Regulations.--The establishment of specific regulations
to govern the appeals process.
(E) Case tracking.--The development of a unified case
tracking system that will facilitate the maintenance and
transfer of case specific data across both the fee-for-
service and managed care components of the medicare program.
(F) Feasibility of precedential authority.--The feasibility
of developing a process to give decisions of the Departmental
Appeals Board in the Department of Health and Human Services
addressing broad legal issues binding, precedential
authority.
(G) Access to administrative law judges.--The feasibility
of--
(i) filing appeals with administrative law judges
electronically; and
(ii) conducting hearings using tele- or video-conference
technologies.
(H) Independence of administrative law judges.--The steps
that should be taken to ensure the independence of
administrative law judges, including ensuring that such
judges are in an office that is functionally and
operationally separate from the Centers for Medicare &
Medicaid Services and the Center for Medicare Choices.
(I) Geographic distribution.--The steps that should be
taken to provide for an appropriate geographic distribution
of administrative law judges throughout the United States to
ensure timely access to such judges.
(J) Hiring.--The steps that should be taken to hire
administrative law judges (and support staff).
(K) Performance standards.--The establishment of
performance standards for administrative law judges with
respect to timelines for decisions in cases under title XVIII
of the Social Security Act.
(L) Shared resources.--The feasibility of the Secretary
entering into such arrangements with the Commissioner of
Social Security as may be appropriate with respect to
transferred functions under the plan to share office space,
support staff, and other resources, with appropriate
reimbursement.
(M) Training.--The training that should be provided to
administrative law judges with respect to laws and
regulations under title XVIII of the Social Security Act.
(3) Additional information.--The plan may also include
recommendations for further congressional action, including
modifications to the requirements and deadlines established
under section 1869 of the Social Security Act (as amended by
sections 521 and 522 of BIPA (114 Stat. 2763A-534) and this
Act).
(b) GAO Evaluation.--The Comptroller General of the United
States shall--
(1) evaluate the plan submitted under subsection (a); and
(2) not later than 6 months after such submission, submit
to Congress, the Commissioner of Social Security, and the
Secretary a report on such evaluation.
(c) Submission of GAO Report Required Before Plan
Implementation.--The Commissioner of Social Security and the
Secretary may not implement the plan developed under
subsection (a) before the date that is 6 months after the
date the report required under subsection (b)(2) is submitted
to the Commissioner and the Secretary.
SEC. 512. EXPEDITED ACCESS TO JUDICIAL REVIEW.
(a) In General.--Section 1869(b) (42 U.S.C. 1395ff(b)) is
amended--
(1) in paragraph (1)(A), by inserting ``, subject to
paragraph (2),'' before ``to judicial review of the
Secretary's final decision''; and
(2) by adding at the end the following new paragraph:
[[Page H6236]]
``(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 a beneficiary who has filed an appeal
under paragraph (1) (other than an appeal filed under
paragraph (1)(F)(i)) may obtain access to judicial review
when a review entity (described in subparagraph (D)), on its
own motion or at the request of the appellant, determines
that the Departmental Appeals Board does not have 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 for a specific matter in dispute 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 entity that the Departmental Appeals Board does not
have 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 entity shall require for purposes of
making such determination, such review entity shall make a
determination on the request in writing within 60 days after
the date such review entity receives the request and such
accompanying documents and materials. Such a determination by
such review entity 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 entity--
``(I) determines that there are no material issues of fact
in dispute and that the only issues to be adjudicated are
ones of law or regulation that the Departmental Appeals Board
does not have 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 the date of the
determination described in such clause; 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 1 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 any amounts in controversy.--Where a
provider of services or supplier is granted judicial review
pursuant to this paragraph, the amount in controversy (if
any) 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 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, physicians, practitioners, and other
suppliers under this Act.
``(D) Review entity defined.--For purposes of this
subsection, a `review entity' is a panel of no more than 3
members from the Departmental Appeals Board, selected for the
purpose 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 beneficiaries 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) GAO Study and Report on Access to Judicial Review.--
(1) Study.--The Comptroller General of the United States
shall conduct a study on the access of medicare beneficiaries
and health care providers to judicial review of actions of
the Secretary and the Department of Health and Human Services
with respect to items and services under title XVIII of the
Social Security Act subsequent to February 29, 2000, the date
of the decision of Shalala, Secretary of Health and Human
Services, et al. v. Illinois Council on Long Term Care, Inc.
(529 U.S. 1 (2000)).
(2) Report.--Not later than 1 year after the date of
enactment of this Act, the Comptroller General shall submit
to Congress a report on the study conducted under paragraph
(1) together with such recommendations as the Comptroller
General determines to be appropriate.
(d) Conforming Amendment.--Section 1869(b)(1)(F)(ii) (42
U.S.C. 1395ff(b)(1)(F)(ii)) is amended to read as follows:
``(ii) Reference to expedited access to judicial review.--
For the provision relating to expedited access to judicial
review, see paragraph (2).''.
(e) Effective Date.--The amendments made by this section
shall apply to appeals filed on or after October 1, 2004.
SEC. 513. EXPEDITED REVIEW OF CERTAIN PROVIDER AGREEMENT
DETERMINATIONS.
(a) Termination and Certain Other Immediate Remedies.--
(1) In general.--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--
(A) the remedy of termination of participation has been
imposed;
(B) a sanction described in clause (i) or (iii) of section
1819(h)(2)(B) of such Act (42 U.S.C. 1395i-3(h)(2)(B)) has
been imposed, but only if such sanction has been imposed on
an immediate basis; or
(C) the Secretary has required a skilled nursing facility
to suspend operations of a nurse aide training program.
(2) Priority for cases of termination.--Under the process
described in paragraph (1), priority shall be provided in
cases of termination described in subparagraph (A) of such
paragraph.
(b) 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 sums for fiscal year 2004 and
each subsequent fiscal year as may be necessary to increase
the number of administrative law judges (and their staffs) at
the Departmental Appeals Board of the Department of Health
and Human Services and to educate such judges and staff on
long-term care issues.
SEC. 514. REVISIONS TO MEDICARE APPEALS PROCESS.
(a) Timeframes for the Completion of the Record.--Section
1869(b) (42 U.S.C. 1395ff(b)), as amended by section
512(a)(2), is amended by adding at the end the following new
paragraph:
``(3) Timely completion of the record.--
``(A) Deadline.--Subject to subparagraph (B), the deadline
to complete the record in a hearing before an administrative
law judge or a review by the Departmental Appeals Board is 90
days after the date the request for the review or hearing is
filed.
``(B) Extensions for good cause.--The person filing a
request under subparagraph (A) may request an extension of
such deadline for good cause. The administrative law judge,
in the case of a hearing, and the Departmental Appeals Board,
in the case of a review, may extend such deadline based upon
a finding of good cause to a date specified by the judge or
Board, as the case may be.
``(C) Delay in decision deadlines until completion of
record.--Notwithstanding any other provision of this section,
the deadlines otherwise established under subsection (d) for
the making of determinations in hearings or review under this
section are 90 days after the date on which the record is
complete.
``(D) Complete record described.--For purposes of this
paragraph, a record is complete when the administrative law
judge, in the case of a hearing, or the Departmental Appeals
Board, in the case of a review, has received--
``(i) written or testimonial evidence, or both, submitted
by the person filing the request,
``(ii) written or oral argument, or both,
``(iii) the decision of, and the record for, the prior
level of appeal, and
``(iv) such other evidence as such judge or Board, as the
case may be, determines is required to make a determination
on the request.''.
(b) Use of Patients' Medical Records.--Section
1869(c)(3)(B)(i) (42 U.S.C. 1395ff(c)(3)(B)(i)) 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)) is amended by adding at the end
the following new paragraph:
``(4) Requirements of notice of determinations and
redeterminations.--A written notice of a determination on an
initial determination or on a redetermination, insofar as
such determination or redetermination results in a denial of
a claim for benefits, shall be provided in printed form and
written in a manner to be understood by the beneficiary and
shall include--
``(A) the reasons for the determination, including, as
appropriate--
``(i) upon request in the case of an initial determination,
the provision of the policy, manual, or regulation that
resulted in the denial; and
[[Page H6237]]
``(ii) in the case of a redetermination, a summary of the
clinical or scientific evidence used in making the
determination (as appropriate);
``(B) the procedures for obtaining additional information
concerning the determination or redetermination; and
``(C) notification of the right to seek a redetermination
or otherwise appeal the determination and instructions on how
to initiate such a redetermination or appeal under this
section.''.
(2) Reconsiderations.--Section 1869(c)(3)(E) (42 U.S.C.
1395ff(c)(3)(E)) is amended to read as follows:
``(E) Explanation of decision.--Any decision with respect
to a reconsideration of a qualified independent contractor
shall be in writing in a manner to be understood by the
beneficiary and shall include--
``(i) to the extent appropriate, a detailed explanation of
the decision as well as a discussion of the pertinent facts
and applicable regulations applied in making such decision;
``(ii) a notification of the right to appeal such
determination and instructions on how to initiate such appeal
under this section; and
``(iii) in the case of a determination of whether an item
or service is reasonable and necessary for the diagnosis or
treatment of illness or injury (under section 1862(a)(1)(A))
an explanation of the medical or scientific rationale for the
decision.''.
(3) Appeals.--Section 1869(d) (42 U.S.C. 1395ff(d)) 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 to be understood by
the beneficiary 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) Preparation of record for appeal.--Section
1869(c)(3)(J) (42 U.S.C. 1395ff(c)(3)(J)) is amended by
striking ``such information as is required for an appeal''
and inserting ``the record for the appeal''.
(d) Qualified Independent Contractors.--
(1) Eligibility requirements of qualified independent
contractors.--Section 1869(c) (42 U.S.C. 1395ff(c)) is
amended--
(A) in paragraph (2)--
(i) by inserting ``(except in the case of a utilization and
quality control peer review organization, as defined in
section 1152)'' after ``means an entity or organization
that''; and
(ii) by striking the period at the end and inserting the
following: ``and meets the following requirements:
``(A) General requirements.--
``(i) The entity or organization has (directly or through
contracts or other arrangements) sufficient medical, legal,
and other expertise (including knowledge of the program under
this title) and sufficient staffing to carry out duties of a
qualified independent contractor under this section on a
timely basis.
``(ii) The entity or organization has provided assurances
that it will conduct activities consistent with the
applicable requirements of this section, including that it
will not conduct any activities in a case unless the
independence requirements of subparagraph (B) are met with
respect to the case.
``(iii) The entity or organization meets such other
requirements as the Secretary provides by regulation.
``(B) Independence requirements.--
``(i) In general.--Subject to clause (ii), an entity or
organization meets the independence requirements of this
subparagraph with respect to any case if 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 (as determined under regulations).
``(ii) Exception for 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.''; and
(B) in paragraph (3)(A), by striking ``, and shall have
sufficient training and expertise in medical science and
legal matters to make reconsiderations under this
subsection''.
(2) Eligibility requirements for reviewers.--Section 1869
(42 U.S.C. 1395ff) is amended--
(A) by amending subsection (c)(3)(D) to read as follows:
``(D) Qualifications of 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'), each reviewing professional meets
the qualifications described in paragraph (4).
``(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 (as determined under regulations).
``(B) Exception.--Nothing in subparagraph (A) shall be
construed to--
``(i) prohibit an individual, solely on the basis of
affiliation with a fiscal intermediary, carrier, or other
contractor, from serving as a reviewing professional if--
``(I) a nonaffiliated individual is not reasonably
available;
``(II) the affiliated individual is not involved in the
provision of items or services in the case under review;
``(III) the fact of such an affiliation is disclosed to the
Secretary and the beneficiary (or authorized representative)
and neither party objects; and
``(IV) the affiliated 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 such affiliation
if the affiliation is disclosed to the Secretary and the
beneficiary (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).
``(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 physician (allopathic or osteopathic) or health
care professional who--
``(A) is appropriately credentialed or licensed in 1 or
more States to deliver health care services; and
``(B) has medical expertise in the field of practice that
is appropriate for the items or services at issue.
``(5) Related party defined.--For purposes of this section,
the term `related party' means, with respect to a case under
this title involving an individual beneficiary, 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) Number of qualified independent contractors.--Section
1869(c)(4) (42 U.S.C. 1395ff(c)(4)) is amended by striking
``12'' and inserting ``4''.
(e) Implementation of Certain BIPA Reforms.--
(1) Delay in certain bipa reforms.--Section 521(d) of BIPA
(114 Stat. 2763A-543) is amended to read as follows:
``(d) Effective Date.--
``(1) In general.--Except as specified in paragraph (2),
the amendments made by this section shall apply with respect
to initial determinations made on or after December 1, 2004.
``(2) Expedited proceedings and reconsideration
requirements.--For the following provisions, the amendments
made by subsection (a) shall apply with respect to initial
determinations made on or after October 1, 2003:
``(A) Subsection (b)(1)(F)(i) of section 1869 of the Social
Security Act.
``(B) Subsection (c)(3)(C)(iii) of such section.
[[Page H6238]]
``(C) Subsection (c)(3)(C)(iv) of such section to the
extent that it applies to expedited reconsiderations under
subsection (c)(3)(C)(iii) of such section.
``(3) Transitional use of peer review organizations to
conduct expedited reconsiderations until qics are
operational.--Expedited reconsiderations of initial
determinations under section 1869(c)(3)(C)(iii) of the Social
Security Act shall be made by peer review organizations until
qualified independent contractors are available for such
expedited reconsiderations.''.
(2) Conforming amendments.--Section 521(c) of BIPA (114
Stat. 2763A-543) and section 1869(c)(3)(C)(iii)(III) of the
Social Security Act (42 U.S.C. 1395ff(c)(3)(C)(iii)(III)), as
added by section 521 of BIPA, are repealed.
(f) Effective Date.--The amendments made by this section
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.
(g) Transition.--In applying section 1869(g) of the Social
Security Act (as added by subsection (d)(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. 515. HEARING RIGHTS RELATED TO DECISIONS BY THE
SECRETARY TO DENY OR NOT RENEW A MEDICARE
ENROLLMENT AGREEMENT; CONSULTATION BEFORE
CHANGING PROVIDER ENROLLMENT FORMS.
(a) Hearing Rights.--
(1) In general.--Section 1866 (42 U.S.C. 1395cc) is amended
by adding at the end the following new subsection:
``(j) Hearing Rights in Cases of Denial or Nonrenewal.--The
Secretary shall establish by regulation procedures under
which--
``(1) there are deadlines for actions on applications for
enrollment (and, if applicable, renewal of enrollment); and
``(2) providers of services, physicians, practitioners, and
suppliers whose application to enroll (or, if applicable, to
renew enrollment) are denied are provided a mechanism to
appeal such denial and a deadline for consideration of such
appeals.''.
(2) Effective date.--The Secretary shall provide for the
establishment of the procedures under the amendment made by
paragraph (1) within 18 months after the date of enactment of
this Act.
(b) Consultation Before Changing Provider Enrollment
Forms.--Section 1871 (42 U.S.C. 1395hh), as amended by
sections 502 and 503, is amended by adding at the end the
following new subsection:
``(f) The Secretary shall consult with providers of
services, physicians, practitioners, and suppliers before
making changes in the provider enrollment forms required of
such providers, physicians, practitioners, and suppliers to
be eligible to submit claims for which payment may be made
under this title.''.
SEC. 516. APPEALS BY PROVIDERS WHEN THERE IS NO OTHER PARTY
AVAILABLE.
(a) In General.--Section 1870 (42 U.S.C. 1395gg) is amended
by adding at the end the following new subsection:
``(h) Notwithstanding subsection (f) or any other provision
of law, the Secretary shall permit a provider of services,
physician, practitioner, or other supplier to appeal any
determination of the Secretary under this title relating to
services rendered under this title to an individual who
subsequently dies if there is no other party available to
appeal such determination.''.
(b) Effective Date.--The amendment made by subsection (a)
shall take effect on the date of enactment of this Act and
shall apply to items and services furnished on or after such
date.
SEC. 517. PROVIDER ACCESS TO REVIEW OF LOCAL COVERAGE
DETERMINATIONS.
(a) Provider Access To Review of Local Coverage
Determinations.--Section 1869(f)(5) (42 U.S.C. 1395ff(f)(5))
is amended to read as follows:
``(5) Aggrieved party defined.--In this section, the term
`aggrieved party' means--
``(A) with respect to a national coverage determination, an
individual entitled to benefits under part A, or enrolled
under part B, or both, who is in need of the items or
services that are the subject of the coverage determination;
and
``(B) with respect to a local coverage determination--
``(i) an individual who is entitled to benefits under part
A, or enrolled under part B, or both, who is adversely
affected by such a determination; or
``(ii) a provider of services, physician, practitioner, or
supplier that is adversely affected by such a
determination.''.
(b) Clarification of Local Coverage Determination
Definition.--Section 1869(f)(2)(B) (42 U.S.C.
1395ff(f)(2)(B)) is amended by inserting ``, including, where
appropriate, the specific requirements and clinical
indications relating to the medical necessity of an item or
service'' before the period at the end.
(c) Request for Local Coverage Determinations by
Providers.--Section 1869 (42 U.S.C. 1395ff), as amended by
section 514(d)(2)(B), is amended by adding at the end the
following new subsection:
``(h) Request for Local Coverage Determinations by
Providers.--
``(1) Establishment of process.--The Secretary shall
establish a process under which a provider of services,
physician, practitioner, or supplier who certifies that they
meet the requirements established in paragraph (3) may
request a local coverage determination in accordance with the
succeeding provisions of this subsection.
``(2) Provider local coverage determination request
defined.--In this subsection, the term `provider local
coverage determination request' means a request, filed with
the Secretary, at such time and in such form and manner as
the Secretary may specify, that the Secretary, pursuant to
paragraph (4)(A), require a fiscal intermediary, carrier, or
program safeguard contractor to make or revise a local
coverage determination under this section with respect to an
item or service.
``(3) Request requirements.--Under the process established
under paragraph (1), by not later than 30 days after the date
on which a provider local coverage determination request is
filed under paragraph (1), the Secretary shall determine
whether such request establishes that--
``(A) there have been at least 5 reversals of
redeterminations made by a fiscal intermediary or carrier
after a hearing before an administrative law judge on claims
submitted by the provider in at least 2 different cases
before an administrative law judge;
``(B) each reversal described in subparagraph (A) involves
substantially similar material facts;
``(C) each reversal described in subparagraph (A) involves
the same medical necessity issue; and
``(D) at least 50 percent of the total number of claims
submitted by such provider within the past year involving the
substantially similar material facts described in
subparagraph (B) and the same medical necessity issue
described in subparagraph (C) have been denied and have been
reversed by an administrative law judge.
``(4) Approval or rejection of request.--
``(A) Approval of request.--If the Secretary determines
that subparagraphs (A) through (D) of paragraph (3) have been
satisfied, the Secretary shall require the fiscal
intermediary, carrier, or program safeguard contractor
identified in the provider local coverage determination
request, to make or revise a local coverage determination
with respect to the item or service that is the subject of
the request not later than the date that is 210 days after
the date on which the Secretary makes the determination. Such
fiscal intermediary, carrier, or program safeguard contractor
shall retain the discretion to determine whether or not, and/
or the circumstances under which, to cover the item or
service for which a local coverage determination is
requested. Nothing in this subsection shall be construed to
require a fiscal intermediary, carrier or program safeguard
contractor to develop a local coverage determination that is
inconsistent with any national coverage determination, or any
coverage provision in this title or in regulation, manual, or
interpretive guidance of the Secretary.
``(B) Rejection of request.--If the Secretary determines
that subparagraphs (A) through (D) of paragraph (3) have not
been satisfied, the Secretary shall reject the provider local
coverage determination request and shall notify the provider
of services, physician, practitioner, or supplier that filed
the request of the reason for such rejection and no further
proceedings in relation to such request shall be
conducted.''.
(d) Study and Report on the Use of Contractors To Monitor
Medicare Appeals.--
(1) Study.--The Secretary shall conduct a study on the
feasibility and advisability of requiring fiscal
intermediaries and carriers to monitor and track--
(A) the subject matter and status of claims denied by the
fiscal intermediary or carrier (as applicable) that are
appealed under section 1869 of the Social Security Act (42
U.S.C. 1395ff), as added by section 522 of BIPA (114 Stat.
2763A-543) and amended by this Act; and
(B) any final determination made with respect to such
claims.
(2) Report.--Not later than the date that is 1 year after
the date of enactment of this Act, the Secretary shall submit
to Congress a report on the study conducted under paragraph
(1) together with such recommendations for legislation and
administrative action as the Commission determines
appropriate.
(e) Authorization of Appropriations.--There are authorized
to be appropriated such sums as are necessary to carry out
the amendments made by subsections (a), (b), and (c).
(f) Effective Dates.--
(1) Provider access to review of local coverage
determinations.--The amendments made by subsections (a) and
(b) shall apply to--
(A) any review of any local coverage determination filed on
or after October 1, 2003;
(B) any request to make such a determination made on or
after such date; or
(C) any local coverage determination made on or after such
date.
(2) Provider local coverage determination requests.--The
amendment made by subsection (c) shall apply with respect to
provider local coverage determination requests (as defined in
section 1869(h)(2) of the Social Security Act, as added by
subsection (c)) filed on or after the date of enactment of
this Act.
Subtitle C--Contracting Reform
SEC. 521. INCREASED FLEXIBILITY IN MEDICARE ADMINISTRATION.
(a) Consolidation and Flexibility in Medicare
Administration.--
[[Page H6239]]
(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, physician, practitioner, facility, or supplier (or
class of such providers of services, physicians,
practitioners, facilities, 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, physician,
practitioner, facility, or supplier or class of provider of
services, physician, practitioner, facility, or supplier.
``(4) Functions described.--The functions referred to in
paragraphs (1) and (2) are payment functions (including the
function of developing local coverage determinations, as
defined in section 1869(f)(2)(B)), provider services
functions, and beneficiary services functions 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, physicians, practitioners,
facilities, 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.--Serving as a
center for, and communicating to individuals entitled to
benefits under part A or enrolled under part B, or both, with
respect to education and outreach for those individuals, and
assistance with specific issues, concerns, or problems of
those individuals.
``(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, physicians, practitioners,
facilities, or suppliers.
``(E) Communication with providers.--Serving as a center
for, and communicating to providers of services, physicians,
practitioners, facilities, and suppliers, any information or
instructions furnished to the medicare administrative
contractor by the Secretary, and serving as a channel of
communication from such providers, physicians, practitioners,
facilities, and suppliers to the Secretary.
``(F) Provider education and technical assistance.--
Performing the functions described in subsections (e) and
(f), relating to education, training, and technical
assistance to providers of services, physicians,
practitioners, facilities, and suppliers.
``(G) Additional functions.--Performing such other
functions, including (subject to paragraph (5)) functions
under the Medicare Integrity Program under section 1893, as
are necessary to carry out the purposes of this title.
``(5) Relationship to mip contracts.--
``(A) Nonduplication of activities.--In entering into
contracts under this section, the Secretary shall assure that
activities of medicare administrative contractors do not
duplicate activities carried out under contracts entered into
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, the
Federal Acquisition Regulation, or in subparagraph (B), the
Secretary shall use competitive procedures when entering into
contracts with medicare administrative contractors under this
section.
``(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 6 years.
``(C) Transfer of functions.--The Secretary may transfer
functions among medicare administrative contractors without
regard to any provision of law requiring competition. The
Secretary shall ensure that performance quality is considered
in such transfers. The Secretary shall provide notice
(whether in the Federal Register or otherwise) of any such
transfer (including a description of the functions so
transferred and contact information for the contractors
involved) to providers of services, physicians,
practitioners, facilities, and suppliers affected by the
transfer.
``(D) Incentives for quality.--The Secretary may 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, and other matters as the
Secretary finds pertinent.
``(3) Performance requirements.--
``(A) Development of specific performance requirements.--
The Secretary shall develop contract performance requirements
to carry out the specific requirements applicable under this
title to a function described in subsection (a)(4) and shall
develop standards for measuring the extent to which a
contractor has met such requirements. In developing such
performance requirements and standards for measurement, the
Secretary shall consult with providers of services,
organizations representative of beneficiaries under this
title, and organizations and agencies performing functions
necessary to carry out the purposes of this section with
respect to such performance requirements. The Secretary shall
make such performance requirements and measurement standards
available to the public.
``(B) Considerations.--The Secretary shall include, as 1 of
the standards, provider and beneficiary satisfaction levels.
``(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 published
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.
``(6) Retaining diversity of local coverage
determinations.--A contract with a medicare administrative
contractor under this section to perform the function of
developing local coverage determinations (as defined in
section 1869(f)(2)(B)) shall provide that the contractor
shall--
``(A) designate at least 1 different individual to serve as
medical director for each State for which such contract
performs such function;
``(B) utilize such medical director in the performance of
such function; and
[[Page H6240]]
``(C) appoint a contractor advisory committee with respect
to each such State to provide a formal mechanism for
physicians in the State to be informed of, and participate
in, the development of a local coverage determination in an
advisory capacity.
``(c) Terms and Conditions.--
``(1) In general.--Subject to subsection (a)(6), 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.--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 a 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.
``(4) 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'').
``(5) Indemnification by secretary.--
``(A) In general.--Notwithstanding any other provision of
law and subject to the succeeding provisions of this
paragraph, 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 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 Secretary to be criminal in nature,
fraudulent, or grossly negligent.
``(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 a settlement. Any
indemnification under subparagraph (A) with respect to
amounts paid under a settlement are conditioned upon the
Secretary's prior written approval of the final settlement.
``(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 added
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 enactment of this Act.
(b) Conforming Amendments to Section 1816 (Relating to
Fiscal Intermediaries).--Section 1816 (42 U.S.C. 1395h) is
amended as follows:
(1) The heading is amended to read as follows:
``provisions relating to the administration of part a''.
(2) Subsection (a) is amended to read as follows:
``(a) The administration of this part shall be conducted
through contracts with medicare administrative contractors
under section 1874A.''.
(3) Subsection (b) is repealed.
(4) Subsection (c) is amended--
(A) by striking paragraph (1); and
(B) in each of paragraphs (2)(A) and (3)(A), by striking
``agreement under this section'' and inserting ``contract
under section 1874A that provides for making payments under
this part''.
(5) Subsections (d) through (i) are repealed.
(6) Subsections (j) and (k) are each amended--
(A) by striking ``An agreement with an agency or
organization under this section'' and inserting ``A contract
with a medicare administrative contractor under section 1874A
with respect to the administration of this part''; and
(B) by striking ``such agency or organization'' and
inserting ``such medicare administrative contractor'' each
place it appears.
(7) Subsection (l) is repealed.
(c) Conforming Amendments to Section 1842 (Relating to
Carriers).--Section 1842 (42 U.S.C. 1395u) is amended as
follows:
(1) The heading is amended to read as follows:
``provisions relating to the administration of part b''.
(2) Subsection (a) is amended to read as follows:
``(a) The administration of this part shall be conducted
through contracts with medicare administrative contractors
under section 1874A.''.
(3) Subsection (b) is amended--
(A) by striking paragraph (1);
(B) in paragraph (2)--
(i) by striking subparagraphs (A) and (B);
(ii) in subparagraph (C), by striking ``carriers'' and
inserting ``medicare administrative contractors''; and
(iii) by striking subparagraphs (D) and (E);
(C) in paragraph (3)--
(i) in the matter before subparagraph (A), by striking
``Each such contract shall provide that the carrier'' and
inserting ``The Secretary'';
(ii) by striking ``will'' the first place it appears in
each of subparagraphs (A), (B), (F), (G), (H), and (L) and
inserting ``shall'';
(iii) in subparagraph (B), in the matter before clause (i),
by striking ``to the policyholders and subscribers of the
carrier'' and inserting ``to the policyholders and
subscribers of the medicare administrative contractor'';
(iv) by striking subparagraphs (C), (D), and (E);
(v) in subparagraph (H)--
(I) by striking ``if it makes determinations or payments
with respect to physicians' services,''; and
(II) by striking ``carrier'' and inserting ``medicare
administrative contractor'';
(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,'';
(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), 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), by striking ``carrier'' and inserting
``medicare administrative contractor'';
(E) in paragraph (5), by striking ``contract under this
section which provides for the disbursement of funds, as
described in subsection (a)(1)(B), shall require the
carrier'' and ``carrier responses'' and inserting ``contract
under section 1874A that provides for making payments under
this part shall require the medicare administrative
contractor'' and ``contractor responses'', respectively; and
(F) by striking paragraph (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
[[Page H6241]]
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 title, 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, 2011.
(2) General transition rules.--
(A) Authority to continue to enter into new agreements and
contracts and waiver of provider nomination provisions during
transition.--Prior to the date specified in paragraph (1)(A),
the Secretary may, consistent with subparagraph (B), continue
to enter into agreements under section 1816 and contracts
under section 1842 of the Social Security Act (42 U.S.C.
1395h, 1395u). The Secretary may enter into new agreements
under section 1816 during the time period without regard to
any of the provider nomination provisions of such section.
(B) Appropriate transition.--The Secretary shall take such
steps as are necessary to provide for an appropriate
transition from agreements under section 1816 and contracts
under 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 activities under
current contracts and agreements and under transition
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 agreements and contracts entered into pursuant to
paragraph (2)(A).
(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 an
appropriate medicare administrative contractor (as provided
under section 1874A of the Social Security Act).
(f) Secretarial Submission of Legislative Proposal.--Not
later than 6 months after the date of enactment of this Act,
the Secretary shall submit to the appropriate committees of
Congress a legislative proposal providing for such technical
and conforming amendments in the law as are required by the
provisions of this section.
(g) Reports on Implementation.--
(1) Proposal for implementation.--At least 1 year before
the date specified in subsection (d)(1)(A), the Secretary
shall submit a report to Congress and the Comptroller General
of the United States that describes a plan for an appropriate
transition. 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.
Subtitle D--Education and Outreach Improvements
SEC. 531. PROVIDER EDUCATION AND TECHNICAL ASSISTANCE.
(a) Coordination of Education Funding.--
(1) In general.--The Social Security Act 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 (e), including under section 1893) in order to
maximize the effectiveness of Federal education efforts for
providers of services, physicians, practitioners, and
suppliers.''.
(2) Effective date.--The amendment made by paragraph (1)
shall take effect on the date of 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
521(a)(1), is amended by adding at the end the following new
subsection:
``(e) Incentives To Improve Contractor Performance in
Provider Education and Outreach.--
``(1) Methodology to measure contractor error rates.--In
order to give medicare contractors (as defined in paragraph
(3)) an incentive to implement effective education and
outreach programs for providers of services, physicians,
practitioners, and suppliers, the Secretary shall develop and
implement by October 1, 2004, a methodology to measure the
specific claims payment error rates of such contractors in
the processing or reviewing of medicare claims.
``(2) GAO review of methodology.--The Comptroller General
of the United States shall review, and make recommendations
to the Secretary, regarding the adequacy of such methodology.
``(3) Medicare contractor defined.--For purposes of this
subsection, the term `medicare contractor' includes a
medicare administrative contractor, a fiscal intermediary
with a contract under section 1816, and a carrier with a
contract under section 1842.''.
(2) Report.--The Secretary shall submit to Congress a
report that describes how the Secretary intends to use the
methodology developed under section 1874A(e)(1) of the Social
Security Act, as added by paragraph (1), in assessing
medicare contractor performance in implementing effective
education and outreach programs, including whether to use
such methodology as a basis for performance bonuses.
(c) Improved Provider Education and Training.--
(1) Increased funding for enhanced education and training
through medicare integrity program.--Section 1817(k)(4) (42
U.S.C. 1395i(k)(4)) is amended--
(A) in subparagraph (A), by striking ``subparagraph (B)''
and inserting ``subparagraphs (B) and (C)'';
(B) in subparagraph (B), by striking ``The amount
appropriated'' and inserting ``Subject to subparagraph (C),
the amount appropriated''; and
(C) by adding at the end the following new subparagraph:
``(C) Enhanced provider education and training.--
``(i) In general.--In addition to the amount appropriated
under subparagraph (B), the amount appropriated under
subparagraph (A) for a fiscal year (beginning with fiscal
year 2004) is increased by $35,000,000.
``(ii) Use.--The funds made available under this
subparagraph shall be used only to increase the conduct by
medicare contractors of education and training of providers
of services, physicians, practitioners, and suppliers
regarding billing, coding, and other appropriate items and
may also be used to improve the accuracy, consistency, and
timeliness of contractor responses to written and phone
inquiries from providers of services, physicians,
practitioners, and suppliers.''.
(2) Tailoring education and training for small providers or
suppliers.--
(A) In general.--Section 1889, as added by subsection (a),
is amended by adding at the end the following new subsection:
``(b) 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 take
into consideration the special needs of small providers of
services or suppliers (as defined in paragraph (2)). Such
education and training activities for small providers of
services and suppliers may include the provision of technical
assistance (such as review of billing systems and internal
controls to determine program compliance and to suggest more
efficient and effective means of achieving such compliance).
``(2) Small provider of services or supplier.--In this
subsection, the term `small provider of services or supplier'
means--
``(A) an institutional provider of services with fewer than
25 full-time-equivalent employees; or
[[Page H6242]]
``(B) a physician, practitioner, or supplier with fewer
than 10 full-time-equivalent employees.''.
(B) Effective date.--The amendment made by subparagraph (A)
shall take effect on January 1, 2004.
(d) Additional Provider Education Provisions.--
(1) In general.--Section 1889, as added by subsection (a)
and as amended by subsection (c)(2), is amended by adding at
the end the following new subsections:
``(c) 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, physicians,
practitioners, or suppliers for the purpose of conducting any
type of audit or prepayment review.
``(d) Construction.--Nothing in this section or section
1893(g) shall be construed as providing for disclosure by a
medicare contractor--
``(1) of the screens used for identifying claims that will
be subject to medical review; or
``(2) of information that would compromise pending law
enforcement activities or reveal findings of law enforcement-
related audits.
``(e) Definitions.--For purposes of this section and
section 1817(k)(4)(C), the term `medicare contractor'
includes the following:
``(1) A medicare administrative contractor with a contract
under section 1874A, 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, physician, practitioner, or
supplier an entity that has no authority under this title or
title XI with respect to such activities and such provider of
services, physician, practitioner, or supplier.''.
(2) Effective date.--The amendment made by paragraph (1)
shall take effect on the date of enactment of this Act.
SEC. 532. ACCESS TO AND PROMPT RESPONSES FROM MEDICARE
CONTRACTORS.
(a) In General.--Section 1874A, as added by section
521(a)(1) and as amended by section 531(b)(1), is amended by
adding at the end the following new subsection:
``(f) Communicating With Beneficiaries and Providers.--
``(1) Communication process.--The Secretary shall develop a
process for medicare contractors to communicate with
beneficiaries and with providers of services, physicians,
practitioners, and suppliers under this title.
``(2) Response to written inquiries.--Each medicare
contractor (as defined in paragraph (5)) shall provide
general written responses (which may be through electronic
transmission) in a clear, concise, and accurate manner to
inquiries by beneficiaries, providers of services,
physicians, practitioners, and suppliers 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 medicare contractors provide a toll-free
telephone number at which beneficiaries, providers,
physicians, practitioners, 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 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
publish in the Federal Register) standards regarding the
accuracy, consistency, and timeliness of the information
provided in response to 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 contractors, the Secretary shall consider 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.
``(5) Medicare contractor defined.--For purposes of this
subsection, the term `medicare contractor' has the meaning
given such term in subsection (e)(3).''.
(b) Effective Date.--The amendment made by subsection (a)
shall take effect October 1, 2004.
SEC. 533. RELIANCE ON GUIDANCE.
(a) In General.--Section 1871(d), as added by section
502(a), is amended by adding at the end the following new
paragraph:
``(2) If--
``(A) a provider of services, physician, practitioner, or
other supplier follows written guidance provided--
``(i) by the Secretary; or
``(ii) by a medicare contractor (as defined in section
1889(e) and whether in the form of a written response to a
written inquiry under section 1874A(f)(1) or otherwise)
acting within the scope of the contractor's contract
authority,
in response to a written inquiry with respect to the
furnishing of items or services or the submission of a claim
for benefits for such items or services;
``(B) the Secretary determines that--
``(i) the provider of services, physician, practitioner, or
supplier has accurately presented the circumstances relating
to such items, services, and claim to the Secretary or the
contractor in the written guidance; and
``(ii) there is no indication of fraud or abuse committed
by the provider of services, physician, practitioner, or
supplier against the program under this title; and
``(C) the guidance was in error;
the provider of services, physician, practitioner, or
supplier shall not be subject to any penalty or interest
under this title (or the provisions of title XI insofar as
they relate to this title) relating to the provision of such
items or service or such claim if the provider of services,
physician, practitioner, or supplier reasonably relied on
such guidance. In applying this paragraph with respect to
guidance in the form of general responses to frequently asked
questions, the Secretary retains authority to determine the
extent to which such general responses apply to the
particular circumstances of individual claims.''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to penalties imposed on or after the date of
enactment of this Act.
SEC. 534. MEDICARE PROVIDER 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.--
``(1) In general.--By not later than 1 year after the date
of enactment of the Prescription Drug and Medicare
Improvement Act of 2003, the Secretary shall appoint a
Medicare Provider Ombudsman.
``(2) Duties.--The Medicare Provider Ombudsman shall--
``(A) provide assistance, on a confidential basis, to
entities and individuals providing items and services,
including covered drugs under part D, under this title 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
``(B) submit recommendations to the Secretary for
improvement in the administration of this title and such
provisions, including--
``(i) 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
``(ii) 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.
``(3) Staff.--The Secretary shall provide the Medicare
Provider Ombudsman with appropriate staff.''.
(b) 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 (including the Prescription Drug
Account)) to carry out the provisions of subsection (b) of
section 1868 of the Social Security Act (42 U.S.C. 1395ee)
(relating to the Medicare Provider Ombudsman), as added by
subsection (a)(5), such sums as are necessary for fiscal year
2004 and each succeeding fiscal year.
SEC. 535. BENEFICIARY OUTREACH DEMONSTRATION PROGRAMS.
(a) Demonstration on the Provision of Advice and Assistance
to Medicare Beneficiaries at Local Offices of the Social
Security Administration.--
(1) Establishment.--The Secretary shall establish a
demonstration program (in this subsection referred to as the
``demonstration program'') under which medicare specialists
[[Page H6243]]
employed by the Department of Health and Human Services
provide advice and assistance to medicare beneficiaries at
the location of existing local offices of the Social Security
Administration.
(2) Locations.--
(A) In general.--The demonstration program shall be
conducted in at least 6 offices or areas. Subject to
subparagraph (B), in selecting such offices and areas, the
Secretary shall provide preference for offices with a high
volume of visits by medicare beneficiaries.
(B) 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.
(3) Duration.--The demonstration program shall be conducted
over a 3-year period.
(4) Evaluation and report.--
(A) Evaluation.--The Secretary shall provide for an
evaluation of the demonstration program. Such evaluation
shall include an analysis of--
(i) utilization of, and beneficiary satisfaction with, the
assistance provided under the program; and
(ii) the cost-effectiveness of providing beneficiary
assistance through out-stationing medicare specialists at
local social security offices.
(B) 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 social security
offices.
(b) Demonstration on Providing Prior Determinations.--
(1) Establishment.--By not later than 1 year after the date
of enactment of this Act, the Secretary shall establish a
demonstration project to test the administrative feasibility
of providing a process for medicare beneficiaries and
entities and individuals furnishing such beneficiaries with
items and services under title XVIII of the Social Security
Act program to make a request for, and receive, a
determination (after an advance beneficiary notice is issued
with respect to the item or service involved but before such
item or service is furnished to the beneficiary) as to
whether the item or service is covered under such title
consistent with the applicable requirements of section
1862(a)(1)(A) of such Act (42 U.S.C. 1395y(a)(1)(A))
(relating to medical necessity).
(2) Evaluation and report.--
(A) Evaluation.--The Secretary shall provide for an
evaluation of the demonstration program conducted under
paragraph (1).
(B) Report.--By not later than January 1, 2006, the
Secretary shall submit to Congress a report on such
evaluation together with recommendations for such legislation
and administrative actions as the Secretary considers
appropriate.
Subtitle E--Review, Recovery, and Enforcement Reform
SEC. 541. PREPAYMENT REVIEW.
(a) In General.--Section 1874A, as added by section
521(a)(1) and as amended by sections 531(b)(1) and 532(a), is
amended by adding at the end the following new subsection:
``(g) Conduct of Prepayment Review.--
``(1) Standardization of random prepayment review.--A
medicare administrative contractor shall conduct random
prepayment review only in accordance with a standard protocol
for random prepayment audits developed by the Secretary.
``(2) Limitations on initiation of nonrandom prepayment
review.--A medicare administrative contractor may not
initiate nonrandom prepayment review of a provider of
services, physician, practitioner, or supplier based on the
initial identification by that provider of services,
physician, practitioner, or supplier of an improper billing
practice unless there is a likelihood of sustained or high
level of payment error (as defined by the Secretary).
``(3) Termination of nonrandom prepayment review.--The
Secretary shall establish protocols or standards relating to
the termination, including termination dates, of nonrandom
prepayment review. Such regulations may vary such a
termination date based upon the differences in the
circumstances triggering prepayment review.
``(4) Construction.--Nothing in this subsection shall be
construed as preventing the denial of payments for claims
actually reviewed under a random prepayment review. In the
case of a provider of services, physician, practitioner, or
supplier with respect to which amounts were previously
overpaid, nothing in this subsection shall be construed as
limiting the ability of a medicare administrative contractor
to request the periodic production of records or supporting
documentation for a limited sample of submitted claims to
ensure that the previous practice is not continuing.
``(5) Random prepayment review defined.--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.''.
(b) Effective Date.--
(1) In general.--Except as provided in this subsection, the
amendment made by subsection (a) shall take effect on the
date of enactment of this Act.
(2) Deadline for promulgation of certain regulations.--The
Secretary shall first issue regulations under section
1874A(g) of the Social Security Act, as added by subsection
(a), by not later than 1 year after the date of enactment of
this Act.
(3) Application of standard protocols for random prepayment
review.--Section 1874A(g)(1) 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 enactment of this Act) as the
Secretary shall specify. The Secretary shall develop and
publish the standard protocol under such section by not later
than 1 year after the date of enactment of this Act.
SEC. 542. RECOVERY OF OVERPAYMENTS.
(a) In General.--Section 1874A, as added by section
521(a)(1) and as amended by sections 531(b)(1), 532(a), and
541(a), is amended by adding at the end the following new
subsection:
``(h) Recovery of Overpayments.--
``(1) Use of repayment plans.--
``(A) In general.--If the repayment, within the period
otherwise permitted by a provider of services, physician,
practitioner, or other supplier, of an overpayment under this
title meets the standards developed under subparagraph (B),
subject to subparagraph (C), and the provider, physician,
practitioner, or supplier requests the Secretary to enter
into a repayment plan with respect to such overpayment, the
Secretary shall enter into a plan with the provider,
physician, practitioner, or supplier for the offset or
repayment (at the election of the provider, physician,
practitioner, or supplier) of such overpayment over a period
of at least 1 year, but not longer than 3 years. Interest
shall accrue on the balance through the period of repayment.
The repayment plan shall meet terms and conditions determined
to be appropriate by the Secretary.
``(B) Development of standards.--The Secretary shall
develop standards for the recovery of overpayments. Such
standards shall--
``(i) include a requirement that the Secretary take into
account (and weigh in favor of the use of a repayment plan)
the reliance (as described in section 1871(d)(2)) by a
provider of services, physician, practitioner, and supplier
on guidance when determining whether a repayment plan should
be offered; and
``(ii) provide for consideration of the financial hardship
imposed on a provider of services, physician, practitioner,
or supplier in considering such a repayment plan.
In developing standards with regard to financial hardship
with respect to a provider of services, physician,
practitioner, or supplier, the Secretary shall take into
account the amount of the proposed recovery as a proportion
of payments made to that provider, physician, practitioner,
or supplier.
``(C) Exceptions.--Subparagraph (A) shall not apply if--
``(i) the Secretary has reason to suspect that the provider
of services, physician, practitioner, 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, physician, practitioner, 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) No recoupment until reconsideration exercised.--In
the case of a provider of services, physician, practitioner,
or supplier that is determined to have received an
overpayment under this title and that seeks a reconsideration
of such determination by a qualified independent contractor
under section 1869(c), 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.
``(B) Payment of interest.--
``(i) Return of recouped amount with interest in case of
reversal.--Insofar as such determination on appeal against
the provider of services, physician, practitioner, or
supplier is later reversed, the Secretary shall provide for
repayment of the amount recouped plus interest for the period
in which the amount was recouped.
``(ii) Interest in case of affirmation.--Insofar as the
determination on such appeal is against the provider of
services, physician, practitioner, or supplier, interest on
the overpayment shall accrue on and after the date of the
original notice of overpayment.
``(iii) Rate of interest.--The rate of interest under this
subparagraph shall be the rate otherwise applicable under
this title in the case of overpayments.
``(C) Medicare contractor defined.--For purposes of this
subsection, the term `medicare contractor' has the meaning
given such term in section 1889(e).
``(3) Payment audits.--
``(A) Written notice for post-payment audits.--Subject to
subparagraph (C), if a
[[Page H6244]]
medicare contractor decides to conduct a post-payment audit
of a provider of services, physician, practitioner, or
supplier under this title, the contractor shall provide the
provider of services, physician, practitioner, 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, physician, practitioner, or supplier under this
title, the contractor shall--
``(i) give the provider of services, physician,
practitioner, or supplier a full review and explanation of
the findings of the audit in a manner that is understandable
to the provider of services, physician, practitioner, or
supplier and permits the development of an appropriate
corrective action plan;
``(ii) inform the provider of services, physician,
practitioner, or supplier of the appeal rights under this
title as well as consent settlement options (which are at the
discretion of the Secretary); and
``(iii) give the provider of services, physician,
practitioner, or supplier an opportunity to provide
additional information to the contractor.
``(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.
``(4) Notice of over-utilization of codes.--The Secretary
shall establish, in consultation with organizations
representing the classes of providers of services,
physicians, practitioners, and suppliers, a process under
which the Secretary provides for notice to classes of
providers of services, physicians, practitioners, and
suppliers served by a medicare contractor in cases in which
the contractor has identified that particular billing codes
may be overutilized by that class of providers of services,
physicians, practitioners, or suppliers under the programs
under this title (or provisions of title XI insofar as they
relate to such programs).
``(5) Standard methodology for probe sampling.--The
Secretary shall establish a standard methodology for medicare
administrative contractors to use in selecting a sample of
claims for review in the case of an abnormal billing pattern.
``(6) 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, physician, practitioner, or supplier a consent
settlement, the Secretary shall--
``(i) communicate to the provider of services, physician,
practitioner, or supplier in a nonthreatening manner 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; and
``(ii) provide for a 45-day period during which the
provider of services, physician, practitioner, 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, physician, practitioner, 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, physician, practitioner, 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, physician, practitioner, 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, physician,
practitioner, 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, physician, practitioner, or supplier agrees not to
appeal the claims involved.''.
(b) Effective Dates and Deadlines.--
(1) Not later than 1 year after the date of enactment of
this Act, the Secretary shall first--
(A) develop standards for the recovery of overpayments
under section 1874A(h)(1)(B) of the Social Security Act, as
added by subsection (a);
(B) establish the process for notice of overutilization of
billing codes under section 1874A(h)(4) of the Social
Security Act, as added by subsection (a); and
(C) establish a standard methodology for selection of
sample claims for abnormal billing patterns under section
1874A(h)(5) of the Social Security Act, as added by
subsection (a).
(2) Section 1874A(h)(2) of the Social Security Act, as
added by subsection (a), shall apply to actions taken after
the date that is 1 year after the date of enactment of this
Act.
(3) Section 1874A(h)(3) of the Social Security Act, as
added by subsection (a), shall apply to audits initiated
after the date of enactment of this Act.
(4) Section 1874A(h)(6) of the Social Security Act, as
added by subsection (a), shall apply to consent settlements
entered into after the date of enactment of this Act.
SEC. 543. PROCESS FOR CORRECTION OF MINOR ERRORS AND
OMISSIONS ON CLAIMS WITHOUT PURSUING APPEALS
PROCESS.
(a) In General.--The Secretary shall develop, in
consultation with appropriate medicare contractors (as
defined in section 1889(e) of the Social Security Act, as
added by section 531(d)(1)) and representatives of providers
of services, physicians, practitioners, facilities, 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, physician, practitioner,
facility, 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) Deadline.--Not later than 1 year after the date of
enactment of this Act, the Secretary shall first develop the
process under subsection (a).
SEC. 544. 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 5 years, except that, upon the request of an
administrator of a Federal health care program (as defined in
section 1128B(f)) who determines that the exclusion would
impose a hardship on beneficiaries of that program, the
Secretary may, after consulting with the Inspector General of
the Department of Health and Human Services, 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.''.
TITLE VI--OTHER PROVISIONS
SEC. 601. INCREASE IN MEDICAID DSH ALLOTMENTS FOR FISCAL
YEARS 2004 AND 2005.
(a) In General.--Section 1923(f)(4) (42 U.S.C. 1396r-
4(f)(4)) is amended--
(1) in the paragraph heading, by striking ``fiscal years
2001 and 2002'' and inserting ``certain fiscal years'';
(2) in subparagraph (A)--
(A) in clause (i)--
(i) by striking ``paragraph (2)'' and inserting
``paragraphs (2) and (3)''; and
(ii) by striking ``and'' at the end;
(B) in clause (ii), by striking the period and inserting a
semicolon; and
(C) by adding at the end the following:
``(iii) for fiscal year 2004, shall be the DSH allotment
determined under paragraph (3) for that fiscal year increased
by the amount equal to the product of 0.50 and the difference
between--
``(I) the amount that the DSH allotment would be if the DSH
allotment for the State determined under clause (ii) were
increased, subject to subparagraph (B) and paragraph (5), by
the percentage change in the Consumer Price Index for all
urban consumers (all items; U.S. city average) for each of
fiscal years 2002 and 2003; and
``(II) the DSH allotment determined under paragraph (3) for
the State for fiscal year 2004; and
``(iv) for fiscal year 2005, shall be the DSH allotment
determined under paragraph (3) for that fiscal year increased
by the amount equal to the product of 0.50 and the difference
between--
``(I) the amount that the DSH allotment would be if the DSH
allotment for the State determined under clause (ii) were
increased, subject to subparagraph (B) and paragraph (5), by
the percentage change in the Consumer Price Index for all
urban consumers (all items; U.S. city average) for each of
fiscal years 2002, 2003, and 2004; and
``(II) the DSH allotment determined under paragraph (3) for
the State for fiscal year 2005.''; and
(3) in subparagraph (C)--
(A) in the subparagraph heading, by striking ``after fiscal
year 2002'' and inserting ``for other fiscal years''; and
(B) by striking ``2003 or'' and inserting ``2003, fiscal
year 2006, or''.
(b) DSH Allotment for the District of Columbia.--Section
1923(f)(4) (42 U.S.C. 1396r-4(f)(4)), as amended by paragraph
(1), is amended--
(1) in subparagraph (A), by inserting ``and except as
provided in subparagraph (C)'' after ``paragraph (2)'';
(2) by redesignating subparagraph (C) as subparagraph (D);
and
(3) by inserting after subparagraph (B) the following:
``(C) DSH allotment for the district of columbia.--
``(i) In general.--Notwithstanding subparagraph (A), the
DSH allotment for the District of Columbia for fiscal year
2004, shall be determined by substituting ``49'' for ``32''
in the item in the table contained in paragraph (2) with
respect to the DSH allotment for FY 00 (fiscal year 2000) for
the District of Columbia, and then increasing such
[[Page H6245]]
allotment, subject to subparagraph (B) and paragraph (5), by
the percentage change in the Consumer Price Index for all
urban consumers (all items; U.S. city average) for each of
fiscal years 2000, 2001, 2002, and 2003.
``(ii) No application to allotments after fiscal year
2004.--The DSH allotment for the District of Columbia for
fiscal year 2003, fiscal year 2005, or any succeeding fiscal
year shall be determined under paragraph (3) without regard
to the DSH allotment determined under clause (i).''.
(c) Conforming Amendment.--Section 1923(f)(3) of such Act
(42 U.S.C. 1396r-4(f)(3)) is amended by inserting ``,
paragraph (4),'' after ``subparagraph (B)''.
SEC. 602. INCREASE IN FLOOR FOR TREATMENT AS AN EXTREMELY LOW
DSH STATE UNDER THE MEDICAID PROGRAM FOR FISCAL
YEARS 2004 AND 2005.
(a) In General.--Section 1923(f)(5) (42 U.S.C. 1396r-
4(f)(5)) is amended--
(1) by striking ``In the case of'' and inserting the
following:
``(A) In general.--In the case of''; and
(2) by adding at the end the following:
``(B) Increase in floor for fiscal years 2004 and 2005.--
``(i) Fiscal year 2004.--In the case of a State in which
the total expenditures under the State plan (including
Federal and State shares) for disproportionate share hospital
adjustments under this section for fiscal year 2000, as
reported to the Administrator of the Centers for Medicare &
Medicaid Services as of August 31, 2003, is greater than 0
but less than 3 percent of the State's total amount of
expenditures under the State plan for medical assistance
during the fiscal year, the DSH allotment for fiscal year
2004 shall be increased to 3 percent of the State's total
amount of expenditures under such plan for such assistance
during such fiscal year.
``(ii) Fiscal year 2005.--In the case of a State in which
the total expenditures under the State plan (including
Federal and State shares) for disproportionate share hospital
adjustments under this section for fiscal year 2001, as
reported to the Administrator of the Centers for Medicare &
Medicaid Services as of August 31, 2004, is greater than 0
but less than 3 percent of the State's total amount of
expenditures under the State plan for medical assistance
during the fiscal year, the DSH allotment for fiscal year
2005 shall be the DSH allotment determined for the State for
fiscal year 2004 (under clause (i) or paragraph (4) (as
applicable)), increased by the percentage change in the
consumer price index for all urban consumers (all items; U.S.
city average) for fiscal year 2004.
``(iii) No application to allotments after fiscal year
2005.--The DSH allotment for any State for fiscal year 2006
or any succeeding fiscal year shall be determined under this
subsection without regard to the DSH allotments determined
under this subparagraph.''.
(b) Allotment Adjustment.--
(1) In general.--Section 1923(f) of the Social Security Act
(42 U.S.C. 1396r-4(f)) is amended--
(A) by redesignating paragraph (6) as paragraph (7); and
(B) by inserting after paragraph (5) the following:
``(6) Allotment adjustment.--Only with respect to fiscal
year 2004 or 2005, if a statewide waiver under section 1115
that was implemented on January 1, 1994, is revoked or
terminated before the end of either such fiscal year, the
Secretary shall--
``(A) permit the State whose waiver was revoked or
terminated to submit an amendment to its State plan that
would describe the methodology to be used by the State (after
the effective date of such revocation or termination) to
identify and make payments to disproportionate share
hospitals, including children's hospitals and institutions
for mental diseases or other mental health facilities (other
than State-owned institutions or facilities), on the basis of
the proportion of patients served by such hospitals that are
low-income patients with special needs; and
``(B) provide for purposes of this subsection for
computation of an appropriate DSH allotment for the State for
fiscal year 2004 or 2005 (or both) that provides for the
maximum amount (permitted consistent with paragraph
(3)(B)(ii)) that does not result in greater expenditures
under this title than would have been made if such waiver had
not been revoked or terminated.''.
(2) Treatment of institutions for mental diseases.--Section
1923(h)(1) of the Social Security Act (42 U.S.C. 1396r-
4(h)(1)) is amended--
(A) in paragraph (1), in the matter preceding subparagraph
(A), by inserting ``(subject to paragraph (3))'' after ``the
lesser of the following''; and
(B) by adding at the end the following new paragraph:
``(3) Special rule.--The limitation of paragraph (1) shall
not apply in the case of a State to which subsection (f)(6)
applies.''.
SEC. 603. INCREASED REPORTING REQUIREMENTS TO ENSURE THE
APPROPRIATENESS OF PAYMENT ADJUSTMENTS TO
DISPROPORTIONATE SHARE HOSPITALS UNDER THE
MEDICAID PROGRAM.
Section 1923 (42 U.S.C. 1396r-4) is amended by adding at
the end the following new subsection:
``(j) Annual Reports Regarding Payment Adjustments.--With
respect to fiscal year 2004 and each fiscal year thereafter,
the Secretary shall require a State, as a condition of
receiving a payment under section 1903(a)(1) with respect to
a payment adjustment made under this section, to submit an
annual report that--
``(1) identifies each disproportionate share hospital that
received a payment adjustment under this section for the
preceding fiscal year and the amount of the payment
adjustment made to such hospital for the preceding fiscal
year; and
``(2) includes such other information as the Secretary
determines necessary to ensure the appropriateness of the
payment adjustments made under this section for the preceding
fiscal year.''.
SEC. 604. 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) of the Social
Security Act (42 U.S.C. 1396r-8(c)(1)(C)(i)(I)) is amended by
inserting before the semicolon the following: ``(including
inpatient prices charged to hospitals described in section
340B(a)(4)(L) of the Public Health Service Act)''.
(b) Anti-Diversion Protection.--Section 1927(c)(1)(C) of
the Social Security Act (42 U.S.C. 1396r-8(c)(1)(C)) is
amended by adding at the end the following:
``(iii) Application of auditing and recordkeeping
requirements.--With respect to a covered entity described in
section 340B(a)(4)(L) of the Public Health Service Act, any
drug purchased for inpatient use shall be subject to the
auditing and recordkeeping requirements described in section
340B(a)(5)(C) of the Public Health Service Act.''.
(c) Effective Date.--The amendments made by this section
take effect on October 1, 2003.
SEC. 605. ASSISTANCE WITH COVERAGE OF LEGAL IMMIGRANTS UNDER
THE MEDICAID PROGRAM AND SCHIP.
(a) Medicaid Program.--Section 1903(v) (42 U.S.C. 1396b(v))
is amended--
(1) in paragraph (1), by striking ``paragraph (2)'' and
inserting ``paragraphs (2) and (4)''; and
(2) by adding at the end the following new paragraph:
``(4)(A) With respect to any or all of fiscal years 2005
through 2007, a State may elect (in a plan amendment under
this title) to provide medical assistance under this title
(including under a waiver authorized by the Secretary) for
aliens who are lawfully residing in the United States
(including battered aliens described in section 431(c) of
such Act) and who are otherwise eligible for such assistance,
within either or both of the following eligibility
categories:
``(i) Pregnant women.--Women during pregnancy (and during
the 60-day period beginning on the last day of the
pregnancy).
``(ii) Children.--Children (as defined under such plan),
including optional targeted low-income children described in
section 1905(u)(2)(B).
``(B)(i) In the case of a State that has elected to provide
medical assistance to a category of aliens under subparagraph
(A), no debt shall accrue under an affidavit of support
against any sponsor of such an alien on the basis of
provision of assistance to such category and the cost of such
assistance shall not be considered as an unreimbursed cost.
``(ii) The provisions of sections 401(a), 402(b), 403, and
421 of the Personal Responsibility and Work Opportunity
Reconciliation Act of 1996 shall not apply to a State that
makes an election under subparagraph (A).''.
(b) SCHIP.--Section 2107(e)(1) (42 U.S.C. 1397gg(e)(1)) is
amended by redesignating subparagraphs (C) and (D) as
subparagraph (D) and (E), respectively, and by inserting
after subparagraph (B) the following new subparagraph:
``(C) Section 1903(v)(4) (relating to optional coverage of
categories of permanent resident alien children), but only if
the State has elected to apply such section to the category
of children under title XIX and only with respect to any or
all of fiscal years 2005 through 2007.''.
SEC. 606. ESTABLISHMENT OF CONSUMER OMBUDSMAN ACCOUNT.
(a) In General.--Section 1817 (42 U.S.C. 1395i) is amended
by adding at the end the following new subsection:
``(i) Consumer Ombudsman Account.--
``(1) Establishment.--There is hereby established in the
Trust Fund an expenditure account to be known as the
`Consumer Ombudsman Account' (in this subsection referred to
as the `Account').
``(2) Appropriated amounts to account for health insurance
information, counseling, and assistance grants.--
``(A) In general.--There are hereby appropriated to the
Account from the Trust Fund for each fiscal year beginning
with fiscal year 2005, the amount described in subparagraph
(B) for such fiscal year for the purpose of making grants
under section 4360 of the Omnibus Budget Reconciliation Act
of 1990.
``(B) Amount described.--For purposes of subparagraph (A),
the amount described in this subparagraph for a fiscal year
is the amount equal to the product of--
``(i) $1; and
``(ii) the total number of individuals receiving benefits
under this title for the calendar year ending on December 31
of the preceding fiscal year.''.
(b) Conforming Amendment.--Section 4360(g) of the Omnibus
Budget Reconciliation Act of 1990 (42 U.S.C. 1395b-4(g)) is
amended to read as follows:
[[Page H6246]]
``(g) Funding.--The Secretary shall use amounts
appropriated to the Consumer Ombudsman Account in accordance
with section 1817(i) of the Social Security Act for a fiscal
year for making grants under this section for that fiscal
year.''.
SEC. 607. GAO STUDY REGARDING IMPACT OF ASSETS TEST FOR LOW-
INCOME BENEFICIARIES.
(a) Study.--The Comptroller General of the United States
shall conduct a study to determine the extent to which drug
utilization and access to covered drugs for an individual
described in subsection (b) differs from the drug utilization
and access to covered drugs of an individual who qualifies
for the transitional assistance prescription drug card
program under section 1807A of the Social Security Act (as
added by section 111) or for the premiums and cost-sharing
subsidies applicable to a qualified medicare beneficiary, a
specified low-income medicare beneficiary, or a qualifying
individual under section 1860D-19 of the Social Security Act
(as added by section 101).
(b) Individual Described.--An individual is described in
this subsection if the individual does not qualify for the
transitional assistance prescription drug card program under
section 1807A of the Social Security Act or for the premiums
and cost-sharing subsidies applicable to a qualified medicare
beneficiary, a specified low-income medicare beneficiary, or
a qualifying individual under section 1860D-19 of the Social
Security Act solely as a result of the application of an
assets test to the individual.
(c) Report.--Not later than September 30, 2007, the
Comptroller General shall submit a report to Congress on the
study conducted under subsection (a) that includes such
recommendations for legislation as the Comptroller General
determines are appropriate.
(d) Definitions.--In this section:
(1) Covered drugs.--The term ``covered drugs'' has the
meaning given that term in section 1860D(a)(D) of the Social
Security Act.
(2) Qualified medicare beneficiary; specified low-income
medicare beneficiary; qualifying individual.--The terms
``qualified medicare beneficiary'', ``specified low-income
medicare beneficiary'' and ``qualifying individual'' have the
meaning given those terms under section 1860D-19 of the
Social Security Act.
SEC. 608. HEALTH CARE INFRASTRUCTURE IMPROVEMENT.
At the end of the Social Security Act, add the following
new title:
``TITLE XXII--HEALTH CARE INFRASTRUCTURE IMPROVEMENT
``SEC. 2201. DEFINITIONS.
``In this title, the following definitions apply:
``(1) Eligible project costs.--The term `eligible project
costs' means amounts substantially all of which are paid by,
or for the account of, an obligor in connection with a
project, including the cost of--
``(A) development phase activities, including planning,
feasibility analysis, revenue forecasting, environmental
study and review, permitting, architectural engineering and
design work, and other preconstruction activities;
``(B) construction, reconstruction, rehabilitation,
replacement, and acquisition of facilities and real property
(including land related to the project and improvements to
land), environmental mitigation, construction contingencies,
and acquisition of equipment;
``(C) capitalized interest necessary to meet market
requirements, reasonably required reserve funds, capital
issuance expenses, and other carrying costs during
construction;
``(D) major medical equipment determined to be appropriate
by the Secretary; and
``(E) refinancing projects or activities that are otherwise
eligible for financial assistance under subparagraphs (A)
through (D).
``(2) Federal credit instrument.--The term `Federal credit
instrument' means a secured loan, loan guarantee, or line of
credit authorized to be made available under this title with
respect to a project.
``(3) Investment-grade rating.--The term `investment-grade
rating' means a rating category of BBB minus, Baa3, or higher
assigned by a rating agency to project obligations offered
into the capital markets.
``(4) Lender.--The term `lender' means any non-Federal
qualified institutional buyer (as defined in section
230.144A(a) of title 17, Code of Federal Regulations (or any
successor regulation), known as Rule 144A(a) of the
Securities and Exchange Commission and issued under the
Securities Act of 1933 (15 U.S.C. 77a et seq.)), including--
``(A) a qualified retirement plan (as defined in section
4974(c) of the Internal Revenue Code of 1986) that is a
qualified institutional buyer; and
``(B) a governmental plan (as defined in section 414(d) of
the Internal Revenue Code of 1986) that is a qualified
institutional buyer.
``(5) Line of credit.--The term `line of credit' means an
agreement entered into by the Secretary with an obligor under
section 2204 to provide a direct loan at a future date upon
the occurrence of certain events.
``(6) Loan guarantee.--The term `loan guarantee' means any
guarantee or other pledge by the Secretary to pay all or part
of the principal of and interest on a loan or other debt
obligation issued by an obligor and funded by a lender.
``(7) Local servicer.--The term `local servicer' means a
State or local government or any agency of a State or local
government that is responsible for servicing a Federal credit
instrument on behalf of the Secretary.
``(8) Obligor.--The term `obligor' means a party primarily
liable for payment of the principal of or interest on a
Federal credit instrument, which party may be a corporation,
partnership, joint venture, trust, or governmental entity,
agency, or instrumentality.
``(9) Project.--The term `project' means any project that
is designed to improve the health care infrastructure,
including the construction, renovation, or other capital
improvement of any hospital, medical research facility, or
other medical facility or the purchase of any equipment to be
used in a hospital, research facility, or other medical
research facility.
``(10) Project obligation.--The term `project obligation'
means any note, bond, debenture, lease, installment sale
agreement, or other debt obligation issued or entered into by
an obligor in connection with the financing of a project,
other than a Federal credit instrument.
``(11) Rating agency.--The term `rating agency' means a
bond rating agency identified by the Securities and Exchange
Commission as a Nationally Recognized Statistical Rating
Organization.
``(12) Secured loan.--The term `secured loan' means a
direct loan or other debt obligation issued by an obligor and
funded by the Secretary in connection with the financing of a
project under section 2203.
``(13) State.--The term `State' has the meaning given the
term in section 101 of title 23, United States Code.
``(14) Subsidy amount.--The term `subsidy amount' means the
amount of budget authority sufficient to cover the estimated
long-term cost to the Federal Government of a Federal credit
instrument, calculated on a net present value basis,
excluding administrative costs and any incidental effects on
governmental receipts or outlays in accordance with the
provisions of the Federal Credit Reform Act of 1990 (2 U.S.C.
661 et seq.).
``(15) Substantial completion.--The term `substantial
completion' means the opening of a project to patients or for
research purposes.
``SEC. 2202. DETERMINATION OF ELIGIBILITY AND PROJECT
SELECTION.
``(a) Eligibility.--To be eligible to receive financial
assistance under this title, a project shall meet the
following criteria:
``(1) Application.--A State, a local servicer identified
under section 2205(a), or the entity undertaking a project
shall submit a project application to the Secretary.
``(2) Eligible project costs.--To be eligible for
assistance under this title, a project shall have total
eligible project costs that are reasonably anticipated to
equal or exceed $40,000,000.
``(3) Sources of repayments.--Project financing shall be
repayable, in whole or in part, from reliable revenue sources
as described in the application submitted under paragraph
(1).
``(4) Public sponsorship of private entities.--In the case
of a project that is undertaken by an entity that is not a
State or local government or an agency or instrumentality of
a State or local government, the project that the entity is
undertaking shall be publicly sponsored or sponsored by an
entity that is described in section 501(c)(3) of the Internal
Revenue Code of 1986 and exempt from tax under section 501(a)
of such Code.
``(b) Selection Among Eligible Projects.--
``(1) Establishment.--The Secretary shall establish
criteria for selecting among projects that meet the
eligibility criteria specified in subsection (a).
``(2) Selection criteria.--
``(A) In general.--The selection criteria shall include the
following:
``(i) The extent to which the project is nationally or
regionally significant, in terms of expanding or improving
the health care infrastructure of the United States or the
region or in terms of the medical benefit that the project
will have.
``(ii) The creditworthiness of the project, including a
determination by the Secretary that any financing for the
project has appropriate security features, such as a rate
covenant, credit enhancement requirements, or debt services
coverages, to ensure repayment.
``(iii) The extent to which assistance under this title
would foster innovative public-private partnerships and
attract private debt or equity investment.
``(iv) The likelihood that assistance under this title
would enable the project to proceed at an earlier date than
the project would otherwise be able to proceed.
``(v) The extent to which the project uses or results in
new technologies.
``(vi) The amount of budget authority required to fund the
Federal credit instrument made available under this title.
``(vii) The extent to which the project helps maintain or
protect the environment.
``(B) Specific requirements.--The selection criteria shall
require that a project applicant--
``(i) be engaged in research in the causes, prevention, and
treatment of cancer;
``(ii) be designated as a cancer center for the National
Cancer Institute or be designated by the State as the
official cancer institute of the State; and
``(iii) be located in a State that, on the date of
enactment of this title, has a population of less than
3,000,000 individuals.
[[Page H6247]]
``(C) Rating letter.--For purposes of subparagraph (A)(ii),
the Secretary shall require each project applicant to provide
a rating letter from at least 1 rating agency indicating that
the project's senior obligations have the potential to
achieve an investment-grade rating with or without credit
enhancement.
``SEC. 2203. SECURED LOANS.
``(a) In General.--
``(1) Agreements.--Subject to paragraphs (2) through (4),
the Secretary may enter into agreements with 1 or more
obligors to make secured loans, the proceeds of which shall
be used--
``(A) to finance eligible project costs;
``(B) to refinance interim construction financing of
eligible project costs; or
``(C) to refinance existing debt or prior project
obligations;
of any project selected under section 2202.
``(2) Limitation on refinancing of interim construction
financing.--A loan under paragraph (1) shall not refinance
interim construction financing under paragraph (1)(B) later
than 1 year after the date of substantial completion of the
project.
``(3) Risk assessment.--Before entering into an agreement
for a secured loan under this subsection, the Secretary, in
consultation with each rating agency providing a rating
letter under section 2202(b)(2)(B), shall determine an
appropriate capital reserve subsidy amount for each secured
loan, taking into account such letter.
``(4) Investment-grade rating requirement.--The funding of
a secured loan under this section shall be contingent on the
project's senior obligations receiving an investment-grade
rating, except that--
``(A) the Secretary may fund an amount of the secured loan
not to exceed the capital reserve subsidy amount determined
under paragraph (3) prior to the obligations receiving an
investment-grade rating; and
``(B) the Secretary may fund the remaining portion of the
secured loan only after the obligations have received an
investment-grade rating by at least 1 rating agency.
``(b) Terms and Limitations.--
``(1) In general.--A secured loan under this section with
respect to a project shall be on such terms and conditions
and contain such covenants, representations, warranties, and
requirements (including requirements for audits) as the
Secretary determines appropriate.
``(2) Maximum amount.--The amount of the secured loan shall
not exceed 100 percent of the reasonably anticipated eligible
project costs.
``(3) Payment.--The secured loan--
``(A) shall--
``(i) be payable, in whole or in part, from reliable
revenue sources; and
``(ii) include a rate covenant, coverage requirement, or
similar security feature supporting the project obligations;
and
``(B) may have a lien on revenues described in subparagraph
(A) subject to any lien securing project obligations.
``(4) Interest rate.--The interest rate on the secured loan
shall be not less than the yield on marketable United States
Treasury securities of a similar maturity to the maturity of
the secured loan on the date of execution of the loan
agreement.
``(5) Maturity date.--The final maturity date of the
secured loan shall be not later than 30 years after the date
of substantial completion of the project.
``(6) Nonsubordination.--The secured loan shall not be
subordinated to the claims of any holder of project
obligations in the event of bankruptcy, insolvency, or
liquidation of the obligor.
``(7) Fees.--The Secretary may establish fees at a level
sufficient to cover all or a portion of the costs to the
Federal Government of making a secured loan under this
section.
``(c) Repayment.--
``(1) Schedule.--The Secretary shall establish a repayment
schedule for each secured loan under this section based on
the projected cash flow from project revenues and other
repayment sources.
``(2) Commencement.--Scheduled loan repayments of principal
or interest on a secured loan under this section shall
commence not later than 5 years after the date of substantial
completion of the project.
``(3) Sources of repayment funds.--The sources of funds for
scheduled loan repayments under this section shall include
any revenue generated by the project.
``(4) Deferred payments.--
``(A) Authorization.--If, at any time during the 10 years
after the date of substantial completion of the project, the
project is unable to generate sufficient revenues to pay the
scheduled loan repayments of principal and interest on the
secured loan, the Secretary may, subject to subparagraph (C),
allow the obligor to add unpaid principal and interest to the
outstanding balance of the secured loan.
``(B) Interest.--Any payment deferred under subparagraph
(A) shall--
``(i) continue to accrue interest in accordance with
subsection (b)(4) until fully repaid; and
``(ii) be scheduled to be amortized over the remaining term
of the loan beginning not later than 10 years after the date
of substantial completion of the project in accordance with
paragraph (1).
``(C) Criteria.--
``(i) In general.--Any payment deferral under subparagraph
(A) shall be contingent on the project meeting criteria
established by the Secretary.
``(ii) Repayment standards.--The criteria established under
clause (i) shall include standards for reasonable assurance
of repayment.
``(5) Prepayment.--
``(A) Use of excess revenues.--Any excess revenues that
remain after satisfying scheduled debt service requirements
on the project obligations and secured loan and all deposit
requirements under the terms of any trust agreement, bond
resolution, reimbursement agreement, credit agreement, loan
agreement, or similar agreement securing project obligations
may be applied annually to prepay the secured loan without
penalty.
``(B) Use of proceeds of refinancing.--The secured loan may
be prepaid at any time without penalty, regardless of whether
such repayment is from the proceeds of refinancing from non-
Federal funding sources.
``(6) Forgiveness of indebtedness.--The Secretary may
forgive a loan secured under this title under terms and
conditions that are analogous to the loan forgiveness
provision for student loans under part D of title IV of the
Higher Education Act of 1965 (20 U.S.C. 1087a et seq.),
except that the Secretary shall condition such forgiveness on
the establishment by the project of--
``(A) an outreach program for cancer prevention, early
diagnosis, and treatment that provides services to a
substantial majority of the residents of a State or region,
including residents of rural areas;
``(B) an outreach program for cancer prevention, early
diagnosis, and treatment that provides services to multiple
Indian tribes; and
``(C)(i) unique research resources (such as population
databases); or
``(ii) an affiliation with an entity that has unique
research resources.
``(d) Sale of Secured Loans.--
``(1) In general.--Subject to paragraph (2), as soon as
practicable after substantial completion of a project and
after notifying the obligor, the Secretary may sell to
another entity or reoffer into the capital markets a secured
loan for the project if the Secretary determines that the
sale or reoffering can be made on favorable terms.
``(2) Consent of obligor.--In making a sale or reoffering
under paragraph (1), the Secretary may not change the
original terms and conditions of the secured loan without the
written consent of the obligor.
``(e) Loan Guarantees.--
``(1) In general.--The Secretary may provide a loan
guarantee to a lender in lieu of making a secured loan if the
Secretary determines that the budgetary cost of the loan
guarantee is substantially the same as that of a secured
loan.
``(2) Terms.--The terms of a guaranteed loan shall be
consistent with the terms set forth in this section for a
secured loan, except that the rate on the guaranteed loan and
any prepayment features shall be negotiated between the
obligor and the lender, with the consent of the Secretary.
``SEC. 2204. LINES OF CREDIT.
``(a) In General.--
``(1) Agreements.--Subject to paragraphs (2) through (4),
the Secretary may enter into agreements to make available
lines of credit to 1 or more obligors in the form of direct
loans to be made by the Secretary at future dates on the
occurrence of certain events for any project selected under
section 2202.
``(2) Use of proceeds.--The proceeds of a line of credit
made available under this section shall be available to pay
debt service on project obligations issued to finance
eligible project costs, extraordinary repair and replacement
costs, operation and maintenance expenses, and costs
associated with unexpected Federal or State environmental
restrictions.
``(3) Risk assessment.--Before entering into an agreement
for a secured loan under this subsection, the Secretary, in
consultation with each rating agency providing a rating
letter under section 2202(b)(2)(B), shall determine an
appropriate subsidy amount for each secured loan, taking into
account such letter.
``(4) Investment-grade rating requirement.--The funding of
a line of credit under this section shall be contingent on
the project's senior obligations receiving an investment-
grade rating from at least 1 rating agency.
``(b) Terms and Limitations.--
``(1) In general.--A line of credit under this section with
respect to a project shall be on such terms and conditions
and contain such covenants, representations, warranties, and
requirements (including requirements for audits) as the
Secretary determines appropriate.
``(2) Maximum amounts.--
``(A) Total amount.--The total amount of the line of credit
shall not exceed 33 percent of the reasonably anticipated
eligible project costs.
``(B) 1-year draws.--The amount drawn in any 1 year shall
not exceed 20 percent of the total amount of the line of
credit.
``(3) Draws.--Any draw on the line of credit shall
represent a direct loan and shall be made only if net
revenues from the project (including capitalized interest,
any debt service reserve fund, and any other available
reserve) are insufficient to pay the costs specified in
subsection (a)(2).
``(4) Interest rate.--The interest rate on a direct loan
resulting from a draw on the line of credit shall be not less
than the yield on 30-year marketable United States Treasury
securities as of the date on which the line of credit is
obligated.
``(5) Security.--The line of credit--
[[Page H6248]]
``(A) shall--
``(i) be payable, in whole or in part, from reliable
revenue sources; and
``(ii) include a rate covenant, coverage requirement, or
similar security feature supporting the project obligations;
and
``(B) may have a lien on revenues described in subparagraph
(A) subject to any lien securing project obligations.
``(6) Period of availability.--The line of credit shall be
available during the period beginning on the date of
substantial completion of the project and ending not later
than 10 years after that date.
``(7) Rights of third-party creditors.--
``(A) Against federal government.--A third-party creditor
of the obligor shall not have any right against the Federal
Government with respect to any draw on the line of credit.
``(B) Assignment.--An obligor may assign the line of credit
to 1 or more lenders or to a trustee on the lenders' behalf.
``(8) Nonsubordination.--A direct loan under this section
shall not be subordinated to the claims of any holder of
project obligations in the event of bankruptcy, insolvency,
or liquidation of the obligor.
``(9) Fees.--The Secretary may establish fees at a level
sufficient to cover all or a portion of the costs to the
Federal Government of providing a line of credit under this
section.
``(10) Relationship to other credit instruments.--A project
that receives a line of credit under this section also shall
not receive a secured loan or loan guarantee under section
2203 of an amount that, combined with the amount of the line
of credit, exceeds 100 percent of eligible project costs.
``(c) Repayment.--
``(1) Terms and conditions.--The Secretary shall establish
repayment terms and conditions for each direct loan under
this section based on the projected cash flow from project
revenues and other repayment sources.
``(2) Timing.--All scheduled repayments of principal or
interest on a direct loan under this section shall commence
not later than 5 years after the end of the period of
availability specified in subsection (b)(6) and be fully
repaid, with interest, by the date that is 25 years after the
end of the period of availability specified in subsection
(b)(6).
``(3) Sources of repayment funds.--The sources of funds for
scheduled loan repayments under this section shall include
reliable revenue sources.
``SEC. 2205. PROJECT SERVICING.
``(a) Requirement.--The State in which a project that
receives financial assistance under this title is located may
identify a local servicer to assist the Secretary in
servicing the Federal credit instrument made available under
this title.
``(b) Agency; Fees.--If a State identifies a local servicer
under subsection (a), the local servicer--
``(1) shall act as the agent for the Secretary; and
``(2) may receive a servicing fee, subject to approval by
the Secretary.
``(c) Liability.--A local servicer identified under
subsection (a) shall not be liable for the obligations of the
obligor to the Secretary or any lender.
``(d) Assistance From Expert Firms.--The Secretary may
retain the services of expert firms in the field of project
finance to assist in the underwriting and servicing of
Federal credit instruments.
``SEC. 2206. STATE AND LOCAL PERMITS.
``The provision of financial assistance under this title
with respect to a project shall not--
``(1) relieve any recipient of the assistance of any
obligation to obtain any required State or local permit or
approval with respect to the project;
``(2) limit the right of any unit of State or local
government to approve or regulate any rate of return on
private equity invested in the project; or
``(3) otherwise supersede any State or local law (including
any regulation) applicable to the construction or operation
of the project.
``SEC. 2207. REGULATIONS.
``The Secretary may issue such regulations as the Secretary
determines appropriate to carry out this title.
``SEC. 2208. FUNDING.
``(a) Funding.--
``(1) In general.--There are authorized to be appropriated
to carry out this title, $49,000,000 to remain available
during the period beginning on July 1, 2004 and ending on
September 30, 2008.
``(2) Administrative costs.--From funds made available
under paragraph (1), the Secretary may use, for the
administration of this title, not more than $2,000,000 for
each of fiscal years 2004 through 2008.
``(b) Contract Authority.--Notwithstanding any other
provision of law, approval by the Secretary of a Federal
credit instrument that uses funds made available under this
title shall be deemed to be acceptance by the United States
of a contractual obligation to fund the Federal credit
instrument.
``(c) Availability.--Amounts appropriated under this
section shall be available for obligation on July 1, 2004.
``SEC. 2209. REPORT TO CONGRESS.
``Not later than 4 years after the date of enactment of
this title, the Secretary shall submit to Congress a report
summarizing the financial performance of the projects that
are receiving, or have received, assistance under this title,
including a recommendation as to whether the objectives of
this title are best served--
``(1) by continuing the program under the authority of the
Secretary;
``(2) by establishing a Government corporation or
Government-sponsored enterprise to administer the program; or
``(3) by phasing out the program and relying on the capital
markets to fund the types of infrastructure investments
assisted by this title without Federal participation.''.
SEC. 609. CAPITAL INFRASTRUCTURE REVOLVING LOAN PROGRAM.
(a) In General.--Part A of title XVI of the Public Health
Service Act (42 U.S.C. 300q et seq.) is amended by adding at
the end the following new section:
``capital infrastructure revolving loan program
``Sec. 1603. (a) Authority To Make and Guarantee Loans.--
``(1) Authority to make loans.--The Secretary may make
loans from the fund established under section 1602(d) to any
rural entity for projects for capital improvements,
including--
``(A) the acquisition of land necessary for the capital
improvements;
``(B) the renovation or modernization of any building;
``(C) the acquisition or repair of fixed or major movable
equipment; and
``(D) such other project expenses as the Secretary
determines appropriate.
``(2) Authority to guarantee loans.--
``(A) In general.--The Secretary may guarantee the payment
of principal and interest for loans made to rural entities
for projects for any capital improvement described in
paragraph (1) to any non-Federal lender.
``(B) Interest subsidies.--In the case of a guarantee of
any loan made to a rural entity under subparagraph (A), the
Secretary may pay to the holder of such loan, for and on
behalf of the project for which the loan was made, amounts
sufficient to reduce (by not more than 3 percent) the net
effective interest rate otherwise payable on such loan.
``(b) Amount of Loan.--The principal amount of a loan
directly made or guaranteed under subsection (a) for a
project for capital improvement may not exceed $5,000,000.
``(c) Funding Limitations.--
``(1) Government credit subsidy exposure.--The total of the
Government credit subsidy exposure under the Credit Reform
Act of 1990 scoring protocol with respect to the loans
outstanding at any time with respect to which guarantees have
been issued, or which have been directly made, under
subsection (a) may not exceed $50,000,000 per year.
``(2) Total amounts.--Subject to paragraph (1), the total
of the principal amount of all loans directly made or
guaranteed under subsection (a) may not exceed $250,000,000
per year.
``(d) Capital Assessment and Planning Grants.--
``(1) Nonrepayable grants.--Subject to paragraph (2), the
Secretary may make a grant to a rural entity, in an amount
not to exceed $50,000, for purposes of capital assessment and
business planning.
``(2) Limitation.--The cumulative total of grants awarded
under this subsection may not exceed $2,500,000 per year.
``(e) Termination of Authority.--The Secretary may not
directly make or guarantee any loan under subsection (a) or
make a grant under subsection (d) after September 30,
2008.''.
(b) Rural Entity Defined.--Section 1624 of the Public
Health Service Act (42 U.S.C. 300s-3) is amended by adding at
the end the following new paragraph:
``(14)(A) The term `rural entity' includes--
``(i) a rural health clinic, as defined in section
1861(aa)(2) of the Social Security Act;
``(ii) any medical facility with at least 1 bed, but with
less than 50 beds, that is located in--
``(I) a county that is not part of a metropolitan
statistical area; or
``(II) 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));
``(iii) a hospital that is classified as a rural, regional,
or national referral center under section 1886(d)(5)(C) of
the Social Security Act; and
``(iv) a hospital that is a sole community hospital (as
defined in section 1886(d)(5)(D)(iii) of the Social Security
Act).
``(B) For purposes of subparagraph (A), the fact that a
clinic, facility, or hospital has been geographically
reclassified under the medicare program under title XVIII of
the Social Security Act shall not preclude a hospital from
being considered a rural entity under clause (i) or (ii) of
subparagraph (A).''.
(c) Conforming Amendments.--Section 1602 of the Public
Health Service Act (42 U.S.C. 300q-2) is amended--
(1) in subsection (b)(2)(D), by inserting ``or
1603(a)(2)(B)'' after ``1601(a)(2)(B)''; and
(2) in subsection (d)--
(A) in paragraph (1)(C), by striking ``section
1601(a)(2)(B)'' and inserting ``sections 1601(a)(2)(B) and
1603(a)(2)(B)''; and
(B) in paragraph (2)(A), by inserting ``or 1603(a)(2)(B)''
after ``1601(a)(2)(B)''.
[[Page H6249]]
SEC. 610. FEDERAL REIMBURSEMENT OF EMERGENCY HEALTH SERVICES
FURNISHED TO UNDOCUMENTED ALIENS.
(a) Total Amount Available for Allotment.--There is
appropriated, out of any funds in the Treasury not otherwise
appropriated, $250,000,000 for each of fiscal years 2005
through 2008, for the purpose of making allotments under this
section to States described in paragraph (1) or (2) of
subsection (b). Funds appropriated under the preceding
sentence shall remain available until expended.
(b) State Allotments.--
(1) Based on percentage of undocumented aliens.--
(A) In general.--Out of the amount appropriated under
subsection (a) for a fiscal year, the Secretary shall use
$167,000,000 of such amount to make allotments for such
fiscal year in accordance with subparagraph (B).
(B) Formula.--The amount of the allotment for each State
for a fiscal year shall be equal to the product of--
(i) the total amount available for allotments under this
paragraph for the fiscal year; and
(ii) the percentage of undocumented aliens residing in the
State with respect to the total number of such aliens
residing in all States, as determined by the Statistics
Division of the Immigration and Naturalization Service, as of
January 2003, based on the 2000 decennial census.
(2) Based on number of undocumented alien apprehension
states.--
(A) In general.--Out of the amount appropriated under
subsection (a) for a fiscal year, the Secretary shall use
$83,000,000 of such amount to make allotments for such fiscal
year for each of the 6 States with the highest number of
undocumented alien apprehensions for such fiscal year.
(B) Determination of allotments.--The amount of the
allotment for each State described in subparagraph (A) for a
fiscal year shall bear the same ratio to the total amount
available for allotments under this paragraph for the fiscal
year as the ratio of the number of undocumented alien
apprehensions in the State in that fiscal year bears to the
total of such numbers for all such States for such fiscal
year.
(C) Data.--For purposes of this paragraph, the highest
number of undocumented alien apprehensions for a fiscal year
shall be based on the 4 most recent quarterly apprehension
rates for undocumented aliens in such States, as reported by
the Immigration and Naturalization Service.
(3) Rule of construction.--Nothing in this section shall be
construed as prohibiting a State that is described in both of
paragraphs (1) and (2) from receiving an allotment under both
paragraphs for a fiscal year.
(c) Use of Funds.--
(1) Authority to make payments.--From the allotments made
for a State under subsection (b) for a fiscal year, the
Secretary shall pay directly to local governments, hospitals,
or other providers located in the State (including providers
of services received through an Indian Health Service
facility whether operated by the Indian Health Service or by
an Indian tribe or tribal organization) that provide
uncompensated emergency health services furnished to
undocumented aliens during that fiscal year, and to the
State, such amounts (subject to the total amount available
from such allotments) as the local governments, hospitals,
providers, or State demonstrate were incurred for the
provision of such services during that fiscal year.
(2) Limitation on state use of funds.--Funds paid to a
State from allotments made under subsection (b) for a fiscal
year may only be used for making payments to local
governments, hospitals, or other providers for costs incurred
in providing emergency health services to undocumented aliens
or for State costs incurred with respect to the provision of
emergency health services to such aliens.
(3) Inclusion of costs incurred with respect to certain
aliens.--Uncompensated emergency health services furnished to
aliens who have been allowed to enter the United States for
the sole purpose of receiving emergency health services may
be included in the determination of costs incurred by a
State, local government, hospital, or other provider with
respect to the provision of such services.
(d) Applications; Advance Payments.--
(1) Deadline for establishment of application process.--
(A) In general.--Not later than September 1, 2004, the
Secretary shall establish a process under which States, local
governments, hospitals, or other providers located in the
State may apply for payments from allotments made under
subsection (b) for a fiscal year for uncompensated emergency
health services furnished to undocumented aliens during that
fiscal year.
(B) Inclusion of measures to combat fraud.--The Secretary
shall include in the process established under subparagraph
(A) measures to ensure that fraudulent payments are not made
from the allotments determined under subsection (b).
(2) Advance payment; retrospective adjustment.--The process
established under paragraph (1) shall allow for making
payments under this section for each quarter of a fiscal year
on the basis of advance estimates of expenditures submitted
by applicants for such payments and such other investigation
as the Secretary may find necessary, and for making
reductions or increases in the payments as necessary to
adjust for any overpayment or underpayment for prior quarters
of such fiscal year.
(e) Definitions.--In this section:
(1) Hospital.--The term ``hospital'' has the meaning given
such term in section 1861(e) of the Social Security Act (42
U.S.C. 1395x(e)).
(2) Indian tribe; tribal organization.--The terms ``Indian
tribe'' and ``tribal organization'' have the meanings given
such terms in section 4 of the Indian Health Care Improvement
Act (25 U.S.C. 1603).
(3) Provider.--The term ``provider'' includes a physician,
any other health care professional licensed under State law,
and any other entity that furnishes emergency health
services, including ambulance services.
(4) Secretary.--The term ``Secretary'' means the Secretary
of Health and Human Services.
(5) State.--The term ``State'' means the 50 States and the
District of Columbia.
SEC. 611. INCREASE IN APPROPRIATION TO THE HEALTH CARE FRAUD
AND ABUSE CONTROL ACCOUNT.
Section 1817(k)(3)(A) (42 U.S.C. 1395i(k)(3)(A)) is
amended--
(1) in clause (i)--
(A) in subclause (II), by striking ``and'' at the end; and
(B) by striking subclause (III), and inserting the
following new subclauses:
``(III) for fiscal year 2004, the limit for fiscal year
2003 increased by $10,000,000;
``(IV) for fiscal year 2005, the limit for fiscal year 2003
increased by $15,000,000;
``(V) for fiscal year 2006, the limit for fiscal year 2003
increased by $25,000,000; and
``(VI) for each fiscal year after fiscal year 2006, the
limit for fiscal year 2003.''; and
(2) in clause (ii)--
(A) in subclause (VI), by striking ``and'' at the end;
(B) in subclause (VII)--
(i) by striking ``each fiscal year after fiscal year 2002''
and inserting ``fiscal year 2003''; and
(ii) by striking the period and inserting a semicolon; and
(3) by adding at the end the following:
``(VIII) for fiscal year 2004, $170,000,000;
``(IX) for fiscal year 2005, $175,000,000;
``(X) for fiscal year 2006, $185,000,000; and
``(XI) for each fiscal year after fiscal year 2006, not
less than $150,000,000 and not more than $160,000,000.''.
SEC. 612. INCREASE IN CIVIL PENALTIES UNDER THE FALSE CLAIMS
ACT.
(a) In General.--Section 3729(a) of title 31, United States
Code, is amended--
(1) by striking ``$5,000'' and inserting ``$7,500''; and
(2) by striking ``$10,000'' and inserting ``$15,000''.
(b) Effective Date.--The amendments made by subsection (a)
shall apply to violations occurring on or after January 1,
2004.
SEC. 613. INCREASE IN CIVIL MONETARY PENALTIES UNDER THE
SOCIAL SECURITY ACT.
(a) In General.--Section 1128A(a) (42 U.S.C. 1320a-7a(a)),
in the matter following paragraph (7), is amended--
(1) by striking ``$10,000'' each place it appears and
inserting ``$12,500'';
(2) by striking ``$15,000'' and inserting ``$18,750''; and
(3) striking ``$50,000'' and inserting ``$62,500''.
(b) Effective Date.--The amendments made by subsection (a)
shall apply to violations occurring on or after January 1,
2004.
TITLE VII--ACCESS TO AFFORDABLE PHARMACEUTICALS
SEC. 701. SHORT TITLE.
This title may be cited as the ``Greater Access to
Affordable Pharmaceuticals Act''.
SEC. 702. 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 not valid or will
not be infringed.--
``(i) Agreement to give notice.--An applicant that makes a
certification described in subparagraph (A)(vii)(IV) shall
include in the application a statement that the applicant
will give notice as required by this subparagraph.
``(ii) Timing of notice.--An applicant that makes a
certification described in subparagraph (A)(vii)(IV) shall
give notice as required under this subparagraph--
``(I) if the certification is in the application, not later
than 20 days after the date of the postmark on the notice
with which the Secretary informs the applicant that the
application has been filed; or
``(II) if the certification is in an amendment or
supplement to the application, at the time at which the
applicant submits the amendment or supplement, regardless of
whether the applicant has already given notice with respect
to another such certification contained in the application or
in an amendment or supplement to the application.
``(iii) Recipients of notice.--An applicant required under
this subparagraph to give notice shall give notice to--
``(I) each owner of the patent that is the subject of the
certification (or a representative of the owner designated to
receive such a notice); and
``(II) the holder of the approved application under
subsection (b) for the drug that is
[[Page H6250]]
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 not valid 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 is 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 not valid 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 not valid 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--
``(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
[[Page H6251]]
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. 703. 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 __02) 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 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
[[Page H6252]]
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. 704. 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. 705. 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. 706. 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)''.
TITLE VIII--IMPORTATION OF PRESCRIPTION DRUGS
SEC. 801. 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.
[[Page H6253]]
``(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.
``(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..--he 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;
[[Page H6254]]
``(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.''.
(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 IX--OFFSET
SEC. 901. INCREASE IN MEDICAID BEST PRICE REBATE PERCENTAGE.
Section 1927(c)(1)(B)(i) (42 U.S.C. 1396r-8(c)(1)(B)(i)) is
amended--
(1) in subclause (IV), by striking ``and'' at the end;
(2) in subclause (V)--
(A) by inserting ``and before January 1, 2004,'' after
``December 31, 1995,''; and
(B) by striking the period at the end and inserting ``;
and''; and
(3) by adding at the end the following new subclause:
``(V) after December 31, 2003, is 20 percent.''.
Make such changes in subsidy payments to employers under
1860D-21, as added by section 101, to ensure that the total
cost of this Act does not exceed $393,000,000,000 during the
10-fiscal-year period that begins on October 1, 2003.
Mr. THOMPSON of California (during the reading). Mr. Speaker, I ask
unanimous consent that the motion to recommit be considered as read and
printed in the Record.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from California?
There was no objection.
The SPEAKER pro tempore. The gentleman from California (Mr. Thompson)
is recognized for 5 minutes on his motion to recommit.
Mr. THOMPSON of California. Mr. Speaker, I yield myself 1 minute.
Mr. Speaker, during tonight's debate we have heard a number of times
the Democrats do not have a feasible Medicare prescription drug
proposal. This is just not true. The Blue Dogs have a motion to
recommit that offers a real and an affordable prescription drug
alternative, and it does so without calling for an end of Medicare. And
we have included strong safeguard language that specifically instructs
the Secretary to keep the costs of this measure within the $400 billion
budget window. The Blue Dog motion to recommit provides Medicare
fallback, unlike the Republican bill, protects traditional fee for
service Medicare, unlike the Republican bill, and provides billions of
dollars of relief for rural providers.
Unfortunately, for America's seniors, our proposal will only get 5
minutes of discussion tonight, 5 minutes to protect Medicare from
privatization, 5 minutes to ensure rural seniors have a benefit if the
PPOs do not come to their areas. And for all of the Members tonight who
have said they are supporting the Republican bill in order to move the
debate, the best way to do that is to support this recommit so we can
promptly get a measure back here in the morning to vote on.
{time} 0115
Mr. THOMPSON of California. Mr. Speaker, I yield 45 seconds to the
gentleman from Texas (Mr. Stenholm).
Mr. STENHOLM. Mr. Speaker, I rise in humble appreciation for the 45
seconds being allowed to me tonight to speak for what I am for in
Medicare and to express my extreme disappointment in the leadership of
this House for bringing to the floor a bill based on an ideological
agenda that will undermine the traditional Medicare program and fail to
offer reliable prescription drug coverage for seniors in rural areas,
or seriously address the issue of prescription drug costs.
The motion to recommit promptly reported back to the floor will have
a guaranteed fallback within Medicare for rural areas if private plans
are not available, stronger provisions for rural providers, stays
within the $400 billion allocation which safeguards to make sure that
that happens, and it is based on the compromise in the other body that
will give strong bipartisan support and become law.
Mr. THOMPSON of California. Mr. Speaker, I yield 45 seconds to the
gentleman from Tennessee (Mr. Tanner).
Mr. TANNER. Mr. Speaker, I did not vote for the Democratic substitute
because I thought it was too light on reform. The Republican bill is
too light on substance.
Mr. Speaker, we have a middle ground here, if we were only allowed to
offer it; and it is what the gentleman from Texas (Mr. Stenholm) said.
Basically, any meaningful reform in the Medicare or health care area,
the crux of that matter is, one, a Federal backstop for rural America,
which is not in the bill we are considering; and, two, some measure of
cost containment. That is how we save the program. Neither one of these
essential elements in my judgment is in the bill. If we could get this
motion to recommit, we could fix it and we could come back here with
strong bipartisan support.
Mr. THOMPSON of California. Mr. Speaker, I yield 45 seconds to our
colleague, the gentleman from Georgia (Mr. Scott).
Mr. SCOTT of Georgia. Mr. Speaker, I say to my colleagues, I plead
with my colleagues to let us have this opportunity to recommit. We have
had so much debate where we have talked about the cost of these plans,
and I thought it was an unfair dig at my good friends, the gentleman
from New York (Mr. Rangel) and the gentleman from Michigan (Mr.
Dingell), and their bill being $1 trillion. That was not true, because
there was no effort to put the cost containment in.
But we and the Blue Dogs have put together a budget; we put together
a plan at $400 billion that falls right within the issue.
This is an important issue to all the people of this Nation. And here
we are at 1:30 in the morning on my birthday. But I will tell my
colleagues this: I could not find a better thing to do on my birthday
than to be down here fighting for these seniors, that the Democratic
Party has been fighting for ever since we have had a Democratic Party.
I would hope that we would get this opportunity to recommit.
Mr. THOMPSON of California. Mr. Speaker, I yield 45 seconds to our
colleague, the gentleman from Vermont (Mr. Sanders).
Mr. SANDERS. Mr. Speaker, I am not really a Blue Dog.
Mr. Speaker, the Republican proposal ignores the most important
prescription drug issue facing our country: cost containment and the
need to end the national disgrace by which our citizens are forced to
pay, by far, the highest prices in the world for prescription drugs. If
we do not pass this motion to recommit, the pharmaceutical industry
will have succeeded in keeping prices high and their profits high.
This motion to recommit removes the poison pill in H.R. 1, the so-
called Cochran amendment, and establishes a real prescription drug
reimportation program with Canada. This provision alone, without
costing the taxpayers one penny, will do more to help seniors and all
Americans get affordable drugs than the $400 billion being spent by the
Republicans.
Mr. THOMPSON of California. Mr. Speaker, I yield 45 seconds to our
colleague, the gentleman from Illinois (Mr. Emanuel), who is not a Blue
Dog, but knows a good deal when he sees one.
Mr. EMANUEL. Mr. Speaker, the speaker earlier talked about using
competition and market forces. This bill allows competition between
generics versus name brand, so we get the best price. It allows us to
have competition whether we want to buy here in the United States,
England, France, or Germany, and allows competition between those
prices. It would save money. It uses market forces to reduce prices.
Third, it allows the Secretary of HHS to get the best available
price, just like all of the Sam's Clubs all over America. It does that
here. It allows competition and market forces to reduce prices.
These provisions have, in the past, received bipartisan support. They
should receive bipartisan support today because they represent our
common
[[Page H6255]]
principles of reducing prices and making medications affordable to all
Americans.
Mr. THOMPSON of California. Mr. Speaker, I urge this body to vote to
send this motion back to committee and promptly report back a solid
Medicare prescription drug benefit that we can pass tomorrow.
Mr. THOMAS. Mr. Speaker, I rise in opposition to the motion to
recommit.
I do want to announce that today is the gentleman from Iowa's (Mr.
Nussle) birthday as well.
As my colleagues know, I have a reputation for reading legislation. I
apologize. As I began reading the motion to recommit, as I got to page
3, the comment of the gentleman from Vermont ringing in my ears, about
how they are really concerned about cost containment.
It turns out subtitle D has been scratched from the bill, my
colleagues might like to know. It contains section 131, additional
requirements for annual financial report and oversight on the Medicare
program. Section 132, trustee report on Medicare's unfunded
obligations. That has been scratched from the bill.
And I continued to try to go through; but, actually, you only need
the front page. My colleagues heard them say over and over again:
``promptly.'' We know by now: ``forthwith,'' ``it works.'' ``It comes
back, we can vote on it.''
I say: promptly, it does not mean a thing.
Vote ``no'' on the motion to recommit.
Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore (Mr. Hastings of Washington). Without
objection, the previous question is ordered on the motion to recommit.
There was no objection.
The SPEAKER pro tempore. The question is on the motion to recommit.
The question was taken; and the Speaker pro tempore announced that
the noes appeared to have it.
Recorded Vote
Mr. THOMPSON of California. Mr. Speaker, I demand a recorded vote.
A recorded vote was ordered.
The vote was taken by electronic device, and there were--ayes 208,
noes 223, not voting 4, as follows:
[Roll No. 331]
AYES--208
Abercrombie
Ackerman
Alexander
Allen
Andrews
Baca
Baird
Baldwin
Ballance
Becerra
Bell
Berkley
Berman
Berry
Bishop (GA)
Bishop (NY)
Blumenauer
Boswell
Boucher
Boyd
Brady (PA)
Brown (OH)
Brown, Corrine
Capps
Capuano
Cardin
Cardoza
Carson (IN)
Carson (OK)
Case
Clay
Clyburn
Conyers
Cooper
Costello
Cramer
Crowley
Cummings
Davis (AL)
Davis (CA)
Davis (FL)
Davis (IL)
Davis (TN)
DeFazio
DeGette
Delahunt
DeLauro
Deutsch
Dicks
Dingell
Doggett
Dooley (CA)
Doyle
Edwards
Emanuel
Emerson
Engel
Eshoo
Etheridge
Evans
Farr
Fattah
Filner
Ford
Frank (MA)
Frost
Gephardt
Gonzalez
Gordon
Green (TX)
Grijalva
Gutierrez
Gutknecht
Hall
Harman
Hastings (FL)
Hill
Hinchey
Hinojosa
Hoeffel
Holden
Holt
Honda
Hooley (OR)
Hoyer
Inslee
Israel
Jackson (IL)
Jackson-Lee (TX)
Jefferson
John
Johnson, E. B.
Jones (OH)
Kanjorski
Kaptur
Kennedy (RI)
Kildee
Kilpatrick
Kind
Kleczka
Kucinich
Lampson
Langevin
Lantos
Larsen (WA)
Larson (CT)
Lee
Levin
Lewis (GA)
Lipinski
Lofgren
Lowey
Lucas (KY)
Lynch
Majette
Maloney
Markey
Marshall
Matheson
Matsui
McCarthy (MO)
McCarthy (NY)
McCollum
McDermott
McGovern
McIntyre
McNulty
Meehan
Meek (FL)
Meeks (NY)
Menendez
Michaud
Millender-McDonald
Miller (NC)
Miller, George
Mollohan
Moore
Moran (VA)
Murtha
Nadler
Napolitano
Neal (MA)
Oberstar
Obey
Olver
Ortiz
Owens
Pallone
Pascrell
Pastor
Payne
Pelosi
Peterson (MN)
Pomeroy
Price (NC)
Rahall
Rangel
Reyes
Rodriguez
Ross
Rothman
Roybal-Allard
Ruppersberger
Rush
Ryan (OH)
Sabo
Sanchez, Linda T.
Sanchez, Loretta
Sanders
Sandlin
Schakowsky
Schiff
Scott (GA)
Scott (VA)
Serrano
Sherman
Skelton
Slaughter
Snyder
Solis
Spratt
Stark
Stenholm
Strickland
Stupak
Tanner
Tauscher
Taylor (MS)
Thompson (CA)
Thompson (MS)
Tierney
Towns
Turner (TX)
Udall (CO)
Udall (NM)
Van Hollen
Velazquez
Visclosky
Wamp
Waters
Watson
Watt
Waxman
Weiner
Wexler
Woolsey
Wu
Wynn
NOES--223
Aderholt
Akin
Bachus
Baker
Ballenger
Barrett (SC)
Bartlett (MD)
Barton (TX)
Bass
Beauprez
Bereuter
Biggert
Bilirakis
Bishop (UT)
Blackburn
Blunt
Boehlert
Boehner
Bonilla
Bonner
Bono
Boozman
Bradley (NH)
Brady (TX)
Brown (SC)
Brown-Waite, Ginny
Burgess
Burns
Burr
Burton (IN)
Buyer
Calvert
Camp
Cannon
Cantor
Capito
Carter
Castle
Chabot
Chocola
Coble
Cole
Collins
Cox
Crane
Crenshaw
Cubin
Culberson
Cunningham
Davis, Jo Ann
Davis, Tom
Deal (GA)
DeLay
DeMint
Diaz-Balart, L.
Diaz-Balart, M.
Doolittle
Dreier
Duncan
Dunn
Ehlers
English
Everett
Feeney
Ferguson
Flake
Fletcher
Foley
Forbes
Fossella
Franks (AZ)
Frelinghuysen
Gallegly
Garrett (NJ)
Gerlach
Gibbons
Gilchrest
Gillmor
Gingrey
Goode
Goodlatte
Goss
Granger
Graves
Green (WI)
Greenwood
Harris
Hart
Hastert
Hastings (WA)
Hayes
Hayworth
Hefley
Hensarling
Herger
Hobson
Hoekstra
Hostettler
Houghton
Hulshof
Hunter
Hyde
Isakson
Issa
Istook
Janklow
Jenkins
Johnson (CT)
Johnson (IL)
Johnson, Sam
Jones (NC)
Keller
Kelly
Kennedy (MN)
King (IA)
King (NY)
Kingston
Kirk
Kline
Knollenberg
Kolbe
LaHood
Latham
Leach
Lewis (CA)
Lewis (KY)
Linder
LoBiondo
Lucas (OK)
Manzullo
McCotter
McCrery
McHugh
McKeon
Mica
Miller (FL)
Miller (MI)
Miller, Gary
Moran (KS)
Murphy
Musgrave
Myrick
Nethercutt
Neugebauer
Ney
Northup
Norwood
Nunes
Nussle
Osborne
Ose
Otter
Oxley
Paul
Pearce
Pence
Peterson (PA)
Petri
Pickering
Pitts
Platts
Pombo
Porter
Portman
Pryce (OH)
Putnam
Quinn
Radanovich
Ramstad
Regula
Rehberg
Renzi
Reynolds
Rogers (AL)
Rogers (KY)
Rogers (MI)
Rohrabacher
Ros-Lehtinen
Royce
Ryan (WI)
Ryun (KS)
Saxton
Schrock
Sensenbrenner
Sessions
Shadegg
Shaw
Shays
Sherwood
Shimkus
Shuster
Simmons
Simpson
Smith (MI)
Smith (NJ)
Smith (TX)
Souder
Stearns
Sullivan
Sweeney
Tancredo
Tauzin
Taylor (NC)
Terry
Thomas
Thornberry
Tiahrt
Tiberi
Toomey
Turner (OH)
Upton
Vitter
Walden (OR)
Walsh
Weldon (FL)
Weldon (PA)
Weller
Whitfield
Wicker
Wilson (NM)
Wilson (SC)
Wolf
Young (AK)
NOT VOTING--4
LaTourette
McInnis
Smith (WA)
Young (FL)
Announcement by the Speaker Pro Tempore
The SPEAKER pro tempore (Mr. Hastings of Washington) (during the
vote). Members are advised there are 2 minutes remaining in this vote.
{time} 0138
So the motion to recommit was rejected.
The result of the vote was announced as above recorded.
The SPEAKER pro tempore. The question is on the passage of the bill.
The question was taken; and the Speaker pro tempore announced that
the ayes appeared to have it.
Recorded Vote
Mr. LEVIN. Mr. Speaker, I demand a recorded vote.
A recorded vote was ordered.
The SPEAKER pro tempore. Pursuant to clause 8 of rule XX, this 15-
minute vote will be followed by a 5-minute vote on H.R. 2417.
The vote was taken by electronic device, and there were--ayes 216,
noes 215, answered ``present'' 1, not voting 3, as follows:
[Roll No. 332]
AYES--216
Aderholt
Akin
Alexander
Bachus
Baker
Ballenger
Barrett (SC)
Bartlett (MD)
Barton (TX)
Bass
Beauprez
Bereuter
Biggert
Bilirakis
Bishop (UT)
Blackburn
Blunt
Boehlert
Boehner
Bonilla
Bonner
Bono
Boozman
Boswell
Bradley (NH)
Brady (TX)
Brown (SC)
Brown-Waite, Ginny
Burgess
Burns
Calvert
Camp
Cannon
Cantor
Capito
Carter
Castle
Chabot
Chocola
Coble
Cole
Collins
Cox
Cramer
Crane
Crenshaw
Cubin
Culberson
Cunningham
Davis, Jo Ann
Davis, Tom
Deal (GA)
DeLay
Diaz-Balart, L.
Diaz-Balart, M.
Doolittle
Dreier
Duncan
Dunn
Ehlers
Emerson
English
Everett
Feeney
Ferguson
Fletcher
Foley
Forbes
Fossella
Franks (AZ)
Frelinghuysen
Gallegly
Garrett (NJ)
Gerlach
[[Page H6256]]
Gibbons
Gilchrest
Gillmor
Gingrey
Goode
Goodlatte
Goss
Granger
Graves
Green (WI)
Greenwood
Hall
Harris
Hart
Hastert
Hastings (WA)
Hayes
Hayworth
Hefley
Hensarling
Herger
Hobson
Hoekstra
Houghton
Hulshof
Hunter
Hyde
Isakson
Israel
Issa
Janklow
Jenkins
Johnson (CT)
Johnson (IL)
Johnson, Sam
Keller
Kelly
Kennedy (MN)
King (IA)
King (NY)
Kingston
Kirk
Kline
Knollenberg
Kolbe
LaHood
Latham
LaTourette
Leach
Lewis (CA)
Lewis (KY)
Linder
LoBiondo
Lucas (KY)
Lucas (OK)
Manzullo
Matheson
McCotter
McCrery
McHugh
McKeon
Mica
Miller (MI)
Miller, Gary
Murphy
Myrick
Nethercutt
Neugebauer
Ney
Northup
Nunes
Nussle
Osborne
Ose
Otter
Oxley
Pearce
Peterson (MN)
Peterson (PA)
Petri
Pickering
Pitts
Platts
Pombo
Pomeroy
Porter
Portman
Pryce (OH)
Putnam
Quinn
Radanovich
Ramstad
Regula
Rehberg
Renzi
Reynolds
Rogers (AL)
Rogers (KY)
Rogers (MI)
Rohrabacher
Ros-Lehtinen
Royce
Ryan (WI)
Saxton
Schrock
Sessions
Shaw
Shays
Sherwood
Shimkus
Shuster
Simmons
Simpson
Smith (NJ)
Smith (TX)
Souder
Stearns
Sullivan
Sweeney
Tauzin
Taylor (NC)
Terry
Thomas
Thornberry
Tiahrt
Tiberi
Toomey
Turner (OH)
Upton
Vitter
Walden (OR)
Walsh
Wamp
Weldon (FL)
Weldon (PA)
Weller
Whitfield
Wicker
Wilson (NM)
Wilson (SC)
Wolf
Young (AK)
NOES--215
Abercrombie
Ackerman
Allen
Andrews
Baca
Baird
Baldwin
Ballance
Becerra
Bell
Berkley
Berman
Berry
Bishop (GA)
Bishop (NY)
Blumenauer
Boucher
Boyd
Brady (PA)
Brown (OH)
Brown, Corrine
Burr
Burton (IN)
Buyer
Capps
Capuano
Cardin
Cardoza
Carson (IN)
Carson (OK)
Case
Clay
Clyburn
Conyers
Cooper
Costello
Crowley
Cummings
Davis (AL)
Davis (CA)
Davis (FL)
Davis (IL)
Davis (TN)
DeFazio
DeGette
Delahunt
DeLauro
DeMint
Deutsch
Dicks
Dingell
Doggett
Dooley (CA)
Doyle
Edwards
Emanuel
Engel
Eshoo
Etheridge
Evans
Farr
Fattah
Filner
Flake
Ford
Frank (MA)
Frost
Gephardt
Gonzalez
Gordon
Green (TX)
Grijalva
Gutierrez
Gutknecht
Harman
Hastings (FL)
Hill
Hinchey
Hinojosa
Hoeffel
Holden
Holt
Honda
Hooley (OR)
Hostettler
Hoyer
Inslee
Jackson (IL)
Jackson-Lee (TX)
Jefferson
John
Johnson, E. B.
Jones (NC)
Jones (OH)
Kanjorski
Kaptur
Kennedy (RI)
Kildee
Kilpatrick
Kind
Kleczka
Kucinich
Lampson
Langevin
Lantos
Larsen (WA)
Larson (CT)
Lee
Levin
Lewis (GA)
Lipinski
Lofgren
Lowey
Lynch
Majette
Maloney
Markey
Marshall
Matsui
McCarthy (MO)
McCarthy (NY)
McCollum
McDermott
McGovern
McIntyre
McNulty
Meehan
Meek (FL)
Meeks (NY)
Menendez
Michaud
Millender-McDonald
Miller (FL)
Miller (NC)
Miller, George
Mollohan
Moore
Moran (KS)
Moran (VA)
Murtha
Musgrave
Nadler
Napolitano
Neal (MA)
Norwood
Oberstar
Obey
Olver
Ortiz
Owens
Pallone
Pascrell
Pastor
Paul
Payne
Pelosi
Pence
Price (NC)
Rahall
Rangel
Reyes
Rodriguez
Ross
Rothman
Roybal-Allard
Ruppersberger
Rush
Ryan (OH)
Ryun (KS)
Sabo
Sanchez, Linda T.
Sanchez, Loretta
Sanders
Sandlin
Schakowsky
Schiff
Scott (GA)
Scott (VA)
Sensenbrenner
Serrano
Shadegg
Sherman
Skelton
Slaughter
Smith (MI)
Snyder
Solis
Spratt
Stark
Stenholm
Strickland
Stupak
Tancredo
Tanner
Tauscher
Taylor (MS)
Thompson (CA)
Thompson (MS)
Tierney
Towns
Turner (TX)
Udall (CO)
Udall (NM)
Van Hollen
Velazquez
Visclosky
Waters
Watson
Watt
Waxman
Weiner
Wexler
Woolsey
Wu
Wynn
ANSWERED ``PRESENT''--1
Istook
NOT VOTING--3
McInnis
Smith (WA)
Young (FL)
Announcement by the Speaker Pro Tempore
The SPEAKER pro tempore (Mr. Hastings of Washington) (during the
vote). Members are advised there are 2 minutes remaining in this vote.
{time} 0233
Live pair:
On this vote:
Mr. Istook with Mr. Young of Florida:
Mr. ISTOOK. Mr. Speaker, on my vote just recorded I voted ``no.'' I
have a pair with the gentleman from Florida, Mr. Young, who is at a
funeral, and desire to change my vote and be recorded as ``present.''
``Mr. OTTER and Mrs. EMERSON changed their vote from ``no'' to
``aye.''
So the bill was passed.
The result of the vote was announced as above recorded.
A motion to reconsider was laid on the table.
The SPEAKER pro tempore. Pursuant to section 3 of House Resolution
299, the text of H.R. 2596 will be appended to the engrossment of H.R.
1; and H.R. 2596 shall be laid on the table.
____________________