[Congressional Record (Bound Edition), Volume 148 (2002), Part 9]
[House]
[Pages 11846-12005]
[From the U.S. Government Publishing Office, www.gpo.gov]




        MEDICARE MODERNIZATION AND PRESCRIPTION DRUG ACT OF 2002

  Mr. LINDER. Mr. Speaker, by direction of the Committee on Rules, I 
call up House Resolution 465 and ask for its immediate consideration.
  The Clerk read the resolution, as follows:

                              H. Res. 465

       Resolved, That upon the adoption of this resolution it 
     shall be in order without intervention of any point of order 
     (except those arising under section 302(f) of the 
     Congressional Budget Act of 1974) to consider in the House 
     the bill (H.R. 4954) to amend title XVIII of the Social 
     Security Act to provide for a voluntary program for 
     prescription drug coverage under the Medicare Program, to 
     modernize and reform payments and the regulatory structure of 
     the Medicare Program, and for other purposes. The bill shall 
     be considered as read for amendment. In lieu of the amendment 
     recommended by the Committee on Ways and Means, the amendment 
     in the nature of a substitute printed in the report of the 
     Committee on Rules accompanying this resolution shall be 
     considered as adopted. All points of order against the bill, 
     as amended, are waived. The previous question shall be 
     considered as ordered on the bill, as amended, to final 
     passage without intervening motion except: (1) two hours of 
     debate on the bill, as amended, with one hour equally divided 
     and controlled by the chairman and ranking minority member of 
     the Committee on Ways and Means and one hour equally divided 
     and controlled by the chairman and ranking minority member of 
     the Committee on Energy and Commerce; and (2) one motion to 
     recommit with or without instructions.

  The SPEAKER pro tempore (Mr. Simpson). The gentleman from Georgia 
(Mr. Linder) is recognized for 1 hour.
  Mr. LINDER. Mr. Speaker, for the purpose of debate only, I yield the 
customary 30 minutes to the gentlewoman from New York (Mrs. Slaughter), 
pending which I yield myself such time as I may consume.
  Mr. Speaker, H. Res. 465 is a closed rule that provides 2 hours of 
debate in the House, with 1 hour equally divide and controlled by the 
chairman and ranking minority member of the Committee on Ways and Means 
and 1 hour equally divided and controlled by the chairman and ranking 
minority member of the Committee on Energy and Commerce.
  H. Res. 465 waives all points of order against consideration of the 
bill, except those arising under section 302(f)of the Congressional 
Budget Act of 1974. H. Res. 465 provides that in lieu of the amendment 
recommended by the Committee on Ways and Means, the amendment in the 
nature of a substitute printed in the report of the Committee on Rules 
accompanying this resolution shall be considered as adopted.
  The rule waives all points of order against the bill as amended and 
provides one motion to recommit, with or without instructions.
  Mr. Speaker, I urge my colleagues to join me in approving this rule 
so that the full House can proceed to consider this important Medicare 
reform legislation. The underlying bill is critically important 
legislation that is designed to provide much-needed financial 
assistance to seniors to ease the burden of the rising costs of 
prescription drugs.
  H.R. 4954 seeks to improve the Medicare program by introducing free 
market forces in order to bring down drug prices and medical costs 
overall by introducing competition to a program that currently has 
none.
  In addition to unleashing market forces on prescription drug prices, 
the bill seeks to move the Medicare+Choice program into a more 
competitive structure, the durable medical equipment and off-the-shelf 
orthotics are subject to competitive bidding and, finally, Medicare 
contractors will bid competitively for business. All of these

[[Page 11847]]

reform elements will help move Medicare in the right direction, and our 
seniors will surely reap the benefits of a more consumer-friendly and 
patient-sensitive Medicare.
  The House voted on similar legislation in the 106th Congress but was 
unable to reach agreement with the other body and the Clinton White 
House in order to enact a law to help our seniors. Well, with our new 
administration under President Bush now in office, I believe the House 
of Representatives needs to seize the historic opportunity to move a 
Medicare prescription drug benefit proposal through the 107th Congress 
in order to give our President a chance to sign such important 
legislation into law.
  I applaud the hard work and leadership of my friends and colleagues, 
the gentleman from California (Mr. Thomas), the chairman of the 
Committee on Ways and Means, and the gentleman from Louisiana (Mr. 
Tauzin), the chairman of the Committee on Energy and Commerce, and 
their respective ranking members in bringing this legislation to the 
House floor today.
  I urge my colleagues on both sides of the aisle to support H. Res. 
465, a rule that will allow the House to consider and pass legislation 
that will improve the lives of millions of seniors across the country 
by providing them affordable prescription drugs.
  Mr. Speaker, I neglected to say earlier that all time yielded in the 
pursuit of passage of the rule is yielded for the purpose of debate 
only.
  Mr. Speaker, I reserve the balance of my time.
  Ms. SLAUGHTER. Mr. Speaker, I thank the gentleman from Georgia for 
yielding me the customary 30 minutes, and I yield myself such time as I 
may consume.
  Mr. Speaker, with the rule before us today, this body is being asked 
to hand over one of the most popular government programs in history to 
private insurance companies. Medicare is a critical program, a program 
that benefits a wide spectrum of our constituents and one that American 
families have come to depend on for their loved ones in need. But 
today, in a cynical nod to the pharmaceutical industry, the leadership 
has shut out any meaningful debate. No Democrat substitute will be 
allowed, no amendments to guarantee affordable prescription drugs for 
our seniors will be permitted, and anyone voicing dissent has been 
silenced.

                              {time}  2100

  Indeed, in the wee hours of this morning in the Committee on Rules, 
one of my colleagues made it clear that he wanted the free market to 
determine drug prices, and declared that Medicare was, attention, a 
Soviet-style program, echoing the sentiment made by his former leader, 
Newt Gingrich, that Medicare should be allowed ``to wither on the 
vine.''
  Make no mistake: the contempt for Medicare runs deep within this 
leadership, as it does for other vital social programs. By calling 
Medicare Soviet-style, we can be certain that this is not a mandate to 
ensure the future of the program, but rather, the opposite.
  Mr. LINDER. Mr. Speaker, will the gentlewoman yield? She is 
misquoting something I said, and I would like to respond to it.
  The SPEAKER pro tempore (Mr. LaTourette). The gentleman has not been 
yielded to.
  Mr. LINDER. Will the gentlewoman yield?
  Ms. SLAUGHTER. No, I want to finish my statement.
  Mr. LINDER. She referred directly.
  The SPEAKER pro tempore. The time is controlled by the gentlewoman 
from New York.
  Ms. SLAUGHTER. But rather the opposite, a call to leave seniors to 
the mercies of the private sector and the free market, rather than 
guarantee them livable, affordable health care.
  My constituents and others around the Nation are reeling from public 
programs that have been turned over to the so-called free market. 
Utility rates, cable rates, you name it, the free market has ensured 
exorbitant prices with diminished service. Pensions and retirement 
security have taken a similar beating.
  Moreover, the timing of this proposal could not be worse. The 
proposal places the program in the private sector at a time when 
private insurers have dropped Medicare+Choice beneficiaries by the 
thousands.
  Private insurers will inevitably alter plans and move in and out of 
markets, leading to unpredictability for our seniors. A given drug 
might be covered one month, but not the next. Premiums could double 
from year to year without warning.
  The rule before us is one of the most heavy-handed procedures to come 
out of the Committee on Rules, and given the last few weeks, that is 
saying something. Amendment after amendment was blocked from floor 
consideration.
  My colleague, the gentlewoman from Florida (Mrs. Thurman), and the 
gentleman from Maine (Mr. Allen) had a remarkably sensible idea of 
requiring that prescription drug plans negotiate with pharmaceuticals 
for lower prescription drug prices, a necessity before we put a Federal 
program on top of them. Canada does it, and France does it, Germany, 
Italy, Japan, Britain.
  Virtually every developed country in the world has committed itself 
to negotiating lower drug prices for its citizens. Even the United 
States demonstrated remarkable success when negotiating Cipro prices 
during the anthrax attacks last fall.
  But under this rule, this very sensible amendment will not be 
permitted. This is even more remarkable when we consider that the 
underlying bill prohibits the Federal Government from pushing for lower 
prescription prices.
  My colleagues, the gentleman from New Jersey (Mr. Pallone) and the 
gentlewoman from California (Mrs. Capps), attempted to ensure that all 
seniors have the option of prescription drug coverage, especially in 
those geographic areas where insurance companies choose not to offer a 
plan. Under the current bill, there is no guarantee that seniors will 
have access to coverage at all if insurers should decide not to cover 
their area.
  The amendment will never see the light of day, however, under this 
rule. Instead, we are left with a fundamentally flawed document that 
fails our constituents on every level. The proposed plan would be 
administered through either HMOs or drug-only insurance plans.
  The fact that drug-only insurance plans do not exist in the private 
market does not deter proponents from their privatization agenda. In 
fact, they are so bent on privatizing the drug benefit that they are 
prepared to bribe private plans with a subsidy as large as 99.99 
percent in order to get them to offer drug coverage to seniors, 
regardless of the quality of the service or extent of the benefit.
  Mr. Speaker, a little more history may be in order. The Medicare 
program was originally created because the private sector did not offer 
affordable and reliable health insurance to the elderly and the 
disabled. Health care has certainly changed in the past 30 years, but 
what has not changed is the fact that the private market does not want 
to ensure people who are old, disabled, and likely to need care.
  Mr. Speaker, the inadequacies in this bill continue, and I will 
highlight them briefly. The measure penalizes seniors who receive aid 
with prescription drug costs from charitable, church, or State programs 
by not counting the costs paid by those parties toward the individual's 
Medicare deductible.
  Seniors may actually have to drop out of programs like New York's 
Elderly Prescription Insurance Coverage, the EPIC program, in an 
attempt to obtain their Medicare benefits.
  The proposal has numerous gaps that leave seniors without coverage 
while requiring them to pay premiums. For example, earlier this month I 
received a letter from a 71-year-old constituent who must take 
medication to prevent a recurrence of a potentially dangerous, deadly 
fungal lung infection. The drug costs her nearly $1,000 a month. Under 
the majority plan, this woman would still pay well over $3,000 a year 
for this medication, and in addition, she would have to drop out of New 
York's program, which is currently helping her with these expenses.
  The proposal includes copayments, premiums, and deductibles that will 
be

[[Page 11848]]

unaffordable for many low- and middle-income seniors. The $35-per-month 
premium is a suggested amount and certainly not a guarantee. Insurers 
could choose to charge double or triple that amount if they chose to.
  The bill is opposed by numerous respected organizations, including 
the National Council on Aging, AARP, Families U.S.A., and the National 
Committee to Preserve Social Security and Medicare.
  Mr. Speaker, the majority has taken the proverbial sow's ear and is 
trying to convince America it is a silk purse. My constituents are not 
fooled, and I hope my colleagues will not be, either.
  Mr. Speaker, I yield such time as she may consume to the gentlewoman 
from California (Ms. Woolsey).
  Ms. WOOLSEY. Mr. Speaker, I express my opposition to this sham bill 
that is harmful to senior women.
   Mr. Speaker, studies show that older women live an average of six 
years longer than men. Often widowed and living alone, the average 
woman age 65 and older struggles to survive on an annual income of 
$15,615.
  During her lifetime she probably spent 17 years out of the workforce 
caring for children, and perhaps 18 years caring for elderly parents. 
Her retirement income is also smaller because she probably did not 
receive a pension, and was paid less than most men.
  As a result, she receives lower Social Security benefits. She spends 
a larger percentage of her income on housing costs--leaving less money 
for necessary expenses like utilities, food, and health care. This is a 
particularly difficult problem because the average older woman spends 
20 percent of her income each year on out-of-pocket health care costs.
  Even though Medicare is not typically thought of as a woman's 
program, it's central to a woman's well-being. Because women live 
longer than their male counterparts, they also rely on Medicare and its 
benefits longer.
  While Medicare provides women with critical access to health care, 
gaps in the program leave women vulnerable to unaffordable out-of-
pocket-costs. According to the Kaiser Family Foundation, women account 
for nearly 7 in 10 Medicare beneficiaries with incomes below the 
poverty level.
  Similarly, access to affordable prescription drugs is a woman's 
issue. Why? Because women make up a large portion of consumers 
purchasing prescription drugs.
  Women have a greater rate of health problems since they live longer. 
They have lower incomes, which make access to affordable prescription 
drugs more difficult. In addition, because of age, women report more 
chronic conditions that require ongoing treatment, accompanied by a 
regimen of costly drugs.
  As the costs of prescription drugs continue to rise these out-of-
pocket expenses will continue to take a higher percentage of older 
women's limited monthly income. Where do we draw the line? When will we 
enact a drug benefit that will allow all seniors to live out their 
lives without being forced to choose between food or medicine?
  It's time we start considering women's needs when we debate 
prescription drug proposals.
  Sadly, the GOP's Medicare modernization plan will only perpetuate 
persistent health care disparities among women because it creates new 
gaps in coverage.
  If the GOP plan prevails, seniors won't feel any more certain about 
their benefits--in fact, the GOP proposal allows plans to vary their 
benefits and premiums from one region to another; from one plan to 
another and, the GOP plan provides no guarantees. Their plan would 
privatize prescription drug plans like an HMO . . . not put the plan 
under Medicare. Our seniors need more stability and certainty than 
that--especially older women who are counting on Congress to provide a 
real solution to the high cost of prescription drugs.
  Women are major stakeholders in the debate over Medicare's future and 
a prescription drug benefit. Policies that expand access to outpatient 
prescription drugs and long-term care would help fill coverage gaps 
that drive up out-of-pocket spending for women.
  Conversely, policies that erode coverage or that shift costs to 
beneficiaries could affect women, especially those with low incomes.
  Older women are one of the nation's most at-risk gropus, and a 
prescription drug benefit must meet their needs. Understanding the full 
implications of proposed reforms for aging women must be an essential 
component of efforts to preserve and protect medicare for generations 
to come.
  Under the GOP plan, there will be no real winners--only struggling 
survivors, seniors who manage to make ends meet.
  For my constituents and the older women in this country, merely 
getting by is not good enough, so instead, let's make everyone a winner 
by enacting a prescription drug benefit that guarantees seniors and 
women real assistance.
  After a lifetime of taking care of their families, older women 
deserve better than what the Republican leadership is proposing. That's 
why I strongly urge my colleagues to stop further debate on this sham 
of a proposal and get serious about providing genuine relief to 
Medicare recipients.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from Ohio (Mrs. Jones).
  Mrs. JONES of Ohio. Mr. Speaker, I express my opposition to this bill 
that is particularly harmful to senior women, like my mother.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from California (Ms. Lee).
  Ms. LEE. Mr. Speaker, I express my opposition to this sham bill that 
is particularly harmful to senior women. This is a shame.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from Indiana (Ms. Carson).
  Ms. CARSON of Indiana. Mr. Speaker, I express my opposition to this 
bill that does not allow senior women to be able to afford to live, 
particularly those senior women who suffer from cardiovascular disease.
  Mr. Speaker, I rise in support of the American people. The same 
American people who have been paying too much for prescription drugs 
and have been waiting for years for Congress to pass a fair Medicare 
prescription drug benefit. This plan that the Republican leadership has 
brought to the floor is a sham.
  Where is the benefit for our seniors who are living on a fixed income 
and cannot afford such a high co-payment? Where is the benefit for the 
women who, because they were stay at home mothers and did not earn a 
pension, cannot afford the prescription drugs that are needed for a 
better quality of life.
  The costs of prescription drugs for seniors are rising at a rate 
greater than that of inflation.
  Senior women must be accounted for and given a platform regarding 
prescription drug benefits because they make up almost 60% of the 
Medicare population. Without affordable benefits, women will be forced 
to pay extremely high costs for prescription drugs that they already 
struggle to afford.
  We need a plan that makes prescription drugs more affordable for the 
people who cannot live without these products. What the Republicans are 
proposing is not help for seniors, but more heartache.
  The ``plan'' the Republicans have drawn up would not be a benefit to 
anyone except the insurance companies.
  Forcing Medicare recipients into private plans which cover less than 
half of the costs of prescription drugs is not a benefit?
  A plan that forces Medicare recipients to pay for a gap in coverage 
of at least $1,800 a year is not a benefit!
  A plan that does not guarantee the same coverage for the entire 
country, that seniors in Indiana could pay a higher premium than those 
in a different part of the country, is not a benefit!
  There are over 844,835 people on Medicare in my state of Indiana. 
That is 14% of the population. 44% of these people are under 200% of 
the federal poverty level. I will not go home and tell them that I gave 
away their security to a private company trying to make money off of 
their health.
  Prescription drug benefits are particularly crucial for women because 
they tend to live an average of 6 years longer than men and are more 
likely to suffer from prolonged chronic illness. Senior women have a 
longer period of time to incur out of pocket cost to pay for 
prescription drugs and deserve to be provided with considerable 
benefits.
  Not only do women tend to live longer than men, but they are also at 
an unfair disadvantage where their income is concerned. The average 
annual income for women age 65 and older is $15,615, which is only half 
of the annual income of men. Recent surveys indicate that eight out of 
ten women on Medicare, approximately 17 million women, use prescription 
drugs regularly and most pay for these medications themselves. Senior 
women have a limited income and must receive affordable prescription 
drug benefits that they can rely on.
  How dare the Republicans try to give to the seniors of this country a 
plan that is not equal to what they receive as Members of Congress! 
They have stated over and over that seniors deserve the same coverage 
as Members of Congress.
  When the non-partisan Congressional Research Service did a comparison 
of the drug

[[Page 11849]]

benefit under the Blue Cross-Blue Shield Standard option available to 
Federal Employees to the Democrat and Republican prescription drug 
plans, they found that the Republican plan would give about 40% of the 
coverage Members of Congress receive, but the Democratic plan would 
give comparable coverage.
  In addition, when given the opportunity to rectify this gap in 
coverage, the Republicans on the Committee voted against giving this 
same coverage.
  Whay type of thinking is this?
  Give the minority a voice! Let there be a vote on the Democratic 
Medicare Prescription Drug benefit, a plan that actually helps seniors 
and does not hurt them!
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from California (Mrs. Napolitano).
  Mrs. NAPOLITANO. Mr. Speaker, I express my opposition to this 
shameful bill that is particularly harmful to our senior women who live 
longer and have the largest consumption of purchases of drugs.


                         Parliamentary Inquiry

  Mr. LINDER. Parliamentary inquiry, Mr. Speaker.
  The SPEAKER pro tempore. The gentleman from Georgia will state his 
parliamentary inquiry.
  Mr. LINDER. Mr. Speaker, at what point does this series of speeches 
become credited against their time?
  The SPEAKER pro tempore. After their request for unanimous consent to 
revise and extend their remarks in opposition, the Chair will count 
against the minority's time any speeches that are given. To this point, 
the Chair has not heard any.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from Hawaii (Mrs. Mink).
  Mrs. MINK of Hawaii. Mr. Speaker, I rise on behalf of my constituents 
to oppose the rule and the passage of this bill as a fatal step towards 
privatization of Social Security.
  Mr. Speaker, I rise today to urge my colleagues to oppose the 
Republican's prescription drug benefit plan because it does not provide 
a meaningful prescription drug benefit.
  There are 40 million elderly and disabled people enrolled in 
Medicare. They need Medicare to obtain basic health care coverage. 
Unfortunately, the program has a very limited prescription drug 
benefit. Since Congress created Medicare in 1965, it has struggled to 
find a way to create an adequate prescription drug benefit.
  Prescription drug expenditures have grown at a double-digit rate 
almost every year since 1980. Congress needs to act now to help those 
currently in the system and the estimated 77 million Americans who will 
be in Medicare by 2030. These Americans expect to obtain affordable 
prescription drugs through Medicare. Congress cannot wait any longer. 
It must create a prescription drug benefit.
  Even though creating a prescription drug benefit is one of the most 
important bills of this Congress, the Republican leadership has 
prohibited members of the House from offering amendments or even voting 
on the Democrat's substitute. Since the Republicans began their rule, 
they have imposed ``gag'' rules to prevent a full debate on may 
important issues. In a chamber dedicated to the principles of democracy 
and a free and open debate, it is unacceptable for the Republican 
leadership to prevent members from even considering other prescription 
drug plans or amending the Republican plan. The House should have an 
opportunity to amend the bill created by the Republican leadership 
because it is flawed. It is not a guaranteed Medicare benefit. It 
relies on HMOs and other private insurance companies, who may restrict 
benefits at any time.
  The Republican's bill (H.R. 4954) does not create a defined 
prescription drug benefit under Medicare. It subsidizes private 
insurance companies, who will offer prescription drug coverage to 
Medicare beneficiaries. This plan leaves the elderly alone in a fight 
with private insurance companies to obtain the prescription drug 
coverage they need.
  H.R. 4954 does not specifically define the type of benefit that 
insurance companies must provide. The insurance companies can create 
strict rules that limit access to certain expensive drugs that could 
hurt a company's bottom line. Doctors will prescribe medicine without 
any assurance that seniors will be able to obtain them through their 
private insurer.
  Additionally, insurance companies can limit which pharmacies 
participate in their network. Seniors in rural areas may be forced to 
travel many miles to find a pharmacy that is ``acceptable'' to their 
private insurance provider.
  By relying on private insurers, the elderly will not even know how 
much their monthly premium will cost. The Republicans think it will be 
$35 per month. It might be higher. It might be lower. Premiums could 
vary from county to county and year to year. The monthly premiums in 
the Republican's prescription drug benefit plan could rise beyond the 
resources of the disabled and the elderly. In Nevada, the only state 
where a similar plan is offered, premiums exceed $80 per month.
  The Republican plan does not provide sufficient coverage. It covers 
less than a quarter of Medicare beneficiaries' estimated drug costs 
over the next 10 years, and the complicated coverage formula has a 
large hole. After providing partial coverage on the first $2,000 
seniors spend on prescription drugs, the Republican plan does not 
provide any additional help until they pay $3,800. It does not cover 
expenses between $2,000 and $3,800. The elderly must find a way to pay 
for these expenses by themselves.
  America needs a prescription drug plan that truly helps the elderly 
obtain the drugs they desperately need. We do not need a plan that 
exposes Medicare beneficiaries to the whims of private insurance 
companies who are more interested in profits than providing 
comprehensive benefits.
  Under the Democratic proposal, which the Republicans refused to 
debate: the monthly premium is locked in at $25, the annual deductible 
is only $100, Medicare pays 80% of seniors' drug costs up to $2,000, 
and there is a $2,000 out-of-pocket limit per beneficiary per year.
  The Democratic proposal fully integrates prescription drug benefits 
into the Medicare program. It allows the elderly to rely on their 
governmental prescription drug benefit, rather than depending on the 
generosity of profit driven insurance companies.
  This House has an opportunity to pass legislation to help disabled 
and elderly women obtain affordable prescription drugs. I urge my 
colleagues to support the Democratic plan to create a simple 
prescription drug plan that helps all seniors pay for the skyrocketing 
cost of prescription drugs. I urge my colleagues to vote against the 
Republican bill because it fails to do this.


                Announcement by the Speaker pro Tempore

  The SPEAKER pro tempore. The Chair would advise the gentlewoman from 
New York that one came close to debate.
  Ms. SLAUGHTER. Mr. Speaker, we will watch it.
  Mr. Speaker, I yield such time as she may consume to the gentlewoman 
from California (Ms. Roybal-Allard).
  Ms. ROYBAL-ALLARD. Mr. Speaker, I rise to express my strong 
opposition to this irresponsible bill that is particularly harmful to 
women.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from Florida (Mrs. Thurman).
  Mrs. THURMAN. Mr. Speaker, I express my opposition to this rule and 
to this sham bill that is particularly harmful to senior women.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from New York (Mrs. McCarthy).
  Mrs. McCARTHY of New York. Mr. Speaker, I express my opposition to 
this sham bill that is particularly harmful to senior women.
  I have seen much in my lifetime, but nothing like the blatant 
disregard for America's seniors by House Republican Leadership. 
Prescription Drugs is a life and death issue affecting millions of 
seniors.
  This body should not be forced to debate a bill severely lacking in 
substance and without even the opportunity for a discussion on an 
alternative.
  Unfortunately, there is no room for discussion.
  There is no room for options.
  There is no chance for an open, constructive and spirited debate on 
what America's seniors need most--a Prescription Drug Benefit under 
Medicare.
  The bill before us today is nothing but a sham proposal, which does 
nothing to provide a real, guaranteed prescription drug benefit to our 
nation's seniors.
  I was a nurse before I came to Congress. Let me tell you what this 
bill does not do for America's seniors.
  This bill does not bring down the cost of prescription drugs.
  This bill does not guarantee a prescription drug benefit for seniors; 
and This bill does not guarantee coverage for any drug prescribed by 
their doctor.
  What the bill does do, however, is to provide benefits to insurance 
companies.

[[Page 11850]]

  As a nurse, the worst aspect of this bill to me is that the higher 
your drug bills get, the less help you get with paying those bills.
  Our seniors deserve a plan that is guaranteed and affordable. They 
should not have to worry about coverage gaps, or which pharmacy they 
can go to for their prescription drugs.
  And they certainly shouldn't be limited to which drugs their doctor 
can prescribe.
  We owe our seniors more than vague promises. We owe them a 
prescription drug benefit that will be there whenever they need it, and 
for whatever drug their doctor prescribes.
  We owe it to the American people not to support this sham 
Prescription Drug Bill.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from California (Mrs. Tauscher).
  Mrs. TAUSCHER. Mr. Speaker, I express my opposition to this sham bill 
that is particularly harmful to senior women, my sisters, and my 
mother.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from Michigan (Ms. Kilpatrick).
  Ms. KILPATRICK. Mr. Speaker, I express my opposition to this sham 
Republican bill that is harmful to women all over America.
   Mr. Speaker, I rise today to stress the importance of providing a 
meaningful prescription drug benefit for seniors in our nation. We have 
paid lip service for too long and now is the time for Members of 
Congress to deliver good on our word.
  However, while we need to enact a prescription drug coverage under 
Medicare, we cannot afford to enact a benefit that is anything less 
than what seniors deserve--a meaningful benefit that is voluntary and 
universal and will provide seniors with affordable prescription drugs. 
The plan that Republicans plan to offer does not meet these important 
goals.
  Most importantly, the proposed Republican plan does not provide 
seniors with the promise of guaranteed universal coverage. What does 
this mean? The Republican plan relies on private insurance plans or 
Medicare HMOs to offer prescription drug coverage to seniors and offers 
no concrete or strict guidelines for benefits. Simply put, Republicans 
have put the industry's interests above those of seniors. Seniors will 
be given no guarantee of meaningful drug coverage and will be at the 
mercy of the private industry. Seniors have worked too hard and 
contributed too much to this nation for us to give them anything but 
the best we can. And, Mr. Speaker, the Republican plan is definitely 
not the best we can do--it is far from it.
  Democrats are committed to providing a universal, comprehensive drug 
benefit through Medicare for all seniors. We also are committed to 
addressing the high cost of prescription drugs that have skyrocketed 
out of control. It is time for Congress to deliver on our promise and 
provide seniors with a true prescription drug benefit. Anything less is 
unsatisfactory.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from Minnesota (Ms. McCollum).
  Ms. McCOLLUM. Mr. Speaker, I express my opposition to this sham bill 
that is particularly harmful to senior women.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from Florida (Ms. Brown).
  Ms. BROWN of Florida. Mr. Speaker, I ask unanimous consent to revise 
and extend my remarks, and I rise against this shameful GOP 
prescription drug so-called benefit that is very much against my 
grandmother and all of the grandmothers in this country.
  Mr. CUNNINGHAM. Mr. Speaker, I object. I object to the last one.
  The SPEAKER pro tempore. There was objection to the statement of the 
gentlewoman from Florida.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from Florida (Mrs. Meek).
  Mrs. MEEK of Florida. Mr. Speaker, this is a sham bill. I represent 
senior women very seriously.
  Mr. Speaker, I rise in strong opposition to both the ``sham'' 
prescription drug bill that the Republican leadership has brought to 
the floor today, and to the unconscionable Rule that the Republican 
Leadership has proposed, a Rule that denies the Democrats an 
opportunity to offer a Substitute bill providing real prescription drug 
coverage through Medicare.
  Mr. Speaker, no one in America should have to choose between buying 
medicine or food, between paying their utility bills or their drug 
store account, between taking their medicine or living in pain and 
discomfort. Yet this is the problem that many of our people face every 
day and we all know it. ``Miracle drugs,'' no matter how innovative or 
effective, are worthless to those who cannot afford them. Yet today 
there are huge numbers of seniors who are unable to follow their 
doctor's orders because they cannot afford the medications their 
doctors prescribe.
  The problem is obvious and so is the solution. Unfortunately, it 
involves the one thing that our people want and that the Republican 
Leadership steadfastly refuses to provide: a real prescription drug 
benefit through Medicare.
  The Republican Leadership knows that American people want a real 
prescription drug benefit through Medicare. The Republican Leadership's 
efforts to pass this bill are attempt to create an illusion for the 
voters this fall. They want to give their candidates a talking point 
with the voters so they can say that they support prescription drug 
coverage without actually having to provide it. This is a sham. Our 
seniors deserve much better.
  Mr. Speaker, America's seniors, particularly older women, need 
comprehensive prescription drug coverage through Medicare and fair drug 
pricing. The Republican bill on the floor provides neither. The 
Republican bill is unworkable, unreliable and grossly inadequate.
  Mr. Speaker, America's seniors do not want to be left to their own 
devices and sent on a wild goose chase shopping for private drug plans 
with no guaranteed benefits, plans that private health insurers do not 
even want to offer. They should not have to join an HMO that tells them 
where they are able to fill their prescriptions in order to get drug 
coverage. They deserve the reductions in drug prices that can only be 
obtained if we pass a real prescription drug bill that takes advantage 
of the purchasing power of Medicare's 40 million beneficiaries.
  While I am outraged by the Republican Leadership's refusal to allow 
the Democrats an opportunity to offer a Substitute, I certainly 
understand the reason for it and so do the American people. The 
Republican Leadership will not allow the Democrats to offer a 
Substitute because they know their bill cannot withstand a ``side by 
side'' comparison with the Democratic Substitute.
  The Democratic Substitute that the Republican Leadership will not 
allow to be debated and voted on has a yearly out of pocket limit on 
drug costs of $2000. Why would the Republican Leadership want to 
highlight the fact that under their bill, seniors will have to pay 
$100% of their drug costs between $2000 and $3700 when nearly one-half 
of all seniors have drug costs over $2000 and would be subject to this 
gap in coverage?
  Why would the Republican Leadership want a comparison between a 
Republican bill that will force seniors into private HMO's and restrict 
patients' choice of drugs and pharmacies and a Democratic Substitute 
that guarantees affordable, dependable, comprehensive drug coverage at 
a uniform price while preserving freedom of choice for seniors?
  Why should seniors in different states pay different premiums for the 
exact same benefits as the Republican bill will permit?
  Now some will in this body will contend that a real comprehensive 
prescription drug benefit through Medicare is simply not affordable. I 
say that anybody that can find the funds to grant the bloated tax 
relief for the rich that this House has provided, including $1.2 
trillion in estate tax relief for the millionaires in this country, 
surely can find a way to pay for a real prescription drug benefit. It's 
simply a matter of our priorities.
  Mr. Speaker, the affordability of providing a real prescription drug 
benefit is a fair subject for debate and should be debated. But this 
surely is a reason why the Democratic Substitute needs to be debated 
and voted upon. It is not a reason to keep the Democratic Substitute 
from the floor. If a Member of this body believes that we cannot afford 
the real prescription drug benefit that the Democratic Substitute 
provides, then I say: vote against it.
  So the reasons for the Republican Leadership's approach to this issue 
are clear as they are deplorable. They want a press release for the 
fall elections, not a real drug benefit and they don't want to take the 
heat that would come from a side by side comparison of the Republican 
``pretend'' bill and the Democratic Substitute.
  I urge all my Colleagues. Reject this unfair, one-sided process. 
Let's have a full and fair debate and produce a real prescription drug 
benefit. Defeat the proposed rule; pass a fair rule that allows a 
Democratic Substitute; Vote for the Democratic Substitute and reject 
the Republican Leadership's bill.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to

[[Page 11851]]

the gentlewoman from Texas (Ms. Eddie Bernice Johnson).
  Ms. EDDIE BERNICE JOHNSON of Texas. Mr. Speaker, I express my 
opposition to this bill because it does hurt senior women, in 
particular, and is another big windfall for the corporate industry.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from California (Ms. Lofgren).
  Ms. LOFGREN. Mr. Speaker, I rise to express my opposition to this 
bogus bill that will hurt older women.
  Mr. Speaker, today, prescription drugs play a larger role in modern 
medicine than ever before. Prescription drugs are used as complements 
to surgical procedures, as substitutes for surgery, and to help reduce 
future health risks and treat many chronic health conditions. Yet those 
who need them the most, older adults, and we know that the majority of 
seniors are women, often find themselves without either affordable 
prescription drugs coverage or the means to pay for their prescription 
drugs needs.
  Women on average live longer and are more likely to suffer from 
prolonged chronic illness. In fact, women on Medicare spend nearly 20% 
more for prescription drugs than men. And--with women's poverty rates 
twice that of men, prescription drug costs take a bigger bite out of 
women's limited income.
  It is a shame that we are not considering a real prescription drug 
benefit today, one that would benefit all seniors. Under the Republican 
bill, the more a senior woman spends for prescription drugs, the less 
coverage she gets. For some reason, the Republican bill forces seniors, 
your mother, your grandmother, to pay a higher percentage of costs as 
their needs increase. Mr. Speaker, does this makes any sense?
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from California (Ms. Millender-McDonald).
  Ms. MILLENDER-McDONALD. Mr. Speaker, I express my opposition to this 
bill that is particularly harmful to senior women.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from Nevada (Ms. Berkley).
  Ms. BERKLEY. Mr. Speaker, I express my opposition to this shameful 
bill that is particularly harmful to the senior women in my district.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from California (Ms. Solis).
  Ms. SOLIS. Mr. Speaker, I express my opposition to this bill.
  (The following sentence was delivered in Spanish.)
  Mr. Speaker, for all of the old women who can hear me loud and clear, 
this is another tactic for the Republicans to take away your 
medication.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from Ohio (Ms. Kaptur).
  Ms. KAPTUR. Mr. Speaker, I ask unanimous consent to revise and extend 
my remarks.
  Mr. Speaker, I express my strong opposition to this pitiful bill that 
denies senior women across America access to affordable prescription 
drugs because the Republicans gave all the money away to companies like 
Enron in tax cuts, and they were not deserved.
  Mr. CUNNINGHAM. Mr. Speaker, I object.
  The SPEAKER pro tempore. An objection is heard to the last request to 
revise and extend.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from Oregon (Ms. Hooley).
  Ms. HOOLEY of Oregon. Mr. Speaker, I rise against the Republican no-
benefit prescription drug proposal that is harmful to seniors in my 
State.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from California (Mrs. Davis).
  Mrs. DAVIS of California. Mr. Speaker, I express my opposition to 
this unacceptable bill that is particularly harmful to senior women in 
my district.
   Mr. Speaker, I rise today to talk about H.R. 4954, the Medicare 
Modernization and Prescription Drug Act and its implications for our 
seniors. In particular, I would like to discuss how women fare under 
this proposal before us.
  Women are literally the face of Medicare. They comprise 58 percent of 
the Medicare population at age 65 and represent 71 percent of 
beneficiaries at age 85. Any potential prescription drug plan must be 
evaluated with regard to its impact on women--if it works for women, it 
works for everyone.
  When Medicare was established in the 1960s, the biggest need was 
insurance coverage for hospital stays and doctor visits, not 
prescription drugs. The focus then was on providing relief for acute 
conditions, not chronic.
  Today more than 88 percent of Medicare's 42 million beneficiaries use 
prescription drugs. The average senior takes four prescriptions daily 
and fills an average of 18 prescriptions a year.
  The use of prescription drugs is more pronounced among women. 
Beginning at midlife, women have a higher incidence of chronic illness 
than men. The average woman age 65 and over lives nearly seven years 
longer than the average man and relies on Medicare for her health 
insurance coverage for more years.
  While most women on Medicare use prescription drugs regularly, over 
\1/4\ of these beneficiaries--nearly six million women--lack any 
prescription drug coverage.
  Out-of-pocket spending for prescription drugs place a 
disproportionate burden on older women who have retirement incomes that 
are roughly half than those of men. In 2000, the average income for 
women over 65 was $15,638, compared to $29,329 for men.
  Even though women have significantly smaller incomes than men, they 
spend a larger proportion of their income on out-of-pocket health 
costs. Women over 65 spend 20 percent in comparison to the 17 percent 
spent by men. These expenses increase to 27 percent for women 85 and 
older.
  Older women are one of our nation's most vulnerable groups and 
providing affordable prescription drug coverage is critical to 
improving their quality of life.
  Unfortunately, the proposal before us today does not achieve this 
objective. This legislation does not guarantee any specific benefit. 
Instead, the bill provides subsidies to insurance companies to provide 
private insurance to seniors. The coverage and $33 premium mentioned 
today would only be available to beneficiaries who can find a private 
plan that offers it. All these figures depend on what HMOs and private 
drug insurance plans want to charge.
  H.R. 4954 provides less than one-quarter of the amount seniors are 
estimated to pay for prescription drugs over 10 years. In fact, it 
leaves seniors wholly responsible for costs between $2000 and $3700. 
Nearly half of all seniors' annual drug costs are above $2000. I cannot 
support a plan that subjects seniors to a gap in coverage. These 
seniors will not receive any help with their drug bills for at least 
part of the year, even though they continue to pay premiums.
  I am committed to passing a fair prescription drug plan under 
Medicare that does not stifle innovation or eliminate choice in 
coverage. Seniors need assistance in order to obtain prescription drugs 
to treat or prevent illness.
  In addition, I am disappointed that today's activities will not 
include a discussion of an alternative bill. As our senior population 
continues to grow, we must take a comprehensive look at all of our 
options in order to provide seniors with real benefits.
  Instead of H.R. 4954, I support a meaningful prescription drug 
benefit that does not handicap our seniors at a time when they most 
need assistance. The plan I support builds on the existing Medicare 
system and provides seniors with guaranteed benefits, premiums, and 
cost sharing for all beneficiaries. Not estimates. The federal 
government would use the collective bargaining clout of all Medicare 
beneficiaries to negotiate fair drug prices and these savings would be 
passed on to our seniors.
  American seniors want, need, and deserve real prescription drug 
coverage. The Medicare Modernization and Prescription Drug Act 
establishes a complex program that offers modest benefits at most.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from New York (Ms. Velazquez).
  Ms. VELAZQUEZ. Mr. Speaker, I express my opposition to this sham bill 
that is a giveaway to the pharmaceutical industry at the expense of 
seniors and especially women in our country.
  Mr. Speaker, I rise today in opposition to this legislation. While we 
all agree that today's elderly need and deserve a prescription drug 
benefit, I am afraid this proposal is not the answer.
  If we are lucky enough, our parents are still with us. And we know 
how they can live

[[Page 11852]]

longer and more active lives with the new medical treatments that exist 
today. Some of our parents already face--and some of us in the not so 
distant future may face--the issue of drug affordability--drugs that 
help us to live life to the fullest.
  We are in the middle of a health care crisis in this Nation. Drug 
prices rose 17 percent last year alone--after five years of double-
digit spikes. The prices of popular and heavily-marketed drugs 
increased even more--an incredible 34 percent.
  No one doubts that something must be done--and fast. But passing 
legislation that makes two wrongs does not make a right. As Ranking 
member of the Small Business Committee, I want to point out how this 
plan fails in two critical ways.
  First, it fails our seniors. It does nothing to provide a 
comprehensive, affordable drug benefit with Medicare. Second, it fails 
small community pharmacists. These pharmacists serve a vital purpose in 
our communities. The corner drug stores anchor our neighborhoods and 
the local pharmacist counsels our seniors about their medications.
  Once again, through the lens of this proposal, we see who the 
Republicans care about most--big business--the pharmaceuticals, the 
health care companies. Not the little people--seniors citizens that 
give so much back to our communities and the corner drug stores they 
visit and depend on each and every day.
  Mr. Speaker, this is a bad plan. It enriches a handful of 
corporations at the expense of seniors and the small businesses across 
the country that serve them--without even delivering on the promise of 
comprehensive, affordable prescription drug coverage.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from Michigan (Ms. Rivers).
  Ms. RIVERS. Mr. Speaker, I express my opposition to this terrible 
bill that is particularly harmful to senior women.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from California (Ms. Watson).
  Ms. WATSON of California. Mr. Speaker, I rise to express my 
opposition to this most deceptive bill that is particularly harmful to 
my 92-year-old mother and other senior women.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from North Carolina (Mrs. Clayton).
  Mrs. CLAYTON. Mr. Speaker, I express my opposition to this sham bill 
that is particularly harmful to older women who live longer, have more 
diseases, have less money, and need prescription drugs that they can 
afford.
  Women live longer, suffer from more diseases, have less money when 
they retire and must pay more for their prescriptions. 65 percent of 
Social Security recipients are women--75 percent of the low income 
retired persons are women. The majority of those need real prescription 
help, not this bill which does nothing to help sick older women.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from Wisconsin (Ms. Baldwin).
  Ms. BALDWIN. Mr. Speaker, I rise to express my opposition to this 
bill, which I deem to be a betrayal of the women of the Greatest 
Generation.
  Mr. Speaker, I urge my colleagues to vote against this sham of a 
bill. It lays the groundwork to privatize Medicare and does not provide 
a real, guaranteed, defined benefit that our seniors desperately need.
  The Republican bill that is on the floor today forces seniors to shop 
around for prescription drug coverage through Medicare HMOs and private 
insurance plans. The prices and benefits under this private coverage 
would vary from region to region, so that a senior in Wisconsin would 
have to pay a different premium than a senior in Florida for the exact 
same benefit. These geographic disparities are simply unacceptable.
  There are no assurances in this bill that prescription drugs will be 
affordable. In fact, this bill would cover less than one-fifth of the 
estimated drug costs of Medicare beneficiaries over the next ten years. 
In addition, there is a huge gap in coverage. Seniors who need more 
than 2,000 worth of drugs a year must pay 100% out-of-pocket, and keep 
paying premiums, until they reach the $3,700 out-of-pocket cap. 
Millions of seniors will fall into this gaping hole. I believe all 
seniors deserve affordable prescription drug coverage, and we should 
not help some seniors cover their drug costs while leaving others out 
in the cold.
  Seniors will not be guaranteed access to the drugs they need or to 
their local pharmacies. The bill would allow private insurance plans to 
limit access to covered drugs, even if the drugs are on an approved 
list. Seniors would be restricted to certain pharmacy providers or 
would be forced to pay higher costs to use the pharmacy of their 
choice, even a pharmacy they have been using for years. I know many 
seniors in my district who have developed relationships with their 
pharmacists over the years and would hate to have to go to another 
provider or pay extra to keep going to their same trusted pharmacist.
  I hear from seniors in my district who cannot afford their 
prescriptions. They send me receipts for their drug bills and ask me 
how they are supposed to afford their rising drug costs on a fixed 
budget. They take less than the required dosage to save money, which 
puts their health at even greater risk.
  I support the Democratic proposal that adds a new Part D in Medicare 
to provide voluntary prescription drug coverage for all Medicare 
beneficiaries. This proposal would provide the same benefits, premiums 
and cost sharing for all beneficiaries no matter where they live. It 
guarantees fair drug prices by giving the Secretary of the Department 
of Health and Human Services the authority to use the collective 
bargaining clout of all 40 million Medicare beneficiaries to negotiate 
drug prices. Savings will then be passed on to seniors. Unlike the 
Republican bill, there are no gaps in coverage in the Democratic 
proposal. Coverage is provided for any drug a senior's doctor 
prescribes. Seniors will be able to choose where to fill their 
prescriptions and will not have to join an HMO or a private insurance 
plan to get drug coverage. This is the proposal seniors have been 
waiting for. Unfortunately, it is not the proposal that was brought to 
the floor today.
  Today we are voting on a bill that is a sad mockery of what the 
seniors in our country deserve. Instead of providing a comprehensive 
Medicare prescription drug benefit for America's seniors, the 
Republicans have decided to make sure this bill suits big drug 
companies. Close ties to the pharmaceutical industry have influenced 
this bill at the expense of our seniors. That is just plain wrong for 
the retirees of the greatest generation who worked hard, lived through 
the depression won a war, and raised their families.
  Seniors need a comprehensive prescription drug benefit that is 
affordable and dependable for all--with no gaps or gimmicks in 
coverage. The Republican proposal fails on all these counts. I urge my 
colleagues to vote against H.R. 4954.

                              {time}  2115

  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from Illinois (Ms. Schakowsky).
  Ms. SCHAKOWSKY. Mr. Speaker, I rise in opposition to this pathetic 
excuse for a bill that is particularly harmful to senior women and to 
persons with disabilities.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from California (Ms. Sanchez).
  Ms. SANCHEZ. Mr. Speaker, I rise in opposition to this sham bill that 
is particularly harmful to senior women, the heart and the soul of our 
families.
   Mr. Speaker, I rise today to express my strong opposition to the 
Republican prescription drug bill, H.R. 4954. This bill, while unfair 
to millions of seniors, is particularly harmful to women.
  Women make up a large portion of consumers purchasing prescription 
drugs. For this reason alone, women's health care needs must be 
considered as we debate prescription drug proposals. And unfortunately, 
I am hard-pressed to find many of my women colleagues who were 
consulted as this bill was drafted. It is no surprise, therefore, that 
this GOP bill ignores health problems unique to women.
  At least one-third of Medicare beneficiaries, many of them women, do 
not have coverage for drugs--and others are forced to create a 
patchwork of coverage that simply doesn't get the job done. Too often, 
women and seniors are left choosing between food and medicine.
  Thanks to Medicare, millions of women have dignity and security in 
their retirement years. Millions of women have avoided poverty and 
lived better lives. But today, with all of the incredible medical 
advances coupled with the rising cost of prescription drugs, it's vital 
that the country pull together to pass a meaningful Medicare 
prescription drug plan for all women--and all senior citizens.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from Texas (Ms. Jackson-Lee).

[[Page 11853]]

  Ms. JACKSON-LEE of Texas. Mr. Speaker, I rise in opposition to this 
destructive insurance protection act that hurts the grandmothers, 
mothers, aunts and sisters and all of seniors and those disabled and 
provides zero benefits to Americans.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from New York (Mrs. Maloney).
  Mrs. MALONEY of New York. Mr. Speaker, I rise in opposition to this 
rule that would not allow a Democratic substitute and to the underlying 
bill.
  I rise against the rule and the Republican bill. I regret for 
America's seniors that a Democratic alternative was not allowed. 
Medicare provides health care coverage to forty million retired and 
disabled Americans.
  For decades, Medicare has worked to provide needed, lifesaving health 
care to millions, but it is missing a fundamental component: a 
prescription drug benefit.
  If we have courage, this Congress can make history and give our 
nation's seniors what they desperately need: a real, and meaningful 
prescription drug plan.
  I am proud to join my Democratic colleagues, led by Mr. Dingell, Mr. 
Rangel, Mr. Stark, and Mr. Brown, as an original cosponsor of H.R. 
5019, the ``Medicare Prescription Drug Benefit and Discount Act.''
  I come to the floor to discuss two points:
  Number 1: unlike the Republican drug plan, the Democratic plan is 
simple because it builds upon a proven model--Medicare.
  Just like seniors pay a Part B premium today for doctor visits, under 
our plan, seniors would pay a voluntary Part D premium of $25 per month 
for drug coverage. For that, Medicare or the government will pay 80 
percent of drug costs after a $100 deductible. And no senior will have 
to pay more than $2,000 in costs per year.
  There is an urgent need for this plan. The most recent data indicates 
that almost 40 percent of seniors--an estimated 11 milion--have no drug 
coverage. Problems are particularly acute for low income seniors and 
seniors over the age of 85 (the majority whom are women). Additionally, 
those older Americans who do have coverage find that their coverage is 
often inadequate for their needs.
  The Democratic plan is a real plan with real numbers, not estimates.
  Point 2: the Republican plan does nothing to bring down the cost of 
prescription drugs. The Democratic plan is the only plan that provides 
real Medicare prescription drug coverage for our seniors by stopping 
soaring drug costs.
  Under the buying power of Medicare, through competition and 
bargaining we can rein in drug costs. Prescription drug costs are too 
high for our older Americans. They need help now!
  For instance, let's look at the cost of Prevacid. Prevacid is an 
ulcer medication, and the second most widely used drug by American 
seniors. The cost for this prescription is on average $137.54 per month 
in New York City--but only $45.02 in the United Kingdom, a price 
differential of 206 percent.
  Or look at Celebrex, a popular arthritis medication and a drug needed 
by many older women, especially, since older women are stricken more 
often than men by arthritis. According to a Government Reform Committee 
report released by Mr. Weiner and myself, a monthly supply of this drug 
costs $86.26 in New York City. In France, a monthly supply of Celebrex 
costs only $30.60. This is a price differential of 182 percent. Seniors 
in New York City without drug coverage must pay almost three times as 
much as purchasers in France.
  Prices for prescriptions have risen 10 percent per year for the last 
several years, leading to over $37 billion in profits last year for the 
giant drug companies. While these corporations wallow in their spoils, 
seniors suffer without coverage.
  Mr. Speaker, we must pass the Democratic prescription drug plan 
without delay. It is built on a proven model, Medicare. The Republican 
plan only offers gap-ridden coverage. The Republican bill is about 
privatization. The Republican plan is all about election year politics.
  For the sake of our seniors, we must pass the Democratic plan, and we 
must pass it now.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from California (Ms. Harman).
  Ms. HARMAN. Mr. Speaker, on behalf of seniors in my district, 
particularly women, and in particular veterans, I express my strong 
opposition to this bill.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from Colorado (Ms. DeGette).
  Ms. DeGETTE. Mr. Speaker, I rise in opposition to this rule on behalf 
of the senior women in my district and around this country who live 
longer than men and pay far more money for prescription drugs.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from California (Ms. Waters).
  Ms. WATERS. Mr. Speaker, I enter my objection and opposition to this 
irresponsible bill that will do nothing to help the senior women of 
this country.
  Every day, millions of American seniors are forced to choose between 
buying prescription drugs and buying food. The Republican leadership in 
Congress has responded to this crisis with H.R. 4954, a prescription 
drug bill that does nothing to help them.
  The Republican bill would force seniors who want prescription drug 
coverage to get it from private insurance companies, but the bill 
provides no guarantee that insurance companies will offer prescription 
drug policies. Even the Health Insurance Association of America has 
admitted that insurance companies will not offer drug-only policies. So 
the Republican plan is guaranteed to fail.
  Furthermore, even if prescription drug policies do become available, 
the premiums, deductibles and co-payments will vary widely. Low-income 
seniors could be denied the drugs they need if they cannot afford the 
co-payments. For many middle-income seniors, the benefits would be so 
limited that it would not be worthwhile for them to enroll. H.R. 4954 
is a poor excuse for a prescription drug plan for our nation's senior 
citizens.
  The Democrats have proposed a prescription drug plan that would 
provide a guaranteed prescription drug benefit under Medicare to all 
seniors who want one.
  This bill would ensure that all seniors who choose to participate 
would pay the same low premiums and receive the same benefits.
  Beneficiaries could choose to obtain their prescriptions from any 
willing pharmacy and would be guaranteed coverage for any drug their 
doctor prescribes.
  Premiums and co-payments would be waived for seniors who are living 
under 150% of the poverty level.
  The bill would use the collective bargaining clout of all 40 million 
Medicare beneficiaries to negotiate fair and reasonable drug prices.
  Finally, no senior would have to pay more than $2 thousand per year 
in out-of-pocket expenses for the prescriptions they need.
  It is time that Congress make prescription drugs available to all 
seniors who need them. I urge my colleagues to oppose H.R. 4954 and 
support the Democratic plan to provide guaranteed prescription drug 
coverage to all seniors who desire it.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from Georgia (Ms. McKinney).
  Ms. McKINNEY. Mr. Speaker, I rise in opposition to this bill which is 
a sham and does nothing for seniors in my district, in my State and in 
my country.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from California (Ms. Eshoo).
  Ms. ESHOO. Mr. Speaker, I rise to express my opposition to the bill 
that will be considered this evening on behalf of my constituents, 
especially the senior women that I represent. They deserve a great deal 
more and much better and all the women of the country do.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from California (Ms. Pelosi).
  Ms. PELOSI. Mr. Speaker, I rise in opposition to this sham bill which 
is a cruel hoax on the American people, especially cruel to America's 
senior women who raised our families and deserve better.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from Connecticut (Ms. DeLauro).
  Ms. DeLAURO. Mr. Speaker, I rise in opposition to this insurance 
industry, pharmaceutical written bill that does not drive down the cost 
of prescription drugs or cover most of America's seniors and is very 
harmful to women in this country, those tomorrow, and those who are in 
older generations.
  Mr. LINDER. Mr. Speaker, I, too, enjoyed that parade; and I 
particularly enjoyed the fact that they had not a particular thing to 
say about the bill.

[[Page 11854]]

To say something about impact the bill and how it impacts women, I 
yield such time as she may consume to the gentlewoman from Connecticut 
(Mrs. Johnson), who wrote the bill.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, we have had a parade of my 
colleagues from the other side claim that this legislation is harmful 
to senior women. I wonder how they could have so lost touch with the 
lives of women in America and women in their districts. This bill 
represents the greatest leap forward in women's health since the 
passage of Medicare.
  I was polite to you, and I ask that you be polite to me.
  For the very first time, women, particularly low-income women, will 
have their prescriptions covered. Perhaps you did not read the bill. 
You know and I know that women live longer than men. The great majority 
of seniors are women. Perhaps you did not know that retired women are 
living on half the income of retired men, that the average income of 
retired men in America is $30,000 and the average income of retired 
women is $15,000 and of retired women over 85 is $10,000.
  Under this bill those low-income women will receive 100 percent of 
the costs of their drugs, of their premiums, of the deductible, and of 
the co-insurance up to maybe 2 to $5. They will have a right to charge 
that much co-insurance. That is an incredible boon to these women. They 
will have the security of knowing that every dollar of their 
prescription costs up to $2,000 will be covered if your income is under 
175 percent of poverty, and that is 44 percent of all seniors.
  Yes, this is a wonderful thing for women in America. Yes, this bill 
is a giant step forward for seniors in America. Yes, this is the 
greatest leap forward for women in health care since the founding of 
Medicare. And once you have read the bill, I will be happy to talk with 
you about details. But there can be no arguing with the fact that the 
first $2,000 of drug expense for people under 175 percent of poverty is 
completely covered and, by saving the State $40 billion, they will be 
able to go up that ladder of income.
  So let us try to talk about the facts tonight, let us have a little 
less theater, let us have a little more discussion about the details of 
the legislation, and let us try to do America proud as we talk about 
the need for prescription drugs in Medicare.
  Mr. THOMAS. Mr. Speaker, will the gentlewoman yield?
  Mrs. JOHNSON of Connecticut. I yield to the gentleman from 
California.
  Mr. THOMAS. As women enter their senior years, in terms of the 
problems they have with osteoporosis, do we include in this bill 
additional money to assist in mammography?
  Mrs. JOHNSON of Connecticut. We certainly do. We fix all the problems 
with reimbursements for mammography so they will be more accessible to 
the women of America. Furthermore, we provide access for something that 
is extremely important to women, more important to women than men, and 
that is access to disease management plans to manage chronic illness. 
It is women who are plagued with four, five, and six chronic illnesses.
  Mr. THOMAS. Mr. Speaker, will the gentlewoman yield?
  Mrs. JOHNSON of Connecticut. I yield to the gentleman from 
California.
  Mr. THOMAS. Is it not true that during their working lives men very 
often have physicals? In fact, it is oftentimes part of their 
professional occupation to get a physical periodically, and many times 
women who are not working do not get that physical?
  Mrs. JOHNSON of Connecticut. Absolutely.
  Mr. THOMAS. Is it not true in this bill that, for the first time, 
every senior who becomes Medicare eligible, that means every woman, 
gets a free physical?
  Mrs. JOHNSON of Connecticut. Every woman gets a free physical under 
this bill, and for the first time they have an option for a plan that 
provides entirely free preventative benefits across the board to men 
and women.
  So this is an enormous advancement for women because women are the 
ones who get the poorest health care throughout their lives, and they 
will have an option to a plan that has free preventive benefits across 
the board and, if they choose it, and they will all get a free baseline 
physical when they enter Medicare. Yes, a great advancement for senior 
women.
  Ms. SLAUGHTER. Mr. Speaker, I yield 1 minute to the gentleman from 
Massachusetts (Mr. McGovern).
  Mr. McGOVERN. Mr. Speaker, I rise in strong opposition to this sham 
bill and to this woefully inadequate bill offered by the majority.
  Every Member of this House knows that the number one issue facing 
senior citizens is the soaring cost of prescription drugs. Our seniors 
need relief and real relief now.
  My Republicans colleagues go on about how they support giving our 
seniors relief, and then they send this poor excuse for a benefit bill 
to the House floor. This guarantees seniors nothing, nothing. It is a 
bad bill. And to make matters worse, the gentlewoman from Connecticut 
(Mrs. Johnson) gets up and tells us how wonderful and strong her bill 
is. Yet she and the Republican leadership make it unamendable. No 
substitute. No amendments. No bipartisanship. Two hours total debate. 
That is it.
  How sad. How outrageous. If there ever should have been an open and 
fair process, it should have been today. There were even good 
Republican amendments that were offered before the Committee on Rules 
that were ruled out of order. But, no, you are afraid you might lose 
because deep in your hearts you know that your bill is nothing more 
than a political soundbite and you deserve to lose.
  Vote ``no'' on this rule and vote ``no'' on this bad bill.
  Mr. LINDER. Mr. Speaker, I yield 3 minutes to the gentlewoman from 
West Virginia (Mrs. Capito).
  Mrs. CAPITO. Mr. Speaker, I stand before you today to offer my 
remarks on the prescription drug plan.
  On May 1, 2002, four of my constituents boarded a bus, traveled from 
Martinsburg, West Virginia, to Washington, D.C., to offer their voice 
and their story on how the prescription drug dilemma has reshaped their 
lives. That day I heard each of their voices; and, unfortunately, it is 
a voice I hear and we all hear all too often.
  At each of the town meetings I have had the majority of the questions 
deal with the high cost of prescription drugs. After one particular 
town meeting a young lady approached me. She showed me a list of 
prescription drugs that her mother was taking and the cost of each drug 
listed besides it. Looking at the list my heart sank. These figures 
were staggering. Additionally, because of the high cost of her mother's 
medication, lack of Medicare coverage for her mother, this young woman 
who had a family of her own was paying for her mother's medication.
  Is this right, Mr. Speaker? No, it is not.
  Our seniors deserve the peace of mind of knowing that they can and 
will be able to afford their prescriptions. Anxiety over the 
affordability of prescribed medications should not spoil one's golden 
years. That is why I am standing here tonight.
  I am choosing to stand here and tell you that Medicare needs to offer 
prescription drug benefit. To be blunt, we need to offer it. We needed 
to offer it yesterday or the day before or the day before. This 
situation should be resolved.
  It is our duty as representatives to represent the people's voice, 
and their voice says now is the time. I urge all of my colleagues to 
stand up, pass this rule, pass the Medicare prescription drug 
legislation which is extremely beneficial to the senior women of 
America.
  Ms. SLAUGHTER. Mr. Speaker, I yield 3 minutes to the gentleman from 
New York (Mr. Rangel).
  Mr. RANGEL. Mr. Speaker, this rule does not allow Democrats an 
opportunity to say that we think we have a better idea. The majority 
found it very difficult to get enough votes to support the 
pharmaceutical industry, but it would just seem to me that it is not a 
rule against Democrats. It is not a rule

[[Page 11855]]

even against the integrity of the House. It is a rule against the 
senior citizens who really deserve better treatment than they are 
getting.
  Mr. Speaker, I yield to the gentleman from Maryland (Mr. Hoyer).
  Mr. HOYER. Mr. Speaker, I thank the distinguished ranking member of 
the Committee on Ways and Means.
  There may be no more serious issue that we consider on the floor of 
this House this year. The gentlewoman from West Virginia (Mrs. Capito) 
that just spoke said why it was so important. She is right. This issue 
is critically important to the women that she mentioned, critically 
important to the individuals that the gentlewoman from Connecticut 
(Mrs. Johnson) mentioned, and I would say critically important to the 
citizens that every one of the women on this side of the aisle 
represent and came and said they were concerned about and, therefore, 
are not supporting this rule.
  The gentlewoman from Connecticut said she was polite to those people, 
and she was. But I suggest to the gentlewoman that this rule is not 
polite. This rule denigrates the importance and seriousness of this 
issue.
  When your side took over in 1995, Gerald Solomon, the then-chairman 
of the Committee on Rules, said this, ``The guiding principals will be 
openness and fairness. The Rules Committee will no longer rig the 
procedure to contrive a pre-determined outcome. From now on the Rules 
Committee will clear the stage for debate and let the House work its 
will.''
  You have, of course, retreated from that statement. You have not 
honored the seriousness of this issue.

                              {time}  2130

  The gentlewoman from Connecticut who the gentleman from California 
(Mr. Thomas) says wrote this bill will not have the opportunity to 
defend this bill against an alternative that can be fully debated as to 
whether or not the seniors to whom she refers will, in fact, be 
protected.
  The gentlewoman served with Bill Gradison. Bill Gradison for those 
who are relatively new to the House was a member of the Committee on 
Ways and Means and one of the senior members of the Committee on Ways 
and Means, and then Bill Gradison left here, and he went to head up the 
Insurance Industries Association in this country.
  Ms. SLAUGHTER. Mr. Speaker, I yield 1 minute to the gentleman from 
Maryland (Mr. Hoyer).
  Mr. HOYER. Mr. Speaker, he went to the insurance industry and what 
does Bill Gradison say, a Republican, not a Democrat, a member of the 
Committee on Ways and Means, retired, what does he say? A member 
representing the insurance agency, he says this bill will not work. 
That is what Bill Gradison says, and the shame on this democratic body 
is that an issue that all of us agree is so critically important will 
not be fully debated consistent with the principle that Mr. Solomon 
enunciated in 1995 when the reformers took over this House.
  How sad it is, how sad it is that we come here at this hour to debate 
one of America's most important issues, affecting millions and millions 
and millions of people. All of us, all of us have heard the lament of 
those individuals, be they female or male, who cannot pay their 
prescription drugs. It is our duty to reject this rule and to have a 
full and fair debate, consistent with the Solomon principles.
  Mr. LINDER. Mr. Speaker, I am pleased to yield 2 minutes to the 
gentlewoman from Virginia (Mrs. Jo Ann Davis).
  Mrs. JO ANN DAVIS of Virginia. Mr. Speaker, I rise to speak in 
support of the rule. For years I have been an avid supporter of 
prescription drug coverage for senior citizens. Why? Because I have a 
mom whose prescription drugs amount to over 50 percent of her Social 
Security check.
  Today, I rise to speak for all of those who have moms and dads on 
Medicare. The minority does not have a serious bill. They have a $1 
trillion election year gimmick that will bankrupt Medicare.
  This is a good and fair rule because it allows a vote on the only 
credible plan that has been carefully and thoughtfully designed to help 
seniors by lowering drug costs, guaranteeing coverage and providing 
choices.
  Under the Republican plan, every senior will be eligible for 
coverage. We guarantee this coverage. It cannot be taken away. The 
Democrat plan, however, phases out coverage. It is essentially an 
experiment. Mr. Speaker, seniors cannot afford an experiment. They need 
real, credible coverage that they can rely on.
  This bill will help our seniors. This is a good rule for a long-
awaited and much-needed legislation and we must pass it. I urge my 
colleagues to join me in voting ``yes'' on the rule and ``yes'' on 
final passage of the bill for my mom and everyone's mom and dad that is 
on Medicare.
  Ms. SLAUGHTER. Mr. Speaker, I yield 1 minute to the gentleman from 
New Jersey (Mr. Menendez).
  Mr. MENENDEZ. Mr. Speaker, I rise on behalf of my 83-year-old mother 
and millions like her across this country who work for decades, in her 
case, in the factories of New Jersey, now has Alzheimer's and spends 
over half of her Social Security check on prescription drugs and but 
for my sister and my assistance would not live with the dignity that 
she deserves. There is a difference between Republicans and Democrats 
on prescription drugs, and that is why Republicans will not even let us 
debate our proposal here on the floor of the House of Representatives.
  The denial of a vote on the Democratic proposal for a universal, 
affordable, guaranteed benefit under Medicare is a corruption of this 
institution by the Republican majority, by the way, for an industry 
that has given them millions in campaign contributions.
  There is a difference in who benefits. Democrats cover all seniors. 
My colleagues subsidize big insurance companies and cover less than a 
quarter of seniors' costs. There is a difference in what seniors will 
pay. Democrats guarantee a $25 monthly premium with low out-of-pocket 
expenses. My colleagues leave those decisions to the whims of 
corporations. Plenty of opportunity for more corporate greed.
  No senior in America should have to choose between paying their rent, 
putting food on the table, and having access to life-enhancing drugs.


                Announcement by the Speaker Pro Tempore

  The SPEAKER pro tempore (Mr. LaTourette). The Chair would ask the 
courtesy of all Members in not exceeding the time that has been yielded 
to them.
  Mr. LINDER. Mr. Speaker, I yield 2 minutes to the gentleman from Iowa 
(Mr. Latham).
  Mr. LATHAM. Mr. Speaker, I thank the gentleman from Georgia for 
yielding me the time, and I thank the Speaker for this time.
  This is a long time coming. This is so important for people like my 
mother who is 85 years old, living in a town of 168 people in 
Alexander, Iowa. This is not only a bill that is going to help her to 
be able to afford her prescription drugs and to enhance her length of 
life and quality of life; but just as importantly, in rural America, 
this bill is going to make sure that there is access to quality health 
care in rural America.
  There is a lot of work that has gone into this bill, and I would like 
to see any other proposal out there that has brought together so many 
people when we look at the American Hospital Association, the AMA, the 
physical therapists, the National Association of Home Care, the 
National Rural Health Care Association, all coming together in support 
of this very, very important legislation.
  Mr. Speaker, I have been very proud to serve on the Speaker's 
Prescription Drug Action Team, and I want to thank the Speaker and all 
the chairmen of the committees that have worked so hard on this bill 
and to the successful end which is really going to address the problems 
that we have.
  I also want to congratulate my three Republican colleagues from Iowa 
(Mr. Leach), (Mr. Nussle), and (Mr. Ganske) for working as a team to 
try and make sure that we did get relief in Iowa. We have the lowest 
reimbursement for our hospitals in the country by a wide margin. This 
bill is going to

[[Page 11856]]

take a giant step toward keeping those rural hospitals open, to keep 
the kind of high-quality health care providers on the job and serving 
in Iowa. It is absolutely critical that we continue to have the 
physicians, the nurses, the home health care folks available for my 
mother.
  Mr. Speaker, this is a great evening, and I support the rule and the 
bill.
  Ms. SLAUGHTER. Mr. Speaker, I yield 2 minutes to the gentleman from 
New Jersey (Mr. Pallone).
  Mr. PALLONE. Mr. Speaker, some of the comments that are being made by 
my colleagues on the other side, both on the floor and in the Committee 
on Rules, have been very upsetting to me.
  I rise in opposition to the rule, but I heard the gentlewoman from 
Virginia just say that the rule was fair because it allows an up-or-
down vote on what is the only good bill dealing with prescription 
drugs. That is not what fairness is about. That is not what democracy 
is about.
  I asked this morning in the Committee on Rules that the Democratic 
substitute and three other amendments that would lead to price 
reductions and another amendment that would provide a guaranteed 
Medicare benefit be placed in order. All were denied. My colleague may 
not agree with me, but the gentlewoman from Virginia should not suggest 
that the only thing that should be considered is what they think is the 
right thing. That is not the way a democracy operates.
  The other thing that upset me was that I heard the gentlewoman from 
Connecticut say that we should just read the bill. Let me tell my 
colleague, I read the bill. We have not had a lot of time to read the 
Republican bill, but I read it. There is nothing in it. It is not a 
Medicare benefit. It does not guarantee any benefit. It does not tell 
us what the premium is going to be. It does not tell us what the 
deductible is going to be. It does not tell us anything about whether 
it is going to be available anywhere, and there is no price reduction.
  The gentlewoman from Connecticut mentioned the passage of Medicare, 
but she was very proud of the fact this morning in the Committee on 
Rules that this was not a Medicare bill and that it operated through 
private insurance and through market competition and was not part of 
Medicare because she said that Medicare oftentimes does not work now 
and we need to change it.
  Then the gentleman from Georgia actually said in response to the 
gentleman from Massachusetts (Mr. McGovern) when I spoke about how we 
wanted a Medicare guarantee and we wanted this to be under Medicare, 
the gentleman from Massachusetts (Mr. McGovern) said it is unfortunate 
that the gentleman from Georgia (Mr. Linder) made a reference to the 
Medicare prescription drug program as a Soviet-style model program, and 
the gentleman from Georgia (Mr. Linder) said, well, it is; and he said 
it several times.
  The problem is that the Republicans do not like Medicare. They do not 
want this to be a Medicare program because they never liked Medicare, 
and they want it to wither on the vine, and they do not want to provide 
any benefit for senior citizens in this country.
  Mr. LINDER. Mr. Speaker, I yield myself such time as I may consume. 
That was some of the gentleman's more interesting prose. I am sure 
there is a kernel of thought in there, but I did not detect it.
  Mr. Speaker, I yield 1 minute to the gentleman from California (Mr. 
Thomas), the chairman of the Committee on Ways and Means.
  Mr. THOMAS. Mr. Speaker, the parade on the other side of the aisle 
which repeated the mantra that it was a sham bill, cruel hoax, harmful 
to women and the disabled, in case anybody really thinks that is true, 
I am wondering why then when we look at the more than 90 organizations 
that support this bill, have names such as the Visiting Nurses 
Association, the Pennsylvania Women's Health Alliance, the National 
Spinal Cord Injury Association, the National Coalition for Women With 
Heart Disease, the National Alliance for the Mentally Ill of 
Pennsylvania, American Parkinson's Association of Vermont, the Epilepsy 
Foundation of Mississippi, having someone parade to the microphone and 
repeat some mantra, as though it was some kind of a fixed statement 
that meant anything really does embarrass me, when if we look at the 
organizations and more that I just repeated who every day help the 
people that my colleagues say are not helped are for this bill. Someone 
is wrong, and it is not them.
  Ms. SLAUGHTER. Mr. Speaker, I yield myself such time as I may 
consume.
  The Democrats are standing with AARP, the National Committee to 
Preserve Social Security and Medicare, the Alliance for Retired 
Americans, National Council on the Aging, National Senior Citizens Law 
Center, Families USA, the National Partnership for Women and Families, 
the AFL and countless others who represent America's 40 million 
Medicare beneficiaries.
  Mr. Speaker, I yield 3 minutes to the gentleman from Michigan (Mr. 
Dingell).
  Mr. DINGELL. Mr. Speaker, I thank the distinguished gentlewoman for 
yielding me the time.
  We have got a remarkable thing here before us, a closed rule. We have 
got a bill on which there were never any hearings, a bill that just 
drips defects, a bill that is opposed by almost everybody that knows 
anything about pharmaceuticals and about the needs of the senior 
citizens and a bill that is opposed by every single responsible major 
organization of senior citizens.
  We cannot offer amendments to it. They cannot be cut-and-bite 
amendments. There is no possibility of us offering a substitute to it. 
This is what my colleagues call democracy on that side of the aisle? 
This is the way we treat the concerns and the rights and the interests 
of our senior citizens? I wonder how many of them like what they are 
seeing tonight on television as they watch this body engage in debate 
which is at best fraudulent and which is at worst just plain 
outrageous.
  The hard fact of the matter is we cannot offer amendments on this 
side at all, but we can bring to attention the fact that this is going 
to significantly damage, if not in fact destroy, most of the plans that 
on behalf of industry and labor offer to retirees the right to have 
prescription pharmaceuticals as a part of the medical care program of 
the company which offers that particular benefit.
  That is an outrage. There is no way that we can address here what the 
amount is that is going to be charged for the program. In other words, 
in this legislation, there is nothing anywhere which tells how much the 
senior citizen is going to pay to whom for what. That is all left up to 
some kind of nebulous understanding between the Secretary and an 
insurance company. There is no correction for that particular problem.
  Is that bad? Of course. But there is worse. There is not a nickel's 
worth of subsidy for the health care of a senior citizen in this 
legislation. Do my colleagues know where the money goes in the 
legislation that is before us? To an insurance company. The insurance 
company can offer whatever benefits it wants or no benefits, but it is 
going to get a big fat subsidy.
  With companies like Arthur Andersen I am sure that we will have an 
accounting system which will make that look good, but the simple fact 
of the matter is the benefits that are going to come under this 
legislation are not going to come to citizens. They are going to go to 
a bunch of cold-hearted, steely-eyed insurance companies that are going 
to be interested in maximizing benefits. In fact, there is not one plan 
which will be offered by insurance companies that is not going to be 
heavily subsidized.
  Mr. Speaker, I rise in strong opposition to this abominable closed 
rule. On the most important issue to face this Congress, the Republican 
leadership has decided to prevent a single amendment to be offered, and 
in particular, a Democratic substitute.
  There is no secret why we Democrats are not being allowed to offer a 
substitute, even a substitute that requires no waivers of the rules. It 
is not because our substitute has no merit. It is because it has so 
much merit, it would pass.

[[Page 11857]]

  Let me explain why the rule needs to be defeated so that we can offer 
the Democratic substitute.
  Unlike the bill introduced by our Republican colleagues, our 
substitute can be simply explained, because it is built on a simple, 
known, and effective model--Medicare itself.
  Just like seniors pay a voluntary premium for Part B medical costs 
such as doctor visits, our bill provides for a voluntary Part D drug 
premium of $25 per month. For that, the Government will pay 80% of drug 
costs after a $100 deductible. And no senior will have to pay more than 
$2,000 in costs per year.
  These are real numbers, not estimates. The benefits and the $25 
monthly premium are specified on the first page of the substitute. 
Unfortunately, there are no such guarantees in the Republican bill.
  On top of that, we will be arming seniors with the most potent 
protection from soaring drug costs. Forty million seniors banded 
together under the buying power of Medicare, we can begin to use the 
necessary bargaining power to rein in high drug prices.
  This is not price controls; it is competition and bargaining. We saw 
that the Government was effective in negotiating a competitive price 
for the prescription drug Cipro during the anthrax outbreak. Why 
shouldn't we do the same for other life saving drugs for seniors?
  In contrast to our simple and effective prescription drug benefit, 
the Republican bill is a complex scheme that would make Rube Goldberg 
blush. In fact, it is not a drug benefit at all. It is a host of 
subsidies to private insurers in the hope that they will offer a drug-
only benefit to seniors. Will they? Time and again they have told us 
``no.''
  Why would the Republicans put forward such a model? Well, quite 
simply they have a larger agenda--they want to privatize all of 
Medicare, and this is just another step. That is the only reason why 
seniors are not even given a choice of getting the benefit through 
their traditional Medicare provider.
  Any why don't they endorse our plan? Our plan is simple; it is 
comprehensive; it is what seniors want. The Republicans have raised 
just one issue: they say it costs too much. Well, I can tell you that 
we can afford it. It is just a matter of priorities.
  Should that priority be making the estate tax repeal on the 
wealthiest people permanent, which will cost $750 billion in the decade 
that the permanent repeal is effective, or should it be enacting a 
critical health program that will help all of our seniors?
  Our prescription drug benefit has the strong support of organizations 
representing millions of seniors, such as the National Committee to 
Preserve Social Security and Medicare, the alliance for Retired 
Americans, the National Council on Aging, and AARP. They recognize our 
benefit is a good value for seniors.
  The substitute also includes provisions to shore up the Medicare fee-
for-service system such as increased payments to hospitals, doctors, 
and nursing homes. Senior citizens and individuals with disabilities 
depend on Medicare fee-for-service an ensuring its continued viability 
has always been a priority for Democrats.
  It is a good substitute, and I hope my colleagues will vote against 
the rule, so that it can be offered.

                              {time}  2145

  Mr. LINDER. Mr. Speaker, I yield 1 minute to the gentleman from 
Mississippi (Mr. Pickering).
  Mr. PICKERING. Mr. Speaker, I rise in proud support of the rule and 
the effort of this body. It is an historic opportunity for us.
  If we put the politics and the extreme language aside, these are the 
facts: $350 billion will go to our seniors for prescription drugs, to 
our rural hospitals, to our health community centers, to those who need 
it most.
  In my home State of Mississippi, 55 percent of all seniors live at 
the rate that will get the fixed income assistance, which means no 
deductible, no premium, only a copayment of $2 to $5 per prescription 
drug, an enormous benefit for the seniors who need it most. Fifty-five 
percent of seniors in Mississippi.
  If we look at those who have catastrophic occurrences in their life, 
when drug costs exceed $3,700, they will see no cost over that. Those 
most in need will be helped. It is responsible, it is reasonable, it is 
right. I urge the Members to follow and support the rule.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as he may consume to 
the gentleman from California (Mr. Honda).
  Mr. HONDA. Mr. Speaker, I rise to express my opposition of this 
prescription drug proposal.
  Mr. Speaker, the elderly and disabled have waited long enough for a 
prescription drug benefit in Medicare and for relief from the high cost 
of prescription drug prices. While the Republicans have been busy 
voting on permanent tax cuts and attending lavish fundraisers by the 
pharmaceutical industry, seniors throughout the country have been 
waiting for Congress to take action. All seniors need relief from 
prescription drug prices, and they need it now.
  However, the Republican prescription drug bill completely fails the 
test of a real Medicare drug benefit. The Republican bill has no 
guaranteed minimum benefit, no guaranteed, affordable monthly premium, 
and no guarantee of fair drug prices. To add insult to injury, their 
bill leaves a huge coverage gap. Seniors who need more than $2,000 
worth of drugs must pay one hundred percent out-of-pocket, and keep 
paying premiums, until they reach the $3,700 out-of-pocket cap.
  Mr. Speaker, the Democrats have an alternative we had hoped to offer. 
Under the Democratic plan, seniors and individuals with disabilities 
will be able to keep making the choices that matter. Seniors will not 
be forced to join an HMO. They will not be forced to join a private 
insurance plan that will restrict their access to needed drugs, deny 
coverage for the medicine their doctors prescribe, or force them to 
change pharmacies. And unlike the Republican plan, our plan has no 
gap--beneficiaries will always have coverage.
  But the Republican Leadership is denying Democrats the opportunity to 
offer our alternative. They are denying our right to participate in a 
fair, democratic debate about prescription drugs. The time is now for a 
real, meaningful, and affordable Medicare prescription drug benefit. 
Unfortunately, it looks like this Republican-led House won't be 
providing one anytime soon.
  Ms. SLAUGHTER. Mr. Speaker, I yield 1 minute to the gentlewoman from 
California (Mrs. Capps).
  Mrs. CAPPS. Mr. Speaker, I thank my colleague for yielding me this 
time.
  Mr. Speaker, I acknowledge my sisters in Congress as we rise in 
opposition to this terrible rule.
  One of the proudest days of my life was when I was sworn into this 
body, the symbol of our democracy. But today I am sad for the House and 
for this country. The process the majority has used to produce their 
Medicare bill is completely contrary to the principles of our 
Constitution. A bill was rammed through committee that will not give 
seniors an affordable, reliable, comprehensive benefit; seniors, most 
of whom are women.
  Now the majority is refusing to allow a free and fair debate on the 
issue. Why? They know their bill will not work. They know seniors will 
not get affordable drug coverage from insurance companies, and they 
know so many seniors will get no help with their medications, and they 
are afraid they would lose.
  I can accept losing in a fair fight, but I cannot accept this anti-
democratic attempt to muzzle fair debate. We should reject this rule, 
have a full debate on the needs of our seniors, and pass a real 
prescription drug benefit.
  Mr. LINDER. Mr. Speaker, I am pleased to yield 1 minute to the 
gentleman from Minnesota (Mr. Kennedy).
  Mr. KENNEDY of Minnesota. Mr. Speaker, this bill is important and 
overdue for our Nation's 13 million seniors. Our seniors deserve 
prescription drug coverage now. They do not deserve the Democrat's 
election-year gimmick.
  The average senior saves 44 percent on current drug costs under our 
plan. Mr. Speaker, our plan gives seniors immediate relief from the 
rising cost of prescription drugs by providing a discount of up to 25 
percent off the top of the overall drug cost.
  Just last week, Health and Human Services Secretary Tommy Thompson 
released a study showing our plan would save seniors more money than 
our friends on the other side of the aisle. In addition to the 
immediate discount and cost sharing, our plan includes catastrophic 
protection, 100 percent prescription drug coverage for low-income 
seniors, and more Medicare choices and savings.
  I support the passage of this bill and this rule, and I urge my 
colleagues to do the same.
  Ms. SLAUGHTER. Mr. Speaker, I yield 1 minute to the gentleman from 
Michigan (Mr. Bonior)
  Mr. BONIOR. Mr. Speaker, about 2 weeks ago, I got on a bus with some

[[Page 11858]]

seniors from my State of Michigan, and we went over to Ontario, Canada, 
to buy some prescription drugs. They got these drugs at 60, 70, 80, 90, 
110 percent less than what they would have to pay in the United States, 
drugs like Lipitor and Celebrex.
  They deserve a secure retirement. A secure retirement means not 
having to choose between medication and rent, medication and food, 
medication and transportation. It also means not having to go to 
another country to buy medicines that they need. That is an outrage.
  We have the power in this institution to change that. We have had the 
power to change that for the last 8 years, and we have not done a damn 
thing about it, if my colleagues will pardon my language.
  The Republicans have turned a blind eye to the plight of our mothers 
and our fathers and our grandparents. They have been blinded by the 
money and the power of the pharmaceutical lobby, and the Republicans 
are putting up roadblocks to prescription drugs time after time after 
time.
  It is time for real reform, not a sham proposal. I ask my colleagues 
to open their eyes to the reality of what is happening in the country 
and give us some decent options to vote on.
  Mr. LINDER. Mr. Speaker, I yield myself such time as I may consume to 
remind my friend from Michigan that, about 10 years ago, they had the 
power to change it with overwhelming majorities in both bodies and the 
Presidency, and they chose not to do it then, too.
  Mr. Speaker, I yield 2 minutes to the gentleman from Texas (Mr. 
Barton).
  Mr. BARTON of Texas. Mr. Speaker, I rise in support of the rule, even 
though I had an amendment that I would have liked to have offered that 
was not made in order on prescription drug savings accounts.
  This is not the fairest rule. We could have made in order a 
Democratic alternative. But for a first start, I think it is a fair 
enough rule.
  This is a good plan that will be on the floor. It spends $350 billion 
over 10 years to provide a prescription drug benefit and some Medicare 
reforms for the providers. The drug benefit comes to a population where 
we have about 30 million senior citizens on Medicare, and 70 percent of 
those seniors have some prescription drug coverage under private 
medigap policies. Of those that do not have any prescription drug 
benefits, 50 percent of them have drug costs that are less than $1,000 
a year, and only about 700,000 have drug costs that are over $5,000 a 
year.
  Now, if you are one of those 700,000 or it is your mother or your 
father, your grandmother, your grandfather, your aunt or your uncle, 
that is a big problem. But to say that a prescription drug benefit that 
is going to provide $31 billion a year to provide coverage for 
prescription drugs is not at least a good start, I think is just flat 
hypocritical.
  Now, I think we can do more. I would like for us to do more. I would 
like to, at some point in time, make in order an option for those that 
want to use a prescription drug savings account to have that option; 
and, hopefully, later this year, we will get that.
  I would point out that if the plan that is before us were to become 
law and it is a bad plan, it is optional. There is nothing mandatory 
about this plan that is going to be on the floor.
  I would also point out that the provider benefits in the bill, which 
are over $4 billion a year, there is almost universal support for in 
the provider community.
  So this is a good start. I would hope we would vote for the rule and 
have the debate.
  Ms. SLAUGHTER. Mr. Speaker, may I inquire as to the time remaining on 
both sides?
  The SPEAKER pro tempore (Mr. LaTourette). The gentlewoman from New 
York (Ms. Slaughter) has 10 minutes remaining, and the gentleman from 
Georgia (Mr. Linder) has 11 minutes remaining.
  Ms. SLAUGHTER. Mr. Speaker, I yield 1 minute to the gentleman from 
Ohio (Mr. Brown).
  Mr. BROWN of Ohio. Mr. Speaker, I thank my friend from New York for 
yielding me this time.
  Last week, the Committee on Energy and Commerce was marking up the 
prescription drug bill. Last Wednesday, we stopped at 5 p.m. in the 
afternoon when we should have been working into the evening. Why? 
Because my friends on that side of the aisle went to a Republican fund-
raiser underwritten by the prescription drug companies.
  The Chair of that dinner was the CEO of a British drug company who 
donated $250,000 to the Republican Party. There were hundreds of 
thousands of other dollars donated by drug companies that night.
  The next day, Mr. Speaker, when we went back for the markup, every 
amendment that Democrats offered that the drug companies did not like, 
surprise, was voted down. An amendment that said seniors should get the 
same drug benefits that Members of Congress get was voted down on a 
party line vote because the drug company sat in the back of the room 
and said no.
  Every amendment we voted on that the drug companies did not like, to 
close the gap in all the out-of-pocket expenses that seniors had to 
pay, if the drug companies did not like it, they sat back in the back 
of the room and said no.
  Vote for the Democratic plan written for seniors.
  The SPEAKER pro tempore. The gentleman's time has expired.
  Mr. BROWN of Ohio. Vote ``no'' on the Republican plan written by the 
drug companies for the drug companies.
  The SPEAKER pro tempore. The gentleman's time has expired.
  Ms. SLAUGHTER. I was going to yield that gentleman another 30 
seconds.


                Announcement by the Speaker Pro Tempore

  The SPEAKER pro tempore. Members need to heed the gavel, and the 
Chair would respectfully ask that, when the gravel is pounding, the 
Members cease speaking so that the gentlewoman from New York (Ms. 
Slaughter) could yield additional time, which is her desire.
  Mr. LINDER. Mr. Speaker, I am pleased to yield 2 minutes to my 
friend, the gentleman from Florida (Mr. Weldon).
  Mr. WELDON of Florida. Mr. Speaker, as many of my colleagues in this 
body know, I practiced internal medicine for many years before coming 
to the House. Indeed, I still see patients about once a month at the 
veterans' clinic in my congressional district. I lived this problem on 
a daily basis. I practiced internal medicine. Mainly what I did was I 
wrote prescriptions mainly for senior citizens, and I dealt personally 
with the struggles that many of them face in paying for their drugs.
  My primary concern is getting a bill, and frankly I was very 
disappointed we did not get a bill 2 years ago, and I think the reason 
we did not get a bill is because some people thought they could 
capitalize on it in the campaign, and I have to honestly say this is 
deja vu all over again. We are starting out very, very poorly.
  I have heard that they have not had a chance. We had two committees 
mark up this bill. The Committee on Ways and Means spent 13 hours on 
it. They were in until 2 a.m. The Committee on Energy and Commerce went 
all night. We hear these claims that the pharmaceutical company is 
giving us all this money. Do I assume the Democratic party has never 
taken any pharmaceutical money?
  I will tell the Members what we need. We need a plan. We need some 
kind of plan, and this is step one. We have to go to conference with 
the Senate. Then we have to negotiate in conference, and many of you 
people who are over there demagogueing this issue are going to be in 
that conference committee. We are going to have plenty of opportunities 
to get a very, very good bill to help our seniors.
  But if we keep on with this attitude, I am going to tell my folks 
back home, forget it. It is going to be kicked off into the campaign 
again. People are going to hope they are going to get an advantage, and 
I do not think anybody is going to get an advantage, and the people who 
are going to suffer are the senior citizens.

[[Page 11859]]

  I want to say one other thing. We do not want a plan that stifles 
innovation. If you stifle innovation, I can tell you I used to write 
prescriptions for people and give them to them, new pills that kept 
them alive, and without those pills, they would have died.
  Ms. SLAUGHTER. Mr. Speaker, I yield 1 minute to the gentlewoman from 
Florida (Mrs. Thurman).
  Mrs. THURMAN. Mr. Speaker, I thank the gentlewoman for yielding me 
this time.
  Mr. Speaker, I want the people of the fifth district's voices to be 
heard tonight, too. First of all, I want to say that this debate 
tonight is not about the provider givebacks in this bill. This debate 
is about the most important issue facing the American people and the 
issue that every Member of this Congress and including the President 
ran on in the last election.
  And let us make it clear, today I went to the Committee on Rules 
because the people in the fifth district said to me, we want the cost 
of drugs down, we are tired of seeing on the TV people going to Canada 
to buy their medicines cheaper, or why is it that industrialized 
nations, our competitors, are buying their drugs at a lesser cost?
  Just to give you some examples, how about Zocor? In industrialized 
nations their average pricing is about $65. In the fifth district, it 
is $104. We need to bring these costs down.
  Mr. LINDER. Mr. Speaker, I am pleased to yield 2 minutes to the 
gentleman from Illinois (Mr. Shimkus).
  Mr. SHIMKUS. Mr. Speaker, I wish my friend, the gentleman from 
Maryland (Mr. Hoyer), was here because he played the Solomon card, and 
I have great respect for Jerry Solomon, and I say semper fi to Jerry, 
who is probably watching these proceedings and chuckling.
  Mr. Speaker, I support this rule. We labored hard for over 25 hours 
in the Committee on Energy and Commerce, and I know my friends on the 
Committee on Ways and Means worked deeply as hard. It is not a perfect 
bill. In fact, the bill coming to the floor stripped out my language on 
orphan drugs, help for Lou Gehrig's disease, Crohn's disease and 
Tourette's disease.
  But this bill has some positive aspects. First, it fits within the 
budget. This is critical because any amendment either on the floor 
would add to the bill which would strip it on a budget point of order 
or it would shortchange the prescription drug benefit or shortchange 
the hospital benefits.
  Illinois offers a pharmaceutical assistance program for dual 
eligibles. This bill will assume Federal responsibility for dual 
eligibles, saving Illinois $2 billion over 8 years.

                              {time}  2200

  Individuals who make 175 percent of poverty level will receive full 
cost-sharing assistance. This covers 34 percent of Illinois' Medicare 
population, 549,000 people. It increases payments to all hospitals in 
2003. It increases payments to community hospitals. It increases DSH 
payments, adds a 10 percent increase to rural home health care 
agencies, increases by 10 percent hospice payments.
  Mr. Speaker, it is a finely crafted bill that went through the 
committee process. It is not a perfect bill. It is a bill that we can 
pass on the floor tonight. I commend my colleagues and look forward to 
passing this bill.
  Ms. SLAUGHTER. Mr. Speaker, I yield 2 minutes to the gentlewoman from 
California (Ms. Pelosi), the Democratic whip.
  Ms. PELOSI. Mr. Speaker, I thank the gentlewoman for yielding me this 
time.
  Mr. Speaker, 37 years ago when Medicare first came into existence, 
there was a big fight over it. The Democrats wholeheartedly supported 
it. The Republicans opposed it. They still oppose Medicare.
  Over the years, they have made statements to that effect. Newt 
Gingrich when he was Speaker said that he would like to see Medicare, 
in his words, wither on the vine. And the Republican leader of the 
House, the gentleman from Texas (Mr. Armey) said that Medicare should 
be no part of a free world. In the debate in the Committee on Rules 
last night, the gentleman from Georgia (Mr. Linder) referred to it as a 
Soviet-style model, what the Democrats were proposing. A Soviet-style 
model.
  They did not support it then. They do not support it now. It is no 
wonder they have proposed this cruel hoax on America's seniors. To 
pretend they have a prescription drug benefit that is a guarantee is 
simply not true. They offer no guarantee, merely a suggestion.
  The Republican bill does not contain any defined premium or 
assurances that prescription drugs will be affordable. In the one State 
where such a program exists, the monthly premium is $85 per month. That 
is in Nevada.
  Less than one-fifth of the estimated cost of Medicare beneficiaries 
over the next 10 years will be covered in this bill. The Republican 
bill does not provide guaranteed access to the drugs seniors need or 
access to their local pharmacy.
  If we had been allowed to present a substitute tonight, which this 
rule prevents, the Democratic substitute would have provided a 
guaranteed, affordable prescription drug benefit for all seniors that 
will amount to an entitlement under Medicare. The gentleman from Texas 
(Mr. Barton) said before this is optional; it is not mandatory. He said 
that himself on the floor here.
  Mr. Speaker, imagine a situation where we could have prescription 
drug benefits for all of our seniors, the quality of life that it would 
produce, and the cost savings to our budget.
  Mr. LINDER. Mr. Speaker, I yield myself 30 seconds to point out a 
couple of things in the previous statement.
  Mr. Speaker, Mr. Gingrich did not ever say Medicare would wither on 
the vine. This was played out on CNN very clearly when they played the 
whole statement, not the botched statement the Democrats have been 
running. He said if we bring competition into the system, the Health 
Care Financing Administration would wither on the vine.
  Secondly, I will point out that the Democrats had a majority here for 
40 years. When I first came here, they had a huge majority in both 
bodies, and the President was a Democratic; and they did not even offer 
one. I think it is fair to say that the Republicans are making the 
effort.
  Mr. Speaker, I yield 1 minute to the gentlewoman from Pennsylvania 
(Ms. Hart).
  Ms. HART. Mr. Speaker, I rise in support of the rule and urge Members 
to also support the bill.
  The Centers for Medicaid and Medicare Services did a poll checking 
out this bill. They estimated that virtually all of the Medicare 
beneficiaries, that is at least 95 percent of them, would opt for this 
drug coverage. I doubt that 95 percent of Medicare recipients would be 
interested in their proposal, but this proposal provides seniors with 
coverage for prescription drugs that they cannot get today. That means 
the choice they currently make of leaving that prescription drug bag on 
the counter because they cannot afford it or paying for it and taking 
it home is no longer a choice they have to make. They pay for it 
because they have coverage, they take it home, and their health 
improves.
  All of the senior citizens that I have met with in my district have 
been asking me to please help them get the coverage for the 
prescription drugs they need to stay healthy and out of the hospital. 
That is all they ask. The women and the men. That is what we give them 
in our bill. I urge support.
  Ms. SLAUGHTER. Mr. Speaker, I yield 1 minute to the gentleman from 
New York (Mr. Nadler).
  Mr. NADLER. Mr. Speaker, what we have on the floor today is a 
pitiful, pathetic, puny, pretend plan; a pretend plan that pretends to 
offer seniors prescription drug care, prescription drugs; but what it 
really does is gives a lot of money to the insurance companies and says 
please, we hope you will do something for our seniors, maybe. That is 
all it is.
  They are too something, I will not say what because my words might be 
taken down, but they will not permit the Democratic plan, which is a 
straight plan for Medicare to pay for 80 percent of the cost of 
prescription

[[Page 11860]]

drugs, to be offered on this floor because they do not have confidence 
that they could win the debate. They will not permit the two plans to 
be offered on this floor to be debated because they are afraid in the 
light of day if the American people see it, they would say, We want a 
plan. We want what they call the Soviet-style plan, which is what they 
characterize Medicare as for the last 40 years.
  They did not want it then. They still do not want it. And they 
certainly do not want Medicare coverage for prescription drugs. They 
want to give more money to the insurance companies and say we hope they 
will provide it. Fat chance.
  Mr. LINDER. Mr. Speaker, I yield 1 minute to the gentleman from 
Kentucky (Mr. Fletcher).
  Mr. FLETCHER. Mr. Speaker, this evening we are addressing one of the 
most pressing health care issues in America. I am very disappointed 
that my colleagues on the other side of the aisle, when we marked up 
the budget, they absolutely set aside no amount of money, zippo. They 
did nothing to set aside any money for prescription drugs for seniors. 
There was no plan in order to provide the funding for the plan that 
they offered in the committee; and it was a $973 billion plan offered 
in the committee. There was no way of paying for it. This burden was 
going to be on our children and grandchildren, and the other side of 
the aisle offered no single way of paying for it.
  Mr. Speaker, they talked about taxes, but they did not offer the tax 
increase that would have been required. Are they taking it from Social 
Security? That is where it would have had to come from. Now they talk 
about controlling cost.
  We eliminated the best prices which eliminated the floor. 
Congressional Budget Office estimates this has the most cost-
controlling policy of any plan offered. That means we are going to 
provide the most competitive prices for drugs. I encourage Members to 
support the rule and the bill.
  Ms. SLAUGHTER. Mr. Speaker, I yield 2 minutes to the gentleman from 
Arkansas (Mr. Berry).
  Mr. BERRY. Mr. Speaker, I thank the gentlewoman for yielding me this 
time.
  Mr. Speaker, this rule is a fraud. This bill is a fraud. They have 
come to the floor and said that they are going to do something about 
prescription drugs for our seniors. Not a dime of this money goes to 
buy any medicine. It goes to the insurance companies.
  I wondered, as I listened to this debate this evening, if my 
colleagues on the other side of the aisle have bought into the 
philosophy of that old philosopher and spiritual leader, Brother Dave 
Gardner, who said, ``When you get a man down, kick him because it gives 
him incentive to rise above himself.''
  They have got our senior citizens down, and now they want to kick 
them. The Greatest Generation that lived through the Depression, fought 
World War II and built this Nation, and now we are going to just kick 
them one more time. And if we cannot kick them, we are going to trick 
them and try to make them think that we are going to buy them some 
prescription medicine. This bill does not buy them anything.
  Mr. Speaker, this rule should not pass and this bill should not pass 
because everyone who votes for it is going to have to live forever with 
the fact that they mistreated our senior citizens, the Greatest 
Generation one more time.
  Mr. LINDER. Mr. Speaker, I yield 2 minutes to the gentleman from 
California (Mr. Cunningham).
  Mr. CUNNINGHAM. Mr. Speaker, I would like to speak to my colleagues 
on the other side of the aisle. The gentlewoman from New York (Ms. 
Slaughter) and I have been friends for a long time. I have a mom. I 
have a grandmother that is 93 years old. I have a mother-in-law and two 
daughters. They just left topside.
  What we resent on this side, and they know the gamesmanship when they 
had the majority, but the inferences that Republicans do not care about 
our families is wrong. We do. I would give my life for my family. And I 
would not give a dime to drug companies if I thought it was going to 
hurt.
  Let me give an example. I had pneumonia a couple of years ago; and 
when I went to the doctor, the price of Augmentin was $110. My wife had 
prescription drug insurance through the school system where she is a 
teacher. That drug instead of $110 was $17. That is the free market 
private system, and we want more and more people to be included in 
that.
  Now, I understand if the other side of the aisle wants a government-
controlled health care plan like the former First Lady tried to do with 
health care. That is their prerogative, but we think that is wrong. We 
do care about our people. No child should have to apologize because 
they go to get a drug, and like the President sat right up here, 
President Clinton, and we take care of that. But to give the inference 
that Republicans do not care about our families is wrong because we do. 
We care very much.
  I would also say that the gentlewoman from California (Ms. Pelosi), 
who spoke previously, since 1988, every single year she voted to take 
100 percent of the money out of the Social Security trust fund, and 
here is the documentation.
  Ms. SLAUGHTER. Mr. Speaker, I yield 1 minute to the gentlewoman from 
Texas (Ms. Jackson-Lee).
  Ms. JACKSON-LEE of Texas. Mr. Speaker, I am told that our physicians 
take a Hippocratic oath, and that oath says when someone is in need and 
trusts the physician, do no harm.
  I am sad to say that the insurance companies and the Republicans have 
gotten together, and they are doing great harm. The Republican 
insurance protection act: value, zero. Zero benefits. Zero to Mom, zero 
to Dad, zero benefits to the disabled. It is a shame. Realize that our 
sick seniors are on a roller coaster. Their premiums are not 
guaranteed, deductibles are high. She is not assured that she will be 
able to buy the drugs at the pharmacy she trusts, and she gets nothing 
for a big part of the year, even though she keeps paying premiums.
  Mr. Speaker, the Member from Florida said everybody takes money, the 
Democrats took money. But the Democrats did not take $31 million 5 days 
before we were supposed to come to the floor of the House and deny us a 
substitute in order for us to be able to debate this bill on behalf of 
the American people.
  Mr. LINDER. Mr. Speaker, I yield 1 minute to the gentleman from 
Georgia (Mr. Kingston).
  Mr. KINGSTON. Mr. Speaker, after looking at this issue from many 
different angles and for many different weeks, I am going to support 
this rule. There is a lot more left to do that I am going to be a part 
of, and I am proud to see that a number of our Members of our 
leadership have agreed to in terms of addressing and lowering the cost 
of prescription drugs. But as I listen to this rhetoric tonight, and so 
much of it is totally uncalled for, one has to believe the statement 
made in the New Republic in June that the Democrats want this issue on 
the table because it is an election year, they do not want the bill, 
they want the issue. I am listening to this, and I know there are a lot 
of Democrats who want the policy, but I cannot help but think tonight 
that the Democrats want the politics.

                              {time}  2215

  You have to ask yourself, where is your plan? Where is your plan? We 
know that Mr. Daschle and some of the folks across the hall have one, 
but it is a trillion-dollar plan which will bankrupt Medicare. As you 
say, you do not like our plan. Well, our plan does not bankrupt 
Medicare. If you want to protect Medicare, why do you want to bankrupt 
it?


                Announcement by the Speaker Pro Tempore

  The SPEAKER pro tempore (Mr. LaTourette). The Chair would again ask 
all Members to yield to the gavel.
  Ms. SLAUGHTER. Mr. Speaker, we had a plan. We had a fine plan. We 
just could not bring it out here before the American people.
  Mr. Speaker, I yield 1\1/2\ minutes to the gentlewoman from 
California (Ms. Eshoo).
  Ms. ESHOO. I thank the gentlewoman for yielding me this time.

[[Page 11861]]

  Mr. Speaker, I rise this evening in opposition to this rule. There is 
something very, very, very wrong in this House; and my Republican 
colleagues know it. You know it because you always speak of choice. You 
always speak about competition. You are always talking about new ideas. 
But you will not allow them to come to the floor of the House of 
Representatives.
  I represent 650,000 people. The gentleman that just came to the 
podium said, ``Where is your plan?'' It is right here. But you are 
afraid to debate it. Why do you not stand up, be men and women, and 
debate it? Do not be afraid of ideas. So we will protest.
  You know that the Democrats since the 1960s and before that have had 
a love affair with Medicare. You will never drive a wedge between us 
and Medicare. That is what we wanted to offer. We wanted to bring our 
plan to the floor of the House. Perhaps you have the votes to beat 
that, but the disgrace is that you waved the flag and then you waived 
the democratic rules.
  Shame on you. Shame on you for doing that. Go home and explain that 
to good Republicans, to good independents and to the Democrats in your 
district. They would never, ever accept that. That is why there is 
frustration and anger on this side. We can debate these things, but you 
are afraid to. You do not want to hear an idea, you do not want to hear 
about choice, and you do not want to hear about competition.
  Ms. SLAUGHTER. Mr. Speaker, I yield back the balance of my time.
  Mr. LINDER. Mr. Speaker, I yield myself the balance of my time.
  We have had an interesting debate here. We had a parade of female 
Democrats march down citing the mantra that this bill does nothing for 
senior women. In fact, not one of them spoke with any particularity to 
the bill. We had the gentlewoman from Connecticut (Mrs. Johnson) step 
up right after that and list time after time after time where this was 
of benefit for women across the country and most particularly low-
income women.
  Women have been abused by our social service programs from Social 
Security through Medicare. This is the first time that any party or any 
Congress has made an effort to fix that. This is a genuine improvement 
on this current circumstance.
  Facts do not cease to exist just because they are ignored.
  It was a fact that, some time ago, the Democrats controlled this body 
for 40 years and controlled the White House from time to time in the 
midst of that and never once put forth this important program.
  It was a fact that when I came here in 1993 they had overwhelming 
majorities and a President who was enthusiastic about taking over the 
health care system. But they did not ever put on the floor for a 
discussion or debate any prescription drug program for either side to 
consider.
  It is a fact that the Democrats had an opportunity to put forth a 
program that fit within the budget agreement that was passed by this 
House, a discipline that this body and this side of the House took 
seriously. We put forth a bill that fit within the discipline. They did 
not. This is our proposal. This is our rule. We urge support for it.
  Mr. Speaker, I yield back the balance of my time, and I move the 
previous question on the resolution.
  The previous question was ordered.
  The SPEAKER pro tempore. The question is on the resolution.
  The question was taken; and the Speaker pro tempore announced that 
the ayes appeared to have it.
  Ms. SLAUGHTER. Mr. Speaker, I object to the vote on the ground that a 
quorum is not present and make the point of order that a quorum is not 
present.
  The SPEAKER pro tempore. Evidently, a quorum is not present.
  The Sergeant at Arms will notify absent Members.
  The vote was taken by electronic device, and there were--yeas 218, 
nays 213, not voting 4, as follows:

                             [Roll No. 280]

                               YEAS--218

     Aderholt
     Akin
     Armey
     Bachus
     Baker
     Ballenger
     Barr
     Bartlett
     Barton
     Bass
     Bereuter
     Biggert
     Bilirakis
     Blunt
     Boehlert
     Boehner
     Bonilla
     Bono
     Boozman
     Brady (TX)
     Brown (SC)
     Bryant
     Burr
     Burton
     Buyer
     Callahan
     Calvert
     Camp
     Cannon
     Cantor
     Capito
     Castle
     Chabot
     Chambliss
     Coble
     Collins
     Combest
     Cooksey
     Cox
     Crane
     Crenshaw
     Cubin
     Culberson
     Cunningham
     Davis, Jo Ann
     Davis, Tom
     Deal
     DeLay
     DeMint
     Diaz-Balart
     Doolittle
     Dreier
     Duncan
     Dunn
     Ehlers
     Ehrlich
     Emerson
     English
     Everett
     Ferguson
     Flake
     Fletcher
     Foley
     Forbes
     Fossella
     Frelinghuysen
     Gallegly
     Ganske
     Gekas
     Gibbons
     Gilchrest
     Gillmor
     Gilman
     Goode
     Goodlatte
     Goss
     Graham
     Granger
     Graves
     Green (WI)
     Greenwood
     Grucci
     Hansen
     Hart
     Hastert
     Hastings (WA)
     Hayes
     Hayworth
     Hefley
     Herger
     Hilleary
     Hobson
     Hoekstra
     Horn
     Hostettler
     Houghton
     Hulshof
     Hunter
     Hyde
     Isakson
     Issa
     Jenkins
     Johnson (CT)
     Johnson (IL)
     Johnson, Sam
     Keller
     Kelly
     Kennedy (MN)
     Kerns
     King (NY)
     Kingston
     Kirk
     Knollenberg
     Kolbe
     LaHood
     Latham
     LaTourette
     Leach
     Lewis (CA)
     Lewis (KY)
     Linder
     LoBiondo
     Lucas (OK)
     Manzullo
     McCrery
     McHugh
     McInnis
     McKeon
     Mica
     Miller, Dan
     Miller, Gary
     Miller, Jeff
     Moran (KS)
     Myrick
     Nethercutt
     Ney
     Northup
     Norwood
     Nussle
     Osborne
     Ose
     Otter
     Oxley
     Paul
     Pence
     Peterson (PA)
     Petri
     Pickering
     Pitts
     Platts
     Pombo
     Portman
     Pryce (OH)
     Putnam
     Quinn
     Radanovich
     Ramstad
     Regula
     Rehberg
     Reynolds
     Riley
     Rogers (KY)
     Rogers (MI)
     Rohrabacher
     Ros-Lehtinen
     Royce
     Ryan (WI)
     Ryun (KS)
     Saxton
     Schaffer
     Schrock
     Sensenbrenner
     Sessions
     Shadegg
     Shaw
     Shays
     Sherwood
     Shimkus
     Shuster
     Simmons
     Simpson
     Skeen
     Smith (MI)
     Smith (NJ)
     Smith (TX)
     Souder
     Stearns
     Stump
     Sullivan
     Sununu
     Sweeney
     Tancredo
     Tauzin
     Taylor (NC)
     Terry
     Thomas
     Thornberry
     Thune
     Tiahrt
     Tiberi
     Toomey
     Upton
     Vitter
     Walden
     Walsh
     Wamp
     Watkins (OK)
     Watts (OK)
     Weldon (FL)
     Weldon (PA)
     Weller
     Whitfield
     Wicker
     Wilson (NM)
     Wilson (SC)
     Wolf
     Young (AK)
     Young (FL)

                               NAYS--213

     Abercrombie
     Ackerman
     Allen
     Andrews
     Baca
     Baird
     Baldacci
     Baldwin
     Barcia
     Barrett
     Becerra
     Bentsen
     Berkley
     Berman
     Berry
     Bishop
     Blagojevich
     Blumenauer
     Bonior
     Borski
     Boswell
     Boucher
     Boyd
     Brady (PA)
     Brown (FL)
     Brown (OH)
     Capps
     Capuano
     Cardin
     Carson (IN)
     Carson (OK)
     Clayton
     Clement
     Clyburn
     Condit
     Conyers
     Costello
     Coyne
     Cramer
     Crowley
     Cummings
     Davis (CA)
     Davis (FL)
     Davis (IL)
     DeFazio
     DeGette
     Delahunt
     DeLauro
     Deutsch
     Dicks
     Dingell
     Doggett
     Dooley
     Doyle
     Edwards
     Eshoo
     Etheridge
     Evans
     Farr
     Fattah
     Filner
     Ford
     Frank
     Frost
     Gephardt
     Gonzalez
     Gordon
     Green (TX)
     Gutierrez
     Gutknecht
     Hall (OH)
     Hall (TX)
     Harman
     Hastings (FL)
     Hill
     Hilliard
     Hinchey
     Hinojosa
     Hoeffel
     Holden
     Holt
     Honda
     Hooley
     Hoyer
     Inslee
     Israel
     Istook
     Jackson (IL)
     Jackson-Lee (TX)
     Jefferson
     John
     Johnson, E. B.
     Jones (NC)
     Jones (OH)
     Kanjorski
     Kaptur
     Kennedy (RI)
     Kildee
     Kilpatrick
     Kind (WI)
     Kleczka
     Kucinich
     LaFalce
     Lampson
     Langevin
     Lantos
     Larsen (WA)
     Larson (CT)
     Lee
     Levin
     Lewis (GA)
     Lipinski
     Lofgren
     Lowey
     Lucas (KY)
     Luther
     Lynch
     Maloney (CT)
     Maloney (NY)
     Markey
     Mascara
     Matheson
     Matsui
     McCarthy (MO)
     McCarthy (NY)
     McCollum
     McDermott
     McGovern
     McIntyre
     McKinney
     McNulty
     Meehan
     Meek (FL)
     Meeks (NY)
     Menendez
     Millender-McDonald
     Miller, George
     Mink
     Mollohan
     Moore
     Moran (VA)
     Morella
     Murtha
     Nadler
     Napolitano
     Neal
     Oberstar
     Obey
     Olver
     Ortiz
     Owens
     Pallone
     Pascrell
     Pastor
     Payne
     Pelosi
     Peterson (MN)
     Phelps
     Pomeroy
     Price (NC)
     Rahall
     Rangel
     Reyes
     Rivers
     Rodriguez
     Roemer
     Ross
     Rothman
     Roybal-Allard
     Rush
     Sabo
     Sanchez
     Sanders
     Sandlin
     Sawyer
     Schakowsky
     Schiff
     Scott
     Serrano
     Sherman
     Shows
     Skelton
     Slaughter
     Smith (WA)
     Snyder
     Solis
     Spratt
     Stark
     Stenholm
     Strickland
     Stupak
     Tanner
     Tauscher
     Taylor (MS)
     Thompson (CA)
     Thompson (MS)
     Thurman
     Tierney
     Towns
     Turner
     Udall (CO)
     Udall (NM)
     Velazquez
     Visclosky
     Waters
     Watson (CA)
     Watt (NC)

[[Page 11862]]


     Waxman
     Weiner
     Wexler
     Woolsey
     Wu
     Wynn

                             NOT VOTING--4

     Clay
     Engel
     Roukema
     Traficant

                              {time}  2243

  Mr. WEINER, Ms. KAPTUR, and Mr. BECERRA changed their vote from 
``yea'' to ``nay.''
  So the resolution was agreed to.
  The result of the vote was announced as above recorded.
  A motion to reconsider was laid on the table.

                              {time}  2245

  Mrs. JOHNSON of Connecticut. Mr. Speaker, pursuant to House 
Resolution 465, I call up the bill (H.R. 4954) to amend title XVIII of 
the Social Security Act to provide for a voluntary program for 
prescription drug coverage under the Medicare Program, to modernize and 
reform payments and the regulatory structure of the Medicare Program, 
and for other purposes, and ask for its immediate consideration.
  The Clerk read the title of the bill.
  The SPEAKER pro tempore (Mr. Thornberry). Pursuant to House 
Resolution 465, the bill is considered as read for amendment.
  The text of H.R. 4954 is as follows:

                               H.R. 4954

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

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

       (a) Short Title.--This Act may be cited as the ``Medicare 
     Modernization and Prescription Drug Act of 2002''.
       (b) Amendments to Social Security Act.--Except as otherwise 
     specifically provided, whenever in this Act an amendment is 
     expressed in terms of an amendment to or repeal of a section 
     or other provision, the reference shall be considered to be 
     made to that section or other provision of the Social 
     Security Act.
       (c) BIPA; Secretary.--In this Act:
       (1) BIPA.--The term ``BIPA'' means the Medicare, Medicaid, 
     and SCHIP Benefits Improvement and Protection Act of 2000, as 
     enacted into law by section 1(a)(6) of Public Law 106-554.
       (2) Secretary.--The term ``Secretary'' means the Secretary 
     of Health and Human Services.
       (d) Table of Contents.--The table of contents of this Act 
     is as follows:

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

              TITLE I--MEDICARE PRESCRIPTION DRUG BENEFIT

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

         ``Part D--Voluntary Prescription Drug Benefit Program

``Sec. 1860A. Benefits; eligibility; enrollment; and coverage period.
``Sec. 1860B. Requirements for qualified prescription drug coverage.
``Sec. 1860C. Beneficiary protections for qualified prescription drug 
              coverage.
``Sec. 1860D. Requirements for prescription drug plan (PDP) sponsors; 
              contracts; establishment of standards.
``Sec. 1860E. Process for beneficiaries to select qualified 
              prescription drug coverage.
``Sec. 1860F. Submission of bids.
``Sec. 1860G. Premium and cost-sharing subsidies for low-income 
              individuals.
``Sec. 1860H. Subsidies for all medicare beneficiaries for qualified 
              prescription drug coverage.
``Sec. 1860I. Medicare Prescription Drug Trust Fund.
``Sec. 1860J. Definitions; treatment of references to provisions in 
              part C.
Sec. 102. Offering of qualified prescription drug coverage under the 
              Medicare+Choice program.
Sec. 103. Medicaid amendments.
Sec. 104. Medigap transition.
Sec. 105. Medicare prescription drug discount card endorsement program.

     TITLE II--MEDICARE+CHOICE REVITALIZATION AND MEDICARE+CHOICE 
                          COMPETITION PROGRAM

               Subtitle A--Medicare+Choice Revitalization

Sec. 201. Medicare+Choice improvements.
Sec. 202. Making permanent change in Medicare+Choice reporting 
              deadlines and annual, coordinated election period.
Sec. 203. Avoiding duplicative State regulation.
Sec. 204. Specialized Medicare+Choice plans for special needs 
              beneficiaries.
Sec. 205. Medicare MSAs.
Sec. 206. Extension of reasonable cost and SHMO contracts.

            Subtitle B--Medicare+Choice Competition Program

Sec. 211. Medicare+Choice competition program.
Sec. 212. Demonstration program for competitive-demonstration areas.
Sec. 213. Conforming amendments.

               TITLE III--RURAL HEALTH CARE IMPROVEMENTS

Sec. 301. Reference to full market basket increase for sole community 
              hospitals.
Sec. 302. Enhanced disproportionate share hospital (DSH) treatment for 
              rural hospitals and urban hospitals with fewer than 100 
              beds.
Sec. 303. 2-year phased-in increase in the standardized amount in rural 
              and small urban areas to achieve a single, uniform 
              standardized amount.
Sec. 304. More frequent update in weights used in hospital market 
              basket.
Sec. 305. Improvements to critical access hospital program.
Sec. 306. Extension of temporary increase for home health services 
              furnished in a rural area.
Sec. 307. Reference to 10 percent increase in payment for hospice care 
              furnished in a frontier area and rural hospice 
              demonstration project.
Sec. 308. Reference to priority for hospitals located in rural or small 
              urban areas in redistribution of unused graduate medical 
              education residencies.
Sec. 309. GAO study of geographic differences in payments for 
              physicians' services.
Sec. 310. Providing safe harbor for certain collaborative efforts that 
              benefit medically underserved populations.

                TITLE IV--PROVISIONS RELATING TO PART A

                Subtitle A--Inpatient Hospital Services

Sec. 401. Revision of acute care hospital payment updates.
Sec. 402. 2-year increase in level of adjustment for indirect costs of 
              medical education (IME).
Sec. 403. Recognition of new medical technologies under inpatient 
              hospital PPS.
Sec. 404. Phase-in of Federal rate for hospitals in Puerto Rico.
Sec. 405. Reference to provision relating to enhanced disproportionate 
              share hospital (DSH) payments for rural hospitals and 
              urban hospitals with fewer than 100 beds.
Sec. 406. Reference to provision relating to 2-year phased-in increase 
              in the standardized amount in rural and small urban areas 
              to achieve a single, uniform standardized amount.
Sec. 407. Reference to provision for more frequent updates in the 
              weights used in hospital market basket.
Sec. 408. Reference to provision making improvements to critical access 
              hospital program.for more frequent updates in the weights 
              used in hospital market basket.

             Subtitle B--Skilled Nursing Facility Services

Sec. 411. Payment for covered skilled nursing facility services.

                          Subtitle C--Hospice

Sec. 421. Coverage of hospice consultation services.
Sec. 422. 10 percent increase in payment for hospice care furnished in 
              a frontier area.
Sec. 423. Rural hospice demonstration project.

                      Subtitle D--Other Provisions

Sec. 431. Demonstration project for use of recovery audit contractors 
              for part A services.

                 TITLE V--PROVISIONS RELATING TO PART B

                    Subtitle A--Physicians' Services

Sec. 501. Revision of updates for physicians' services.
Sec. 502. Studies on access to physicians' services.
Sec. 503. MedPAC report on payment for physicians' services.

                       Subtitle B--Other Services

Sec. 511. Competitive acquisition of certain items and services.
Sec. 512. Payment for ambulance services.
Sec. 513. 1-year extension of moratorium on therapy caps; provisions 
              relating to reports.
Sec. 514. Accelerated implementation of 20 percent coinsurance for 
              hospital outpatient department (OPD) services; other OPD 
              provisions.
Sec. 515. Coverage of an initial preventive physical examination.
Sec. 516. Renal dialysis services.

             TITLE VI--PROVISIONS RELATING TO PARTS A AND B

                    Subtitle A--Home Health Services

Sec. 601. Elimination of 15 percent reduction in payment rates under 
              the prospective payment system.

[[Page 11863]]

Sec. 602. Establishment of reduced copayment for a home health service 
              episode of care for certain beneficiaries.
Sec. 603. Update in home health services.
Sec. 604. OASIS Task Force; suspension of certain OASIS data collection 
              requirements pending Task Force submittal of report.
Sec. 605. MedPAC study on medicare margins of home health agencies.

             Subtitle B--Direct Graduate Medical Education

Sec. 611. Extension of update limitation on high cost programs.
Sec. 612. Redistribution of unused resident positions.

                      Subtitle C--Other Provisions

Sec. 621. Modifications to Medicare Payment Advisory Commission 
              (MedPAC).
Sec. 622. Demonstration project for disease management for certain 
              medicare beneficiaries with diabetes.
Sec. 623. Demonstration project for medical adult day care services.

              TITLE VII--MEDICARE BENEFITS ADMINISTRATION

Sec. 701. Establishment of Medicare Benefits Administration.

        TITLE VIII--REGULATORY REDUCTION AND CONTRACTING REFORM

                     Subtitle A--Regulatory Reform

Sec. 801. Construction; definition of supplier.
Sec. 802. Issuance of regulations.
Sec. 803. Compliance with changes in regulations and policies.
Sec. 804. Reports and studies relating to regulatory reform.

                     Subtitle B--Contracting Reform

Sec. 811. Increased flexibility in medicare administration.
Sec. 812. Requirements for information security for medicare 
              administrative contractors.

                   Subtitle C--Education and Outreach

Sec. 821. Provider education and technical assistance.
Sec. 822. Small provider technical assistance demonstration program.
Sec. 823. Medicare provider ombudsman; medicare beneficiary ombudsman.
Sec. 824. Beneficiary outreach demonstration program.

                    Subtitle D--Appeals and Recovery

Sec. 831. Transfer of responsibility for medicare appeals.
Sec. 832. Process for expedited access to review.
Sec. 833. Revisions to medicare appeals process.
Sec. 834. Prepayment review.
Sec. 835. Recovery of overpayments.
Sec. 836. Provider enrollment process; right of appeal.
Sec. 837. Process for correction of minor errors and omissions on 
              claims without pursuing appeals process.
Sec. 838. Prior determination process for certain items and services; 
              advance beneficiary notices.

                  Subtitle E--Miscellaneous Provisions

Sec. 841. Policy development regarding evaluation and management (E & 
              M) documentation guidelines.
Sec. 842. Improvement in oversight of technology and coverage.
Sec. 843. Treatment of hospitals for certain services under medicare 
              secondary payor (MSP) provisions.
Sec. 844. EMTALA improvements.
Sec. 845. Emergency Medical Treatment and Active Labor Act (EMTALA) 
              Technical Advisory Group.
Sec. 846. Authorizing use of arrangements with other hospice programs 
              to provide core hospice services in certain 
              circumstances.
Sec. 847. Application of OSHA bloodborne pathogens standard to certain 
              hospitals.
Sec. 848. BIPA-related technical amendments and corrections.
Sec. 849. Conforming authority to waive a program exclusion.
Sec. 850. Treatment of certain dental claims.
Sec. 851. Annual publication of list of national coverage 
              determinations.

     TITLE IX--MEDICAID, PUBLIC HEALTH, AND OTHER HEALTH PROVISIONS

                    Subtitle A--Medicaid Provisions

Sec. 901. National Bipartisan Commission on the Future of Medicaid.
Sec. 902. GAO study on medicaid drug payment system.

                    Subtitle B--Internet Pharmacies

Sec. 911. Findings.
Sec. 912. Amendment to Federal Food, Drug, and Cosmetic Act.
Sec. 913. Public education.
Sec. 914. Study regarding coordination of regulatory activities.
Sec. 915. Effective date.

            Subtitle C--Promotion of Electronic Prescription

Sec. 921. Program of grants to health care providers to implement 
              electronic prescription drug programs.

                 Subtitle D--Treatment of Rare Diseases

Sec. 931. NIH Office of Rare Diseases at National Institutes of Health.
Sec. 932. Rare disease regional centers of excellence.

             Subtitle E--Other Provisions Relating to Drugs

Sec. 941. GAO study regarding direct-to-consumer advertising of 
              prescription drugs.
Sec. 942. Certain health professions programs regarding practice of 
              pharmacy.

               ``Subpart 3--Pharmacist Workforce Programs

``Sec. 771. Public service announcements.
``Sec. 772. Demonstration project.
``Sec. 773. Information technology.
``Sec. 774. Authorization of appropriations.

              TITLE X--HEALTH-CARE RELATED TAX PROVISIONS

Sec. 1001. Eligibility for Archer MSA's extended to account holders of 
              Medicare+Choice MSA's.
Sec. 1002. Adjustment of employer contributions to Combined Benefit 
              Fund to reflect medicare prescription drug subsidy 
              payments.
Sec. 1003. Expansion of human clinical trials qualifying for orphan 
              drug credit.

              TITLE I--MEDICARE PRESCRIPTION DRUG BENEFIT

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

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

         ``Part D--Voluntary Prescription Drug Benefit Program

     ``SEC. 1860A. BENEFITS; ELIGIBILITY; ENROLLMENT; AND COVERAGE 
                   PERIOD.

       ``(a) Provision of Qualified Prescription Drug Coverage 
     Through Enrollment in Plans.--Subject to the succeeding 
     provisions of this part, each individual who is entitled to 
     benefits under part A or is enrolled under part B is entitled 
     to obtain qualified prescription drug coverage (described in 
     section 1860B(a)) as follows:
       ``(1) Medicare+choice plan.--If the individual is eligible 
     to enroll in a Medicare+Choice plan that provides qualified 
     prescription drug coverage under section 1851(j), the 
     individual may enroll in the plan and obtain coverage through 
     such plan.
       ``(2) Prescription drug plan.--If the individual is not 
     enrolled in a Medicare+Choice plan that provides qualified 
     prescription drug coverage, the individual may enroll under 
     this part in a prescription drug plan (as defined in section 
     1860J(a)(5)).

     Such individuals shall have a choice of such plans under 
     section 1860E(d).
       ``(b) General Election Procedures.--
       ``(1) In general.--An individual eligible to make an 
     election under subsection (a) may elect to enroll in a 
     prescription drug plan under this part, or elect the option 
     of qualified prescription drug coverage under a 
     Medicare+Choice plan under part C, and to change such 
     election only in such manner and form as may be prescribed by 
     regulations of the Administrator of the Medicare Benefits 
     Administration (appointed under section 1808(b)) (in this 
     part referred to as the `Medicare Benefits Administrator') 
     and only during an election period prescribed in or under 
     this subsection.
       ``(2) Election periods.--
       ``(A) In general.--Except as provided in this paragraph, 
     the election periods under this subsection shall be the same 
     as the coverage election periods under the Medicare+Choice 
     program under section 1851(e), including--
       ``(i) annual coordinated election periods; and
       ``(ii) special election periods.

     In applying the last sentence of section 1851(e)(4) (relating 
     to discontinuance of a Medicare+Choice election during the 
     first year of eligibility) under this subparagraph, in the 
     case of an election described in such section in which the 
     individual had elected or is provided qualified prescription 
     drug coverage at the time of such first enrollment, the 
     individual shall be permitted to enroll in a prescription 
     drug plan under this part at the time of the election of 
     coverage under the original fee-for-service plan.
       ``(B) Initial election periods.--
       ``(i) Individuals currently covered.--In the case of an 
     individual who is entitled to benefits under part A or 
     enrolled under part B as of November 1, 2004, there shall be 
     an initial election period of 6 months beginning on that 
     date.
       ``(ii) Individual covered in future.--In the case of an 
     individual who is first entitled to benefits under part A or 
     enrolled under part B after such date, there shall be an 
     initial election period which is the same as the initial 
     enrollment period under section 1837(d).
       ``(C) Additional special election periods.--The 
     Administrator shall establish special election periods--

[[Page 11864]]

       ``(i) in cases of individuals who have and involuntarily 
     lose prescription drug coverage described in subsection 
     (c)(2)(C);
       ``(ii) in cases described in section 1837(h) (relating to 
     errors in enrollment), in the same manner as such section 
     applies to part B;
       ``(iii) in the case of an individual who meets such 
     exceptional conditions (including conditions provided under 
     section 1851(e)(4)(D)) as the Administrator may provide; and
       ``(iv) in cases of individuals (as determined by the 
     Administrator) who become eligible for prescription drug 
     assistance under title XIX under section 1935(d).
       ``(c) Guaranteed Issue; Community Rating; and 
     Nondiscrimination.--
       ``(1) Guaranteed issue.--
       ``(A) In general.--An eligible individual who is eligible 
     to elect qualified prescription drug coverage under a 
     prescription drug plan or Medicare+Choice plan at a time 
     during which elections are accepted under this part with 
     respect to the plan shall not be denied enrollment based on 
     any health status-related factor (described in section 
     2702(a)(1) of the Public Health Service Act) or any other 
     factor.
       ``(B) Medicare+choice limitations permitted.--The 
     provisions of paragraphs (2) and (3) (other than subparagraph 
     (C)(i), relating to default enrollment) of section 1851(g) 
     (relating to priority and limitation on termination of 
     election) shall apply to PDP sponsors under this subsection.
       ``(2) Community-rated premium.--
       ``(A) In general.--In the case of an individual who 
     maintains (as determined under subparagraph (C)) continuous 
     prescription drug coverage since the date the individual 
     first qualifies to elect prescription drug coverage under 
     this part, a PDP sponsor or Medicare+Choice organization 
     offering a prescription drug plan or Medicare+Choice plan 
     that provides qualified prescription drug coverage and in 
     which the individual is enrolled may not deny, limit, or 
     condition the coverage or provision of covered prescription 
     drug benefits or increase the premium under the plan based on 
     any health status-related factor described in section 
     2702(a)(1) of the Public Health Service Act or any other 
     factor.
       ``(B) Late enrollment penalty.--In the case of an 
     individual who does not maintain such continuous prescription 
     drug coverage (as described in subparagraph (C)), a PDP 
     sponsor or Medicare+Choice organization may (notwithstanding 
     any provision in this title) adjust the premium otherwise 
     applicable or impose a pre-existing condition exclusion with 
     respect to qualified prescription drug coverage in a manner 
     that reflects additional actuarial risk involved. Such a risk 
     shall be established through an appropriate actuarial opinion 
     of the type described in subparagraphs (A) through (C) of 
     section 2103(c)(4).
       ``(C) Continuous prescription drug coverage.--An individual 
     is considered for purposes of this part to be maintaining 
     continuous prescription drug coverage on and after the date 
     the individual first qualifies to elect prescription drug 
     coverage under this part if the individual establishes that 
     as of such date the individual is covered under any of the 
     following prescription drug coverage and before the date that 
     is the last day of the 63-day period that begins on the date 
     of termination of the particular prescription drug coverage 
     involved (regardless of whether the individual subsequently 
     obtains any of the following prescription drug coverage):
       ``(i) Coverage under prescription drug plan or 
     medicare+choice plan.--Qualified prescription drug coverage 
     under a prescription drug plan or under a Medicare+Choice 
     plan.
       ``(ii) Medicaid prescription drug coverage.--Prescription 
     drug coverage under a medicaid plan under title XIX, 
     including through the Program of All-inclusive Care for the 
     Elderly (PACE) under section 1934, through a social health 
     maintenance organization (referred to in section 4104(c) of 
     the Balanced Budget Act of 1997), or through a 
     Medicare+Choice project that demonstrates the application of 
     capitation payment rates for frail elderly medicare 
     beneficiaries through the use of a interdisciplinary team and 
     through the provision of primary care services to such 
     beneficiaries by means of such a team at the nursing facility 
     involved.
       ``(iii) Prescription drug coverage under group health 
     plan.--Any outpatient prescription drug coverage under a 
     group health plan, including a health benefits plan under the 
     Federal Employees Health Benefit Plan under chapter 89 of 
     title 5, United States Code, and a qualified retiree 
     prescription drug plan as defined in section 1860H(f)(1), but 
     only if (subject to subparagraph (E)(ii)) the coverage 
     provides benefits at least equivalent to the benefits under a 
     qualified prescription drug plan.
       ``(iv) Prescription drug coverage under certain medigap 
     policies.--Coverage under a medicare supplemental policy 
     under section 1882 that provides benefits for prescription 
     drugs (whether or not such coverage conforms to the standards 
     for packages of benefits under section 1882(p)(1)), but only 
     if the policy was in effect on January 1, 2005, and if 
     (subject to subparagraph (E)(ii)) the coverage provides 
     benefits at least equivalent to the benefits under a 
     qualified prescription drug plan.
       ``(v) State pharmaceutical assistance program.--Coverage of 
     prescription drugs under a State pharmaceutical assistance 
     program, but only if (subject to subparagraph (E)(ii)) the 
     coverage provides benefits at least equivalent to the 
     benefits under a qualified prescription drug plan.
       ``(vi) Veterans' coverage of prescription drugs.--Coverage 
     of prescription drugs for veterans under chapter 17 of title 
     38, United States Code, but only if (subject to subparagraph 
     (E)(ii)) the coverage provides benefits at least equivalent 
     to the benefits under a qualified prescription drug plan.
       ``(D) Certification.--For purposes of carrying out this 
     paragraph, the certifications of the type described in 
     sections 2701(e) of the Public Health Service Act and in 
     section 9801(e) of the Internal Revenue Code shall also 
     include a statement for the period of coverage of whether the 
     individual involved had prescription drug coverage described 
     in subparagraph (C).
       ``(E) Disclosure.--
       ``(i) In general.--Each entity that offers coverage of the 
     type described in clause (iii), (iv), (v), or (vi) of 
     subparagraph (C) shall provide for disclosure, consistent 
     with standards established by the Administrator, of whether 
     such coverage provides benefits at least equivalent to the 
     benefits under a qualified prescription drug plan.
       ``(ii) Waiver of limitations.--An individual may apply to 
     the Administrator to waive the requirement that coverage of 
     such type provide benefits at least equivalent to the 
     benefits under a qualified prescription drug plan, if the 
     individual establishes that the individual was not adequately 
     informed that such coverage did not provide such level of 
     benefits.
       ``(F) Construction.--Nothing in this section shall be 
     construed as preventing the disenrollment of an individual 
     from a prescription drug plan or a Medicare+Choice plan based 
     on the termination of an election described in section 
     1851(g)(3), including for non-payment of premiums or for 
     other reasons specified in subsection (d)(3), which takes 
     into account a grace period described in section 
     1851(g)(3)(B)(i).
       ``(3) Nondiscrimination.--A PDP sponsor offering a 
     prescription drug plan shall not establish a service area in 
     a manner that would discriminate based on health or economic 
     status of potential enrollees.
       ``(d) Effective Date of Elections.--
       ``(1) In general.--Except as provided in this section, the 
     Administrator shall provide that elections under subsection 
     (b) take effect at the same time as the Administrator 
     provides that similar elections under section 1851(e) take 
     effect under section 1851(f).
       ``(2) No election effective before 2005.--In no case shall 
     any election take effect before January 1, 2005.
       ``(3) Termination.--The Administrator shall provide for the 
     termination of an election in the case of--
       ``(A) termination of coverage under both part A and part B; 
     and
       ``(B) termination of elections described in section 
     1851(g)(3) (including failure to pay required premiums).

     ``SEC. 1860B. REQUIREMENTS FOR QUALIFIED PRESCRIPTION DRUG 
                   COVERAGE.

       ``(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 coverage with access to negotiated prices.--
     Standard coverage (as defined in subsection (b)) and access 
     to negotiated prices under subsection (d).
       ``(B) Actuarially equivalent coverage with access to 
     negotiated prices.--Coverage of covered outpatient drugs 
     which meets the alternative coverage requirements of 
     subsection (c) and access to negotiated prices under 
     subsection (d), but only if it is approved by the 
     Administrator, as provided under subsection (c).
       ``(2) Permitting additional outpatient prescription drug 
     coverage.--
       ``(A) In general.--Subject to subparagraph (B), nothing in 
     this part shall be construed as preventing qualified 
     prescription drug coverage from including coverage of covered 
     outpatient drugs that exceeds the coverage required under 
     paragraph (1), but any such additional coverage shall be 
     limited to coverage of covered outpatient drugs.
       ``(B) Disapproval authority.--The Administrator shall 
     review the offering of qualified prescription drug coverage 
     under this part or part C. If the Administrator finds that, 
     in the case of a qualified prescription drug coverage under a 
     prescription drug plan or a Medicare+Choice plan, that the 
     organization or sponsor offering the coverage is engaged in 
     activities intended to discourage enrollment of classes of 
     eligible medicare beneficiaries obtaining coverage through 
     the plan on the basis of their higher likelihood of utilizing 
     prescription drug coverage, the Administrator may terminate 
     the contract with the sponsor or organization under this part 
     or part C.
       ``(3) Application of secondary payor provisions.--The 
     provisions of section 1852(a)(4) shall apply under this part 
     in the same manner as they apply under part C.
       ``(b) Standard Coverage.--For purposes of this part, the 
     `standard coverage' is coverage of covered outpatient drugs 
     (as defined in

[[Page 11865]]

     subsection (f)) that meets the following requirements:
       ``(1) Deductible.--The coverage has an annual deductible--
       ``(A) for 2005, that is equal to $250; or
       ``(B) for a subsequent year, that is equal to the amount 
     specified under this paragraph for the previous year 
     increased by the percentage specified in paragraph (5) for 
     the year involved.

     Any amount determined under subparagraph (B) that is not a 
     multiple of $10 shall be rounded to the nearest multiple of 
     $10.
       ``(2) Limits on cost-sharing.--
       ``(A) In general.--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)) as 
     follows:
       ``(i) First copayment range.--For costs above the annual 
     deductible specified in paragraph (1) and up to amount 
     specified in subparagraph (C), the cost-sharing--

       ``(I) is equal to 20 percent; or
       ``(II) is actuarially equivalent (using processes 
     established under subsection (e)) to an average expected 
     payment of 20 percent of such costs.

       ``(ii) Secondary copayment range.--For costs above the 
     amount specified in subparagraph (C) and up to the initial 
     coverage limit, the cost-sharing--

       ``(I) is equal to 50 percent; or
       ``(II) is actuarially consistent (using processes 
     established under subsection (e)) with an average expected 
     payment of 50 percent of such costs.

       ``(B) Use of tiered copayments.--Nothing in this part shall 
     be construed as preventing a PDP sponsor from applying tiered 
     copayments, so long as such tiered copayments are consistent 
     with subparagraph (A).
       ``(C) Initial copayment threshold.--The amount specified in 
     this subparagraph--
       ``(i) for 2005, is equal to $1,000; 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.

     Any amount determined under clause (ii) that is not a 
     multiple of $10 shall be rounded to the nearest multiple of 
     $10.
       ``(3) Initial coverage limit.--Subject to paragraph (4), 
     the coverage has an initial coverage limit on the maximum 
     costs that may be recognized for payment purposes (above the 
     annual deductible)--
       ``(A) for 2005, that is equal to $2,000; or
       ``(B) for a subsequent year, that is equal to the amount 
     specified in this paragraph for the previous year, increased 
     by the annual percentage increase described in paragraph (5) 
     for the year involved.

     Any amount determined under subparagraph (B) that is not a 
     multiple of $25 shall be rounded to the nearest multiple of 
     $25.
       ``(4) Catastrophic protection.--
       ``(A) In general.--Notwithstanding paragraph (3), the 
     coverage provides benefits with no cost-sharing after the 
     individual has incurred costs (as described in subparagraph 
     (C)) for covered outpatient drugs in a year equal to the 
     annual out-of-pocket threshold specified in subparagraph (B).
       ``(B) Annual out-of-pocket threshold.--For purposes of this 
     part, the `annual out-of-pocket threshold' specified in this 
     subparagraph--
       ``(i) for 2005, is equal to $4,500; 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.

     Any amount determined under clause (ii) that is not a 
     multiple of $100 shall be rounded to the nearest multiple of 
     $100.
       ``(C) Application.--In applying subparagraph (A)--
       ``(i) incurred costs shall only include costs incurred for 
     the annual deductible (described in paragraph (1)), cost-
     sharing (described in paragraph (2)), and amounts for which 
     benefits are not provided because of the application of the 
     initial coverage limit described in paragraph (3); and
       ``(ii) such costs shall be treated as incurred only if they 
     are paid by the individual, under section 1860G, or under 
     title XIX and the individual is not reimbursed (through 
     insurance or otherwise) by another person for such costs.
       ``(5) Annual percentage increase.--For purposes of this 
     part, the annual percentage increase specified in this 
     paragraph for a year is equal to the annual percentage 
     increase in average per capita aggregate expenditures for 
     covered outpatient drugs in the United States for medicare 
     beneficiaries, as determined by the Administrator for the 12-
     month period ending in July of the previous year.
       ``(c) Alternative Coverage Requirements.--A prescription 
     drug plan or Medicare+Choice plan may provide a different 
     prescription drug benefit design from the standard coverage 
     described in subsection (b) so long as the following 
     requirements are met and the plan applies for, and receives, 
     the approval of the Administrator for such benefit design:
       ``(1) Assuring at least actuarially equivalent coverage.--
       ``(A) Assuring equivalent value of total coverage.--The 
     actuarial value of the total coverage (as determined under 
     subsection (e)) is at least equal to the actuarial value (as 
     so determined) of standard coverage.
       ``(B) Assuring equivalent unsubsidized value of coverage.--
     The unsubsidized value of the coverage is at least equal to 
     the unsubsidized value of standard coverage. For purposes of 
     this subparagraph, the unsubsidized value of coverage is the 
     amount by which the actuarial value of the coverage (as 
     determined under subsection (e)) exceeds the actuarial value 
     of the subsidy payments under section 1860H with respect to 
     such coverage.
       ``(C) Assuring standard payment for costs at initial 
     coverage limit.--The coverage is designed, based upon an 
     actuarially representative pattern of utilization (as 
     determined under subsection (e)), to provide for the payment, 
     with respect to costs incurred that are equal to the initial 
     coverage limit under subsection (b)(3), of an amount equal to 
     at least the sum of the following products:
       ``(i) First copayment range.--The product of--

       ``(I) the amount by which the initial copayment threshold 
     described in subsection (b)(2)(C) exceeds the deductible 
     described in subsection (b)(1); and
       ``(II) 100 percent minus the cost-sharing percentage 
     specified in subsection (b)(2)(A)(i)(I).

       ``(ii) Secondary copayment range.--The product of--

       ``(I) the amount by which the initial coverage limit 
     described in subsection (b)(3) exceeds the initial copayment 
     threshold described in subsection (b)(2)(C); and
       ``(II) 100 percent minus the cost-sharing percentage 
     specified in subsection (b)(2)(A)(ii)(I).

       ``(2) Catastrophic protection.--The coverage provides for 
     beneficiaries the catastrophic protection described in 
     subsection (b)(4).
       ``(d) Access to Negotiated Prices.--
       ``(1) In general.--Under qualified prescription drug 
     coverage offered by a PDP sponsor or a Medicare+Choice 
     organization, the sponsor or organization shall provide 
     beneficiaries with access to negotiated prices (including 
     applicable discounts) used for payment for covered outpatient 
     drugs, regardless of the fact that no benefits may be payable 
     under the coverage with respect to such drugs because of the 
     application of cost-sharing or an initial coverage limit 
     (described in subsection (b)(3)). Insofar as a State elects 
     to provide medical assistance under title XIX for a drug 
     based on the prices negotiated by a prescription drug plan 
     under this part, the requirements of section 1927 shall not 
     apply to such drugs.
       ``(2) Disclosure.--The PDP sponsor or Medicare+Choice 
     organization shall disclose to the Administrator (in a manner 
     specified by the Administrator) the extent to which discounts 
     or rebates made available to the sponsor or organization by a 
     manufacturer are passed through to enrollees through 
     pharmacies and other dispensers or otherwise. The provisions 
     of section 1927(b)(3)(D) shall apply to information disclosed 
     to the Administrator under this paragraph in the same manner 
     as such provisions apply to information disclosed under such 
     section.
       ``(e) Actuarial Valuation; Determination of Annual 
     Percentage Increases.--
       ``(1) Processes.--For purposes of this section, the 
     Administrator shall establish processes and methods--
       ``(A) for determining the actuarial valuation of 
     prescription drug coverage, including--
       ``(i) an actuarial valuation of standard coverage and of 
     the reinsurance subsidy payments under section 1860H;
       ``(ii) the use of generally accepted actuarial principles 
     and methodologies; and
       ``(iii) applying the same methodology for determinations of 
     alternative coverage under subsection (c) as is used with 
     respect to determinations of standard coverage under 
     subsection (b); and
       ``(B) for determining annual percentage increases described 
     in subsection (b)(5).
       ``(2) Use of outside actuaries.--Under the processes under 
     paragraph (1)(A), PDP sponsors and Medicare+Choice 
     organizations may use actuarial opinions certified by 
     independent, qualified actuaries to establish actuarial 
     values.
       ``(f) Covered Outpatient Drugs Defined.--
       ``(1) In general.--Except as provided in this subsection, 
     for purposes of this part, the term `covered outpatient drug' 
     means--
       ``(A) a drug that may be dispensed only upon a prescription 
     and that is described in subparagraph (A)(i) or (A)(ii) of 
     section 1927(k)(2); or
       ``(B) a biological product described in clauses (i) through 
     (iii) of subparagraph (B) of such section or insulin 
     described in subparagraph (C) of such section,

     and such term includes a vaccine licensed under section 351 
     of the Public Health Service Act and any use of a covered 
     outpatient drug for a medically accepted indication (as 
     defined in section 1927(k)(6)).
       ``(2) Exclusions.--

[[Page 11866]]

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

     Such exclusions are determinations subject to reconsideration 
     and appeal pursuant to section 1860C(f).

     ``SEC. 1860C. BENEFICIARY PROTECTIONS FOR QUALIFIED 
                   PRESCRIPTION DRUG COVERAGE.

       ``(a) Guaranteed Issue, Community-Related Premiums, Access 
     to Negotiated Prices, and Nondiscrimination.--For provisions 
     requiring guaranteed issue, community-rated premiums, access 
     to negotiated prices, and nondiscrimination, see sections 
     1860A(c)(1), 1860A(c)(2), 1860B(d), and 1860F(b), 
     respectively.
       ``(b) Dissemination of Information.--
       ``(1) General information.--A PDP sponsor shall disclose, 
     in a clear, accurate, and standardized form to each enrollee 
     with a prescription drug plan offered by the sponsor under 
     this part at the time of enrollment and at least annually 
     thereafter, the information described in section 1852(c)(1) 
     relating to such plan. Such information includes the 
     following:
       ``(A) Access to covered outpatient drugs, including access 
     through pharmacy networks.
       ``(B) How any formulary used by the sponsor functions.
       ``(C) Co-payments and deductible requirements, including 
     the identification of the tiered or other co-payment level 
     applicable to each drug (or class of drugs).
       ``(D) Grievance and appeals procedures.
       ``(2) Disclosure upon request of general coverage, 
     utilization, and grievance information.--Upon request of an 
     individual eligible to enroll under a prescription drug plan, 
     the PDP sponsor shall provide the information described in 
     section 1852(c)(2) (other than subparagraph (D)) to such 
     individual.
       ``(3) Response to beneficiary questions.--Each PDP sponsor 
     offering a prescription drug plan shall have a mechanism for 
     providing specific information to enrollees upon request. The 
     sponsor shall make available on a timely basis, through an 
     Internet website and in writing upon request, information on 
     specific changes in its formulary.
       ``(4) Claims information.--Each PDP sponsor offering a 
     prescription drug plan must furnish to enrolled individuals 
     in a form easily understandable to such individuals an 
     explanation of benefits (in accordance with section 1806(a) 
     or in a comparable manner) and a notice of the benefits in 
     relation to initial coverage limit and annual out-of-pocket 
     threshold for the current year, whenever prescription drug 
     benefits are provided under this part (except that such 
     notice need not be provided more often than monthly).
       ``(c) Access to Covered Benefits.--
       ``(1) Assuring pharmacy access.--
       ``(A) In general.--The PDP sponsor of the 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 under section 1860D(e) 
     that ensure such convenient access.
       ``(B) Use of point-of-service system.--A PDP sponsor 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 premiums and copayments any additional costs 
     associated with the point-of-service option.

     The additional copayments so charged shall not count toward 
     the application of section 1860B(b).
       ``(2) Use of standardized technology.--
       ``(A) In general.--The PDP sponsor of a prescription drug 
     plan shall issue (and reissue, as appropriate) such a card 
     (or other technology) that may be used by an enrolled 
     beneficiary to assure access to negotiated prices under 
     section 1860B(d) for the purchase of prescription drugs for 
     which coverage is not otherwise provided under the 
     prescription drug plan.
       ``(B) Standards.--
       ``(i) Development.--The Administrator shall provide for the 
     development of national standards relating to a standardized 
     format for the card or other technology referred to in 
     subparagraph (A). Such standards shall be compatible with 
     standards established under part C of title XI.
       ``(ii) Application of advisory task force.--The advisory 
     task force established under subsection (d)(3)(B)(ii) shall 
     provide recommendations to the Administrator under such 
     subsection regarding the standards developed under clause 
     (i).
       ``(3) Requirements on development and application of 
     formularies.--If a PDP sponsor of a prescription drug plan 
     uses a formulary, the following requirements must be met:
       ``(A) Pharmacy and therapeutic (p&t) committee.--The 
     sponsor must establish a pharmacy and therapeutic committee 
     that develops and reviews the formulary. Such committee shall 
     include at least one physician and at least one pharmacist 
     both with expertise in the care of elderly or disabled 
     persons and a majority of its members shall consist of 
     individuals who are a physician or a 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 such 
     other information as the committee determines to be 
     appropriate.
       ``(C) Inclusion of drugs in all therapeutic categories.--
     The formulary must include drugs within each therapeutic 
     category and class of covered outpatient drugs (although not 
     necessarily for all drugs within such categories and 
     classes).
       ``(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 
     and physicians.
       ``(F) Grievances and appeals relating to application of 
     formularies.--For provisions relating to grievances and 
     appeals of coverage, see subsections (e) and (f).
       ``(d) Cost and Utilization Management; Quality Assurance; 
     Medication Therapy Management Program.--
       ``(1) In general.--The PDP sponsor shall have in place with 
     respect to covered outpatient drugs--
       ``(A) an effective cost and drug utilization management 
     program, including medically appropriate incentives to use 
     generic drugs and therapeutic interchange, when appropriate;
       ``(B) quality assurance measures and systems to reduce 
     medical errors and adverse drug interactions, including a 
     medication therapy management program described in paragraph 
     (2) and for years beginning with 2006, an electronic 
     prescription program described in paragraph (3); and
       ``(C) a program to control fraud, abuse, and waste.

     Nothing in this section shall be construed as impairing a PDP 
     sponsor 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, and congestive heart 
     failure) or multiple prescriptions, that covered outpatient 
     drugs under the prescription drug plan are appropriately used 
     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 pharmacists and physicians.
       ``(D) Considerations in pharmacy fees.--The PDP sponsor of 
     a prescription drug program 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) Electronic prescription program.--

[[Page 11867]]

       ``(A) In general.--An electronic prescription drug program 
     described in this paragraph is a program that includes at 
     least the following components, consistent with national 
     standards established under subparagraph (B):
       ``(i) Electronic transmittal of prescriptions.--
     Prescriptions are only received electronically, except in 
     emergency cases and other exceptional circumstances 
     recognized by the Administrator.
       ``(ii) Provision of information to prescribing health care 
     professional.--The program provides, upon transmittal of a 
     prescription by a prescribing health care professional, for 
     transmittal by the pharmacist to the professional of 
     information that includes--

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

     To the extent feasible, such program shall permit the 
     prescribing health care professional to provide (and be 
     provided) related information on an interactive, real-time 
     basis.
       ``(B) Standards.--
       ``(i) Development.--The Administrator shall provide for the 
     development of national standards relating to the electronic 
     prescription drug program described in subparagraph (A). Such 
     standards shall be compatible with standards established 
     under part C of title XI.
       ``(ii) Advisory task force.--In developing such standards 
     and the standards described in subsection (c)(2)(B)(i) the 
     Administrator shall establish a task force that includes 
     representatives of physicians, hospitals, pharmacists, and 
     technology experts and representatives of the Departments of 
     Veterans Affairs and Defense and other appropriate Federal 
     agencies to provide recommendations to the Administrator on 
     such standards, including recommendations relating to the 
     following:

       ``(I) The range of available computerized prescribing 
     software and hardware and their costs to develop and 
     implement.
       ``(II) The extent to which such systems reduce medication 
     errors and can be readily implemented by physicians and 
     hospitals.
       ``(III) Efforts to develop a common software platform for 
     computerized prescribing.
       ``(IV) The cost of implementing such systems in the range 
     of hospital and physician office settings, including 
     hardware, software, and training costs.
       ``(V) Implementation issues as they relate to part C of 
     title XI, and current Federal and State prescribing laws and 
     regulations and their impact on implementation of 
     computerized prescribing.

       ``(iii) Deadlines.--

       ``(I) The Administrator shall constitute the task force 
     under clause (ii) by not later than April 1, 2003.
       ``(II) Such task force shall submit recommendations to 
     Administrator by not later than January 1, 2004.
       ``(III) The Administrator shall develop and promulgate the 
     national standards referred to in clause (ii) by not later 
     than July 1, 2004.

       ``(C) Reference to availability of grant funds.--Grant 
     funds are authorized under section 399O of the Public Health 
     Service Act to provide assistance to health care providers in 
     implementing electronic prescription drug programs.
       ``(4) Treatment of accreditation.--Section 1852(e)(4) 
     (relating to treatment of accreditation) shall apply to 
     prescription drug plans under this part with respect to the 
     following requirements, in the same manner as they apply to 
     Medicare+Choice plans under part C with respect to the 
     requirements described in a clause of section 1852(e)(4)(B):
       ``(A) Paragraph (1) (including quality assurance), 
     including medication therapy management program under 
     paragraph (2).
       ``(B) Subsection (c)(1) (relating to access to covered 
     benefits).
       ``(C) Subsection (g) (relating to confidentiality and 
     accuracy of enrollee records).
       ``(5) Public disclosure of pharmaceutical prices for 
     equivalent drugs.--Each PDP sponsor shall provide that each 
     pharmacy or other dispenser that arranges for the dispensing 
     of a covered outpatient drug shall inform the beneficiary at 
     the time of purchase of the drug of any differential between 
     the price of the prescribed drug to the enrollee and the 
     price of the lowest cost generic drug covered under the plan 
     that is therapeutically equivalent and bioequivalent.
       ``(e) Grievance Mechanism, Coverage Determinations, and 
     Reconsiderations.--
       ``(1) In general.--Each PDP sponsor shall provide 
     meaningful procedures for hearing and resolving grievances 
     between the organization (including any entity or individual 
     through which the sponsor provides covered benefits) and 
     enrollees with prescription drug plans of the sponsor under 
     this part in accordance with section 1852(f).
       ``(2) Application of coverage determination and 
     reconsideration provisions.--A PDP sponsor shall meet the 
     requirements of paragraphs (1) through (3) of section 1852(g) 
     with respect to covered benefits under the prescription drug 
     plan it offers under this part in the same manner as such 
     requirements apply to a Medicare+Choice organization with 
     respect to benefits it offers under a Medicare+Choice plan 
     under part C.
       ``(3) Request for review of tiered formulary 
     determinations.--In the case of a prescription drug plan 
     offered by a PDP sponsor 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.
       ``(f) Appeals.--
       ``(1) In general.--Subject to paragraph (2), a PDP sponsor 
     shall meet the requirements of paragraphs (4) and (5) of 
     section 1852(g) with respect to drugs not included on any 
     formulary in the same manner as such requirements apply to a 
     Medicare+Choice organization with respect to benefits it 
     offers under a Medicare+Choice plan under part C.
       ``(2) Formulary determinations.--An individual who is 
     enrolled in a prescription drug plan offered by a PDP sponsor 
     may appeal to obtain coverage for a covered outpatient drug 
     that is not on a formulary of the sponsor 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.
       ``(g) Confidentiality and Accuracy of Enrollee Records.--A 
     PDP sponsor shall meet the requirements of section 1852(h) 
     with respect to enrollees under this part in the same manner 
     as such requirements apply to a Medicare+Choice organization 
     with respect to enrollees under part C.

     ``SEC. 1860D. REQUIREMENTS FOR PRESCRIPTION DRUG PLAN (PDP) 
                   SPONSORS; CONTRACTS; ESTABLISHMENT OF 
                   STANDARDS.

       ``(a) General Requirements.--Each PDP sponsor of a 
     prescription drug plan shall meet the following requirements:
       ``(1) Licensure.--Subject to subsection (c), the sponsor is 
     organized and licensed under State law as a risk-bearing 
     entity eligible to offer health insurance or health benefits 
     coverage in each State in which it offers a prescription drug 
     plan.
       ``(2) Assumption of financial risk.--
       ``(A) In general.--Subject to subparagraph (B) and section 
     1860E(d)(2), the entity assumes full financial risk on a 
     prospective basis for qualified prescription drug coverage 
     that it offers under a prescription drug plan and that is not 
     covered under section 1860H.
       ``(B) Reinsurance permitted.--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 sponsors.--In the case of a 
     sponsor that is not described in paragraph (1), the sponsor 
     shall meet solvency standards established by the 
     Administrator under subsection (d).
       ``(b) Contract Requirements.--
       ``(1) In general.--The Administrator shall not permit the 
     election under section 1860A of a prescription drug plan 
     offered by a PDP sponsor under this part, and the sponsor 
     shall not be eligible for payments under section 1860G or 
     1860H, unless the Administrator has entered into a contract 
     under this subsection with the sponsor with respect to the 
     offering of such plan. Such a contract with a sponsor may 
     cover more than one prescription drug plan. Such contract 
     shall provide that the sponsor agrees to comply with the 
     applicable requirements and standards of this part and the 
     terms and conditions of payment as provided for in this part.
       ``(2) Negotiation regarding terms and conditions.--The 
     Administrator shall have the same authority to negotiate the 
     terms and conditions of prescription drug plans under this 
     part as the Director of the Office of Personnel Management 
     has with respect to health benefits plans under chapter 89 of 
     title 5, United States Code. In negotiating the terms and 
     conditions regarding premiums for which information is 
     submitted under section 1860F(a)(2), the Administrator shall 
     take into account the subsidy payments under section 1860H 
     and the adjusted community rate (as defined in section 
     1854(f)(3)) for the benefits covered.
       ``(3) Incorporation of certain medicare+choice contract 
     requirements.--The following provisions of section 1857 shall 
     apply, subject to subsection (c)(5), to contracts under this 
     section in the same manner as they apply to contracts under 
     section 1857(a):
       ``(A) Minimum enrollment.--Paragraphs (1) and (3) of 
     section 1857(b).
       ``(B) Contract period and effectiveness.--Paragraphs (1) 
     through (3) and (5) of section 1857(c).
       ``(C) Protections against fraud and beneficiary 
     protections.--Section 1857(d).
       ``(D) Additional contract terms.--Section 1857(e); except 
     that in applying section 1857(e)(2) under this part--
       ``(i) such section shall be applied separately to costs 
     relating to this part (from costs under part C);

[[Page 11868]]

       ``(ii) in no case shall the amount of the fee established 
     under this subparagraph for a plan exceed 20 percent of the 
     maximum amount of the fee that may be established under 
     subparagraph (B) of such section; and
       ``(iii) no fees shall be applied under this subparagraph 
     with respect to Medicare+Choice plans.
       ``(E) Intermediate sanctions.--Section 1857(g).
       ``(F) Procedures for termination.--Section 1857(h).
       ``(4) Rules of application for intermediate sanctions.--In 
     applying paragraph (3)(E)--
       ``(A) the reference in section 1857(g)(1)(B) to section 
     1854 is deemed a reference to this part; and
       ``(B) the reference in section 1857(g)(1)(F) to section 
     1852(k)(2)(A)(ii) shall not be applied.
       ``(c) Waiver of Certain Requirements to Expand Choice.--
       ``(1) In general.--In the case of an entity that seeks to 
     offer a prescription drug plan in a State, the Administrator 
     shall waive the requirement of subsection (a)(1) that the 
     entity be licensed in that State if the Administrator 
     determines, based on the application and other evidence 
     presented to the Administrator, that any of the grounds for 
     approval of the application described in paragraph (2) has 
     been met.
       ``(2) Grounds for approval.--The grounds for approval under 
     this paragraph are the grounds for approval described in 
     subparagraph (B), (C), and (D) of section 1855(a)(2), and 
     also include the application by a State of any grounds other 
     than those required under Federal law.
       ``(3) Application of waiver procedures.--With respect to an 
     application for a waiver (or a waiver granted) under this 
     subsection, the provisions of subparagraphs (E), (F), and (G) 
     of section 1855(a)(2) shall apply.
       ``(4) Licensure does not substitute for or constitute 
     certification.--The fact that an entity is licensed in 
     accordance with subsection (a)(1) does not deem the entity to 
     meet other requirements imposed under this part for a PDP 
     sponsor.
       ``(5) References to certain provisions.--For purposes of 
     this subsection, in applying provisions of section 1855(a)(2) 
     under this subsection to prescription drug plans and PDP 
     sponsors--
       ``(A) any reference to a waiver application under section 
     1855 shall be treated as a reference to a waiver application 
     under paragraph (1); and
       ``(B) any reference to solvency standards shall be treated 
     as a reference to solvency standards established under 
     subsection (d).
       ``(d) Solvency Standards for Non-Licensed Sponsors.--
       ``(1) Establishment.--The Administrator shall establish, by 
     not later than October 1, 2003, financial solvency and 
     capital adequacy standards that an entity that does not meet 
     the requirements of subsection (a)(1) must meet to qualify as 
     a PDP sponsor under this part.
       ``(2) Compliance with standards.--Each PDP sponsor that is 
     not licensed by a State under subsection (a)(1) and for which 
     a waiver application has been approved under subsection (c) 
     shall meet solvency and capital adequacy standards 
     established under paragraph (1). The Administrator shall 
     establish certification procedures for such PDP sponsors with 
     respect to such solvency standards in the manner described in 
     section 1855(c)(2).
       ``(e) Other Standards.--The Administrator shall establish 
     by regulation other standards (not described in subsection 
     (d)) for PDP sponsors and plans consistent with, and to carry 
     out, this part. The Administrator shall publish such 
     regulations by October 1, 2003.
       ``(f) Relation to State Laws.--
       ``(1) In general.--The standards established under this 
     part shall supersede any State law or regulation (other than 
     State licensing laws or State laws relating to plan solvency, 
     except as provided in subsection (d)) with respect to 
     prescription drug plans which are offered by PDP sponsors 
     under this part.
       ``(2) Prohibition of state imposition of premium taxes.--No 
     State may impose a premium tax or similar tax with respect to 
     premiums paid to PDP sponsors for prescription drug plans 
     under this part, or with respect to any payments made to such 
     a sponsor by the Administrator under this part.

     ``SEC. 1860E. PROCESS FOR BENEFICIARIES TO SELECT QUALIFIED 
                   PRESCRIPTION DRUG COVERAGE.

       ``(a) In General.--The Administrator shall establish a 
     process for the selection of the prescription drug plan or 
     Medicare+Choice plan which offer qualified prescription drug 
     coverage through which eligible individuals elect qualified 
     prescription drug coverage under this part.
       ``(b) Elements.--Such process shall include the following:
       ``(1) Annual, coordinated election periods, in which such 
     individuals can change the qualifying plans through which 
     they obtain coverage, in accordance with section 1860A(b)(2).
       ``(2) Active dissemination of information to promote an 
     informed selection among qualifying plans based upon price, 
     quality, and other features, in the manner described in (and 
     in coordination with) section 1851(d), including the 
     provision of annual comparative information, maintenance of a 
     toll-free hotline, and the use of non-Federal entities.
       ``(3) Coordination of elections through filing with a 
     Medicare+Choice organization or a PDP sponsor, in the manner 
     described in (and in coordination with) section 1851(c)(2).
       ``(c) Medicare+Choice Enrollee In Plan Offering 
     Prescription Drug Coverage May Only Obtain Benefits Through 
     the Plan.--An individual who is enrolled under a 
     Medicare+Choice plan that offers qualified prescription drug 
     coverage may only elect to receive qualified prescription 
     drug coverage under this part through such plan.
       ``(d) Assuring Access to a Choice of Qualified Prescription 
     Drug Coverage.--
       ``(1) Choice of at least two plans in each area.--
       ``(A) In general.--The Administrator shall assure that each 
     individual who is entitled to benefits under part A or 
     enrolled under part B and who is residing in an area in the 
     United States has available, consistent with subparagraph 
     (B), a choice of enrollment in at least two qualifying plans 
     (as defined in paragraph (5)) in the area in which the 
     individual resides, at least one of which is a prescription 
     drug plan.
       ``(B) Requirement for different plan sponsors.--The 
     requirement in subparagraph (A) is not satisfied with respect 
     to an area if only one PDP sponsor or Medicare+Choice 
     organization offers all the qualifying plans in the area.
       ``(2) Guaranteeing access to coverage.--In order to assure 
     access under paragraph (1) and consistent with paragraph (3), 
     the Administrator may provide financial incentives (including 
     partial underwriting of risk) for a PDP sponsor to expand the 
     service area under an existing prescription drug plan to 
     adjoining or additional areas or to establish such a plan 
     (including offering such a plan on a regional or nationwide 
     basis), but only so long as (and to the extent) necessary to 
     assure the access guaranteed under paragraph (1).
       ``(3) Limitation on authority.--In exercising authority 
     under this subsection, the Administrator--
       ``(A) shall not provide for the full underwriting of 
     financial risk for any PDP sponsor;
       ``(B) shall not provide for any underwriting of financial 
     risk for a public PDP sponsor with respect to the offering of 
     a nationwide prescription drug plan; and
       ``(C) shall seek to maximize the assumption of financial 
     risk by PDP sponsors or Medicare+Choice organizations.
       ``(4) Reports.--The Administrator shall, in each annual 
     report to Congress under section 1808(f), include information 
     on the exercise of authority under this subsection. The 
     Administrator also shall include such recommendations as may 
     be appropriate to minimize the exercise of such authority, 
     including minimizing the assumption of financial risk.
       ``(5) Qualifying plan defined.--For purposes of this 
     subsection, the term `qualifying plan' means a prescription 
     drug plan or a Medicare+Choice plan that includes qualified 
     prescription drug coverage.

     ``SEC. 1860F. SUBMISSION OF BIDS.

       ``(a) Submission of Bids and Related Information.--
       ``(1) In general.--Each PDP sponsor shall submit to the 
     Administrator information of the type described in paragraph 
     (2) in the same manner as information is submitted by a 
     Medicare+Choice organization under section 1854(a)(1).
       ``(2) Type of information.--The information described in 
     this paragraph is the following:
       ``(A) Information on the qualified prescription drug 
     coverage to be provided.
       ``(B) Information on the actuarial value of the coverage.
       ``(C) Information on the bid for the coverage, including an 
     actuarial certification of--
       ``(i) the actuarial basis for such bid;
       ``(ii) the portion of such bid attributable to benefits in 
     excess of standard coverage; and
       ``(iii) the reduction in such bid resulting from the 
     subsidy payments provided under section 1860H.
       ``(D) Such other information as the Administrator may 
     require to carry out this part.
       ``(3) Review.--The Administrator shall review the 
     information filed under paragraph (2) for the purpose of 
     conducting negotiations under section 1860D(b)(2).
       ``(b) Uniform Bid.--
       ``(1) In general.--The bid for a prescription drug plan 
     under this section may not vary among individuals enrolled in 
     the plan in the same service area.
       ``(2) Construction.--Nothing in paragraph (1) shall be 
     construed as preventing the imposition of a late enrollment 
     penalty under section 1860A(c)(2)(B).
       ``(c) Collection.--
       ``(1) Use of electronic funds transfer mechanism or, at 
     beneficiary's option, withholding from social security 
     payment.--In accordance with regulations, a PDP sponsor may 
     encourage that enrollees under a plan make payment of the 
     premium established by the plan under this part through an 
     electronic funds transfer mechanism, such as automatic 
     charges of an account at a financial institution or a credit 
     or

[[Page 11869]]

     debit card account, or, at the option of an enrollee, through 
     withholding from benefit payments in the manner provided 
     under section 1840 with respect to monthly premiums under 
     section 1839. All such amounts shall be credited to the 
     Medicare Prescription Drug Trust Fund.
       ``(2) Offsetting.--Reductions in premiums for coverage 
     under parts A and B as a result of a selection of a 
     Medicare+Choice plan may be used to reduce the premium 
     otherwise imposed under paragraph (1).
       ``(3) Payment of plans.--PDP plans shall receive payment 
     based on bid amounts in the same manner as Medicare+Choice 
     organizations receive payment based on bid amounts under 
     section 1853(a)(1)(A)(ii) except that such payment shall be 
     made from the Medicare Prescription Drug Trust Fund.
       ``(d) Acceptance of Benchmark Amount as Full Premium for 
     Subsidized Low-Income Individuals if No Standard (or 
     Equivalent) Coverage in an Area.--
       ``(1) In general.--If there is no standard prescription 
     drug coverage (as defined in paragraph (2)) offered in an 
     area, in the case of an individual who is eligible for a 
     premium subsidy under section 1860G and resides in the area, 
     the PDP sponsor of any prescription drug plan offered in the 
     area (and any Medicare+Choice organization that offers 
     qualified prescription drug coverage in the area) shall 
     accept the benchmark bid amount (under section 1860G(b)(2)) 
     as payment in full for the premium charge for qualified 
     prescription drug coverage.
       ``(2) Standard prescription drug coverage defined.--For 
     purposes of this subsection, the term `standard prescription 
     drug coverage' means qualified prescription drug coverage 
     that is standard coverage or that has an actuarial value 
     equivalent to the actuarial value for standard coverage.

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

       ``(a) Income-Related Subsidies for Individuals With Income 
     Below 150 Percent of Federal Poverty Level.--
       ``(1) Full premium subsidy and reduction of cost-sharing 
     for individuals with income below 150 percent of federal 
     poverty level.--In the case of a subsidy eligible individual 
     (as defined in paragraph (4)) who is determined to have 
     income that does not exceed 150 percent of the Federal 
     poverty level, the individual is entitled under this 
     section--
       ``(A) to an income-related premium subsidy equal to 100 
     percent of the amount described in subsection (b)(1); and
       ``(B) subject to subsection (c), to the substitution for 
     the beneficiary cost-sharing described in paragraphs (1) and 
     (2) of section 1860B(b) (up to the initial coverage limit 
     specified in paragraph (3) of such section) of amounts that 
     do not exceed $2 for a multiple source or generic drug (as 
     described in section 1927(k)(7)(A)) and $5 for a non-
     preferred drug.
       ``(2) Sliding scale premium subsidy and reduction of cost-
     sharing for individuals with income above 150, but below 175 
     percent, of federal poverty level.--In the case of a subsidy 
     eligible individual who is determined to have income that 
     exceeds 150 percent, but does not exceed 175 percent, of the 
     Federal poverty level, the individual is entitled under this 
     section to--
       ``(A) an income-related premium subsidy determined on a 
     linear sliding scale ranging from 100 percent of the amount 
     described in subsection (b)(1) for individuals with incomes 
     at 150 percent of such level to 0 percent of such amount for 
     individuals with incomes at 175 percent of such level; and
       ``(B) subject to subsection (c), to the substitution for 
     the beneficiary cost-sharing described in paragraphs (1) and 
     (2) of section 1860B(b) (up to the initial coverage limit 
     specified in paragraph (3) of such section) of amounts that 
     do not exceed $2 for a multiple source or generic drug (as 
     described in section 1927(k)(7)(A)) and $5 for a non-
     preferred drug.
       ``(3) Construction.--Nothing in this section shall be 
     construed as preventing a PDP sponsor from reducing to 0 the 
     cost-sharing otherwise applicable to generic drugs.
       ``(4) Determination of eligibility.--
       ``(A) Subsidy eligible individual defined.--For purposes of 
     this section, subject to subparagraph (D), the term `subsidy 
     eligible individual' means an individual who--
       ``(i) is eligible to elect, and has elected, to obtain 
     qualified prescription drug coverage under this part;
       ``(ii) has income below 175 percent of the Federal poverty 
     line; and
       ``(iii) meets the resources requirement described in 
     section 1905(p)(1)(C).
       ``(B) Determinations.--The determination of whether an 
     individual residing in a State is a subsidy eligible 
     individual and the amount of such individual's income shall 
     be determined under the State medicaid plan for the State 
     under section 1935(a). 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.
       ``(C) Income determinations.--For purposes of applying this 
     section--
       ``(i) income shall be determined in the manner described in 
     section 1905(p)(1)(B); and
       ``(ii) the term `Federal poverty line' means the official 
     poverty line (as defined by the Office of Management and 
     Budget, and revised annually in accordance with section 
     673(2) of the Omnibus Budget Reconciliation Act of 1981) 
     applicable to a family of the size involved.
       ``(D) Treatment of territorial residents.--In the case of 
     an individual who is not a resident of the 50 States or the 
     District of Columbia, the individual is not eligible to be a 
     subsidy eligible individual but may be eligible for financial 
     assistance with prescription drug expenses under section 
     1935(e).
       ``(E) Treatment of conforming medigap policies.--For 
     purposes of this section, the term `qualified prescription 
     drug coverage' includes a medicare supplemental policy 
     described in section 1860H(b)(4).
       ``(5) Indexing dollar amounts.--
       ``(A) For 2006.--The dollar amounts applied under 
     paragraphs (1)(B) and (2)(B) for 2006 shall be the dollar 
     amounts specified in such paragraph increased by the annual 
     percentage increase described in section 1860B(b)(5) for 
     2006.
       ``(B) For subsequent years.--The dollar amounts applied 
     under paragraphs (1)(B) and (2)(B) for a year after 2006 
     shall be the amounts (under this paragraph) applied under 
     paragraph (1)(B) or (2)(B) for the preceding year increased 
     by the annual percentage increase described in section 
     1860B(b)(5) (relating to growth in medicare prescription drug 
     costs per beneficiary) for the year involved.
       ``(b) Premium Subsidy Amount.--
       ``(1) In general.--The premium subsidy amount described in 
     this subsection for an individual residing in an area is the 
     benchmark bid amount (as defined in paragraph (2)) for 
     qualified prescription drug coverage offered by the 
     prescription drug plan or the Medicare+Choice plan in which 
     the individual is enrolled.
       ``(2) Benchmark bid amount defined.--For purposes of this 
     subsection, the term `benchmark bid amount' means, with 
     respect to qualified prescription drug coverage offered 
     under--
       ``(A) a prescription drug plan that--
       ``(i) provides standard coverage (or alternative 
     prescription drug coverage the actuarial value is equivalent 
     to that of standard coverage), the bid amount for enrollment 
     under the plan under this part (determined without regard to 
     any subsidy under this section or any late enrollment penalty 
     under section 1860A(c)(2)(B)); or
       ``(ii) provides alternative prescription drug coverage the 
     actuarial value of which is greater than that of standard 
     coverage, the bid amount described in clause (i) multiplied 
     by the ratio of (I) the actuarial value of standard coverage, 
     to (II) the actuarial value of the alternative coverage; or
       ``(B) a Medicare+Choice plan, the portion of the bid amount 
     that is attributable to statutory drug benefits (described in 
     section 1853(a)(1)(A)(ii)(II)).
       ``(c) Rules in Applying Cost-Sharing Subsidies.--
       ``(1) In general.--In applying subsections (a)(1)(B) and 
     (a)(2)(B), nothing in this part shall be construed as 
     preventing a plan or provider from waiving or reducing the 
     amount of cost-sharing otherwise applicable.
       ``(2) Limitation on charges.--In the case of an individual 
     receiving cost-sharing subsidies under subsection (a)(1)(B) 
     or (a)(2)(B), the PDP sponsor may not charge more than $5 per 
     prescription.
       ``(3) Application of indexing rules.--The provisions of 
     subsection (a)(4) shall apply to the dollar amount specified 
     in paragraph (2) in the same manner as they apply to the 
     dollar amounts specified in subsections (a)(1)(B) and 
     (a)(2)(B).
       ``(d) Administration of Subsidy Program.--The Administrator 
     shall provide a process whereby, in the case of an individual 
     who is determined to be a subsidy eligible individual and who 
     is enrolled in prescription drug plan or is enrolled in a 
     Medicare+Choice plan under which qualified prescription drug 
     coverage is provided--
       ``(1) the Administrator provides for a notification of the 
     PDP sponsor or Medicare+Choice organization involved that the 
     individual is eligible for a subsidy and the amount of the 
     subsidy under subsection (a);
       ``(2) the sponsor or organization involved reduces the 
     premiums or cost-sharing otherwise imposed by the amount of 
     the applicable subsidy and submits to the Administrator 
     information on the amount of such reduction; and
       ``(3) the Administrator periodically and on a timely basis 
     reimburses the sponsor or organization for the amount of such 
     reductions.

     The reimbursement under paragraph (3) with respect to cost-
     sharing subsidies may be computed on a capitated basis, 
     taking into account the actuarial value of the subsidies and 
     with appropriate adjustments to reflect differences in the 
     risks actually involved.
       ``(e) Relation to Medicaid Program.--
       ``(1) In general.--For provisions providing for eligibility 
     determinations, and additional financing, under the medicaid 
     program, see section 1935.
       ``(2) Medicaid providing wrap around benefits.--The 
     coverage provided under this

[[Page 11870]]

     part is primary payor to benefits for prescribed drugs 
     provided under the medicaid program under title XIX.
       ``(3) Coordination.--The Administrator shall develop and 
     implement a plan for the coordination of prescription drug 
     benefits under this part with the benefits provided under the 
     medicaid program under title XIX, with particular attention 
     to insuring coordination of payments and prevention of fraud 
     and abuse. In developing and implementing such plan, the 
     Administrator shall involve the Secretary, the States, the 
     data processing industry, pharmacists, and pharmaceutical 
     manufacturers, and other experts.

     ``SEC. 1860H. SUBSIDIES FOR ALL MEDICARE BENEFICIARIES FOR 
                   QUALIFIED PRESCRIPTION DRUG COVERAGE.

       ``(a) Subsidy Payment.--In order to reduce premium levels 
     applicable to qualified prescription drug coverage for all 
     medicare beneficiaries, to reduce adverse selection among 
     prescription drug plans and Medicare+Choice plans that 
     provide qualified prescription drug coverage, and to promote 
     the participation of PDP sponsors under this part, the 
     Administrator shall provide in accordance with this section 
     for payment to a qualifying entity (as defined in subsection 
     (b)) of the following subsidies:
       ``(1) Direct subsidy.--In the case of an individual 
     enrolled in a prescription drug plan, Medicare+Choice plan, 
     or qualified retiree prescription drug plan, a direct subsidy 
     equal to a percentage (specified by the Administrator 
     consistent with subsection (d)(2)) of an amount equal to the 
     actuarial value of the standard drug coverage provided under 
     the respective plan.
       ``(2) Subsidy through reinsurance.--The reinsurance payment 
     amount (as defined in subsection (c)) for excess costs 
     incurred in providing qualified prescription drug coverage--
       ``(A) for individuals enrolled with a prescription drug 
     plan under this part;
       ``(B) for individuals enrolled with a Medicare+Choice plan 
     that provides qualified prescription drug coverage under part 
     C; and
       ``(C) for individuals who are enrolled in a qualified 
     retiree prescription drug plan.

     This section constitutes budget authority in advance of 
     appropriations Acts and represents the obligation of the 
     Administrator to provide for the payment of amounts provided 
     under this section.
       ``(b) Qualifying Entity Defined.--For purposes of this 
     section, the term `qualifying entity' means any of the 
     following that has entered into an agreement with the 
     Administrator to provide the Administrator with such 
     information as may be required to carry out this section:
       ``(1) A PDP sponsor offering a prescription drug plan under 
     this part.
       ``(2) A Medicare+Choice organization that provides 
     qualified prescription drug coverage under a Medicare+Choice 
     plan under part C.
       ``(3) The sponsor of a qualified retiree prescription drug 
     plan (as defined in subsection (f)).
       ``(c) Reinsurance Payment Amount.--
       ``(1) In general.--Subject to subsection (d)(2) and 
     paragraph (4), the reinsurance payment amount under this 
     subsection for a qualifying covered individual (as defined in 
     subsection (g)(1)) for a coverage year (as defined in 
     subsection (g)(2)) is equal to the sum of the following:
       ``(A) For the portion of the individual's gross covered 
     prescription drug costs (as defined in paragraph (3)) for the 
     year that exceeds the initial copayment threshold specified 
     in section 1860B(b)(2)(C), but does not exceed the initial 
     coverage limit specified in section 1860B(b)(3), an amount 
     equal to 30 percent of the allowable costs (as defined in 
     paragraph (2)) attributable to such gross covered 
     prescription drug costs.
       ``(B) For the portion of the individual's gross covered 
     prescription drug costs for the year that exceeds the annual 
     out-of-pocket threshold specified in 1860B(b)(4)(B), an 
     amount equal to 80 percent of the allowable costs 
     attributable to such gross covered prescription drug costs.
       ``(2) Allowable costs.--For purposes of this section, the 
     term `allowable costs' means, with respect to gross covered 
     prescription drug costs under a plan described in subsection 
     (b) offered by a qualifying entity, the part of such costs 
     that are actually paid (net of average percentage rebates) 
     under the plan, but in no case more than the part of such 
     costs that would have been paid under the plan if the 
     prescription drug coverage under the plan were standard 
     coverage.
       ``(3) Gross covered prescription drug costs.--For purposes 
     of this section, the term `gross covered prescription drug 
     costs' means, with respect to an enrollee with a qualifying 
     entity under a plan described in subsection (b) during a 
     coverage year, the costs incurred under the plan (including 
     costs attributable to administrative costs) for covered 
     prescription drugs dispensed during the year, including costs 
     relating to the deductible, whether paid by the enrollee or 
     under the plan, regardless of whether the coverage under the 
     plan exceeds standard coverage and regardless of when the 
     payment for such drugs is made.
       ``(4) Indexing dollar amounts.--
       ``(A) Amounts for 2005.--The dollar amounts applied under 
     paragraph (1) for 2005 shall be the dollar amounts specified 
     in such paragraph.
       ``(B) For 2006.--The dollar amounts applied under paragraph 
     (1) for 2006 shall be the dollar amounts specified in such 
     paragraph increased by the annual percentage increase 
     described in section 1860B(b)(5) for 2006.
       ``(C) For subsequent years.--The dollar amounts applied 
     under paragraph (1) for a year after 2006 shall be the 
     amounts (under this paragraph) applied under paragraph (1) 
     for the preceding year increased by the annual percentage 
     increase described in section 1860B(b)(5) (relating to growth 
     in medicare prescription drug costs per beneficiary) for the 
     year involved.
       ``(D) Rounding.--Any amount, determined under the preceding 
     provisions of this paragraph for a year, which is not a 
     multiple of $10 shall be rounded to the nearest multiple of 
     $10.
       ``(d) Adjustment of Payments.--
       ``(1) Estimation of payments.--The Administrator shall 
     estimate--
       ``(A) the total payments to be made (without regard to this 
     subsection) during a year under this section; and
       ``(B) the total payments to be made by qualifying entities 
     for standard coverage under plans described in subsection (b) 
     during the year.
       ``(2) Adjustment.--The Administrator shall proportionally 
     adjust the payments made under this section for a coverage 
     year in such manner so that--
       ``(A) the total of the payments made for the year under 
     this section is equal to 65 percent of the total payments 
     described in paragraph (1)(B) during the year; and
       ``(B) the ratio of the total of the payments made for 
     direct subsidies under subsection (a)(1) for the year to the 
     total of the payments made for reinsurance subsidies for the 
     year under subsection (a)(2) is equal to the ratio of 35 to 
     30.
       ``(3) Risk adjustment.--To the extent the Administrator 
     determines it appropriate to avoid risk selection, the 
     payments made for direct subsidies under subsection (a)(1) 
     are subject to adjustment based upon risk factors specified 
     by the Administrator.
       ``(e) Payment Methods.--
       ``(1) In general.--Payments under this section shall be 
     based on such a method as the Administrator determines. The 
     Administrator may establish a payment method by which interim 
     payments of amounts under this section are made during a year 
     based on the Administrator's best estimate of amounts that 
     will be payable after obtaining all of the information.
       ``(2) Source of payments.--Payments under this section 
     shall be made from the Medicare Prescription Drug Trust Fund.
       ``(f) Qualified Retiree Prescription Drug Plan Defined.--
       ``(1) In general.--For purposes of this section, the term 
     `qualified retiree prescription drug plan' means employment-
     based retiree health coverage (as defined in paragraph 
     (3)(A)) if, with respect to an individual enrolled (or 
     eligible to be enrolled) under this part who is covered under 
     the plan, the following requirements are met:
       ``(A) 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.
       ``(B) Audits.--The sponsor (and the plan) shall maintain, 
     and afford the Administrator access to, such records as the 
     Administrator may require for purposes of audits and other 
     oversight activities necessary to ensure the adequacy of 
     prescription drug coverage, and the accuracy of payments 
     made.
       ``(C) Provision of certification of prescription drug 
     coverage.--The sponsor of the plan shall provide for issuance 
     of certifications of the type described in section 
     1860A(c)(2)(D).
       ``(2) Limitation on benefit eligibility.--No payment shall 
     be provided under this section with respect to an individual 
     who is enrolled under a qualified retiree prescription drug 
     plan unless the individual is--
       ``(A) enrolled under this part;
       ``(B) is covered under the plan; and
       ``(C) is eligible to obtain qualified prescription drug 
     coverage under section 1860A but did not elect such coverage 
     under this part (either through a prescription drug plan or 
     through a Medicare+Choice plan).
       ``(3) Definitions.--As used in this section:
       ``(A) Employment-based retiree health coverage.--The term 
     `employment-based retiree health coverage' means health 
     insurance or other coverage of health care costs for 
     individuals enrolled under this part (or for such individuals 
     and their spouses and dependents) based on their status as 
     former employees or labor union members.
       ``(B) Sponsor.--The term `sponsor' means a plan sponsor, as 
     defined in section 3(16)(B) of the Employee Retirement Income 
     Security Act of 1974.
       ``(g) General Definitions.--For purposes of this section:
       ``(1) Qualifying covered individual.--The term `qualifying 
     covered individual' means an individual who--
       ``(A) is enrolled with a prescription drug plan under this 
     part;
       ``(B) is enrolled with a Medicare+Choice plan that provides 
     qualified prescription drug coverage under part C; or

[[Page 11871]]

       ``(C) is enrolled for benefits under this title and is 
     covered under a qualified retiree prescription drug plan.
       ``(2) Coverage year.--The term `coverage year' means a 
     calendar year in which covered outpatient drugs are dispensed 
     if a claim for payment is made under the plan for such drugs, 
     regardless of when the claim is paid.

     ``SEC. 1860I. MEDICARE PRESCRIPTION DRUG TRUST FUND.

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

     ``SEC. 1860J. DEFINITIONS; TREATMENT OF REFERENCES TO 
                   PROVISIONS IN PART C.

       ``(a) Definitions.--For purposes of this part:
       ``(1) Covered outpatient drugs.--The term `covered 
     outpatient drugs' is defined in section 1860B(f).
       ``(2) Initial coverage limit.--The term `initial coverage 
     limit' means such limit as established under section 
     1860B(b)(3), or, in the case of coverage that is not standard 
     coverage, the comparable limit (if any) established under the 
     coverage.
       ``(3) Medicare prescription drug trust fund.--The term 
     `Medicare Prescription Drug Trust Fund' means the Trust Fund 
     created under section 1860I(a).
       ``(4) PDP sponsor.--The term `PDP sponsor' means an entity 
     that is certified under this part as meeting the requirements 
     and standards of this part for such a sponsor.
       ``(5) Prescription drug plan.--The term `prescription drug 
     plan' means health benefits coverage that--
       ``(A) is offered under a policy, contract, or plan by a PDP 
     sponsor pursuant to, and in accordance with, a contract 
     between the Administrator and the sponsor under section 
     1860D(b);
       ``(B) provides qualified prescription drug coverage; and
       ``(C) meets the applicable requirements of the section 
     1860C for a prescription drug plan.
       ``(6) Qualified prescription drug coverage.--The term 
     `qualified prescription drug coverage' is defined in section 
     1860B(a).
       ``(7) Standard coverage.--The term `standard coverage' is 
     defined in section 1860B(b).
       ``(b) Application of Medicare+Choice Provisions Under This 
     Part.--For purposes of applying provisions of part C under 
     this part with respect to a prescription drug plan and a PDP 
     sponsor, unless otherwise provided in this part such 
     provisions shall be applied as if--
       ``(1) any reference to a Medicare+Choice plan included a 
     reference to a prescription drug plan;
       ``(2) any reference to a provider-sponsored organization 
     included a reference to a PDP sponsor;
       ``(3) any reference to a contract under section 1857 
     included a reference to a contract under section 1860D(b); 
     and
       ``(4) any reference to part C included a reference to this 
     part.''.
       (b) Additional Conforming Changes.--
       (1) Conforming references to previous part d.--Any 
     reference in law (in effect before the date of the enactment 
     of this Act) to part D of title XVIII of the Social Security 
     Act is deemed a reference to part E of such title (as in 
     effect after such date).
       (2) Conforming amendment permitting waiver of cost-
     sharing.--Section 1128B(b)(3) (42 U.S.C. 1320a-7b(b)(3)) is 
     amended--
       (A) by striking ``and'' at the end of subparagraph (E);
       (B) by striking the period at the end of subparagraph (F) 
     and inserting ``; and''; and
       (C) by adding at the end the following new subparagraph:
       ``(G) the waiver or reduction of any cost-sharing imposed 
     under part D of title XVIII.''.
       (3) Submission of legislative proposal.--Not later than 6 
     months after the date of the enactment of this Act, the 
     Secretary of Health and Human Services shall submit to the 
     appropriate committees of Congress a legislative proposal 
     providing for such technical and conforming amendments in the 
     law as are required by the provisions of this subtitle.
       (c) Study on Transitioning Part B Prescription Drug 
     Coverage.--Not later than January 1, 2004, the Medicare 
     Benefits Administrator shall submit a report to Congress that 
     makes recommendations regarding methods for providing 
     benefits under part D of title XVIII of the Social Security 
     Act for outpatient prescription drugs for which benefits are 
     provided under part B of such title.

     SEC. 102. OFFERING OF QUALIFIED PRESCRIPTION DRUG COVERAGE 
                   UNDER THE MEDICARE+CHOICE PROGRAM.

       (a) In General.--Section 1851 (42 U.S.C. 1395w-21) is 
     amended by adding at the end the following new subsection:
       ``(j) Availability of Prescription Drug Benefits.--
       ``(1) Offer of qualified prescription drug coverage.--
       ``(A) In general.--A Medicare+Choice organization may not 
     offer prescription drug coverage (other than that required 
     under parts A and B) to an enrollee under a Medicare+Choice 
     plan unless such drug coverage is at least qualified 
     prescription drug coverage and unless the requirements of 
     this subsection with respect to such coverage are met.
       ``(B) Construction.--Nothing in this subsection shall be 
     construed as--
       ``(i) requiring a Medicare+Choice plan to include coverage 
     of qualified prescription drug coverage; or
       ``(ii) permitting a Medicare+Choice organization from 
     providing such coverage to an individual who has not elected 
     such coverage under section 1860A(b).

     For purposes of this part, an individual who has not elected 
     qualified prescription drug coverage under section 1860A(b) 
     shall be treated as being ineligible to enroll in a 
     Medicare+Choice plan under this part that offers such 
     coverage.
       ``(2) Compliance with additional beneficiary protections.--
     With respect to the offering of qualified prescription drug 
     coverage by a Medicare+Choice organization under a 
     Medicare+Choice plan, the organization and plan shall meet 
     the requirements of section 1860C, including requirements 
     relating to information dissemination and grievance and 
     appeals, in the same manner as they apply to a PDP sponsor 
     and a prescription drug plan under part D and shall submit to 
     the Administrator the information described in section 
     1860F(a)(2). The Administrator shall waive such requirements 
     to the extent the Administrator determines that such 
     requirements duplicate requirements otherwise applicable to 
     the organization or plan under this part.
       ``(3) Availability of premium and cost-sharing subsidies 
     for low-income enrollees and direct and reinsurance subsidy 
     payments for organizations.--For provisions--
       ``(A) providing premium and cost-sharing subsidies to low-
     income individuals receiving qualified prescription drug 
     coverage through a Medicare+Choice plan, see section 1860G; 
     and
       ``(B) providing a Medicare+Choice organization with direct 
     and insurance subsidy payments for providing qualified 
     prescription drug coverage under this part, see section 
     1860H.
       ``(4) Transition in initial enrollment period.--
     Notwithstanding any other provision of this part, the annual, 
     coordinated election period under subsection (e)(3)(B) for 
     2005 shall be the 6-month period beginning with November 
     2004.
       ``(5) Qualified prescription drug coverage; standard 
     coverage.--For purposes of this part, the terms `qualified 
     prescription drug coverage' and `standard coverage' have the 
     meanings given such terms in section 1860B.''.
       (b) Conforming Amendments.--Section 1851 (42 U.S.C. 1395w-
     21) is amended--
       (1) in subsection (a)(1)--
       (A) by inserting ``(other than qualified prescription drug 
     benefits)'' after ``benefits'';

[[Page 11872]]

       (B) by striking the period at the end of subparagraph (B) 
     and inserting a comma; and
       (C) by adding after and below subparagraph (B) the 
     following:

     ``and may elect qualified prescription drug coverage in 
     accordance with section 1860A.''; and
       (2) in subsection (g)(1), by inserting ``and section 
     1860A(c)(2)(B)'' after ``in this subsection''.
       (c) Effective Date.--The amendments made by this section 
     apply to coverage provided on or after January 1, 2005.

     SEC. 103. MEDICAID AMENDMENTS.

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


  ``special provisions relating to medicare prescription drug benefit

       ``Sec. 1935. (a) Requirement for Making Eligibility 
     Determinations for Low-Income Subsidies.--As a condition of 
     its State plan under this title under section 1902(a)(66) and 
     receipt of any Federal financial assistance under section 
     1903(a), a State shall--
       ``(1) make determinations of eligibility for premium and 
     cost-sharing subsidies under (and in accordance with) section 
     1860G;
       ``(2) inform the Administrator of the Medicare Benefits 
     Administration of such determinations in cases in which such 
     eligibility is established; and
       ``(3) otherwise provide such Administrator with such 
     information as may be required to carry out part D of title 
     XVIII (including section 1860G).
       ``(b) Payments for Additional Administrative Costs.--
       ``(1) In general.--The amounts expended by a State in 
     carrying out subsection (a) are, subject to paragraph (2), 
     expenditures reimbursable under the appropriate paragraph of 
     section 1903(a); except that, notwithstanding any other 
     provision of such section, the applicable Federal matching 
     rates with respect to such expenditures under such section 
     shall be increased as follows (but in no case shall the rate 
     as so increased exceed 100 percent):
       ``(A) For expenditures attributable to costs incurred 
     during 2005, the otherwise applicable Federal matching rate 
     shall be increased by 10 percent of the percentage otherwise 
     payable (but for this subsection) by the State.
       ``(B)(i) For expenditures attributable to costs incurred 
     during 2006 and each subsequent year through 2013, the 
     otherwise applicable Federal matching rate shall be increased 
     by the applicable percent (as defined in clause (ii)) of the 
     percentage otherwise payable (but for this subsection) by the 
     State.
       ``(ii) For purposes of clause (i), the `applicable percent' 
     for--
       ``(I) 2006 is 20 percent; or
       ``(II) a subsequent year is the applicable percent under 
     this clause for the previous year increased by 10 percentage 
     points.
       ``(C) For expenditures attributable to costs incurred after 
     2013, the otherwise applicable Federal matching rate shall be 
     increased to 100 percent.
       ``(2) Coordination.--The State shall provide the 
     Administrator with such information as may be necessary to 
     properly allocate administrative expenditures described in 
     paragraph (1) that may otherwise be made for similar 
     eligibility determinations.''.
       (b) Phased-In Federal Assumption of Medicaid Responsibility 
     for Premium and Cost-Sharing Subsidies for Dually Eligible 
     Individuals.--
       (1) In general.--Section 1903(a)(1) (42 U.S.C. 1396b(a)(1)) 
     is amended by inserting before the semicolon the following: 
     ``, reduced by the amount computed under section 1935(c)(1) 
     for the State and the quarter''.
       (2) Amount described.--Section 1935, as inserted by 
     subsection (a)(2), is amended by adding at the end the 
     following new subsection:
       ``(c) Federal Assumption of Medicaid Prescription Drug 
     Costs for Dually-Eligible Beneficiaries.--
       ``(1) In general.--For purposes of section 1903(a)(1), for 
     a State that is one of the 50 States or the District of 
     Columbia for a calendar quarter in a year (beginning with 
     2005) the amount computed under this subsection is equal to 
     the product of the following:
       ``(A) Medicare subsidies.--The total amount of payments 
     made in the quarter under section 1860G (relating to premium 
     and cost-sharing prescription drug subsidies for low-income 
     medicare beneficiaries) that are attributable to individuals 
     who are residents of the State and are entitled to benefits 
     with respect to prescribed drugs under the State plan under 
     this title (including such a plan operating under a waiver 
     under section 1115).
       ``(B) State matching rate.--A proportion computed by 
     subtracting from 100 percent the Federal medical assistance 
     percentage (as defined in section 1905(b)) applicable to the 
     State and the quarter.
       ``(C) Phase-out proportion.--The phase-out proportion (as 
     defined in paragraph (2)) for the quarter.
       ``(2) Phase-out proportion.--For purposes of paragraph 
     (1)(C), the `phase-out proportion' for a calendar quarter 
     in--
       ``(A) 2005 is 90 percent;
       ``(B) a subsequent year before 2014, is the phase-out 
     proportion for calendar quarters in the previous year 
     decreased by 10 percentage points; or
       ``(C) a year after 2013 is 0 percent.''.
       (c) Medicaid Providing Wrap-Around Benefits.--Section 1935, 
     as so inserted and amended, is further amended by adding at 
     the end the following new subsection:
       ``(d) Additional Provisions.--
       ``(1) Medicaid as secondary payor.--In the case of an 
     individual who is entitled to qualified prescription drug 
     coverage under a prescription drug plan under part D of title 
     XVIII (or under a Medicare+Choice plan under part C of such 
     title) and medical assistance for prescribed drugs under this 
     title, medical assistance shall continue to be provided under 
     this title for prescribed drugs to the extent payment is not 
     made under the prescription drug plan or the Medicare+Choice 
     plan selected by the individual.
       ``(2) Condition.--A State may require, as a condition for 
     the receipt of medical assistance under this title with 
     respect to prescription drug benefits for an individual 
     eligible to obtain qualified prescription drug coverage 
     described in paragraph (1), that the individual elect 
     qualified prescription drug coverage under section 1860A.''.
       (d) Treatment of Territories.--
       (1) In general.--Section 1935, as so inserted and amended, 
     is further amended--
       (A) in subsection (a) in the matter preceding paragraph 
     (1), by inserting ``subject to subsection (e)'' after 
     ``section 1903(a)'';
       (B) in subsection (c)(1), by inserting ``subject to 
     subsection (e)'' after ``1903(a)(1)''; and
       (C) by adding at the end the following new subsection:
       ``(e) Treatment of Territories.--
       ``(1) In general.--In the case of a State, other than the 
     50 States and the District of Columbia--
       ``(A) the previous provisions of this section shall not 
     apply to residents of such State; and
       ``(B) if the State establishes a plan described in 
     paragraph (2) (for providing medical assistance with respect 
     to the provision of prescription drugs to medicare 
     beneficiaries), the amount otherwise determined under section 
     1108(f) (as increased under section 1108(g)) for the State 
     shall be increased by the amount specified in paragraph (3).
       ``(2) Plan.--The plan described in this paragraph is a plan 
     that--
       ``(A) provides medical assistance with respect to the 
     provision of covered outpatient drugs (as defined in section 
     1860B(f)) to low-income medicare beneficiaries; and
       ``(B) assures that additional amounts received by the State 
     that are attributable to the operation of this subsection are 
     used only for such assistance.
       ``(3) Increased amount.--
       ``(A) In general.--The amount specified in this paragraph 
     for a State for a year is equal to the product of--
       ``(i) the aggregate amount specified in subparagraph (B); 
     and
       ``(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) 2005, is equal to $20,000,000; or
       ``(ii) a subsequent year, is equal to the aggregate amount 
     specified in this subparagraph for the previous year 
     increased by annual percentage increase specified in section 
     1860B(b)(5) for the year involved.
       ``(4) Report.--The Administrator shall submit to Congress a 
     report on the application of this subsection and may include 
     in the report such recommendations as the Administrator deems 
     appropriate.''.
       (2) Conforming amendment.--Section 1108(f) (42 U.S.C. 
     1308(f)) is amended by inserting ``and section 
     1935(e)(1)(B)'' after ``Subject to subsection (g)''.

     SEC. 104. MEDIGAP TRANSITION.

       (a) In General.--Section 1882 (42 U.S.C. 1395ss) is amended 
     by adding at the end the following new subsection:
       ``(v) Coverage of Prescription Drugs.--
       ``(1) In general.--Notwithstanding any other provision of 
     law, except as provided in paragraph (3) no new medicare 
     supplemental policy that provides coverage of expenses for 
     prescription drugs may be issued under this section on or 
     after January 1, 2005, to an individual unless it replaces a 
     medicare supplemental policy that was issued to that 
     individual and that provided some coverage of expenses for 
     prescription drugs.
       ``(2) Issuance of substitute policies if obtain 
     prescription drug coverage under part d.--

[[Page 11873]]

       ``(A) In general.--The issuer of a medicare supplemental 
     policy--
       ``(i) may not deny or condition the issuance or 
     effectiveness of a medicare supplemental policy that has a 
     benefit package classified as `A', `B', `C', `D', `E', `F', 
     or `G' (under the standards established under subsection 
     (p)(2)) and that is offered and is available for issuance to 
     new enrollees by such issuer;
       ``(ii) may not discriminate in the pricing of such policy, 
     because of health status, claims experience, receipt of 
     health care, or medical condition; and
       ``(iii) may not impose an exclusion of benefits based on a 
     pre-existing condition under such policy,

     in the case of an individual described in subparagraph (B) 
     who seeks to enroll under the policy not later than 63 days 
     after the date of the termination of enrollment described in 
     such paragraph and who submits evidence of the date of 
     termination or disenrollment along with the application for 
     such medicare supplemental policy.
       ``(B) Individual covered.--An individual described in this 
     subparagraph is an individual who--
       ``(i) enrolls in a prescription drug plan under part D; and
       ``(ii) at the time of such enrollment was enrolled and 
     terminates enrollment in a medicare supplemental policy which 
     has a benefit package classified as `H', `I', or `J' under 
     the standards referred to in subparagraph (A)(i) or 
     terminates enrollment in a policy to which such standards do 
     not apply but which provides benefits for prescription drugs.
       ``(C) Enforcement.--The provisions of paragraph (4) of 
     subsection (s) shall apply with respect to the requirements 
     of this paragraph in the same manner as they apply to the 
     requirements of such subsection.
       ``(3) New standards.--In applying subsection (p)(1)(E) 
     (including permitting the NAIC to revise its model 
     regulations in response to changes in law) with respect to 
     the change in benefits resulting from title I of the Medicare 
     Modernization and Prescription Drug Act of 2002, with respect 
     to policies issued to individuals who are enrolled under part 
     D, the changes in standards shall provide for at least two 
     benefit packages (other than the core benefit package) that 
     may provide for coverage of cost-sharing with respect to 
     qualified prescription drug coverage under such part, except 
     that such coverage may not cover the prescription drug 
     deductible under such part. Two benefit packages shall be 
     consistent with the following:
       ``(A) First new policy.--The policy described in this 
     subparagraph has the following benefits, notwithstanding any 
     other provision of this section relating to a core benefit 
     package:
       ``(i) Coverage of 50 percent of the cost-sharing otherwise 
     applicable, except coverage of 100 percent of any cost-
     sharing otherwise applicable for preventive benefits.
       ``(ii) No coverage of the part B deductible.
       ``(iii) Coverage for all hospital coinsurance for long 
     stays (as in the current core benefit package).
       ``(iv) A limitation on annual out-of-pocket expenditures to 
     $4,000 in 2005 (or, in a subsequent year, to such limitation 
     for the previous year increased by an appropriate inflation 
     adjustment specified by the Secretary).
       ``(B) Second new policy.--The policy described in this 
     subparagraph has the same benefits as the policy described in 
     subparagraph (A), except as follows:
       ``(i) Substitute `75 percent' for `50 percent' in clause 
     (i) of such subparagraph.
       ``(ii) Substitute `$2,000' for `$4,000' in clause (iv) of 
     such subparagraph.
       ``(4) Construction.--Any provision in this section or in a 
     medicare supplemental policy relating to guaranteed 
     renewability of coverage shall be deemed to have been met 
     through the offering of other coverage under this 
     subsection.''.

     SEC. 105. MEDICARE PRESCRIPTION DRUG DISCOUNT CARD 
                   ENDORSEMENT PROGRAM.

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


     ``medicare prescription drug discount card endorsement program

       ``Sec. 1807. (a) In General.--The Secretary (or the 
     Medicare Benefits Administrator pursuant to section 
     1808(c)(3)(C)) shall establish a program--
       ``(1) to endorse prescription drug discount card programs 
     that meet the requirements of this section; and
       ``(2) to make available to medicare beneficiaries 
     information regarding such endorsed programs.
       ``(b) Requirements for Endorsement.--The Secretary may not 
     endorse a prescription drug discount card program under this 
     section unless the program meets the following requirements:
       ``(1) Savings to medicare beneficiaries.--The program 
     passes on to medicare beneficiaries who enroll in the program 
     discounts on prescription drugs, including discounts 
     negotiated with manufacturers.
       ``(2) Prohibition on application only to mail order.--The 
     program applies to drugs that are available other than solely 
     through mail order.
       ``(3) Beneficiary services.--The program provides 
     pharmaceutical support services, such as education and 
     counseling, and services to prevent adverse drug 
     interactions.
       ``(4) Information.--The program makes available to medicare 
     beneficiaries through the Internet and otherwise information, 
     including information on enrollment fees, prices charged to 
     beneficiaries, and services offered under the program, that 
     the Secretary identifies as being necessary to provide for 
     informed choice by beneficiaries among endorsed programs.
       ``(5) Demonstrated experience.--The entity operating the 
     program has demonstrated experience and expertise in 
     operating such a program or a similar program.
       ``(6) Quality assurance.--The entity has in place adequate 
     procedures for assuring quality service under the program.
       ``(7) Additional beneficiary protections.--The program 
     meets such additional requirements as the Secretary 
     identifies to protect and promote the interest of medicare 
     beneficiaries, including requirements that ensure that 
     beneficiaries are not charged more than the lower of the 
     negotiated retail price or the usual and customary price.
       ``(c) Program Operation.--The Secretary shall operate the 
     program under this section consistent with the following:
       ``(1) Promotion of informed choice.--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 in a manner coordinated with the 
     dissemination of educational information on Medicare+Choice 
     plans under part C.
       ``(2) Oversight.--The Secretary shall provide appropriate 
     oversight to ensure compliance of endorsed programs with the 
     requirements of this section, including verification of the 
     discounts and services provided.
       ``(3) 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 program and programs endorsed under 
     this section.
       ``(4) Disqualification for abusive practices.--The 
     Secretary shall 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.
       ``(5) Enrollment practices.--A medicare beneficiary may not 
     be enrolled in more than one endorsed program at any time.
       ``(d) Transition.--The Secretary shall provide for an 
     appropriate transition and discontinuation of the program 
     under this section at the time prescription drug benefits 
     first become available under part D.
       ``(e) Authorization of Appropriations.--There are 
     authorized to be appropriated such sums as may be necessary 
     to carry out the program under this section.''.

     TITLE II--MEDICARE+CHOICE REVITALIZATION AND MEDICARE+CHOICE 
                          COMPETITION PROGRAM

               Subtitle A--Medicare+Choice Revitalization

     SEC. 201. MEDICARE+CHOICE IMPROVEMENTS.

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

[[Page 11874]]

     1853(c)(1)(C) (42 U.S.C. 1395w-23(c)(1)(C)) is amended by 
     striking clause (iv) and inserting the following:
       ``(iv) For 2002, 102 percent of the annual Medicare+Choice 
     capitation rate under this paragraph for the area for 2001.
       ``(v) For 2003 and 2004, 103 percent of the annual 
     Medicare+Choice capitation rate under this paragraph for the 
     area for the previous year.
       ``(iv) For 2005 and each succeeding year, 102 percent of 
     the annual Medicare+Choice capitation rate under this 
     paragraph for the area for the previous year.''.
       (d) Inclusion of Costs of DOD and VA Military Facility 
     Services to Medicare-eligible Beneficiaries in Calculation of 
     Medicare+Choice Payment Rates.--Section 1853(c)(3) (42 U.S.C. 
     1395w-23(c)(3)) is amended--
       (1) in subparagraph (A), by striking ``subparagraph (B)'' 
     and inserting ``subparagraphs (B) and (E)'', and
       (2) by adding at the end the following new subparagraph:
       ``(E) Inclusion of costs of dod and va military facility 
     services to medicare-eligible beneficiaries.--In determining 
     the area-specific Medicare+Choice capitation rate under 
     subparagraph (A) for a year (beginning with 2003), the annual 
     per capita rate of payment for 1997 determined under section 
     1876(a)(1)(C) shall be adjusted to include in the rate the 
     Secretary's estimate, on a per capita basis, of the amount of 
     additional payments that would have been made in the area 
     involved under this title if individuals entitled to benefits 
     under this title had not received services from facilities of 
     the Department of Defense or the Department of Veterans 
     Affairs.''.
       (e) Announcement of Revised Medicare+Choice Payment 
     Rates.--Within 2 weeks after the date of the enactment of 
     this Act, the Secretary shall determine, and shall announce 
     (in a manner intended to provide notice to interested 
     parties) Medicare+Choice capitation rates under section 1853 
     of the Social Security Act (42 U.S.C. 1395w-23) for 2003, 
     revised in accordance with the provisions of this section.
       (f) MedPAC Study of AAPCC.--
       (1) Study.--The Medicare Payment Advisory Commission shall 
     conduct a study that assesses the method used for determining 
     the adjusted average per capita cost (AAPCC) under section 
     1876(a)(4) of the Social Security Act (42 U.S.C. 
     1395mm(a)(4)). Such study shall examine--
       (A) the bases for variation in such costs between different 
     areas, including differences in input prices, utilization, 
     and practice patterns;
       (B) the appropriate geographic area for payment under the 
     Medicare+Choice program under part C of title XVIII of such 
     Act; and
       (C) the accuracy of risk adjustment methods in reflecting 
     differences in costs of providing care to different groups of 
     beneficiaries served under such program.
       (2) Report.--Not later than 9 months after the date of the 
     enactment of this Act, the Commission shall submit to 
     Congress a report on the study conducted under paragraph (1). 
     Such report shall include recommendations regarding changes 
     in the methods for computing the adjusted average per capita 
     cost among different areas.

     SEC. 202. MAKING PERMANENT CHANGE IN MEDICARE+CHOICE 
                   REPORTING DEADLINES AND ANNUAL, COORDINATED 
                   ELECTION PERIOD.

       (a) Change in Reporting Deadline.--Section 1854(a)(1) (42 
     U.S.C. 1395w-24(a)(1)), as amended by section 532(b)(1) of 
     the Public Health Security and Bioterrorism Preparedness and 
     Response Act of 2002, is amended by striking ``2002, 2003, 
     and 2004 (or July 1 of each other year)'' and inserting 
     ``2002 and each subsequent year (or July 1 of each year 
     before 2002)''.
       (b) Delay in Annual, Coordinated Election Period.--Section 
     1851(e)(3)(B) (42 U.S.C. 1395w-21(e)(3)(B)), as amended by 
     section 532(c)(1)(A) of the Public Health Security and 
     Bioterrorism Preparedness and Response Act of 2002, is 
     amended by striking ``and after 2005, the month of November 
     before such year and with respect to 2003, 2004, and 2005'' 
     and inserting ``, the month of November before such year and 
     with respect to 2003 and any subsequent year''.
       (c) Annual Announcement of Payment Rates.--Section 
     1853(b)(1) (42 U.S.C. 1395w-23(b)(1)), as amended by section 
     532(d)(1) of the Public Health Security and Bioterrorism 
     Preparedness and Response Act of 2002, is amended by striking 
     ``and after 2005 not later than March 1 before the calendar 
     year concerned and for 2004 and 2005'' and inserting ``not 
     later than March 1 before the calendar year concerned and for 
     2004 and each subsequent year''.
       (d) Requiring Provision of Available Information Comparing 
     Plan Options.--The first sentence of section 
     1851(d)(2)(A)(ii) (42 U.S.C. 1395w-21(d)(2)(A)(ii)) is 
     amended by inserting before the period the following: ``to 
     the extent such information is available at the time of 
     preparation of materials for the mailing''.

     SEC. 203. AVOIDING DUPLICATIVE STATE REGULATION.

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

     SEC. 204. SPECIALIZED MEDICARE+CHOICE PLANS FOR SPECIAL NEEDS 
                   BENEFICIARIES.

       (a) Treatment as Coordinated Care Plan.--Section 
     1851(a)(2)(A) (42 U.S.C. 1395w-21(a)(2)(A)) is amended by 
     adding at the end the following new sentence: ``Specialized 
     Medicare+Choice plans for special needs beneficiaries (as 
     defined in section 1859(b)(4)) may be any type of coordinated 
     care plan.''.
       (b) Specialized Medicare+Choice Plan for Special Needs 
     Beneficiaries Defined.--Section 1859(b) (42 U.S.C. 1395w-
     29(b)) is amended by adding at the end the following new 
     paragraph:
       ``(4) Specialized medicare+choice plans for special needs 
     beneficiaries.--
       ``(A) In general.--The term `specialized Medicare+Choice 
     plan for special needs beneficiaries' means a Medicare+Choice 
     plan that exclusively serves special needs beneficiaries (as 
     defined in subparagraph (B)).
       ``(B) Special needs beneficiary.--The term `special needs 
     beneficiary' means a Medicare+Choice eligible individual 
     who--
       ``(i) is institutionalized (as defined by the Secretary);
       ``(ii) is entitled to medical assistance under a State plan 
     under title XIX; or
       ``(iii) meets such requirements as the Secretary may 
     determine would benefit from enrollment in such a specialized 
     Medicare+Choice plan described in subparagraph (A) for 
     individuals with severe or disabling chronic conditions.''.
       (c) Restriction on Enrollment Permitted.--Section 1859 (42 
     U.S.C. 1395w-29) is amended by adding at the end the 
     following new subsection:
       ``(f) Restriction on Enrollment for Specialized 
     Medicare+Choice Plans for Special Needs Beneficiaries.--In 
     the case of a specialized Medicare+Choice plan (as defined in 
     subsection (b)(4)), notwithstanding any other provision of 
     this part and in accordance with regulations of the Secretary 
     and for periods before January 1, 2007, the plan may restrict 
     the enrollment of individuals under the plan to individuals 
     who are within one or more classes of special needs 
     beneficiaries.''.
       (d) Report to Congress.--Not later than December 31, 2005, 
     the Medicare Benefits Administrator shall submit to Congress 
     a report that assesses the impact of specialized 
     Medicare+Choice plans for special needs beneficiaries on the 
     cost and quality of services provided to enrollees. Such 
     report shall include an assessment of the costs and savings 
     to the medicare program as a result of amendments made by 
     subsections (a), (b), and (c).
       (e) Effective Dates.--
       (1) In general.--The amendments made by subsections (a), 
     (b), and (c) shall take effect upon the date of the enactment 
     of this Act.
       (2) Deadline for issuance of requirements for special needs 
     beneficiaries; transition.--No later than 6 months after the 
     date of the enactment of this Act, the Secretary of Health 
     and Human Services shall issue final regulations to establish 
     requirements for special needs beneficiaries under section 
     1859(b)(4)(B)(iii) of the Social Security Act, as added by 
     subsection (b).

     SEC. 205. MEDICARE MSAS.

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

     SEC. 206. EXTENSION OF REASONABLE COST AND SHMO CONTRACTS.

       (a) Reasonable Cost Contracts.--

[[Page 11875]]

       (1) In general.--Section 1876(h)(5)(C) (42 U.S.C. 
     1395mm(h)(5)(C)) is amended--
       (A) by inserting ``(i)'' after ``(C)'';
       (B) by inserting before the period the following: ``, 
     except (subject to clause (ii)) in the case of a contract for 
     an area which is not covered in the service area of 1 or more 
     coordinated care Medicare+Choice plans under part C''; and
       (C) by adding at the end the following new clause:
       ``(ii) In the case in which--
       ``(I) a reasonable cost reimbursement contract includes an 
     area in its service area as of a date that is after December 
     31, 2003;
       ``(II) such area is no longer included in such service area 
     after such date by reason of the operation of clause (i) 
     because of the inclusion of such area within the service area 
     of a Medicare+Choice plan; and
       ``(III) all Medicare+Choice plans subsequently terminate 
     coverage in such area;

     such reasonable cost reimbursement contract may be extended 
     and renewed to cover such area (so long as it is not included 
     in the service area of any Medicare+Choice plan).''.
       (2) Study.--The Medicare Benefits Administrator shall 
     conduct a study of an appropriate transition for plans 
     offered under reasonable cost contracts under section 1876 of 
     the Social Security Act on and after January 1, 2005. Such a 
     transition may take into account whether there are one or 
     more coordinated care Medicare+Choice plans being offered in 
     the areas involved. Not later than February 1, 2004, the 
     Administrator shall submit to Congress a report on such study 
     and shall include recommendations regarding any changes in 
     the amendment made by paragraph (1) as the Administrator 
     determines to be appropriate.
       (b) Extension of Social Health Maintenance Organization 
     (SHMO) Demonstration Project.--
       (1) In general.--Section 4018(b)(1) of the Omnibus Budget 
     Reconciliation Act of 1987 is amended by striking ``the date 
     that is 30 months after the date that the Secretary submits 
     to Congress the report described in section 4014(c) of the 
     Balanced Budget Act of 1997'' and inserting ``December 31, 
     2004''.
       (2) SHMOs offering medicare+choice plans.--Nothing in such 
     section 4018 shall be construed as preventing a social health 
     maintenance organization from offering a Medicare+Choice plan 
     under part C of title XVIII of the Social Security Act.

            Subtitle B--Medicare+Choice Competition Program

     SEC. 211. MEDICARE+CHOICE COMPETITION PROGRAM.

       (a) Submission of Bid Amounts.--Section 1854 (42 U.S.C. 
     1395w-24) is amended--
       (1) by amending the heading to read as follows:


                     ``submission of bid amounts'';

       (2) in subsection (a)(1)(A)--
       (A) by striking ``(A)'' and inserting ``(A)(i) if the 
     following year is before 2005,''; and
       (B) by inserting before the semicolon at the end the 
     following: `` or (ii) if the following year is 2005 or later, 
     the information described in paragraph (6)(A)''; and
       (3) by adding at the end of subsection (a) the following:
       ``(6) Submission of bid amounts by medicare+choice 
     organizations.--
       ``(A) Information to be submitted.--The information 
     described in this subparagraph is as follows:
       ``(i) The monthly aggregate bid amount for provision of all 
     items and services under this part and the actuarial basis 
     for determining such amount.
       ``(ii) The proportions of such bid amount that are 
     attributable to--

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

     and the actuarial basis for determining such proportions.
       ``(iii) Such additional information as the Administrator 
     may require to verify the actuarial bases described in 
     clauses (i) and (ii).
       ``(B) Statutory benefits defined.--For purposes of this 
     part:
       ``(i) The term `statutory non-drug benefits' means benefits 
     under parts A and B.
       ``(ii) The term `statutory prescription drug benefits' 
     means benefits under part D.
       ``(iii) The term `statutory benefits' means statutory 
     prescription drug benefits and statutory non-drug benefits.
       ``(C) Acceptance and negotiation of bid amounts.--The 
     Administrator has the authority to negotiate regarding 
     monthly bid amounts submitted under subparagraph (A) (and the 
     proportion described in subparagraph (A)(ii)). The 
     Administrator may reject such a bid amount or proportion if 
     the Administrator determines that such amount or proportion 
     is not supported by the actuarial bases provided under 
     subparagraph (A).''.
       (b) Providing for Beneficiary Savings for Certain Plans.--
       (1) In general.--Section 1854(b) (42 U.S.C. 1395w-24(b)) is 
     amended--
       (A) by adding at the end of paragraph (1) the following new 
     subparagraph:
       ``(C) Beneficiary rebate rule.--
       ``(i) Requirement.--The Medicare+Choice plan shall provide 
     to the enrollee a monthly rebate equal to 75 percent of the 
     average per capita savings (if any) described in paragraph 
     (3) applicable to the plan and year involved.
       ``(iii) Form of rebate.--A rebate required under this 
     subparagraph shall be provided--

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

     or any combination thereof.''; and
       (B) by adding at the end the following new paragraph:
       ``(3) Computation of average per capita monthly savings.--
     For purposes of paragraph (1)(C)(i), the average per capita 
     monthly savings referred to in such paragraph for a 
     Medicare+Choice plan and year is computed as follows:
       ``(A) Determination of state-wide average risk 
     adjustment.--
       ``(i) In general.--The Medicare Benefits Administrator 
     shall determine, at the same time rates are promulgated under 
     section 1853(b)(1) (beginning with 2005), for each State the 
     average of the risk adjustment factors to be applied to 
     enrollees under section 1853(a)(1)(A) in that State. In the 
     case of a State in which a Medicare+Choice plan was offered 
     in the previous year, the Administrator may compute such 
     average based upon risk adjustment factors applied in that 
     State in a previous year.
       ``(ii) Treatment of new states.--In the case of a State in 
     which no Medicare+Choice plan was offered in the previous 
     year, the Administrator shall estimate such average. In 
     making such estimate, the Administrator may use average risk 
     adjustment factors applied to comparable States or applied on 
     a national basis.
       ``(B) Determination of risk adjusted benchmark and risk-
     adjusted bid.--For each Medicare+Choice plan offered in a 
     State, the Administrator shall--
       ``(i) adjust the fee-for-service area-specific non-drug 
     benchmark amount by the applicable average risk adjustment 
     factor computed under subparagraph (A); and
       ``(ii) adjust the unadjusted non-drug monthly bid amount by 
     such applicable average risk adjustment factor.
       ``(C) Determination of average per capita monthly 
     savings.--The average per capita monthly savings described in 
     this subparagraph is equal to the amount (if any) by which--
       ``(i) the risk-adjusted benchmark amount computed under 
     subparagraph (B)(i), exceeds
       ``(ii) the risk-adjusted bid computed under subparagraph 
     (B)(ii).
       ``(D) Authority to determine risk adjustment for areas 
     other than states.--The Administrator may provide for the 
     determination and application of risk adjustment factors 
     under this paragraph on the basis of areas other than 
     States.''.
       (2) Computation of fee-for-service area-specific non-drug 
     benchmark.--Section 1853 (42 U.S.C. 1395w-23) is amended by 
     adding at the end the following new subsection:
       ``(j) Computation of Fee-for-Service Area-Specific Non-Drug 
     Benchmark Amount.--For purposes of this part, the term `fee-
     for-service area-specific non-drug benchmark amount' means, 
     with respect to a Medicare+Choice payment area for a month in 
     a year, an amount equal to the greater of the following (but 
     in no case less than \1/12\ of the rate computed under 
     subsection (c)(1), without regard to subparagraph (A), for 
     the year):
       ``(1) Based on 100 percent of fee-for-service costs in the 
     area.--An amount equal to \1/12\ of 100 percent (for 2005 
     through 2007, or 95 percent for 2008 and years thereafter) of 
     the adjusted average per capita cost for the year involved, 
     determined under section 1876(a)(4) for the Medicare+Choice 
     payment area, for the area and the year involved, for 
     services covered under parts A and B for individuals entitled 
     to benefits under part A and enrolled under part B who are 
     not enrolled in a Medicare+Choice plan under this part for 
     the year, and adjusted to exclude from such cost the amount 
     the Medicare Benefits Administrator estimates is payable for 
     costs described in subclauses (I) and (II) of subsection 
     (c)(3)(C)(i) for the year involved and also adjusted in the 
     manner described in subsection (c)(1)(D)(ii) (relating to 
     inclusion of costs of VA and DOD military facility services 
     to medicare-eligible beneficiaries).
       ``(2) Minimum monthly amount.--The minimum amount specified 
     in this paragraph is the amount specified in subsection 
     (c)(1)(B)(iv) for the year involved.''.
       (c) Payment of Plans Based on Bid Amounts.--
       (1) In general.--Section 1853(a)(1)(A) (42 U.S.C. 1395w-23) 
     is amended by striking ``in an amount'' and all that follows 
     and inserting the following: ``in an amount determined as 
     follows:
       ``(i) Payment before 2005.--For years before 2005, the 
     payment amount shall be equal to \1/12\ of the annual 
     Medicare+Choice capitation rate (as calculated under 
     subsection (c)) with respect to that individual for that 
     area,

[[Page 11876]]

     reduced by the amount of any reduction elected under section 
     1854(f)(1)(E) and adjusted under clause (iii).
       ``(ii) Payment for statutory non-drug benefits beginning 
     with 2005.--For years beginning with 2005--

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

       ``(iii) Demographic adjustment, including adjustment for 
     health status.--The Administrator shall adjust the payment 
     amount under clause (i), the unadjusted non-drug monthly bid 
     amount under clause (ii)(I), and the fee-for-service area-
     specific non-drug benchmark amount under clause (ii)(II) for 
     such risk factors as age, disability status, gender, 
     institutional status, and such other factors as the 
     Administrator determines to be appropriate, including 
     adjustment for health status under paragraph (3), so as to 
     ensure actuarial equivalence. The Administrator may add to, 
     modify, or substitute for such adjustment factors if such 
     changes will improve the determination of actuarial 
     equivalence.
       ``(iv) Reference to subsidy payment for statutory drug 
     benefits.--In the case in which an enrollee is enrolled under 
     part D, the Medicare+Choice organization also is entitled to 
     a subsidy payment amount under section 1860H.''.
       (d) Conforming Amendments.--
       (1) Protection against beneficiary selection.--Section 
     1852(b)(1)(A) (42 U.S.C. 1395w-22(b)(1)(A)) is amended by 
     adding at the end the following: ``The Administrator shall 
     not approve a plan of an organization if the Administrator 
     determines that the benefits are designed to substantially 
     discourage enrollment by certain Medicare+Choice eligible 
     individuals with the organization.''.
       (2) Conforming amendment to premium terminology.--
     Subparagraphs (A) and (B) of section 1854(b)(2) (42 U.S.C. 
     1395w-24(b)(2)) are amended to read as follows:
       ``(A) Medicare+Choice monthly basic beneficiary premium.--
     The term `Medicare+Choice monthly basic beneficiary premium' 
     means, with respect to a Medicare+Choice plan--
       ``(i) described in section 1853(a)(1)(A)(ii)(I) (relating 
     to plans providing rebates), zero; or
       ``(ii) described in section 1853(a)(1)(A)(ii)(II), the 
     amount (if any) by which the unadjusted non-drug monthly bid 
     amount exceeds the fee-for-service area-specific non-drug 
     benchmark amount.
       ``(B) Medicare+Choice monthly supplemental beneficiary 
     premium.--The term `Medicare+Choice monthly supplemental 
     beneficiary premium' means, with respect to a Medicare+Choice 
     plan, the portion of the aggregate monthly bid amount 
     submitted under clause (i) of subsection (a)(6)(A) for the 
     year that is attributable under such section to the provision 
     of nonstatutory benefits.''.
       (3) Requirement for uniform bid amounts.--Section 1854(c) 
     (42 U.S.C. 1395w-24(c)) is amended to read as follows:
       ``(c) Uniform Bid Amounts.--The Medicare+Choice monthly bid 
     amount submitted under subsection (a)(6) of a Medicare+Choice 
     organization under this part may not vary among individuals 
     enrolled in the plan.''.
       (4) Permitting beneficiary rebates.--
       (A) Section 1851(h)(4)(A) (42 U.S.C. 1395w-21(h)(4)(A)) is 
     amended by inserting ``except as provided under section 
     1854(b)(1)(C)'' after ``or otherwise''.
       (B) Section 1854(d) (42 U.S.C. 1395w-24(d)) is amended by 
     inserting ``, except as provided under subsection 
     (b)(1)(C),'' after ``and may not provide''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to payments and premiums for months beginning 
     with January 2005.

     SEC. 212. DEMONSTRATION PROGRAM FOR COMPETITIVE-DEMONSTRATION 
                   AREAS.

       (a) Identification of Competitive-Demonstration Areas for 
     Demonstration Program; Computation of Choice Non-Drug 
     Benchmarks.--Section 1853, as amended by section 211(b)(2), 
     is amended by adding at the end the following new subsection:
       ``(k) Establishment of Competitive Demonstration Program.--
       ``(1) Designation of competitive-demonstration areas as 
     part of program.--
       ``(A) In general.--For purposes of this part, the 
     Administrator shall establish a demonstration program under 
     which the Administrator designates Medicare+Choice areas as 
     competitive-demonstration areas consistent with the following 
     limitations:
       ``(i) Limitation on number of areas that may be 
     designated.--The Administrator may not designate more than 4 
     areas as competitive-demonstration areas.
       ``(ii) Limitation on period of designation of any area.--
     The Administrator may not designate any area as a 
     competitive-demonstration area for a period of more than 2 
     years.

     The Administrator has the discretion to decide whether or not 
     to designate as a competitive-demonstration area an area that 
     qualifies for such designation.
       ``(B) Qualifications for designation.--For purposes of this 
     title, a Medicare+Choice area (which is a metropolitan 
     statistical area or other area with a substantial number of 
     Medicare+Choice enrollees) may not be designated as a 
     `competitive-demonstration area' for a 2-year period 
     beginning with a year unless the Administrator determines, by 
     such date before the beginning of the year as the 
     Administrator determines appropriate, that--
       ``(i) there will be offered during the open enrollment 
     period under this part before the beginning of the year at 
     least 2 Medicare+Choice plans (in addition to the fee-for-
     service program under parts A and B), each offered by a 
     different Medicare+Choice organization; and
       ``(ii) during March of the previous year at least 50 
     percent of the number of Medicare+Choice eligible individuals 
     who reside in the area were enrolled in a Medicare+Choice 
     plan.
       ``(2) Choice non-drug benchmark amount.--For purposes of 
     this part, the term `choice non-drug benchmark amount' means, 
     with respect to a Medicare+Choice payment area for a month in 
     a year, the sum of the 2 components described in paragraph 
     (3) for the area and year. The Administrator shall compute 
     such benchmark amount for each competitive-demonstration area 
     before the beginning of each annual, coordinated election 
     period under section 1851(e)(3)(B) for each year (beginning 
     with 2005) in which it is designated as such an area.
       ``(3) 2 components.--For purposes of paragraph (2), the 2 
     components described in this paragraph for an area and a year 
     are the following:
       ``(A) Fee-for-service component weighted by national fee-
     for-service market share.--The product of the following:
       ``(i) National fee-for-service market share.--The national 
     fee-for-service market share percentage (determined under 
     paragraph (5)) for the year.
       ``(ii) Fee-for-service area-specific non-drug bid.--The 
     fee-for-service area-specific non-drug bid (as defined in 
     paragraph (6)) for the area and year.
       ``(B) M+C component weighted by national medicare+choice 
     market share.--The product of the following:
       ``(i) National medicare+choice market share.--1 minus the 
     national fee-for-service market share percentage for the 
     year.
       ``(ii) Weighted average of plan bids in area.--The weighted 
     average of the plan bids for the area and year (as determined 
     under paragraph (4)(A)).
       ``(4) Determination of weighted average bids for an area.--
       ``(A) In general.--For purposes of paragraph (3)(B)(ii), 
     the weighted average of plan bids for an area and a year is 
     the sum of the following products for Medicare+Choice plans 
     described in subparagraph (C) in the area and year:
       ``(i) Proportion of each plan's enrollees in the area.--The 
     number of individuals described in subparagraph (B), divided 
     by the total number of such individuals for all 
     Medicare+Choice plans described in subparagraph (C) for that 
     area and year.
       ``(ii) Monthly non-drug bid amount.--The unadjusted non-
     drug monthly bid amount.
       ``(B) Counting of individuals.--The Administrator shall 
     count, for each Medicare+Choice plan described in 
     subparagraph (C) for an area and year, the number of 
     individuals who reside in the area and who were enrolled 
     under such plan under this part during March of the previous 
     year.
       ``(C) Exclusion of plans not offered in previous year.--For 
     an area and year, the Medicare+Choice plans described in this 
     subparagraph are plans that are offered in the area and year 
     and were offered in the area in March of the previous year.
       ``(5) Computation of national fee-for-service market share 
     percentage.--The Administrator shall determine, for a year, 
     the proportion (in this subsection referred to as the 
     `national fee-for-service market share percentage') of 
     Medicare+Choice eligible individuals who during March of the 
     previous year were not enrolled in a Medicare+Choice plan.
       ``(6) Fee-for-service area-specific non-drug bid.--For 
     purposes of this part, the term `fee-for-service area-
     specific non-drug bid' means, for an area and year, the 
     amount described in section 1853(j)(1) for the area and year, 
     except that any reference to a percent of less than 100 
     percent shall be deemed a reference to 100 percent.''.
       (b) Application of Choice Non-Drug Benchmark in 
     Competitive-Demonstration Areas.--
       (1) In general.--Section 1854 is amended--
       (A) in subsection (b)(1)(C)(i), as added by section 
     211(b)(1)(A), by striking ``(i) Requirement.--If'' and 
     inserting ``(i) Requirement for non-competitive-demonstration 
     areas.--In the case of a Medicare+Choice payment area that is 
     not a competitive-demonstration area designated under section 
     1853(k)(1), if'';

[[Page 11877]]

       (B) in subsection (b)(1)(C), as so added, by inserting 
     after clause (i) the following new clause:
       ``(ii) Requirement for competitive-demonstration areas.--In 
     the case of a Medicare+Choice payment area that is designated 
     as a competitive-demonstration area under section 1853(k)(1), 
     if there are average per capita monthly savings described in 
     paragraph (4) for a Medicare+Choice plan and year, the 
     Medicare+Choice plan shall provide to the enrollee a monthly 
     rebate equal to 75 percent of such savings.'';
       (C) by adding at the end of subsection (b), as amended by 
     section 211(b)(1), the following new paragraph:
       ``(4) Computation of average per capita monthly savings for 
     competitive-demonstration areas.--For purposes of paragraph 
     (1)(C)(ii), the average per capita monthly savings referred 
     to in such paragraph for a Medicare+Choice plan and year 
     shall be computed in the same manner as the average per 
     capita monthly savings is computed under paragraph (3) except 
     that the reference to the fee-for-service area-specific non-
     drug benchmark in paragraph (3)(B)(i) (or to the benchmark 
     amount as adjusted under paragraph (3)(C)(i)) is deemed to be 
     a reference to the choice non-drug benchmark amount (or such 
     amount as adjusted in the manner described in paragraph 
     (3)(B)(i)).''; and
       (D) in subsection (d), as amended by section 211(d)(4), by 
     inserting ``and subsection (b)(1)(D)'' after ``subsection 
     (b)(1)(C),''.
       (2) Conforming amendments.--
       (A) Payment of plans.--Section 1853(a)(1)(A)(ii), as 
     amended by section 211(c)(1), is amended--
       (i) in subclause (I), by inserting ``(or, in the case of a 
     competitive-demonstration area, the choice non-drug benchmark 
     amount)'' after ``benchmark amount''; and
       (ii) in subclauses (I) and (II), by inserting ``(or, in the 
     case of a competitive-demonstration area, described in 
     section 1854(b)(4))'' after ``section 1854(b)(1)(C)''.
       (B) Definition of monthly basic premium.--Section 
     1854(b)(2)(A)(ii), as amended by section 211(d)(2), is 
     amended by inserting ``(or, in the case of a competitive-
     demonstration area, the choice non-drug benchmark amount)'' 
     after ``benchmark amount''.
       (c) Premium Adjustment.--Section 1839 (42 U.S.C. 1395r) is 
     amended by adding at the end the following new subsection:
       ``(h)(1) In the case of an individual who resides in a 
     competitive-demonstration area designated under section 
     1851(k)(1) and who is not enrolled in a Medicare+Choice plan 
     under part C, the monthly premium otherwise applied under 
     this part (determined without regard to subsections (b) and 
     (f) or any adjustment under this subsection) shall be 
     adjusted as follows: If the fee-for-service area-specific 
     non-drug bid (as defined in section 1853(k)(6)) for the 
     Medicare+Choice area in which the individual resides for a 
     month--
       ``(A) does not exceed the choice non-drug benchmark (as 
     determined under section 1853(k)(2)) for such area, the 
     amount of the premium for the individual for the month shall 
     be reduced by an amount equal to 75 percent of the amount by 
     which such benchmark exceeds such fee-for-service bid; or
       ``(B) exceeds such choice non-drug benchmark, the amount of 
     the premium for the individual for the month shall be 
     adjusted to ensure that--
       ``(i) the sum of the amount of the adjusted premium and the 
     choice non-drug benchmark for the area, is equal to
       ``(ii) the sum of the unadjusted premium plus amount of the 
     fee-for-service area-specific non-drug bid for the area.
       ``(2) Nothing in this subsection shall be construed as 
     preventing a reduction under paragraph (1)(A) in the premium 
     otherwise applicable under this part to zero or from 
     requiring the provision of a rebate to the extent such 
     premium would otherwise be required to be less than zero.
       ``(3) The adjustment in the premium under this subsection 
     shall be effected in such manner as the Medicare Benefits 
     Administrator determines appropriate.
       ``(4) In order to carry out this subsection (insofar as it 
     is effected through the manner of collection of premiums 
     under 1840(a)), the Medicare Benefits Administrator shall 
     transmit to the Commissioner of Social Security--
       ``(A) at the beginning of each year, the name, social 
     security account number, and the amount of the adjustment (if 
     any) under this subsection for each individual enrolled under 
     this part for each month during the year; and
       ``(B) periodically throughout the year, information to 
     update the information previously transmitted under this 
     paragraph for the year.''.
       (d) Conforming Amendment.--Section 1844(c) (42 U.S.C. 
     1395w(c)) is amended by inserting ``and without regard to any 
     premium adjustment effected under section 1839(h)'' before 
     the period at the end.
       (e) Report on Demonstration Program.--Not later than 6 
     months after the date on which the designation of the 4th 
     competitive-demonstration area under section 1851(k)(1) of 
     the Social Security Act ends, the Medicare Payment Advisory 
     Commission shall submit to Congress a report on the impact of 
     the demonstration program under the amendments made by this 
     section, including such impact on premiums of medicare 
     beneficiaries, savings to the medicare program, and on 
     adverse selection.
       (f) Effective Date.--The amendments made by this section 
     shall apply to payments and premiums for periods beginning on 
     or after January 1, 2005.

     SEC. 213. CONFORMING AMENDMENTS.

       (a) Conforming Amendments Relating to Bids.--
       (1) Section 1854 (42 U.S.C. 1395w-24) is amended--
       (A) in the heading by inserting ``and bid amounts'' after 
     ``premiums'';
       (B) in the heading of subsection (a), by inserting ``and 
     Bid Amounts'' after ``Premiums''; and
       (C) in subsection (a)(5)(A), by inserting ``paragraphs (2), 
     (3), and (4) of'' after ``filed under''.
       (b) Additional Conforming Amendments.--
       (1) Annual determination and announcement of certain 
     factors.--Section 1853(b) (42 U.S.C. 1395w-23(b)) is 
     amended--
       (A) in paragraph (1), by striking ``the calendar year 
     concerned'' and all that follows and inserting the following: 
     ``the calendar year concerned with respect to each 
     Medicare+Choice payment area, the following:
       ``(A) Pre-competition information.--For years before 2005, 
     the following:
       ``(i) Medicare+choice capitation rates.--The annual 
     Medicare+Choice capitation rate for each Medicare+Choice 
     payment area for the year.
       ``(ii) Adjustment factors.--The risk and other factors to 
     be used in adjusting such rates under subsection (a)(1)(A) 
     for payments for months in that year.
       ``(B) Competition information.--For years beginning with 
     2005, the following:
       ``(i) Benchmarks.--The fee-for-service area-specific non-
     drug benchmark under section 1853(j) and, if applicable, the 
     choice non-drug benchmark under section 1853(k)(2), for the 
     year involved and, if applicable, the national fee-for-
     service market share percentage.
       ``(ii) Adjustment factors.--The adjustment factors applied 
     under section 1853(a)(1)(A)(iii) (relating to demographic 
     adjustment), section 1853(a)(1)(B) (relating to adjustment 
     for end-stage renal disease), and section 1853(a)(3) 
     (relating to health status adjustment).
       ``(iii) Projected fee-for-service bid.--In the case of a 
     competitive area, the projected fee-for-service area-specific 
     non-drug bid (as determined under subsection (k)(6)) for the 
     area.
       ``(iv) Individuals.--The number of individuals counted 
     under subsection (k)(4)(B) and enrolled in each 
     Medicare+Choice plan in the area.''; and
       (B) in paragraph (3), by striking ``in sufficient detail'' 
     and all that follows up to the period at the end.
       (2) Repeal of provisions relating to adjusted community 
     rate (acr).--
       (A) In general.--Subsections (e) and (f) of section 1854 
     (42 U.S.C. 1395w-24) are repealed.
       (B) Conforming amendment.--Section 1839(a)(2) (42 U.S.C. 
     1395r(a)(2)) is amended by striking ``, and to reflect'' and 
     all that follows and inserting a period.
       (3) Prospective implementation of national coverage 
     determinations.--Section 1852(a)(5) (42 U.S.C. 1395w-
     22(a)(5)) is amended to read as follows:
       ``(5) Prospective implementation of national coverage 
     determinations.--The Secretary shall only implement a 
     national coverage determination that will result in a 
     significant change in the costs to a Medicare+Choice 
     organization in a prospective manner that applies to 
     announcements made under section 1853(b) after the date of 
     the implementation of the determination.''.
       (4) Permitting geographic adjustment to consolidate 
     multiple medicare+choice payment areas in a state into a 
     single statewide medicare+choice payment area.--Section 
     1853(d)(3) (42 U.S.C. 1395w-23(e)(3)) is amended--
       (A) by amending clause (i) of subparagraph (A) to read as 
     follows:
       ``(i) to a single statewide Medicare+Choice payment 
     area,''; and
       (B) by amending subparagraph (B) to read as follows:
       ``(B) Budget neutrality adjustment.--In the case of a State 
     requesting an adjustment under this paragraph, the Medicare 
     Benefits Administrator shall initially (and annually 
     thereafter) adjust the payment rates otherwise established 
     under this section for Medicare+Choice 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 
     Medicare+Choice payment areas in the State in the absence of 
     the adjustment under this paragraph.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to payments and premiums for periods beginning on 
     or after January 1, 2005.

[[Page 11878]]



               TITLE III--RURAL HEALTH CARE IMPROVEMENTS

     SEC. 301. REFERENCE TO FULL MARKET BASKET INCREASE FOR SOLE 
                   COMMUNITY HOSPITALS.

       For provision eliminating any reduction from full market 
     basket in the update for inpatient hospital services for sole 
     community hospitals, see section 401.

     SEC. 302. ENHANCED DISPROPORTIONATE SHARE HOSPITAL (DSH) 
                   TREATMENT FOR RURAL HOSPITALS AND URBAN 
                   HOSPITALS WITH FEWER THAN 100 BEDS.

       (a) Blending of Payment Amounts.--
       (1) In general.--Section 1886(d)(5)(F) (42 U.S.C. 
     1395ww(d)(5)(F)) is amended by adding at the end the 
     following new clause:
       ``(xiv)(I) In the case of discharges in a fiscal year 
     beginning on or after October 1, 2002, subject to subclause 
     (II), there shall be substituted for the disproportionate 
     share adjustment percentage otherwise determined under clause 
     (iv) (other than subclause (I)) or under clause (viii), (x), 
     (xi), (xii), or (xiii), the old blend proportion (specified 
     under subclause (III)) of the disproportionate share 
     adjustment percentage otherwise determined under the 
     respective clause and 100 percent minus such old blend 
     proportion of the disproportionate share adjustment 
     percentage determined under clause (vii) (relating to large, 
     urban hospitals).
       ``(II) Under subclause (I), the disproportionate share 
     adjustment percentage shall not exceed 10 percent for a 
     hospital that is not classified as a rural referral center 
     under subparagraph (C).
       ``(III) For purposes of subclause (I), the old blend 
     proportion for fiscal year 2003 is 80 percent, for each 
     subsequent year (through 2006) is the old blend proportion 
     under this subclause for the previous year minus 20 
     percentage points, and for each year beginning with 2007 is 0 
     percent.''.
       (2) Conforming amendments.--Section 1886(d)(5)(F) (42 
     U.S.C. 1395ww(d)(5)(F)) is amended--
       (A) in each of subclauses (II), (III), (IV), (V), and (VI) 
     of clause (iv), by inserting ``subject to clause (xiv) and'' 
     before ``for discharges occurring'';
       (B) in clause (viii), by striking ``The formula'' and 
     inserting ``Subject to clause (xiv), the formula''; and
       (C) in each of clauses (x), (xi), (xii), and (xiii), by 
     striking ``For purposes'' and inserting ``Subject to clause 
     (xiv), for purposes''.
       (b) Effective Date.--The amendments made by this section 
     shall apply with respect to discharges occurring on or after 
     October 1, 2002.

     SEC. 303. 2-YEAR PHASED-IN INCREASE IN THE STANDARDIZED 
                   AMOUNT IN RURAL AND SMALL URBAN AREAS TO 
                   ACHIEVE A SINGLE, UNIFORM STANDARDIZED AMOUNT.

       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 2003, 
     the average standardized amount for hospitals located other 
     than in a large urban area shall be increased by \1/2\ of the 
     difference between the average 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 2004, the Secretary shall compute an average 
     standardized amount for hospitals located in any area within 
     the United States and within each region equal to the average 
     standardized amount computed for the previous fiscal year 
     under this subparagraph for hospitals located in a large 
     urban area (or, beginning with fiscal year 2005, for 
     hospitals located in any area) increased by the applicable 
     percentage increase under subsection (b)(3)(B)(i).''.

     SEC. 304. MORE FREQUENT UPDATE IN WEIGHTS USED IN HOSPITAL 
                   MARKET BASKET.

       (a) More Frequent Updates in Weights.--After revising the 
     weights used in the hospital market basket under section 
     1886(b)(3)(B)(iii) of the Social Security Act (42 U.S.C. 
     1395ww(b)(3)(B)(iii)) to reflect the most current data 
     available, the Secretary shall establish a frequency for 
     revising such weights in such market basket to reflect the 
     most current data available more frequently than once every 5 
     years.
       (b) Report.--Not later than October 1, 2003, the Secretary 
     shall submit a report to Congress on the frequency 
     established under subsection (a), including an explanation of 
     the reasons for, and options considered, in determining such 
     frequency.

     SEC. 305. IMPROVEMENTS TO CRITICAL ACCESS HOSPITAL PROGRAM.

       (a) Reinstatement of Periodic Interim Payment (PIP).--
     Section 1815(e)(2) (42 U.S.C. 1395g(e)(2)) is amended--
       (1) by striking ``and'' at the end of subparagraph (C);
       (2) by adding ``and'' at the end of subparagraph (D); and
       (3) by inserting after subparagraph (D) the following new 
     subparagraph:
       ``(E) inpatient critical access hospital services;''.
       (b) Condition for Application of Special Physician Payment 
     Adjustment.--Section 1834(g)(2) (42 U.S.C. 1395m(g)(2)) is 
     amended by adding after and below subparagraph (B) the 
     following:

     ``The Secretary may not require, as a condition for applying 
     subparagraph (B) with respect to a critical access hospital, 
     that each physician providing professional services in the 
     hospital must assign billing rights with respect to such 
     services, except that such subparagraph shall not apply to 
     those physicians who have not assigned such billing 
     rights.''.
       (c) Flexibility in Bed Limitation for Hospitals with Strong 
     Seasonal Census Fluctuations.--Section 1820 (42 U.S.C. 1395i-
     4) is amended--
       (1) in subsection (c)(2)(B)(iii), by inserting ``subject to 
     paragraph (3)'' after ``(iii) provides'';
       (2) by adding at the end of subsection (c) the following 
     new paragraph:
       ``(3) Increase in maximum number of beds for hospitals with 
     strong seasonal census fluctuations.--
       ``(A) In general.--In the case of a hospital that 
     demonstrates that it meets the standards established under 
     subparagraph (B), the bed limitations otherwise applicable 
     under paragraph (2)(B)(iii) and subsection (f) shall be 
     increased by 5 beds.
       ``(B) Standards.--The Secretary shall specify standards for 
     determining whether a critical access hospital has 
     sufficiently strong seasonal variations in patient admissions 
     to justify the increase in bed limitation provided under 
     subparagraph (A).''; and
       (3) in subsection (f), by adding at the end the following 
     new sentence: ``The limitations in numbers of beds under the 
     first sentence are subject to adjustment under subsection 
     (c)(3).''.
       (d) 5-Year Extension of the Authorization for 
     Appropriations for Grant Program.--Section 1820(j) (42 U.S.C. 
     1395i-4(j)) is amended by striking ``through 2002'' and 
     inserting ``through 2007''.
       (e) Effective Dates.--
       (1) Reinstatement of pip.--The amendments made by 
     subsection (a) shall apply to payments made on or after 
     January 1, 2003.
       (2) Physician payment adjustment condition.--The amendment 
     made by subsection (b) shall be effective as if included in 
     the enactment of section 403(d) of the Medicare, Medicaid, 
     and SCHIP Balanced Budget Refinement Act of 1999 (113 Stat. 
     1501A-371).
       (3) Flexibility in bed limitation.--The amendments made by 
     subsection (c) shall apply to designations made on or after 
     January 1, 2003, but shall not apply to critical access 
     hospitals that were designated as of such date.

     SEC. 306. EXTENSION OF TEMPORARY INCREASE FOR HOME HEALTH 
                   SERVICES FURNISHED IN A RURAL AREA.

       (a) In General.--Section 508(a) BIPA (114 Stat. 2763A-533) 
     is amended--
       (1) by striking ``24-Month Increase Beginning April 1, 
     2001'' and inserting ``In General''; and
       (2) by striking ``April 1, 2003'' and inserting ``January 
     1, 2005''.
       (b) Conforming Amendment.--Section 547(c)(2) of BIPA (114 
     Stat. 2763A-553) is amended by striking ``the period 
     beginning on April 1, 2001, and ending on September 30, 
     2002,'' and inserting ``a period under such section''.

     SEC. 307. REFERENCE TO 10 PERCENT INCREASE IN PAYMENT FOR 
                   HOSPICE CARE FURNISHED IN A FRONTIER AREA AND 
                   RURAL HOSPICE DEMONSTRATION PROJECT.

       For--
       (1) provision of 10 percent increase in payment for hospice 
     care furnished in a frontier area, see section 422; and
       (2) provision of a rural hospice demonstration project, see 
     section 423.

     SEC. 308. REFERENCE TO PRIORITY FOR HOSPITALS LOCATED IN 
                   RURAL OR SMALL URBAN AREAS IN REDISTRIBUTION OF 
                   UNUSED GRADUATE MEDICAL EDUCATION RESIDENCIES.

       For provision providing priority for hospitals located in 
     rural or small urban areas in redistribution of unused 
     graduate medical education residencies, see section 612.

     SEC. 309. GAO STUDY OF GEOGRAPHIC DIFFERENCES IN PAYMENTS FOR 
                   PHYSICIANS' SERVICES.

       (a) Study.--The Comptroller General of the United States 
     shall conduct a study of differences in payment amounts under 
     the physician fee schedule under section 1848 of the Social 
     Security Act (42 U.S.C. 1395w-4) for physicians' services in 
     different geographic areas. Such study shall include--
       (1) an assessment of the validity of the geographic 
     adjustment factors used for each component of the fee 
     schedule;
       (2) an evaluation of the measures used for such adjustment, 
     including the frequency of revisions; and
       (3) an evaluation of the methods used to determine 
     professional liability insurance costs used in computing the 
     malpractice component, including a review of increases in 
     professional liability insurance premiums and variation in 
     such increases by State and physician specialty and methods 
     used to update the geographic cost of practice index and 
     relative weights for the malpractice component.

[[Page 11879]]

       (b) Report.--Not later than 1 year after the date of the 
     enactment of this Act, the Comptroller General shall submit 
     to Congress a report on the study conducted under subsection 
     (a). The report shall include recommendations regarding the 
     use of more current data in computing geographic cost of 
     practice indices as well as the use of data directly 
     representative of physicians' costs (rather than proxy 
     measures of such costs).

     SEC. 310. PROVIDING SAFE HARBOR FOR CERTAIN COLLABORATIVE 
                   EFFORTS THAT BENEFIT MEDICALLY UNDERSERVED 
                   POPULATIONS.

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

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

                TITLE IV--PROVISIONS RELATING TO PART A

                Subtitle A--Inpatient Hospital Services

     SEC. 401. REVISION OF ACUTE CARE HOSPITAL PAYMENT UPDATES.

       Subclause (XVIII) of section 1886(b)(3)(B)(i) (42 U.S.C. 
     1395ww(b)(3)(B)(i)) is amended to read as follows:
       ``(XVIII) for fiscal year 2003, the market basket 
     percentage increase for sole community hospitals and such 
     increase minus 0.25 percentage points for other hospitals, 
     and''.

     SEC. 402. 2-YEAR INCREASE IN LEVEL OF ADJUSTMENT FOR INDIRECT 
                   COSTS OF MEDICAL EDUCATION (IME).

       Section 1886(d)(5)(B)(ii) (42 U.S.C. 1395ww(d)(5)(B)(ii)) 
     is amended--
       (1) in subclause (VI) by striking ``and'' at the end;
       (2) by redesignating subclause (VII) as subclause (IX);
       (3) in subclause (VIII) as so redesignated, by striking 
     ``2002'' and inserting ``2004''; and
       (4) by inserting after subclause (VI) the following new 
     subclause:
       ``(VII) during fiscal year 2003, `c' is equal to 1.47;
       ``(VIII) during fiscal year 2004, `c' is equal to 1.45; 
     and''.

     SEC. 403. RECOGNITION OF NEW MEDICAL TECHNOLOGIES UNDER 
                   INPATIENT HOSPITAL PPS.

       (a) Improving Timeliness of Data Collection.--Section 
     1886(d)(5)(K) (42 U.S.C. 1395ww(d)(5)(K)) is amended by 
     adding at the end the following new clause:
       ``(vii) Under the mechanism under this subparagraph, the 
     Secretary shall provide for the addition of new diagnosis and 
     procedure codes in April 1 of each year, but the addition of 
     such codes shall not require the Secretary to adjust the 
     payment (or diagnosis-related group classification) under 
     this subsection until the fiscal year that begins after such 
     date.''.
       (b) Eligibility Standard.--
       (1) Minimum period for recognition of new technologies.--
     Section 1886(d)(5)(K)(vi) (42 U.S.C. 1395ww(d)(5)(K)(vi)) is 
     amended--
       (A) by inserting ``(I)'' after ``(vi)''; and
       (B) by adding at the end the following new subclause:
       ``(II) Under such criteria, a service or technology shall 
     not be denied treatment as a new service or technology on the 
     basis of the period of time in which the service or 
     technology has been in use if such period ends before the end 
     of the 2-to-3-year period that begins on the effective date 
     of implementation of a code under ICD-9-CM (or a successor 
     coding methodology) that enables the identification of a 
     significant sample of specific discharges in which the 
     service or technology has been used.''.
       (2) Adjustment of threshold.--Section 1886(d)(5)(K)(ii)(I) 
     (42 U.S.C. 1395ww(d)(5)(K)(ii)(I)) is amended by inserting 
     ``(applying a threshold specified by the Secretary that is 
     the lesser of 50 percent of the national average standardized 
     amount for operating costs of inpatient hospital services for 
     all hospitals and all diagnosis-related groups or one 
     standard deviation for the diagnosis-related group 
     involved)'' after ``is inadequate''.
       (3) Criterion for substantial improvement.--Section 
     1886(d)(5)(K)(vi) (42 U.S.C. 1395ww(d)(5)(K)(vi)), as amended 
     by paragraph (1), is further amended by adding at the end the 
     following subclause:
       ``(III) The Secretary shall by regulation provide for 
     further clarification of the criteria applied to determine 
     whether a new service or technology represents an advance in 
     medical technology that substantially improves the diagnosis 
     or treatment of beneficiaries. Under such criteria, in 
     determining whether a new service or technology represents an 
     advance in medical technology that substantially improves the 
     diagnosis or treatment of beneficiaries, the Secretary shall 
     deem a service or technology as meeting such requirement if 
     the service or technology is a drug or biological that is 
     designated under section 506 or 526 of the Federal Food, 
     Drug, and Cosmetic Act, approved under section 314.510 or 
     601.41 of title 21, Code of Federal Regulations, or 
     designated for priority review when the marketing application 
     for such drug or biological was filed or is a medical device 
     for which an exemption has been granted under section 520(m) 
     of such Act, for which priority review has been provided 
     under section 515(d)(5) of such Act, or is a substantially 
     equivalent device for which an expedited review is provided 
     under section 513(f) of such Act.''.
       (4) Process for public input.--Section 1886(d)(5)(K) (42 
     U.S.C. 1395ww(d)(5)(K)), as amended by paragraph (1), is 
     amended--
       (A) in clause (i), by adding at the end the following: 
     ``Such mechanism shall be modified to meet the requirements 
     of clause (viii).''; and
       (B) by adding at the end the following new clause:
       ``(viii) The mechanism established pursuant to clause (i) 
     shall be adjusted to provide, before publication of a 
     proposed rule, for public input regarding whether a new 
     service or technology not described in the second sentence of 
     clause (vi)(III) represents an advance in medical technology 
     that substantially improves the diagnosis or treatment of 
     beneficiaries as follows:
       ``(I) The Secretary shall make public and periodically 
     update a list of all the services and technologies for which 
     an application for additional payment under this subparagraph 
     is pending.
       ``(II) The Secretary shall accept comments, 
     recommendations, and data from the public regarding whether 
     the service or technology represents a substantial 
     improvement.
       ``(III) The Secretary shall provide for a meeting at which 
     organizations representing hospitals, physicians, medicare 
     beneficiaries, manufacturers, and any other interested party 
     may present comments, recommendations, and data to the 
     clinical staff of the Centers for Medicare & Medicaid 
     Services before publication of a notice of proposed 
     rulemaking regarding whether service or technology represents 
     a substantial improvement.''.
       (c) Preference for Use of DRG Adjustment.--Section 
     1886(d)(5)(K) (42 U.S.C. 1395ww(d)(5)(K)) is further amended 
     by adding at the end the following new clause:
       ``(ix) Before establishing any add-on payment under this 
     subparagraph with respect to a new technology, the Secretary 
     shall seek to identify one or more diagnosis-related groups 
     associated with such technology, based on similar clinical or 
     anatomical characteristics and the cost of the technology. 
     Within such groups the Secretary shall assign an eligible new 
     technology into a diagnosis-related group where the average 
     costs of care most closely approximate the costs of care of 
     using the new technology. In such case, no add-on payment 
     under this subparagraph shall be made with respect to such 
     new technology and this clause shall not affect the 
     application of paragraph (4)(C)(iii).''.
       (d) Improvement in Payment for New Technology.--Section 
     1886(d)(5)(K)(ii)(III) (42 U.S.C. 1395ww(d)(5)(K)(ii)(III)) 
     is amended by

[[Page 11880]]

     inserting after ``the estimated average cost of such service 
     or technology'' the following: ``(based on the marginal rate 
     applied to costs under subparagraph (A))''.
       (e) Effective Date.--
       (1) In general.--The Secretary shall implement the 
     amendments made by this section so that they apply to 
     classification for fiscal years beginning with fiscal year 
     2004.
       (2) Reconsiderations of applications for fiscal year 2003 
     that are denied.--In the case of an application for a 
     classification of a medical service or technology as a new 
     medical service or technology under section 1886(d)(5)(K) of 
     the Social Security Act (42 U.S.C. 1395ww(d)(5)(K)) that was 
     filed for fiscal year 2003 and that is denied--
       (A) the Secretary shall automatically reconsider the 
     application as an application for fiscal year 2004 under the 
     amendments made by this section; and
       (B) the maximum time period otherwise permitted for such 
     classification of the service or technology shall be extended 
     by 12 months.

     SEC. 404. PHASE-IN 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, 
     2003, the applicable Puerto Rico percentage is 50 percent and 
     the applicable Federal percentage is 50 percent;
       ``(iii) during fiscal year 2004, the applicable Puerto Rico 
     percentage is 45 percent and the applicable Federal 
     percentage is 55 percent;
       ``(iv) during fiscal year 2005, the applicable Puerto Rico 
     percentage is 40 percent and the applicable Federal 
     percentage is 60 percent;
       ``(v) during fiscal year 2006, the applicable Puerto Rico 
     percentage is 35 percent and the applicable Federal 
     percentage is 65 percent;
       ``(vi) during fiscal year 2007, the applicable Puerto Rico 
     percentage is 30 percent and the applicable Federal 
     percentage is 70 percent; and
       ``(vii) on or after October 1, 2007, the applicable Puerto 
     Rico percentage is 25 percent and the applicable Federal 
     percentage is 75 percent.''.

     SEC. 405. REFERENCE TO PROVISION RELATING TO ENHANCED 
                   DISPROPORTIONATE SHARE HOSPITAL (DSH) PAYMENTS 
                   FOR RURAL HOSPITALS AND URBAN HOSPITALS WITH 
                   FEWER THAN 100 BEDS.

       For provision enhancing disproportionate share hospital 
     (DSH) treatment for rural hospitals and urban hospitals with 
     fewer than 100 beds, see section 302.

     SEC. 406. REFERENCE TO PROVISION RELATING TO 2-YEAR PHASED-IN 
                   INCREASE IN THE STANDARDIZED AMOUNT IN RURAL 
                   AND SMALL URBAN AREAS TO ACHIEVE A SINGLE, 
                   UNIFORM STANDARDIZED AMOUNT.

       For provision phasing in over a 2-year period an increase 
     in the standardized amount for rural and small urban areas to 
     achieve a single, uniform, standardized amount, see section 
     303.

     SEC. 407. REFERENCE TO PROVISION FOR MORE FREQUENT UPDATES IN 
                   THE WEIGHTS USED IN HOSPITAL MARKET BASKET.

       For provision providing for more frequent updates in the 
     weights used in hospital market basket, see section 304.

     SEC. 408. REFERENCE TO PROVISION MAKING IMPROVEMENTS TO 
                   CRITICAL ACCESS HOSPITAL PROGRAM.

       For provision providing making improvements to critical 
     access hospital program, see section 305.

             Subtitle B--Skilled Nursing Facility Services

     SEC. 411. PAYMENT FOR COVERED SKILLED NURSING FACILITY 
                   SERVICES.

       (a) Temporary Increase in Nursing Component of PPS Federal 
     Rate.--Section 312(a) of BIPA is amended by adding at the end 
     the following new sentence: ``The Secretary of Health and 
     Human Services shall increase by 8 percent the nursing 
     component of the case-mix adjusted Federal prospective 
     payment rate specified in Tables 3 and 4 of the final rule 
     published in the Federal Register by the Health Care 
     Financing Administration on July 31, 2000 (65 Fed. Reg. 
     46770) and as subsequently updated under section 
     1888(e)(4)(E)(ii) of the Social Security Act (42 U.S.C. 
     1395yy(e)(4)(E)(ii)), effective for services furnished on or 
     after October 1, 2002, and before October 1, 2005.''.
       (b) Adjustment to RUGs for AIDS Residents.--
       (1) In general.--Paragraph (12) of section 1888(e) (42 
     U.S.C. 1395yy(e)) is amended to read as follows:
       ``(12) Adjustment for residents with aids.--
       ``(A) In general.--Subject to subparagraph (B), in the case 
     of a resident of a skilled nursing facility who is afflicted 
     with acquired immune deficiency syndrome (AIDS), the per diem 
     amount of payment otherwise applicable shall be increased by 
     128 percent to reflect increased costs associated with such 
     residents.
       ``(B) Sunset.--Subparagraph (A) shall not apply on and 
     after such date as the Secretary certifies that there is an 
     appropriate adjustment in the case mix under paragraph 
     (4)(G)(i) to compensate for the increased costs associated 
     with residents described in such subparagraph.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to services furnished on or after October 1, 
     2003.

                          Subtitle C--Hospice

     SEC. 421. COVERAGE OF HOSPICE CONSULTATION SERVICES.

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

     SEC. 422. 10 PERCENT INCREASE IN PAYMENT FOR HOSPICE CARE 
                   FURNISHED IN A FRONTIER AREA.

       (a) In General.--Section 1814(i)(1) (42 U.S.C. 1395f(i)(1)) 
     is amended by adding at the end the following new 
     subparagraph:
       ``(D) With respect to hospice care furnished in a frontier 
     area on or after January 1, 2003, and before January 1, 2008, 
     the payment rates otherwise established for such care shall 
     be increased by 10 percent. For purposes of this 
     subparagraph, the term `frontier area' means a county in 
     which the population density is less than 7 persons per 
     square mile.''.
       (b) Report on Costs.--Not later than January 1, 2007, the 
     Comptroller General of the United States shall submit to 
     Congress a report on the costs of furnishing hospice care in 
     frontier areas. Such report shall include recommendations 
     regarding the appropriateness of extending, and modifying, 
     the payment increase provided under the amendment made by 
     subsection (a).

     SEC. 423. RURAL HOSPICE DEMONSTRATION PROJECT.

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

[[Page 11881]]

       (2) payments for hospice care shall be made at the rates 
     otherwise applicable to such care under title XVIII of such 
     Act.
     The Secretary may require the program to comply with such 
     additional quality assurance standards for its provision of 
     services in its facility as the Secretary deems appropriate.
       (d) Report.--Upon completion of the project, the Secretary 
     shall submit a report to Congress on the project and shall 
     include in the report recommendations regarding extension of 
     such project to hospice programs serving rural areas.

                      Subtitle D--Other Provisions

     SEC. 431. DEMONSTRATION PROJECT FOR USE OF RECOVERY AUDIT 
                   CONTRACTORS.

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

                 TITLE V--PROVISIONS RELATING TO PART B

                    Subtitle A--Physicians' Services

     SEC. 501. REVISION OF UPDATES FOR PHYSICIANS' SERVICES.

       (a) Update for 2003 through 2005.--
       (1) In general.--Section 1848(d) (42 U.S.C. 1395w-4(d)) is 
     amended by adding at the end the following new paragraphs:
       ``(5) Update for 2003.--The update to the single conversion 
     factor established in paragraph (1)(C) for 2003 is 2 percent.
       ``(6) Special rules for update for 2004 and 2005.--The 
     following rules apply in determining the update adjustment 
     factors under paragraph (4)(B) for 2004 and 2005:
       ``(A) Use of 2002 data in determining allowable costs.--
       ``(i) The reference in clause (ii)(I) of such paragraph to 
     April 1, 1996, is deemed to be a reference to January 1, 
     2002.
       ``(ii) The allowed expenditures for 2002 is deemed to be 
     equal to the actual expenditures for physicians' services 
     furnished during 2002, as estimated by the Secretary.
       ``(B) 1 percentage point increase in gdp under sgr.--The 
     annual average percentage growth in real gross domestic 
     product per capita under subsection (f)(2)(C) for each of 
     2003, 2004, and 2005 is deemed to be increased by 1 
     percentage point.''.
       (2) Conforming amendment.--Paragraph (4)(B) of such section 
     is amended, in the matter before clause (i), by inserting 
     ``and paragraph (6)'' after ``subparagraph (D)''.
       (b) Use of 10-Year Rolling Average in Computing Gross 
     Domestic Product.--
       (1) In general.--Section 1848(f)(2)(C) (42 U.S.C. 1395w-
     4(f)(2)(C)) is amended--
       (A) by striking ``projected'' and inserting ``annual 
     average''; and
       (B) by striking ``from the previous applicable period to 
     the applicable period involved'' and inserting ``during the 
     10-year period ending with the applicable period involved''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to computations of the sustainable growth rate 
     for years beginning with 2002.
       (c) Elimination of Transitional Adjustment.--Section 
     1848(d)(4)(F) (42 U.S.C. 1395w-4(d)(4)(F)) is amended by 
     striking ``subparagraph (A)'' and all that follows and 
     inserting ``subparagraph (A), for each of 2001 and 2002, of 
     -0.2 percent.''

     SEC. 502. STUDIES ON ACCESS TO PHYSICIANS' SERVICES.

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

     SEC. 503. MEDPAC REPORT ON PAYMENT FOR PHYSICIANS' SERVICES.

       Not later than 1 year after the date of the enactment of 
     this Act, the Medicare Payment Advisory Commission shall 
     submit to Congress a report on the effect of refinements to 
     the practice expense component of payments for physicians' 
     services in the case of services for which there are no 
     physician work relative value units, after the transition to 
     a full resource-based payment system in 2002, under section 
     1848 of the Social Security Act (42 U.S.C. 1395w-4). Such 
     report shall examine the following matters by physician 
     specialty:
       (1) The effect of such refinements on payment for 
     physicians' services.
       (2) The interaction of the practice expense component with 
     other components of and adjustments to payment for 
     physicians' services under such section.
       (3) The appropriateness of the amount of compensation by 
     reason of such refinements.
       (4) The effect of such refinements on access to care by 
     medicare beneficiaries to physicians' services.
       (5) The effect of such refinements on physician 
     participation under the medicare program.

                       Subtitle B--Other Services

     SEC. 511. COMPETITIVE ACQUISITION OF CERTAIN ITEMS AND 
                   SERVICES.

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


        ``competitive acquisition of certain items and services

       ``Sec. 1847. (a) Establishment of Competitive Acquisition 
     Programs.--
       ``(1) Implementation of programs.--
       ``(A) In general.--The Secretary shall establish and 
     implement programs under which competitive acquisition areas 
     are established throughout the United States for contract 
     award purposes for the furnishing under this part of 
     competitively priced items and services (described in 
     paragraph (2)) for which payment is made under this part. 
     Such areas may differ for different items and services.
       ``(B) Phased-in implementation.--The programs shall be 
     phased-in among competitive acquisition areas over a period 
     of not longer than 3 years in a manner so that the 
     competition under the programs occurs in--
       ``(i) at least \1/3\ of such areas in 2004; and
       ``(ii) at least \2/3\ of such areas in 2005.
       ``(C) Waiver of certain provisions.--In carrying out the 
     programs, the Secretary

[[Page 11882]]

     may waive such provisions of the Federal Acquisition 
     Regulation as are necessary for the efficient implementation 
     of this section, other than provisions relating to 
     confidentiality of information and such other provisions as 
     the Secretary determines appropriate.
       ``(2) Items and services described.--The items and services 
     referred to in paragraph (1) are the following:
       ``(A) Durable medical equipment and inhalation drugs used 
     in connection with durable medical equipment.--Covered items 
     (as defined in section 1834(a)(13)) for which payment is 
     otherwise made under section 1834(a), other than items used 
     in infusion, and inhalation drugs used in conjunction with 
     durable medical equipment.
       ``(B) Off-the-shelf orthotics.--Orthotics (described in 
     section 1861(s)(9)) for which payment is otherwise made under 
     section 1834(h) which require minimal self-adjustment for 
     appropriate use and does not require expertise in trimming, 
     bending, molding, assembling, or customizing to fit to the 
     patient.
       ``(3) Exemption authority.--In carrying out the programs 
     under this section, the Secretary may exempt--
       ``(A) areas that are not competitive due to low population 
     density; and
       ``(B) items and services for which the application of 
     competitive acquisition is not likely to result in 
     significant savings.
       ``(b) Program Requirements.--
       ``(1) In general.--The Secretary shall conduct a 
     competition among entities supplying items and services 
     described in subsection (a)(2) for each competitive 
     acquisition area in which the program is implemented under 
     subsection (a) with respect to such items and services.
       ``(2) Conditions for awarding contract.--
       ``(A) In general.--The Secretary may not award a contract 
     to any entity under the competition conducted in a 
     competitive acquisition area pursuant to paragraph (1) to 
     furnish such items or services unless the Secretary finds all 
     of the following:
       ``(i) The entity meets quality and financial standards 
     specified by the Secretary or developed by accreditation 
     entities or organizations recognized by the Secretary.
       ``(ii) The total amounts to be paid under the contract 
     (including costs associated with the administration of the 
     contract) are expected to be less than the total amounts that 
     would otherwise be paid.
       ``(iii) Beneficiary access to a choice of multiple 
     suppliers in the area is maintained.
       ``(iv) Beneficiary liability is limited to the applicable 
     percentage of contract award price.
       ``(B) Quality standards.--The quality standards specified 
     under subparagraph (A)(i) shall not be less than the quality 
     standards that would otherwise apply if this section did not 
     apply and shall include consumer services standards. The 
     Secretary shall consult with an expert outside advisory panel 
     composed of an appropriate selection of representatives of 
     physicians, practitioners, and suppliers to review (and 
     advise the Secretary concerning) such quality standards.
       ``(3) Contents of contract.--
       ``(A) In general.--A contract entered into with an entity 
     under the competition conducted pursuant to paragraph (1) is 
     subject to terms and conditions that the Secretary may 
     specify.
       ``(B) Term of contracts.--The Secretary shall rebid 
     contracts under this section not less often than once every 3 
     years.
       ``(4) Limit on number of contractors.--
       ``(A) In general.--The Secretary may limit the number of 
     contractors in a competitive acquisition area to the number 
     needed to meet projected demand for items and services 
     covered under the contracts. In awarding contracts, the 
     Secretary shall take into account the ability bidding 
     entities to furnish items or services in sufficient 
     quantities to meet the anticipated needs of beneficiaries for 
     such items or services in the geographic area covered under 
     the contract on a timely basis.
       ``(B) Multiple winners.--The Secretary shall award 
     contracts to more than one entity submitting a bid in each 
     area for an item or service.
       ``(5) Participating contractors.--Payment shall not be made 
     for items and services described in subsection (a)(2) 
     furnished by a contractor and for which competition is 
     conducted under this section unless--
       ``(A) the contractor has submitted a bid for such items and 
     services under this section; and
       ``(B) the Secretary has awarded a contract to the 
     contractor for such items and services under this section.
       ``(6) Authority to contract for education, outreach and 
     complaint services.-- The Secretary may enter into a contract 
     with an appropriate entity to address complaints from 
     beneficiaries who receive items and services from an entity 
     with a contract under this section and to conduct appropriate 
     education of and outreach to such beneficiaries with respect 
     to the program.
       ``(c) Annual Reports.--The Secretary shall submit to 
     Congress an annual management report on the programs under 
     this section. Each such report shall include information on 
     savings, reductions in cost-sharing, access to items and 
     services, and beneficiary satisfaction.
       ``(d) Demonstration Project for Clinical Laboratory 
     Services.--
       ``(1) In general.--The Secretary shall conduct a 
     demonstration project on the application of competitive 
     acquisition under this section to clinical diagnostic 
     laboratory tests--
       ``(A) for which payment is otherwise made under section 
     1833(h) or 1834(d)(1) (relating to colorectal cancer 
     screening tests); and
       ``(B) which are furnished without a face-to-face encounter 
     between the individual and the hospital or physician ordering 
     the tests.
       ``(2) Terms and conditions.--Such project shall be under 
     the same conditions as are applicable to items and services 
     described in subsection (a)(2).
       ``(3) Report.--The Secretary shall submit to Congress--
       ``(A) an initial report on the project not later than 
     December 31, 2004; and
       ``(B) such progress and final reports on the project after 
     such date as the Secretary determines appropriate.''.
       (b) Continuation of Certain Demonstration Projects.--
     Notwithstanding the amendment made by subsection (a), with 
     respect to demonstration projects implemented by the 
     Secretary under section 1847 of the Social Security Act (42 
     U.S.C. 1395w-3) (relating to the establishment of competitive 
     acquisition areas) that was in effect on the day before the 
     date of the enactment of this Act, each such demonstration 
     project may continue under the same terms and conditions 
     applicable under that section as in effect on that date.
       (c) Report on Differences in Payment for Laboratory 
     Services.--Not later than 18 months after the date of the 
     enactment of this Act, the Comptroller General of the United 
     States shall submit to Congress a report that analyzes 
     differences in reimbursement between public and private 
     payors for clinical diagnostic laboratory services.

     SEC. 512. PAYMENT FOR AMBULANCE SERVICES.

       (a) Phase-In Providing Floor Using Blend of Fee Schedule 
     and Regional Fee Schedules.--Section 1834(l) (42 U.S.C. 
     1395m(l)) is amended--
       (1) in paragraph (2)(E), by inserting ``consistent with 
     paragraph (10)'' after ``in an efficient and fair manner'';
       (2) by redesignating the paragraph (8) added by section 
     221(a) of BIPA as paragraph (9); and
       (3) by adding at the end the following new paragraph:
       ``(10) Phase-in providing floor using blend of fee schedule 
     and regional fee schedules.--In carrying out the phase-in 
     under paragraph (2)(E) for each level of service furnished in 
     a year before January 1, 2007, the portion of the payment 
     amount that is based on the fee schedule shall not be less 
     than the following blended rate of the fee schedule under 
     paragraph (1) and of a regional fee schedule for the region 
     involved:
       ``(A) For 2003, the blended rate shall be based 20 percent 
     on the fee schedule under paragraph (1) and 80 percent on the 
     regional fee schedule.
       ``(B) For 2004, the blended rate shall be based 40 percent 
     on the fee schedule under paragraph (1) and 60 percent on the 
     regional fee schedule.
       ``(C) For 2005, the blended rate shall be based 60 percent 
     on the fee schedule under paragraph (1) and 40 percent on the 
     regional fee schedule.
       ``(D) For 2006, the blended rate shall be based 80 percent 
     on the fee schedule under paragraph (1) and 20 percent on the 
     regional fee schedule.
     For purposes of this paragraph, the Secretary shall establish 
     a regional fee schedule for each of the 9 Census divisions 
     using the methodology (used in establishing the fee schedule 
     under paragraph (1)) to calculate a regional conversion 
     factor and a regional mileage payment rate and using the same 
     payment adjustments and the same relative value units as used 
     in the fee schedule under such paragraph.''.
       (b) Adjustment in Payment for Certain Long Trips.--Section 
     1834(l), as amended by subsection (a), is further amended by 
     adding at the end the following new paragraph:
       ``(11) Adjustment in payment for certain long trips.--In 
     the case of ground ambulance services furnished on or after 
     January 1, 2003, and before January 1, 2008, regardless of 
     where the transportation originates, the fee schedule 
     established under this subsection shall provide that, with 
     respect to the payment rate for mileage for a trip above 50 
     miles the per mile rate otherwise established shall be 
     increased by \1/4\ of the payment per mile otherwise 
     applicable to such miles.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to ambulance services furnished on or after 
     January 1, 2003.

     SEC. 513. 1-YEAR EXTENSION OF MORATORIUM ON THERAPY CAPS; 
                   PROVISIONS RELATING TO REPORTS.

       (a) 1-Year Extension of Moratorium on Therapy Caps.--
     Section 1833(g)(4) (42 U.S.C. 1395l(g)(4)) is amended by 
     striking ``and 2002'' and inserting ``2002 and 2003''.
       (b) Prompt Submission of Overdue Reports on Payment and 
     Utilization of Outpatient Therapy Services.--Not later than

[[Page 11883]]

     December 31, 2002, the Secretary shall submit to Congress the 
     reports required under section 4541(d)(2) of the Balanced 
     Budget Act of 1997 (relating to alternatives to a single 
     annual dollar cap on outpatient therapy) and under section 
     221(d) of the Medicare, Medicaid, and SCHIP Balanced Budget 
     Refinement Act of 1999 (relating to utilization patterns for 
     outpatient therapy).
       (c) Identification of Conditions and Diseases Justifying 
     Waiver of Therapy Cap.--
       (1) Study.--The Secretary shall request the Institute of 
     Medicine of the National Academy of Sciences to identify 
     conditions or diseases that should justify conducting an 
     assessment of the need to waive the therapy caps under 
     section 1833(g)(4) of the Social Security Act (42 U.S.C. 
     1395l(g)(4)).
       (2) Reports to congress.--Not later than July 1, 2003, the 
     Secretary shall submit to Congress a preliminary report on 
     the conditions and diseases identified under paragraph (1) 
     and not later than September 1, 2003, a final report on the 
     conditions and diseases so identified.
       (d) GAO Study of Patient Access to Physical Therapist 
     Services.--
       (1) Study.--The Comptroller General of the United States 
     shall conduct a study on access to physical therapist 
     services in States authorizing such services without a 
     physician referral and in States that require such a 
     physician referral. The study shall--
       (A) examine the use of and referral patterns for physical 
     therapist services for patients age 50 and older in States 
     that authorize such services without a physician referral and 
     in States that require such a physician referral;
       (B) examine the use of and referral patterns for physical 
     therapist services for patients who are medicare 
     beneficiaries; and
       (C) examine the delivery of physical therapists' services 
     within the facilities of Department of Defense; and
       (D) analyze the potential impact on medicare beneficiaries 
     and on expenditures under the medicare program of eliminating 
     the need for a physician referral for physical therapist 
     services under the medicare program.
       (2) Report.--The Comptroller General shall submit to 
     Congress a report on the study conducted under paragraph (1) 
     by not later than 1 year after the date of the enactment of 
     this Act.

     SEC. 514. ACCELERATED IMPLEMENTATION OF 20 PERCENT 
                   COINSURANCE FOR HOSPITAL OUTPATIENT DEPARTMENT 
                   (OPD) SERVICES; OTHER OPD PROVISIONS.

       (a) Accelerated Implementation of Coinsurance Reductions.--
     Section 1833(t)(8)(C)(ii) (42 U.S.C. 1395l(t)(8)(C)(ii)) is 
     amended by striking subclauses (III) through (V) and 
     inserting the following:

       ``(III) For procedures performed in 2004, 45 percent.
       ``(IV) For procedures performed in 2005, 40 percent.
       ``(V) For procedures performed in 2006, 2007, 2008 and 
     2009, 35 percent.
       ``(VI) For procedures performed in 2010, 30 percent.
       ``(VII) For procedures performed in 2011, 25 percent.
       ``(VIII) For procedures performed in 2012 and thereafter, 
     20 percent.''.

       (b) Treatment of Temperature Monitored Cryoablation.--
       (1) In general.--Section 1833(t)(6)(A)(ii) (42 U.S.C. 
     1395l(t)(6)(A)(ii)) is amended by striking ``or temperature 
     monitored cryoablation''.
       (2) Effective date.--The amendment made by paragraph (1) 
     applies to payment for services furnished on or after January 
     1, 2003.

     SEC. 515. COVERAGE OF AN INITIAL PREVENTIVE PHYSICAL 
                   EXAMINATION.

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

               ``Initial Preventive Physical Examination

       ``(ww) The term `initial preventive physical examination' 
     means physicians' services consisting of a physical 
     examination with the goal of health promotion and disease 
     detection and includes items and services specified by the 
     Secretary in regulations.''.
       (c) Payment as Physicians' Services.--Section 1848(j)(3) 
     (42 U.S.C. 1395w-4(j)(3)) by inserting ``(2)(W),'' after 
     ``(2)(S),''.
       (d) Other Conforming Amendments.--Section 1862(a) (42 
     U.S.C. 1395y(a)) is amended--
       (1) in paragraph (1)--
       (A) by striking ``and'' at the end of subparagraph (H);
       (B) by striking the semicolon at the end of subparagraph 
     (I) and inserting ``, and''; and
       (C) by adding at the end the following new subparagraph:
       ``(J) in the case of an initial preventive physical 
     examination, which is performed not later than 6 months after 
     the date the individual's first coverage period begins under 
     part B;''; and
       (2) in paragraph (7), by striking ``or (H)'' and inserting 
     ``(H), or (J)''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to services furnished on or after January 1, 
     2004, but only for individuals whose coverage period begins 
     on or after such date.

     SEC. 516. RENAL DIALYSIS SERVICES.

       (a) Report on Differences in Costs in Different Settings.--
     Not later than 1 year after the date of the enactment of this 
     Act, the Comptroller General of the United States shall 
     submit to Congress a report containing--
       (1) an analysis of the differences in costs of providing 
     renal dialysis services under the medicare program in home 
     settings and in facility settings;
       (2) an assessment of the percentage of overhead costs in 
     home settings and in facility settings; and
       (3) an evaluation of whether the charges for home dialysis 
     supplies and equipment are reasonable and necessary.
       (b) Restoring Composite Rate Exceptions for Pediatric 
     Facilities.--
       (1) In general.--Section 422(a)(2) of BIPA is amended--
       (A) in subparagraph (A), by striking ``and (C)'' and 
     inserting ``, (C), and (D)'';
       (B) in subparagraph (B), by striking ``In the case'' and 
     inserting ``Subject to subparagraph (D), in the case''; and
       (C) by adding at the end the following new subparagraph:
       ``(D) Inapplicability to pediatric facilities.--
     Subparagraphs (A) and (B) shall not apply, as of October 1, 
     2002, to pediatric facilities that do not have an exception 
     rate described in subparagraph (C) in effect on such date. 
     For purposes of this subparagraph, the term `pediatric 
     facility' means a renal facility at least 50 percent of whose 
     patients are individuals under 18 years of age.''.
       (2) Conforming amendment.--The fourth sentence of section 
     1881(b)(7) (42 U.S.C. 1395rr(b)(7)) is amended by striking 
     ``The Secretary'' and inserting ``Subject to section 
     422(a)(2) of the Medicare, Medicaid, and SCHIP Benefits 
     Improvement and Protection Act of 2000, the Secretary''.
       (c) Increase in Renal Dialysis Composite Rate for Services 
     Furnished in 2004.--Notwithstanding any other provision of 
     law, with respect to payment under part B of title XVIII of 
     the Social Security Act for renal dialysis services furnished 
     in 2004, the composite payment rate otherwise established 
     under section 1881(b)(7) of such Act (42 U.S.C. 1395rr(b)(7)) 
     shall be increased by 1.2 percent.

             TITLE VI--PROVISIONS RELATING TO PARTS A AND B

                    Subtitle A--Home Health Services

     SEC. 601. ELIMINATION OF 15 PERCENT REDUCTION IN PAYMENT 
                   RATES UNDER THE PROSPECTIVE PAYMENT SYSTEM.

       (a) In General.--Section 1895(b)(3)(A) (42 U.S.C. 
     1395fff(b)(3)(A)) is amended to read as follows:
       ``(A) Initial basis.--Under such system the Secretary shall 
     provide for computation of a standard prospective payment 
     amount (or amounts) as follows:
       ``(i) Such amount (or amounts) shall initially be based on 
     the most current audited cost report data available to the 
     Secretary and shall be computed in a manner so that the total 
     amounts payable under the system for fiscal year 2001 shall 
     be equal to the total amount that would have been made if the 
     system had not been in effect and if section 
     1861(v)(1)(L)(ix) had not been enacted.
       ``(ii) For fiscal year 2002 and for the first quarter of 
     fiscal year 2003, such amount (or amounts) shall be equal to 
     the amount (or amounts) determined under this paragraph for 
     the previous fiscal year, updated under subparagraph (B).
       ``(iii) For 2003, such amount (or amounts) shall be equal 
     to the amount (or amounts) determined under this paragraph 
     for fiscal year 2002, updated under subparagraph (B) for 
     2003.
       ``(iv) For 2004 and each subsequent year, such amount (or 
     amounts) shall be equal to the amount (or amounts) determined 
     under this paragraph for the previous year, updated under 
     subparagraph (B).
     Each such amount shall be standardized in a manner that 
     eliminates the effect of variations in relative case mix and 
     area wage adjustments among different home health agencies in 
     a budget neutral manner consistent with the case mix and wage 
     level adjustments provided under paragraph (4)(A). Under the 
     system, the Secretary may recognize regional differences or 
     differences based upon whether or not the services or agency 
     are in an urbanized area.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect as if included in the amendments made by 
     section 501 of the Medicare, Medicaid, and SCHIP Benefits 
     Improvement and Protection Act of 2000 (as enacted into law 
     by section 1(a)(6) of Public Law 106-554).

     SEC. 602. ESTABLISHMENT OF REDUCED COPAYMENT FOR A HOME 
                   HEALTH SERVICE EPISODE OF CARE FOR CERTAIN 
                   BENEFICIARIES.

       (a) Part A.--
       (1) In general.--Section 1813(a) (42 U.S.C. 1395e(a)) is 
     amended by adding at the end the following new paragraph:
       ``(5)(A)(i) Subject to clause (ii), the amount payable for 
     home health services furnished

[[Page 11884]]

     to the individual under this title for each episode of care 
     beginning in a year (beginning with 2003) shall be reduced by 
     a copayment equal to the copayment amount specified in 
     subparagraph (B)(ii) such year.
       ``(ii) The copayment under clause (i) shall not apply--
       ``(I) in the case of an individual who has been determined 
     to be a qualified medicare beneficiary (as defined in section 
     1905(p)(1)) or otherwise to be entitled to medical assistance 
     under section 1902(a)(10)(A) or 1902(a)(10)(C); and
       ``(II) in the case of an episode of care which consists of 
     4 or fewer visits.
       ``(B)(i) The Secretary shall estimate, before the beginning 
     of each year (beginning with 2003), the national average 
     payment under this title per episode for home health services 
     projected for the year involved.
       ``(ii) For each year the copayment amount under this clause 
     is equal to 1.5 percent of the national average payment 
     estimated for the year involved under clause (i). Any amount 
     determined under the preceding sentence which is not a 
     multiple of $5 shall be rounded to the nearest multiple of 
     $5.
       ``(iii) There shall be no administrative or judicial review 
     under section 1869, 1878, or otherwise of the estimation of 
     average payment under clause (i).''.
       (2) Timely implementation.--Unless the Secretary of Health 
     and Human Services otherwise provides on a timely basis, the 
     copayment amount specified under section 1813(a)(5)(B)(ii) of 
     the Social Security Act (as added by paragraph (1)) for 2003 
     shall be deemed to be $40.
       (b) Conforming Provisions.--
       (1) Section 1833(a)(2)(A) (42 U.S.C. 1395l(a)(2)(A)) is 
     amended by inserting ``less the copayment amount applicable 
     under section 1813(a)(5)'' after ``1895''.
       (2) Section 1866(a)(2)(A)(i) (42 U.S.C. 1395cc(a)(2)(A)(i)) 
     is amended--
       (A) by striking ``or coinsurance'' and inserting ``, 
     coinsurance, or copayment''; and
       (B) by striking ``or (a)(4)'' and inserting ``(a)(4), or 
     (a)(5)''.

     SEC. 603. UPDATE IN HOME HEALTH SERVICES.

       (a) Change to Calendar Year Update.--
       (1) In general.--Section 1895(b) (42 U.S.C. 1395fff(b)(3)) 
     is amended--
       (A) in paragraph (3)(B)(i)--
       (i) by striking ``each fiscal year (beginning with fiscal 
     year 2002)'' and inserting ``fiscal year 2002 and for each 
     subsequent year (beginning with 2003)''; and
       (ii) by inserting ``or year'' after ``the fiscal year'';
       (B) in paragraph (3)(B)(ii)--
       (i) in subclause (II), by striking ``fiscal year'' and 
     inserting ``year'' and by redesignating such subclause as 
     subclause (III); and
       (ii) in subclause (I), by striking ``each of fiscal years 
     2002 and 2003'' and inserting the following: ``fiscal year 
     2002, the home health market basket percentage increase (as 
     defined in clause (iii)) minus 1.1 percentage points;

       ``(II) 2003'';

       (C) in paragraph (3)(B)(iii), by inserting ``or year'' 
     after ``fiscal year'' each place it appears;
       (D) in paragraph (3)(B)(iv)--
       (i) by inserting ``or year'' after ``fiscal year'' each 
     place it appears; and
       (ii) by inserting ``or years'' after ``fiscal years''; and
       (E) in paragraph (5), by inserting ``or year'' after 
     ``fiscal year''.
       (2) Transition rule.--The standard prospective payment 
     amount (or amounts) under section 1895(b)(3) of the Social 
     Security Act for the calendar quarter beginning on October 1, 
     2002, shall be such amount (or amounts) for the previous 
     calendar quarter.
       (b) Changes in Updates for 2003, 2004, and 2005.--Section 
     1895(b)(3)(B)(ii) (42 U.S.C. 1395fff(b)(3)(B)(ii)), as 
     amended by subsection (a)(1)(B), is amended--
       (1) in subclause (II), by striking ``the home health market 
     basket percentage increase (as defined in clause (iii)) minus 
     1.1 percentage points'' and inserting ``2.0 percentage 
     points'';
       (2) by striking ``or'' at the end of subclause (II);
       (3) by redesignating subclause (III) as subclause (V); and
       (4) by inserting after subclause (II) the following new 
     subclause:

       ``(III) 2004, 1.0 percentage points;
       ``(IV) 2005, the home health market basket percentage 
     increase (as defined in clause (iii)) minus 0.8 percentage 
     points; or''.

       (c) Payment Adjustment.--
       (1) In general.--Section 1895(b)(5) (42 U.S.C. 
     1395fff(b)(5)) is amended ``5 percent'' and inserting ``3 
     percent''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to years beginning with 2003.

     SEC. 604. OASIS TASK FORCE; SUSPENSION OF CERTAIN OASIS DATA 
                   COLLECTION REQUIREMENTS PENDING TASK FORCE 
                   SUBMITTAL OF REPORT.

       (a) Establishment.--The Secretary of Health and Human 
     Services shall establish and appoint a task force (to be 
     known as the ``OASIS Task Force'') to examine the data 
     collection and reporting requirements under OASIS. For 
     purposes of this section, the term ``OASIS'' means the 
     Outcome and Assessment Information Set required by reason of 
     section 4602(e) of Balanced Budget Act of 1997 (42 U.S.C. 
     1395fff note).
       (b) Composition.--The OASIS Task Force shall be composed of 
     the following:
       (1) Staff of the Centers for Medicare & Medicaid Services 
     with expertise in post-acute care.
       (2) Representatives of home health agencies.
       (3) Health care professionals and research and health care 
     quality experts outside the Federal Government with expertise 
     in post-acute care.
       (4) Advocates for individuals requiring home health 
     services.
       (c) Duties.--
       (1) Review and recommendations.--The OASIS Task Force shall 
     review and make recommendations to the Secretary regarding 
     changes in OASIS to improve and simplify data collection for 
     purposes of--
       (A) assessing the quality of home health services; and
       (B) providing consistency in classification of patients 
     into home health resource groups (HHRGs) for payment under 
     section 1895 of the Social Security Act (42 U.S.C. 1395fff).
       (2) Specific items.--In conducting the review under 
     paragraph (1), the OASIS Task Force shall specifically 
     examine--
       (A) the 41 outcome measures currently in use;
       (B) the timing and frequency of data collection; and
       (C) the collection of information on comorbidities and 
     clinical indicators.
       (3) Report.--The OASIS Task Force shall submit a report to 
     the Secretary containing its findings and recommendations for 
     changes in OASIS by not later than 18 months after the date 
     of the enactment of this Act.
       (d) Sunset.--The OASIS Task Force shall terminate 60 days 
     after the date on which the report is submitted under 
     subsection (c)(2).
       (e) Nonapplication of FACA.--The provisions of the Federal 
     Advisory Committee Act shall not apply to the OASIS Task 
     Force.
       (f) Suspension of OASIS Requirement for Collection of Data 
     on Non-Medicare and Non-Medicaid Patients Pending Task Force 
     Report.--
       (1) In general.--During the period described in paragraph 
     (2), the Secretary of Health and Human Services may not 
     require, under section 4602(e) of the Balanced Budget Act of 
     1997 or otherwise under OASIS, a home health agency to gather 
     or submit information that relates to an individual who is 
     not eligible for benefits under either title XVIII or title 
     XIX of the Social Security Act.
       (2) Period of suspension.--The period described in this 
     paragraph--
       (A) begins on January 1, 2003, and
       (B) ends on the last day of the 2nd month beginning after 
     the date the report is submitted under subsection (c)(2).

     SEC. 605. MEDPAC STUDY ON MEDICARE MARGINS OF HOME HEALTH 
                   AGENCIES.

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

             Subtitle B--Direct Graduate Medical Education

     SEC. 611. EXTENSION OF UPDATE LIMITATION ON HIGH COST 
                   PROGRAMS.

       Section 1886(h)(2)(D)(iv) (42 U.S.C. 1395ww(h)(2)(D)(iv)) 
     is amended--
       (1) in subclause (I)--
       (A) by striking ``and 2002'' and inserting ``through 
     2012'';
       (B) by striking ``during fiscal year 2001 or fiscal year 
     2002'' and inserting ``during the period beginning with 
     fiscal year 2001 and ending with fiscal year 2012''; and
       (C) by striking ``subject to subclause (III),'';
       (2) by striking subclause (II); and
       (3) in subclause (III)--
       (A) by redesignating such subclause as subclause (II); and
       (B) by striking ``or (II)''.

     SEC. 612. REDISTRIBUTION OF UNUSED RESIDENT POSITIONS.

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

       ``(I) In general.--If a hospital's resident level (as 
     defined in clause (iii)(I)) is less than the otherwise 
     applicable resident limit (as defined in clause (iii)(II)) 
     for each of the reference periods (as defined in subclause 
     (II)),

[[Page 11885]]

     effective for cost reporting periods beginning on or after 
     January 1, 2003, the otherwise applicable resident limit 
     shall be reduced by 75 percent of the difference between such 
     limit and the reference resident level specified in subclause 
     (III) (or subclause (IV) if applicable).
       ``(II) Reference periods defined.--In this clause, the term 
     `reference periods' means, for a hospital, the 3 most recent 
     consecutive cost reporting periods of the hospital for which 
     cost reports have been settled (or, if not, submitted) on or 
     before September 30, 2001.
       ``(III) Reference resident level.--Subject to subclause 
     (IV), the reference resident level specified in this 
     subclause for a hospital is the highest resident level for 
     the hospital during any of the reference periods.
       ``(IV) Adjustment process.--Upon the timely request of a 
     hospital, the Secretary may adjust the reference resident 
     level for a hospital to be the resident level for the 
     hospital for the cost reporting period that includes July 1, 
     2002.

       ``(ii) Redistribution.--

       ``(I) In general.--The Secretary is authorized to increase 
     the otherwise applicable resident limits for hospitals by an 
     aggregate number estimated by the Secretary that does not 
     exceed the aggregate reduction in such limits attributable to 
     clause (i) (without taking into account any adjustment under 
     subclause (IV) of such clause).
       ``(II) Effective date.--No increase under subclause (I) 
     shall be permitted or taken into account for a hospital for 
     any portion of a cost reporting period that occurs before 
     July 1, 2003, or before the date of the hospital's 
     application for an increase under this clause. No such 
     increase shall be permitted for a hospital unless the 
     hospital has applied to the Secretary for such increase by 
     December 31, 2004.
       ``(III) Considerations in redistribution.--In determining 
     for which hospitals the increase in the otherwise applicable 
     resident limit is provided under subclause (I), the Secretary 
     shall take into account the need for such an increase by 
     specialty and location involved, consistent with subclause 
     (IV).
       ``(IV) Priority for rural and small urban areas.--In 
     determining for which hospitals and residency training 
     programs an increase in the otherwise applicable resident 
     limit is provided under subclause (I), the Secretary shall 
     first distribute the increase to programs of hospitals 
     located in rural areas or in urban areas that are not large 
     urban areas (as defined for purposes of subsection (d)) on a 
     first-come-first-served basis (as determined by the 
     Secretary) based on a demonstration that the hospital will 
     fill the positions made available under this clause and not 
     to exceed an increase of 25 full-time equivalent positions 
     with respect to any hospital.
       ``(V) Application of locality adjusted national average per 
     resident amount.--With respect to additional residency 
     positions in a hospital attributable to the increase provided 
     under this clause, notwithstanding any other provision of 
     this subsection, the approved FTE resident amount is deemed 
     to be equal to the locality adjusted national average per 
     resident amount computed under subparagraph (E) for that 
     hospital.
       ``(VI) Construction.--Nothing in this clause shall be 
     construed as permitting the redistribution of reductions in 
     residency positions attributable to voluntary reduction 
     programs under paragraph (6) or as affecting the ability of a 
     hospital to establish new medical residency training programs 
     under subparagraph (H).

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

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

       (b) No Application of Increase to IME.--Section 
     1886(d)(5)(B)(v) (42 U.S.C. 1395ww(d)(5)(B)(v)) is amended by 
     adding at the end the following: ``The provisions of clause 
     (i) of subparagraph (I) of subsection (h)(4) shall apply with 
     respect to the first sentence of this clause in the same 
     manner as it applies with respect to subparagraph (F) of such 
     subsection, but the provisions of clause (ii) of such 
     subparagraph shall not apply.''.
       (c) Report on Extension of Applications Under 
     Redistribution Program.--Not later than July 1, 2004, the 
     Secretary shall submit to Congress a report containing 
     recommendations regarding whether to extend the deadline for 
     applications for an increase in resident limits under section 
     1886(h)(4)(I)(ii)(II) of the Social Security Act (as added by 
     subsection (a)).

                      Subtitle C--Other Provisions

     SEC. 621. MODIFICATIONS TO MEDICARE PAYMENT ADVISORY 
                   COMMISSION (MEDPAC).

       (a) Examination of Budget Consequences.--Section 1805(b) 
     (42 U.S.C. 1395b-6(b)) is amended by adding at the end the 
     following new paragraph:
       ``(8) Examination of budget consequences.--Before making 
     any recommendations, the Commission shall examine the budget 
     consequences of such recommendations, directly or through 
     consultation with appropriate expert entities.''.
       (b) Consideration of Efficient Provision of Services.--
     Section 1805(b)(2)(B)(i) (42 U.S.C. 1395b-6(b)(2)(B)(i)) is 
     amended by inserting ``the efficient provision of'' after 
     ``expenditures for''.
       (c) Additional Reports.--
       (1) Data needs and sources.--The Medicare Payment Advisory 
     Commission shall conduct a study, and submit a report to 
     Congress by not later than June 1, 2003, on the need for 
     current data, and sources of current data available, to 
     determine the solvency and financial circumstances of 
     hospitals and other medicare providers of services.
       (2) Use of tax-related returns.--Using return information 
     provided under Form 990 of the Internal Revenue Service, the 
     Commission shall submit to Congress, by not later than June 
     1, 2003, a report on the following:
       (A) Investments and capital financing of hospitals 
     participating under the medicare program and related 
     foundations.
       (B) Access to capital financing for private and for not-
     for-profit hospitals.

     SEC. 622. DEMONSTRATION PROJECT FOR DISEASE MANAGEMENT FOR 
                   CERTAIN MEDICARE BENEFICIARIES WITH DIABETES.

       (a) In General.--The Secretary of Health and Human Services 
     shall conduct a demonstration project under this section (in 
     this section referred to as the ``project'') to demonstrate 
     the impact on costs and health outcomes of applying disease 
     management to certain medicare beneficiaries with diagnosed 
     diabetes. In no case may the number of participants in the 
     project exceed 30,000 at any time.
       (b) Voluntary Participation.--
       (1) Eligibility.--Medicare beneficiaries are eligible to 
     participate in the project only if--
       (a) they are Hispanic, as determined by the Secretary;
       (A) they meet specific medical criteria demonstrating the 
     appropriate diagnosis and the advanced nature of their 
     disease;
       (B) their physicians approve of participation in the 
     project; and
       (C) they are not enrolled in a Medicare+Choice plan.
       (2) Benefits.--A medicare beneficiary who is enrolled in 
     the project shall be eligible--
       (A) for disease management services related to their 
     diabetes; and
       (B) for payment for all costs for prescription drugs 
     without regard to whether or not they relate to the diabetes, 
     except that the project may provide for modest cost-sharing 
     with respect to prescription drug coverage.
       (c) Contracts With Disease Management Organizations.--
       (1) In general.--The Secretary of Health and Human Services 
     shall carry out the project through contracts with up to 
     three disease management organizations. The Secretary shall 
     not enter into such a contract with an organization unless 
     the organization demonstrates that it can produce improved 
     health outcomes and reduce aggregate medicare expenditures 
     consistent with paragraph (2).
       (2) Contract provisions.--Under such contracts--
       (A) such an organization shall be required to provide for 
     prescription drug coverage described in subsection (b)(2)(B);
       (B) such an organization shall be paid a fee negotiated and 
     established by the Secretary in a manner so that (taking into 
     account savings in expenditures under parts A and B of the 
     medicare program under title XVIII of the Social Security 
     Act) there will be no net increase, and to the extent 
     practicable, there will be a net reduction in expenditures 
     under the medicare program as a result of the project; and
       (C) such an organization shall guarantee, through an 
     appropriate arrangement with a reinsurance company or 
     otherwise, the prohibition on net increases in expenditures 
     described in subparagraph (B).
       (3) Payments.--Payments to such organizations shall be made 
     in appropriate proportion from the Trust Funds established 
     under title XVIII of the Social Security Act.
       (4) Working group.--The Secretary shall establish within 
     the Department of Health and Human Services a working group 
     consisting of employees of the Department to carry out the 
     following:
       (A) To oversee the project.
       (B) To establish policy and criteria for medicare disease 
     management programs within the Department, including the 
     establishment of policy and criteria for such programs.
       (C) To identify targeted medical conditions and targeted 
     individuals.
       (D) To select areas in which such programs are carried out.
       (E) To monitor health outcomes under such programs.
       (F) To measure the effectiveness of such programs in 
     meeting any budget neutrality requirements.

[[Page 11886]]

       (G) Otherwise to serve as a central focal point within the 
     Department for dissemination of information on medicare 
     disease management programs.
       (d) Application of Medigap Protections to Demonstration 
     Project Enrollees.--(1) Subject to paragraph (2), the 
     provisions of section 1882(s)(3) (other than clauses (i) 
     through (iv) of subparagraph (B)) and 1882(s)(4) of the 
     Social Security Act shall apply to enrollment (and 
     termination of enrollment) in the demonstration project under 
     this section, in the same manner as they apply to enrollment 
     (and termination of enrollment) with a Medicare+Choice 
     organization in a Medicare+Choice plan.
       (2) In applying paragraph (1)--
       (A) any reference in clause (v) or (vi) of section 
     1882(s)(3)(B) of such Act to 12 months is deemed a reference 
     to the period of the demonstration project; and
       (B) the notification required under section 1882(s)(3)(D) 
     of such Act shall be provided in a manner specified by the 
     Secretary of Health and Human Services.
       (e) Duration.--The project shall last for not longer than 3 
     years.
       (f) Waiver.--The Secretary of Health and Human Services 
     shall waive such provisions of title XVIII of the Social 
     Security Act as may be necessary to provide for payment for 
     services under the project in accordance with subsection 
     (c)(3).
       (g) Report.--The Secretary of Health and Human Services 
     shall submit to Congress an interim report on the project not 
     later than 2 years after the date it is first implemented and 
     a final report on the project not later than 6 months after 
     the date of its completion. Such reports shall include 
     information on the impact of the project on costs and health 
     outcomes and recommendations on the cost-effectiveness of 
     extending or expanding the project.
       (h) GAO Study on Disease Management Programs.--The 
     Comptroller General of the United States shall conduct a 
     study that compares disease management programs under title 
     XVIII of the Social Security Act with such programs conducted 
     in the private sector, including the prevalence of such 
     programs and programs for case management. The study shall 
     identify the cost-effectiveness of such programs and any 
     savings achieved by such programs. The Comptroller General 
     shall submit a report on such study to Congress by not later 
     than 18 months after the date of the enactment of this Act.

     SEC. 623. DEMONSTRATION PROJECT FOR MEDICAL ADULT DAY CARE 
                   SERVICES.

       (a) Establishment.--Subject to the succeeding provisions of 
     this section, the Secretary of Health and Human Services 
     shall establish a demonstration project (in this section 
     referred to as the ``demonstration project'') under which the 
     Secretary shall, as part of a plan of an episode of care for 
     home health services established for a medicare beneficiary, 
     permit a home health agency, directly or under arrangements 
     with a medical adult day care facility, to provide medical 
     adult day care services as a substitute for a portion of home 
     health services that would otherwise be provided in the 
     beneficiary's home.
       (b) Payment.--
       (1) In general.--The amount of payment for an episode of 
     care for home health services, a portion of which consists of 
     substitute medical adult day care services, under the 
     demonstration project shall be made at a rate equal to 95 
     percent of the amount that would otherwise apply for such 
     home health services under section 1895 of the Social 
     Security Act (42 U.S.C. 1395fff). In no case may a home 
     health agency, or a medical adult day care facility under 
     arrangements with a home health agency, separately charge a 
     beneficiary for medical adult day care services furnished 
     under the plan of care.
       (2) Budget neutrality for demonstration project.--
     Notwithstanding any other provision of law, the Secretary 
     shall provide for an appropriate reduction in the aggregate 
     amount of additional payments made under section 1895 of the 
     Social Security Act (42 U.S.C. 1395fff) to reflect any 
     increase in amounts expended from the Trust Funds as a result 
     of the demonstration project conducted under this section.
       (c) Demonstration Project Sites.--The project established 
     under this section shall be conducted in not more than 5 
     sites in States selected by the Secretary that license or 
     certify providers of services that furnish medical adult day 
     care services.
       (d) Duration.--The Secretary shall conduct the 
     demonstration project for a period of 3 years.
       (e) Voluntary Participation.--Participation of medicare 
     beneficiaries in the demonstration project shall be 
     voluntary. The total number of such beneficiaries that may 
     participate in the project at any given time may not exceed 
     15,000.
       (f) Preference in Selecting Agencies.--In selecting home 
     health agencies to participate under the demonstration 
     project, the Secretary shall give preference to those 
     agencies that--
       (1) are currently licensed or certified to furnish medical 
     adult day care services; and
       (2) have furnished medical adult day care services to 
     medicare beneficiaries for a continuous 2-year period before 
     the beginning of the demonstration project.
       (g) Waiver Authority.--The Secretary may waive such 
     requirements of title XVIII of the Social Security Act as may 
     be necessary for the purposes of carrying out the 
     demonstration project, other than waiving the requirement 
     that an individual be homebound in order to be eligible for 
     benefits for home health services.
       (h) Evaluation and Report.--The Secretary shall conduct an 
     evaluation of the clinical and cost effectiveness of the 
     demonstration project. Not later 30 months after the 
     commencement of the project, the Secretary shall submit to 
     Congress a report on the evaluation, and shall include in the 
     report the following:
       (1) An analysis of the patient outcomes and costs of 
     furnishing care to the medicare beneficiaries participating 
     in the project as compared to such outcomes and costs to 
     beneficiaries receiving only home health services for the 
     same health conditions.
       (2) Such recommendations regarding the extension, 
     expansion, or termination of the project as the Secretary 
     determines appropriate.
       (i) Definitions.--In this section:
       (1) Home health agency.--The term ``home health agency'' 
     has the meaning given such term in section 1861(o) of the 
     Social Security Act (42 U.S.C. 1395x(o)).
       (2) Medical adult day care facility.--The term ``medical 
     adult day care facility'' means a facility that--
       (A) has been licensed or certified by a State to furnish 
     medical adult day care services in the State for a continuous 
     2-year period;
       (B) is engaged in providing skilled nursing services and 
     other therapeutic services directly or under arrangement with 
     a home health agency;
       (C) meets such standards established by the Secretary to 
     assure quality of care and such other requirements as the 
     Secretary finds necessary in the interest of the health and 
     safety of individuals who are furnished services in the 
     facility; and
       (D) provides medical adult day care services.
       (3) Medical adult day care services.--The term ``medical 
     adult day care services'' means--
       (A) home health service items and services described in 
     paragraphs (1) through (7) of section 1861(m) furnished in a 
     medical adult day care facility;
       (B) a program of supervised activities furnished in a group 
     setting in the facility that--
       (i) meet such criteria as the Secretary determines 
     appropriate; and
       (ii) is designed to promote physical and mental health of 
     the individuals; and
       (C) such other services as the Secretary may specify.
       (4) Medicare beneficiary.--The term ``medicare 
     beneficiary'' means an individual entitled to benefits under 
     part A of this title, enrolled under part B of this title, or 
     both.

              TITLE VII--MEDICARE BENEFITS ADMINISTRATION

     SEC. 701. ESTABLISHMENT OF MEDICARE BENEFITS ADMINISTRATION.

       (a) In General.--Title XVIII (42 U.S.C. 1395 et seq.), as 
     amended by section 105, is amended by inserting after 1806 
     the following new section:


                   ``medicare benefits administration

       ``Sec. 1808. (a) Establishment.--There is established 
     within the Department of Health and Human Services an agency 
     to be known as the Medicare Benefits Administration.
       ``(b) Administrator; Deputy Administrator; Chief Actuary.--
       ``(1) Administrator.--
       ``(A) In general.--The Medicare Benefits Administration 
     shall be headed by an administrator to be known as the 
     `Medicare Benefits Administrator' (in this section referred 
     to as the `Administrator') who shall be appointed by the 
     President, by and with the advice and consent of the Senate. 
     The Administrator shall be in direct line of authority to the 
     Secretary.
       ``(B) Compensation.--The Administrator shall be paid at the 
     rate of basic pay payable for level III of the Executive 
     Schedule under section 5314 of title 5, United States Code.
       ``(C) Term of office.--The Administrator shall be appointed 
     for a term of 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 Administration, and shall have authority 
     and control over all personnel and activities thereof.
       ``(E) Rulemaking authority.--The Administrator may 
     prescribe such rules and regulations as the Administrator 
     determines necessary or appropriate to carry out the 
     functions of the Administration. The regulations prescribed 
     by the Administrator shall be subject to the rulemaking 
     procedures established under section 553 of title 5, United 
     States Code.

[[Page 11887]]

       ``(F) Authority to establish organizational units.--The 
     Administrator may establish, alter, consolidate, or 
     discontinue such organizational units or components within 
     the Administration as the Administrator considers necessary 
     or appropriate, except as specified in this section.
       ``(G) Authority to delegate.--The Administrator may assign 
     duties, and delegate, or authorize successive redelegations 
     of, authority to act and to render decisions, to such 
     officers and employees of the Administration as the 
     Administrator may find necessary. Within the limitations of 
     such delegations, redelegations, or assignments, all official 
     acts and decisions of such officers and employees shall have 
     the same force and effect as though performed or rendered by 
     the Administrator.
       ``(2) Deputy administrator.--
       ``(A) In general.--There shall be a Deputy Administrator of 
     the Medicare Benefits Administration who shall be appointed 
     by the President, by and with the advice and consent of the 
     Senate.
       ``(B) Compensation.--The Deputy Administrator shall be paid 
     at the rate of basic pay payable for level IV of the 
     Executive Schedule under section 5315 of title 5, United 
     States Code.
       ``(C) Term of office.--The Deputy Administrator shall be 
     appointed for a term of 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 Acting Administrator of the 
     Administration during the absence or disability of the 
     Administrator and, unless the President designates another 
     officer of the Government as Acting Administrator, in the 
     event of a vacancy in the office of the Administrator.
       ``(3) Chief actuary.--
       ``(A) In general.--There is established in the 
     Administration the position of Chief Actuary. The Chief 
     Actuary shall be appointed by, and in direct line of 
     authority to, the Administrator of such Administration. The 
     Chief Actuary shall be appointed from among individuals who 
     have demonstrated, by their education and experience, 
     superior expertise in the actuarial sciences. The Chief 
     Actuary may be removed only for cause.
       ``(B) Compensation.--The Chief Actuary shall be compensated 
     at the highest rate of basic pay for the Senior Executive 
     Service under section 5382(b) of title 5, United States Code.
       ``(C) Duties.--The Chief Actuary shall exercise such duties 
     as are appropriate for the office of the Chief Actuary and in 
     accordance with professional standards of actuarial 
     independence.
       ``(4) Secretarial coordination of program administration.--
     The Secretary shall ensure appropriate coordination between 
     the Administrator and the Administrator of the Centers for 
     Medicare & Medicaid Services in carrying out the programs 
     under this title.
       ``(c) Duties; Administrative Provisions.--
       ``(1) Duties.--
       ``(A) General duties.--The Administrator shall carry out 
     parts C and D, including--
       ``(i) negotiating, entering into, and enforcing, contracts 
     with plans for the offering of Medicare+Choice plans under 
     part C, including the offering of qualified prescription drug 
     coverage under such plans; and
       ``(ii) negotiating, entering into, and enforcing, contracts 
     with PDP sponsors for the offering of prescription drug plans 
     under part D.
       ``(B) Other duties.--The Administrator shall carry out any 
     duty provided for under part C or part D, including 
     demonstration projects carried out in part or in whole under 
     such parts, the programs of all-inclusive care for the 
     elderly (PACE program) under section 1894, the social health 
     maintenance organization (SHMO) demonstration projects 
     (referred to in section 4104(c) of the Balanced Budget Act of 
     1997), and through a Medicare+Choice project that 
     demonstrates the application of capitation payment rates for 
     frail elderly medicare beneficiaries through the use of a 
     interdisciplinary team and through the provision of primary 
     care services to such beneficiaries by means of such a team 
     at the nursing facility involved).
       ``(C) Prescription drug card.--The Administrator shall 
     carry out section 1807 (relating to the medicare prescription 
     drug discount card endorsement program).
       ``(D) Noninterference.--In carrying out its duties with 
     respect to the provision of qualified prescription drug 
     coverage to beneficiaries under this title, the Administrator 
     may not--
       ``(i) require a particular formulary or institute a price 
     structure for the reimbursement of covered outpatient drugs;
       ``(ii) interfere in any way with negotiations between PDP 
     sponsors and Medicare+Choice organizations and drug 
     manufacturers, wholesalers, or other suppliers of covered 
     outpatient drugs; and
       ``(iii) otherwise interfere with the competitive nature of 
     providing such coverage through such sponsors and 
     organizations.
       ``(E) Annual reports.--Not later March 31 of each year, the 
     Administrator shall submit to Congress and the President a 
     report on the administration of parts C and D during the 
     previous fiscal year.
       ``(2) Staff.--
       ``(A) In general.--The Administrator, with the approval of 
     the Secretary, may employ, without regard to chapter 31 of 
     title 5, United States Code, other than sections 3110 and 
     3112, such officers and employees as are necessary to 
     administer the activities to be carried out through the 
     Medicare Benefits Administration. The Administrator shall 
     employ staff with appropriate and necessary expertise in 
     negotiating contracts in the private sector.
       ``(B) Flexibility with respect to compensation.--
       ``(i) In general.--The staff of the Medicare Benefits 
     Administration shall, subject to clause (ii), be paid without 
     regard to the provisions of chapter 51 (other than section 
     5101) and chapter 53 (other than section 5301) of such title 
     (relating to classification and schedule pay rates).
       ``(ii) Maximum rate.--In no case may the rate of 
     compensation determined under clause (i) exceed the rate of 
     basic pay payable for level IV of the Executive Schedule 
     under section 5315 of title 5, United States Code.
       ``(C) Limitation on full-time equivalent staffing for 
     current cms functions being transferred.--The Administrator 
     may not employ under this paragraph a number of full-time 
     equivalent employees, to carry out functions that were 
     previously conducted by the Centers for Medicare & Medicaid 
     Services and that are conducted by the Administrator by 
     reason of this section, that exceeds the number of such full-
     time equivalent employees authorized to be employed by the 
     Centers for Medicare & Medicaid Services to conduct such 
     functions as of the date of the enactment of this Act.
       ``(3) Redelegation of certain functions of the centers for 
     medicare & medicaid services.--
       ``(A) In general.--The Secretary, the Administrator, and 
     the Administrator of the Centers for Medicare & Medicaid 
     Services shall establish an appropriate transition of 
     responsibility in order to redelegate the administration of 
     part C from the Secretary and the Administrator of the 
     Centers for Medicare & Medicaid Services to the Administrator 
     as is appropriate to carry out the purposes of this section.
       ``(B) Transfer of data and information.--The Secretary 
     shall ensure that the Administrator of the Centers for 
     Medicare & Medicaid Services transfers to the Administrator 
     of the Medicare Benefits Administration such information and 
     data in the possession of the Administrator of the Centers 
     for Medicare & Medicaid Services as the Administrator of the 
     Medicare Benefits Administration requires to carry out the 
     duties described in paragraph (1).
       ``(C) Construction.--Insofar as a responsibility of the 
     Secretary or the Administrator of the Centers for Medicare & 
     Medicaid Services is redelegated to the Administrator under 
     this section, any reference to the Secretary or the 
     Administrator of the Centers for Medicare & Medicaid Services 
     in this title or title XI with respect to such responsibility 
     is deemed to be a reference to the Administrator.
       ``(d) Office of Beneficiary Assistance.--
       ``(1) Establishment.--The Secretary shall establish within 
     the Medicare Benefits Administration an Office of Beneficiary 
     Assistance to coordinate functions relating to outreach and 
     education of medicare beneficiaries under this title, 
     including the functions described in paragraph (2). The 
     Office shall be separate operating division within the 
     Administration.
       ``(2) Dissemination of information on benefits and appeals 
     rights.--
       ``(A) Dissemination of benefits information.--The Office of 
     Beneficiary Assistance shall disseminate, directly or through 
     contract, to medicare beneficiaries, by mail, by posting on 
     the Internet site of the Medicare Benefits Administration and 
     through a toll-free telephone number, information with 
     respect to the following:
       ``(i) Benefits, and limitations on payment (including cost-
     sharing, stop-loss provisions, and formulary restrictions) 
     under parts C and D.
       ``(ii) Benefits, and limitations on payment under parts A 
     and B, including information on medicare supplemental 
     policies under section 1882.

     Such information shall be presented in a manner so that 
     medicare beneficiaries may compare benefits under parts A, B, 
     D, and medicare supplemental policies with benefits under 
     Medicare+Choice 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 Medicare+Choice program under part C, and 
     the Voluntary Prescription Drug Benefit Program under part D.

[[Page 11888]]

       ``(e) Medicare Policy Advisory Board.--
       ``(1) Establishment.--There is established within the 
     Medicare Benefits Administration the Medicare Policy Advisory 
     Board (in this section referred to the `Board'). The Board 
     shall advise, consult with, and make recommendations to the 
     Administrator of the Medicare Benefits Administration with 
     respect to the administration of parts C 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 of the Medicare Benefits 
     Administration such reports as the Board determines 
     appropriate. Each such report may contain such 
     recommendations as the Board determines appropriate for 
     legislative or administrative changes to improve the 
     administration of such parts, including the topics described 
     in subparagraph (B). Each such report shall be published in 
     the Federal Register.
       ``(B) Topics described.--Reports required under 
     subparagraph (A) may include the following topics:
       ``(i) Fostering competition.--Recommendations or proposals 
     to increase competition under parts C and D for services 
     furnished to medicare beneficiaries.
       ``(ii) Education and enrollment.--Recommendations for the 
     improvement to efforts to provide medicare beneficiaries 
     information and education on the program under this title, 
     and specifically parts C and D, and the program for 
     enrollment under the title.
       ``(iii) Implementation of risk-adjustment.--Evaluation of 
     the implementation under section 1853(a)(3)(C) of the risk 
     adjustment methodology to payment rates under that section to 
     Medicare+Choice organizations offering Medicare+Choice plans 
     that accounts for variations in per capita costs based on 
     health status and other demographic factors.
       ``(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 of medicare benefits 
     administration.--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 of the Medicare 
     Benefits Administration shall submit to Congress and the 
     President an analysis of recommendations made by the Board in 
     such report. Each such analysis shall be published in the 
     Federal Register.
       ``(4) Membership.--
       ``(A) Appointment.--Subject to the succeeding provisions of 
     this paragraph, the Board shall consist of seven members to 
     be appointed as follows:
       ``(i) Three members shall be appointed by the President.
       ``(ii) Two members shall be appointed by the Speaker of the 
     House of Representatives, with the advice of the chairmen and 
     the ranking minority members of the Committees on Ways and 
     Means and on Energy and Commerce of the House of 
     Representatives.
       ``(iii) Two members shall be appointed by the President pro 
     tempore of the Senate with the advice of the chairman and the 
     ranking minority member of the Senate Committee on Finance.
       ``(B) Qualifications.--The members shall be chosen on the 
     basis of their integrity, impartiality, and good judgment, 
     and shall be individuals who are, by reason of their 
     education and experience in health care benefits management, 
     exceptionally qualified to perform the duties of members of 
     the Board.
       ``(C) Prohibition on inclusion of federal employees.--No 
     officer or employee of the United States may serve as a 
     member of the Board.
       ``(5) Compensation.--Members of the Board shall receive, 
     for each day (including travel time) they are engaged in the 
     performance of the functions of the board, compensation at 
     rates not to exceed the daily equivalent to the annual rate 
     in effect for level IV of the Executive Schedule under 
     section 5315 of title 5, United States Code.
       ``(6) Terms of office.--
       ``(A) In general.--The term of office of members of the 
     Board shall be 3 years.
       ``(B) Terms of initial appointees.--As designated by the 
     President at the time of appointment, of the members first 
     appointed--
       ``(i) one shall be appointed for a term of 1 year;
       ``(ii) three shall be appointed for terms of 2 years; and
       ``(iii) three shall be appointed for terms of 3 years.
       ``(C) Reappointments.--Any person appointed as a member of 
     the Board may not serve for more than 8 years.
       ``(D) Vacancy.--Any member appointed to fill a vacancy 
     occurring before the expiration of the term for which the 
     member's predecessor was appointed shall be appointed only 
     for the remainder of that term. A member may serve after the 
     expiration of that member's term until a successor has taken 
     office. A vacancy in the Board shall be filled in the manner 
     in which the original appointment was made.
       ``(7) Chair.--The Chair of the Board shall be elected by 
     the members. The term of office of the Chair shall be 3 
     years.
       ``(8) Meetings.--The Board shall meet at the call of the 
     Chair, but in no event less than three times during each 
     fiscal year.
       ``(9) Director and staff.--
       ``(A) Appointment of director.--The Board shall have a 
     Director who shall be appointed by the Chair.
       ``(B) In general.--With the approval of the Board, the 
     Director may appoint, without regard to chapter 31 of title 
     5, United States Code, such additional personnel as the 
     Director considers appropriate.
       ``(C) Flexibility with respect to compensation.--
       ``(i) In general.--The Director and staff of the Board 
     shall, subject to clause (ii), be paid without regard to the 
     provisions of chapter 51 and chapter 53 of such title 
     (relating to classification and schedule pay rates).
       ``(ii) Maximum rate.--In no case may the rate of 
     compensation determined under clause (i) exceed the rate of 
     basic pay payable for level IV of the Executive Schedule 
     under section 5315 of title 5, United States Code.
       ``(D) Assistance from the administrator of the medicare 
     benefits administration.--The Administrator of the Medicare 
     Benefits Administration shall make available to the Board 
     such information and other assistance as it may require to 
     carry out its functions.
       ``(10) Contract authority.--The Board may contract with and 
     compensate government and private agencies or persons to 
     carry out its duties under this subsection, without regard to 
     section 3709 of the Revised Statutes (41 U.S.C. 5).
       ``(f) Funding.--There is authorized to be appropriated, in 
     appropriate part from the Federal Hospital Insurance Trust 
     Fund and from the Federal Supplementary Medical Insurance 
     Trust Fund (including the Medicare Prescription Drug 
     Account), such sums as are necessary to carry out this 
     section.''.
       (b) Effective Date.--
       (1) In general.--The amendment made by subsection (a) shall 
     take effect on the date of the enactment of this Act.
       (2) Timing of initial appointments.--The Administrator and 
     Deputy Administrator of the Medicare Benefits Administration 
     may not be appointed before March 1, 2003.
       (3) Duties with respect to eligibility determinations and 
     enrollment.--The Administrator of the Medicare Benefits 
     Administration shall carry out enrollment under title XVIII 
     of the Social Security Act, make eligibility determinations 
     under such title, and carry out part C of such title for 
     years beginning or after January 1, 2005.
       (4) Transition.--Before the date the Administrator of the 
     Medicare Benefits Administration is appointed and assumes 
     responsibilities under this section and section 1807 of the 
     Social Security Act, the Secretary of Health and Human 
     Services shall provide for the conduct of any 
     responsibilities of such Administrator that are otherwise 
     provided under law.
       (c) Miscellaneous Administrative Provisions.--
       (1) Administrator as member of the board of trustees of the 
     medicare trust funds.--Section 1817(b) and section 1841(b) 
     (42 U.S.C. 1395i(b), 1395t(b)) are each amended by striking 
     ``and the Secretary of Health and Human Services, all ex 
     officio,'' and inserting ``the Secretary of Health and Human 
     Services, and the Administrator of the Medicare Benefits 
     Administration, all ex officio,''.
       (2) Increase in grade to executive level iii for the 
     administrator of the centers for medicare & medicaid 
     services; level for medicare benefits administrator.--
       (A) In general.--Section 5314 of title 5, United States 
     Code, by adding at the end the following:
       ``Administrator of the Centers for Medicare & Medicaid 
     Services .
       ``Administrator of the Medicare Benefits Administration.''.
       (B) Conforming amendment.--Section 5315 of such title is 
     amended by striking ``Administrator of the Health Care 
     Financing Administration.''.
       (C) Effective date.--The amendments made by this paragraph 
     take effect on January 1, 2003.

        TITLE VIII--REGULATORY REDUCTION AND CONTRACTING REFORM

                     Subtitle A--Regulatory Reform

     SEC. 801. CONSTRUCTION; DEFINITION OF SUPPLIER.

       (a) Construction.--Nothing in this title shall be 
     construed--
       (1) to compromise or affect existing legal remedies for 
     addressing fraud or abuse, whether it be criminal 
     prosecution, civil enforcement, or administrative remedies, 
     including under sections 3729 through 3733 of title 31, 
     United States Code (known as the False Claims Act); or
       (2) to prevent or impede the Department of Health and Human 
     Services in any way from

[[Page 11889]]

     its ongoing efforts to eliminate waste, fraud, and abuse in 
     the medicare program.

     Furthermore, the consolidation of medicare administrative 
     contracting set forth in this Act does not constitute 
     consolidation of the Federal Hospital Insurance Trust Fund 
     and the Federal Supplementary Medical Insurance Trust Fund or 
     reflect any position on that issue.
       (b) Definition of Supplier.--Section 1861 (42 U.S.C. 1395x) 
     is amended by inserting after subsection (c) the following 
     new subsection:

                               ``Supplier

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

     SEC. 802. ISSUANCE OF REGULATIONS.

       (a) Consolidation of Promulgation to Once a Month.--
       (1) In general.--Section 1871 (42 U.S.C. 1395hh) is amended 
     by adding at the end the following new subsection:
       ``(d)(1) Subject to paragraph (2), the Secretary shall 
     issue proposed or final (including interim final) regulations 
     to carry out this title only on one business day of every 
     month.
       ``(2) The Secretary may issue a proposed or final 
     regulation described in paragraph (1) on any other day than 
     the day described in paragraph (1) if the Secretary--
       ``(A) finds that issuance of such regulation on another day 
     is necessary to comply with requirements under law; or
       ``(B) finds that with respect to that regulation the 
     limitation of issuance on the date described in paragraph (1) 
     is contrary to the public interest.
     If the Secretary makes a finding under this paragraph, the 
     Secretary shall include such finding, and brief statement of 
     the reasons for such finding, in the issuance of such 
     regulation.
       ``(3) The Secretary shall coordinate issuance of new 
     regulations described in paragraph (1) relating to a category 
     of provider of services or suppliers based on an analysis of 
     the collective impact of regulatory changes on that category 
     of providers or suppliers.''.
       (2) GAO report on publication of regulations on a quarterly 
     basis.--Not later than 3 years after the date of the 
     enactment of this Act, the Comptroller General of the United 
     States shall submit to Congress a report on the feasibility 
     of requiring that regulations described in section 1871(d) of 
     the Social Security Act be promulgated on a quarterly basis 
     rather than on a monthly basis.
       (3) Effective date.--The amendment made by paragraph (1) 
     shall apply to regulations promulgated on or after the date 
     that is 30 days after the date of the enactment of this Act.
       (b) Regular Timeline for Publication of Final Rules.--
       (1) In general.--Section 1871(a) (42 U.S.C. 1395hh(a)) is 
     amended by adding at the end the following new paragraph:
       ``(3)(A) The Secretary, in consultation with the Director 
     of the Office of Management and Budget, shall establish and 
     publish a regular timeline for the publication of final 
     regulations based on the previous publication of a proposed 
     regulation or an interim final regulation.
       ``(B) Such timeline may vary among different regulations 
     based on differences in the complexity of the regulation, the 
     number and scope of comments received, and other relevant 
     factors, but shall not be longer than 3 years except under 
     exceptional circumstances. If the Secretary intends to vary 
     such timeline with respect to the publication of a final 
     regulation, the Secretary shall cause to have published in 
     the Federal Register notice of the different timeline by not 
     later than the timeline previously established with respect 
     to such regulation. Such notice shall include a brief 
     explanation of the justification for such variation.
       ``(C) In the case of interim final regulations, upon the 
     expiration of the regular timeline established under this 
     paragraph for the publication of a final regulation after 
     opportunity for public comment, the interim final regulation 
     shall not continue in effect unless the Secretary publishes 
     (at the end of the regular timeline and, if applicable, at 
     the end of each succeeding 1-year period) a notice of 
     continuation of the regulation that includes an explanation 
     of why the regular timeline (and any subsequent 1-year 
     extension) was not complied with. If such a notice is 
     published, the regular timeline (or such timeline as 
     previously extended under this paragraph) for publication of 
     the final regulation shall be treated as having been extended 
     for 1 additional year.
       ``(D) The Secretary shall annually submit to Congress a 
     report that describes the instances in which the Secretary 
     failed to publish a final regulation within the applicable 
     regular timeline under this paragraph and that provides an 
     explanation for such failures.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on the date of the enactment of this Act. 
     The Secretary shall provide for an appropriate transition to 
     take into account the backlog of previously published interim 
     final regulations.
       (c) Limitations on New Matter in Final Regulations.--
       (1) In general.--Section 1871(a) (42 U.S.C. 1395hh(a)), as 
     amended by subsection (b), is further amended by adding at 
     the end the following new paragraph:
       ``(4) If the Secretary publishes notice of proposed 
     rulemaking relating to a regulation (including an interim 
     final regulation), insofar as such final regulation includes 
     a provision that is not a logical outgrowth of such notice of 
     proposed rulemaking, that provision shall be treated as a 
     proposed regulation and shall not take effect until there is 
     the further opportunity for public comment and a publication 
     of the provision again as a final regulation.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to final regulations published on or after the 
     date of the enactment of this Act.

     SEC. 803. COMPLIANCE WITH CHANGES IN REGULATIONS AND 
                   POLICIES.

       (a) No Retroactive Application of Substantive Changes.--
       (1) In general.--Section 1871 (42 U.S.C. 1395hh), as 
     amended by section 802(a), is amended by adding at the end 
     the following new subsection:
       ``(e)(1)(A) A substantive change in regulations, manual 
     instructions, interpretative rules, statements of policy, or 
     guidelines of general applicability under this title shall 
     not be applied (by extrapolation or otherwise) retroactively 
     to items and services furnished before the effective date of 
     the change, unless the Secretary determines that--
       ``(i) such retroactive application is necessary to comply 
     with statutory requirements; or
       ``(ii) failure to apply the change retroactively would be 
     contrary to the public interest.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to substantive changes issued on or after the 
     date of the enactment of this Act.
       (b) Timeline for Compliance With Substantive Changes After 
     Notice.--
       (1) In general.--Section 1871(e)(1), as added by subsection 
     (a), is amended by adding at the end the following:
       ``(B)(i) Except as provided in clause (ii), a substantive 
     change referred to in subparagraph (A) shall not become 
     effective before the end of the 30-day period that begins on 
     the date that the Secretary has issued or published, as the 
     case may be, the substantive change.
       ``(ii) The Secretary may provide for such a substantive 
     change to take effect on a date that precedes the end of the 
     30-day period under clause (i) if the Secretary finds that 
     waiver of such 30-day period is necessary to comply with 
     statutory requirements or that the application of such 30-day 
     period is contrary to the public interest. If the Secretary 
     provides for an earlier effective date pursuant to this 
     clause, the Secretary shall include in the issuance or 
     publication of the substantive change a finding described in 
     the first sentence, and a brief statement of the reasons for 
     such finding.
       ``(C) No action shall be taken against a provider of 
     services or supplier with respect to noncompliance with such 
     a substantive change for items and services furnished before 
     the effective date of such a change.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to compliance actions undertaken on or after the 
     date of the enactment of this Act.
       (c) Reliance on Guidance.--
       (1) In general.--Section 1871(e), as added by subsection 
     (a), is further amended by adding at the end the following 
     new paragraph:
       ``(2)(A) If--
       ``(i) a provider of services or supplier follows the 
     written guidance (which may be transmitted electronically) 
     provided by the Secretary or by a medicare contractor (as 
     defined in section 1889(g)) acting within the scope of the 
     contractor's contract authority, with respect to the 
     furnishing of items or services and submission of a claim for 
     benefits for such items or services with respect to such 
     provider or supplier;
       ``(ii) the Secretary determines that the provider of 
     services or supplier has accurately presented the 
     circumstances relating to such items, services, and claim to 
     the contractor in writing; and
       ``(iii) the guidance was in error;
     the provider of services or supplier shall not be subject to 
     any sanction (including any penalty or requirement for 
     repayment of any amount) if the provider of services or 
     supplier reasonably relied on such guidance.
       ``(B) Subparagraph (A) shall not be construed as preventing 
     the recoupment or repayment (without any additional penalty) 
     relating to an overpayment insofar as the overpayment was 
     solely the result of a clerical or technical operational 
     error.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on the date of the enactment of this Act 
     but shall not apply to any sanction for which notice was 
     provided on or before the date of the enactment of this Act.

     SEC. 804. REPORTS AND STUDIES RELATING TO REGULATORY REFORM.

       (a) GAO Study on Advisory Opinion Authority.--

[[Page 11890]]

       (1) Study.--The Comptroller General of the United States 
     shall conduct a study to determine the feasibility and 
     appropriateness of establishing in the Secretary authority to 
     provide legally binding advisory opinions on appropriate 
     interpretation and application of regulations to carry out 
     the medicare program under title XVIII of the Social Security 
     Act. Such study shall examine the appropriate timeframe for 
     issuing such advisory opinions, as well as the need for 
     additional staff and funding to provide such opinions.
       (2) Report.--The Comptroller General shall submit to 
     Congress a report on the study conducted under paragraph (1) 
     by not later than January 1, 2004.
       (b) Report on Legal and Regulatory Inconsistencies.--
     Section 1871 (42 U.S.C. 1395hh), as amended by section 
     803(a), is amended by adding at the end the following new 
     subsection:
       ``(f)(1) Not later than 2 years after the date of the 
     enactment of this subsection, and every 2 years thereafter, 
     the Secretary shall submit to Congress a report with respect 
     to the administration of this title and areas of 
     inconsistency or conflict among the various provisions under 
     law and regulation.
       ``(2) In preparing a report under paragraph (1), the 
     Secretary shall collect--
       ``(A) information from individuals entitled to benefits 
     under part A or enrolled under part B, or both, providers of 
     services, and suppliers and from the Medicare Beneficiary 
     Ombudsman and the Medicare Provider Ombudsman with respect to 
     such areas of inconsistency and conflict; and
       ``(B) information from medicare contractors that tracks the 
     nature of written and telephone inquiries.
       ``(3) A report under paragraph (1) shall include a 
     description of efforts by the Secretary to reduce such 
     inconsistency or conflicts, and recommendations for 
     legislation or administrative action that the Secretary 
     determines appropriate to further reduce such inconsistency 
     or conflicts.''.

                     Subtitle B--Contracting Reform

     SEC. 811. INCREASED FLEXIBILITY IN MEDICARE ADMINISTRATION.

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


          ``contracts with medicare administrative contractors

       ``Sec. 1874A. (a) Authority.--
       ``(1) Authority to enter into contracts.--The Secretary may 
     enter into contracts with any eligible entity to serve as a 
     medicare administrative contractor with respect to the 
     performance of any or all of the functions described in 
     paragraph (4) or parts of those functions (or, to the extent 
     provided in a contract, to secure performance thereof by 
     other entities).
       ``(2) Eligibility of entities.--An entity is eligible to 
     enter into a contract with respect to the performance of a 
     particular function described in paragraph (4) only if--
       ``(A) the entity has demonstrated capability to carry out 
     such function;
       ``(B) the entity complies with such conflict of interest 
     standards as are generally applicable to Federal acquisition 
     and procurement;
       ``(C) the entity has sufficient assets to financially 
     support the performance of such function; and
       ``(D) the entity meets such other requirements as the 
     Secretary may impose.
       ``(3) Medicare administrative contractor defined.--For 
     purposes of this title and title XI--
       ``(A) In general.--The term `medicare administrative 
     contractor' means an agency, organization, or other person 
     with a contract under this section.
       ``(B) Appropriate medicare administrative contractor.--With 
     respect to the performance of a particular function in 
     relation to an individual entitled to benefits under part A 
     or enrolled under part B, or both, a specific provider of 
     services or supplier (or class of such providers of services 
     or suppliers), the `appropriate' medicare administrative 
     contractor is the medicare administrative contractor that has 
     a contract under this section with respect to the performance 
     of that function in relation to that individual, provider of 
     services or supplier or class of provider of services or 
     supplier.
       ``(4) Functions described.--The functions referred to in 
     paragraphs (1) and (2) are payment functions, provider 
     services functions, and functions relating to services 
     furnished to individuals entitled to benefits under part A or 
     enrolled under part B, or both, as follows:
       ``(A) Determination of payment amounts.--Determining 
     (subject to the provisions of section 1878 and to such review 
     by the Secretary as may be provided for by the contracts) the 
     amount of the payments required pursuant to this title to be 
     made to providers of services, suppliers and individuals.
       ``(B) Making payments.--Making payments described in 
     subparagraph (A) (including receipt, disbursement, and 
     accounting for funds in making such payments).
       ``(C) Beneficiary education and assistance.--Providing 
     education and outreach to individuals entitled to benefits 
     under part A or enrolled under part B, or both, and providing 
     assistance to those individuals with specific issues, 
     concerns or problems.
       ``(D) Provider consultative services.--Providing 
     consultative services to institutions, agencies, and other 
     persons to enable them to establish and maintain fiscal 
     records necessary for purposes of this title and otherwise to 
     qualify as providers of services or suppliers.
       ``(E) Communication with providers.--Communicating to 
     providers of services and suppliers any information or 
     instructions furnished to the medicare administrative 
     contractor by the Secretary, and facilitating communication 
     between such providers and suppliers and the Secretary.
       ``(F) Provider education and technical assistance.--
     Performing the functions relating to provider education, 
     training, and technical assistance.
       ``(G) Additional functions.--Performing such other 
     functions as are necessary to carry out the purposes of this 
     title.
       ``(5) Relationship to mip contracts.--
       ``(A) Nonduplication of duties.--In entering into contracts 
     under this section, the Secretary shall assure that functions 
     of medicare administrative contractors in carrying out 
     activities under parts A and B do not duplicate activities 
     carried out under the Medicare Integrity Program under 
     section 1893. The previous sentence shall not apply with 
     respect to the activity described in section 1893(b)(5) 
     (relating to prior authorization of certain items of durable 
     medical equipment under section 1834(a)(15)).
       ``(B) Construction.--An entity shall not be treated as a 
     medicare administrative contractor merely by reason of having 
     entered into a contract with the Secretary under section 
     1893.
       ``(6) Application of federal acquisition regulation.--
     Except to the extent inconsistent with a specific requirement 
     of this title, the Federal Acquisition Regulation applies to 
     contracts under this title.
       ``(b) Contracting Requirements.--
       ``(1) Use of competitive procedures.--
       ``(A) In general.--Except as provided in laws with general 
     applicability to Federal acquisition and procurement or in 
     subparagraph (B), the Secretary shall use competitive 
     procedures when entering into contracts with medicare 
     administrative contractors under this section, taking into 
     account performance quality as well as price and other 
     factors.
       ``(B) Renewal of contracts.--The Secretary may renew a 
     contract with a medicare administrative contractor under this 
     section from term to term without regard to section 5 of 
     title 41, United States Code, or any other provision of law 
     requiring competition, if the medicare administrative 
     contractor has met or exceeded the performance requirements 
     applicable with respect to the contract and contractor, 
     except that the Secretary shall provide for the application 
     of competitive procedures under such a contract not less 
     frequently than once every five years.
       ``(C) Transfer of functions.--The Secretary may transfer 
     functions among medicare administrative contractors 
     consistent with the provisions of this paragraph. The 
     Secretary shall ensure that performance quality is considered 
     in such transfers. The Secretary shall provide public notice 
     (whether in the Federal Register or otherwise) of any such 
     transfer (including a description of the functions so 
     transferred, a description of the providers of services and 
     suppliers affected by such transfer, and contact information 
     for the contractors involved).
       ``(D) Incentives for quality.--The Secretary shall provide 
     incentives for medicare administrative contractors to provide 
     quality service and to promote efficiency.
       ``(2) Compliance with requirements.--No contract under this 
     section shall be entered into with any medicare 
     administrative contractor unless the Secretary finds that 
     such medicare administrative contractor will perform its 
     obligations under the contract efficiently and effectively 
     and will meet such requirements as to financial 
     responsibility, legal authority, quality of services 
     provided, and other matters as the Secretary finds pertinent.
       ``(3) Performance requirements.--
       ``(A) Development of specific performance requirements.--In 
     developing contract performance requirements, the Secretary 
     shall develop performance requirements applicable to 
     functions described in subsection (a)(4).
       ``(B) Consultation.-- In developing such requirements, the 
     Secretary may consult with providers of services and 
     suppliers, organizations representing individuals entitled to 
     benefits under part A or enrolled under part B, or both, and 
     organizations and agencies performing functions necessary to 
     carry out the purposes of this section with respect to such 
     performance requirements.
       ``(C) Inclusion in contracts.--All contractor performance 
     requirements shall be set forth in the contract between the 
     Secretary and the appropriate medicare administrative 
     contractor. Such performance requirements--
       ``(i) shall reflect the performance requirements developed 
     under subparagraph (A), but may include additional 
     performance requirements;

[[Page 11891]]

       ``(ii) shall be used for evaluating contractor performance 
     under the contract; and
       ``(iii) shall be consistent with the written statement of 
     work provided under the contract.
       ``(4) Information requirements.--The Secretary shall not 
     enter into a contract with a medicare administrative 
     contractor under this section unless the contractor agrees--
       ``(A) to furnish to the Secretary such timely information 
     and reports as the Secretary may find necessary in performing 
     his functions under this title; and
       ``(B) to maintain such records and afford such access 
     thereto as the Secretary finds necessary to assure the 
     correctness and verification of the information and reports 
     under subparagraph (A) and otherwise to carry out the 
     purposes of this title.
       ``(5) Surety bond.--A contract with a medicare 
     administrative contractor under this section may require the 
     medicare administrative contractor, and any of its officers 
     or employees certifying payments or disbursing funds pursuant 
     to the contract, or otherwise participating in carrying out 
     the contract, to give surety bond to the United States in 
     such amount as the Secretary may deem appropriate.
       ``(c) Terms and Conditions.--
       ``(1) In general.--A contract with any medicare 
     administrative contractor under this section may contain such 
     terms and conditions as the Secretary finds necessary or 
     appropriate and may provide for advances of funds to the 
     medicare administrative contractor for the making of payments 
     by it under subsection (a)(4)(B).
       ``(2) Prohibition on mandates for certain data 
     collection.--The Secretary may not require, as a condition of 
     entering into, or renewing, a contract under this section, 
     that the medicare administrative contractor match data 
     obtained other than in its activities under this title with 
     data used in the administration of this title for purposes of 
     identifying situations in which the provisions of section 
     1862(b) may apply.
       ``(d) Limitation on Liability of Medicare Administrative 
     Contractors and Certain Officers.--
       ``(1) Certifying officer.--No individual designated 
     pursuant to a contract under this section as a certifying 
     officer shall, in the absence of gross negligence or intent 
     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 gross negligence or intent 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 payment or in the 
     supervision of or selection of such officer the medicare 
     administrative contractor acted with gross negligence.
       ``(4) Indemnification by secretary.--
       ``(A) In general.--Subject to subparagraphs (B) and (D), in 
     the case of a medicare administrative contractor (or a person 
     who is a director, officer, or employee of such a contractor 
     or who is engaged by the contractor to participate directly 
     in the claims administration process) who is made a party to 
     any judicial or administrative proceeding arising from or 
     relating directly to the claims administration process under 
     this title, the Secretary may, to the extent the Secretary 
     determines to be appropriate and as specified in the contract 
     with the contractor, indemnify the contractor and such 
     persons.
       ``(B) Conditions.--The Secretary may not provide 
     indemnification under subparagraph (A) insofar as the 
     liability for such costs arises directly from conduct that is 
     determined by the judicial proceeding or by the Secretary to 
     be criminal in nature, fraudulent, or grossly negligent. If 
     indemnification is provided by the Secretary with respect to 
     a contractor before a determination that such costs arose 
     directly from such conduct, the contractor shall reimburse 
     the Secretary for costs of indemnification.
       ``(C) Scope of indemnification.--Indemnification by the 
     Secretary under subparagraph (A) may include payment of 
     judgments, settlements (subject to subparagraph (D)), awards, 
     and costs (including reasonable legal expenses).
       ``(D) Written approval for settlements.--A contractor or 
     other person described in subparagraph (A) may not propose to 
     negotiate a settlement or compromise of a proceeding 
     described in such subparagraph without the prior written 
     approval of the Secretary to negotiate such settlement or 
     compromise. Any indemnification under subparagraph (A) with 
     respect to amounts paid under a settlement or compromise of a 
     proceeding described in such subparagraph are conditioned 
     upon prior written approval by the Secretary of the final 
     settlement or compromise.
       ``(E) Construction.--Nothing in this paragraph shall be 
     construed--
       ``(i) to change any common law immunity that may be 
     available to a medicare administrative contractor or person 
     described in subparagraph (A); or
       ``(ii) to permit the payment of costs not otherwise 
     allowable, reasonable, or allocable under the Federal 
     Acquisition Regulations.''.
       (2) Consideration of incorporation of current law 
     standards.--In developing contract performance requirements 
     under section 1874A(b) of the Social Security Act, as 
     inserted by paragraph (1), the Secretary shall consider 
     inclusion of the performance standards described in sections 
     1816(f)(2) of such Act (relating to timely processing of 
     reconsiderations and applications for exemptions) and section 
     1842(b)(2)(B) of such Act (relating to timely review of 
     determinations and fair hearing requests), as such sections 
     were in effect before the date of the enactment of this Act.
       (b) Conforming Amendments to Section 1816 (Relating to 
     Fiscal Intermediaries).--Section 1816 (42 U.S.C. 1395h) is 
     amended as follows:
       (1) The heading is amended to read as follows:


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

       (2) Subsection (a) is amended to read as follows:
       ``(a) The administration of this part shall be conducted 
     through contracts with medicare administrative contractors 
     under section 1874A.''.
       (3) Subsection (b) is repealed.
       (4) Subsection (c) is amended--
       (A) by striking paragraph (1); and
       (B) in each of paragraphs (2)(A) and (3)(A), by striking 
     ``agreement under this section'' and inserting ``contract 
     under section 1874A that provides for making payments under 
     this part''.
       (5) Subsections (d) through (i) are repealed.
       (6) Subsections (j) and (k) are each amended--
       (A) by striking ``An agreement with an agency or 
     organization under this section'' and inserting ``A contract 
     with a medicare administrative contractor under section 1874A 
     with respect to the administration of this part''; and
       (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,''; and
       (D) by striking paragraph (5);
       (E) in paragraph (6)(D)(iv), by striking ``carrier'' and 
     inserting ``medicare administrative contractor''; and
       (F) in paragraph (7), by striking ``the carrier'' and 
     inserting ``the Secretary'' each place it appears.
       (4) Subsection (c) is amended--
       (A) by striking paragraph (1);
       (B) in paragraph (2), 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'';

[[Page 11892]]

       (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''; and
       (E) by striking paragraphs (5) and (6).
       (5) Subsections (d), (e), and (f) are repealed.
       (6) Subsection (g) is amended by striking ``carrier or 
     carriers'' and inserting ``medicare administrative contractor 
     or contractors''.
       (7) Subsection (h) is amended--
       (A) in paragraph (2)--
       (i) by striking ``Each carrier having an agreement with the 
     Secretary under subsection (a)'' and inserting ``The 
     Secretary''; and
       (ii) by striking ``Each such carrier'' and inserting ``The 
     Secretary'';
       (B) in paragraph (3)(A)--
       (i) by striking ``a carrier having an agreement with the 
     Secretary under subsection (a)'' and inserting ``medicare 
     administrative contractor having a contract under section 
     1874A that provides for making payments under this part''; 
     and
       (ii) by striking ``such carrier'' and inserting ``such 
     contractor'';
       (C) in paragraph (3)(B)--
       (i) by striking ``a carrier'' and inserting ``a medicare 
     administrative contractor'' each place it appears; and
       (ii) by striking ``the carrier'' and inserting ``the 
     contractor'' each place it appears; and
       (D) in paragraphs (5)(A) and (5)(B)(iii), by striking 
     ``carriers'' and inserting ``medicare administrative 
     contractors'' each place it appears.
       (8) Subsection (l) is amended--
       (A) in paragraph (1)(A)(iii), by striking ``carrier'' and 
     inserting ``medicare administrative contractor''; and
       (B) in paragraph (2), by striking ``carrier'' and inserting 
     ``medicare administrative contractor''.
       (9) Subsection (p)(3)(A) is amended by striking ``carrier'' 
     and inserting ``medicare administrative contractor''.
       (10) Subsection (q)(1)(A) is amended by striking 
     ``carrier''.
       (d) Effective Date; Transition Rule.--
       (1) Effective date.--
       (A) In general.--Except as otherwise provided in this 
     subsection, the amendments made by this section shall take 
     effect on October 1, 2004, and the Secretary is authorized to 
     take such steps before such date as may be necessary to 
     implement such amendments on a timely basis.
       (B) Construction for current contracts.--Such amendments 
     shall not apply to contracts in effect before the date 
     specified under subparagraph (A) that continue to retain the 
     terms and conditions in effect on such date (except as 
     otherwise provided under this Act, other than under this 
     section) until such date as the contract is let out for 
     competitive bidding under such amendments.
       (C) Deadline for competitive bidding.--The Secretary shall 
     provide for the letting by competitive bidding of all 
     contracts for functions of medicare administrative 
     contractors for annual contract periods that begin on or 
     after October 1, 2009.
       (D) Waiver of provider nomination provisions during 
     transition.--During the period beginning on the date of the 
     enactment of this Act and before the date specified under 
     subparagraph (A), the Secretary may enter into new agreements 
     under section 1816 of the Social Security Act (42 U.S.C. 
     1395h) without regard to any of the provider nomination 
     provisions of such section.
       (2) General transition rules.--The Secretary shall take 
     such steps, consistent with paragraph (1)(B) and (1)(C), as 
     are necessary to provide for an appropriate transition from 
     contracts under section 1816 and section 1842 of the Social 
     Security Act (42 U.S.C. 1395h, 1395u) to contracts under 
     section 1874A, as added by subsection (a)(1).
       (3) Authorizing continuation of mip functions under current 
     contracts and agreements and under rollover contracts.--The 
     provisions contained in the exception in section 1893(d)(2) 
     of the Social Security Act (42 U.S.C. 1395ddd(d)(2)) shall 
     continue to apply notwithstanding the amendments made by this 
     section, and any reference in such provisions to an agreement 
     or contract shall be deemed to include a contract under 
     section 1874A of such Act, as inserted by subsection (a)(1), 
     that continues the activities referred to in such provisions.
       (e) References.--On and after the effective date provided 
     under subsection (d)(1), any reference to a fiscal 
     intermediary or carrier under title XI or XVIII of the Social 
     Security Act (or any regulation, manual instruction, 
     interpretive 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) Reports on Implementation.--
       (1) Plan for implementation.--By not later than October 1, 
     2003, the Secretary shall submit a report to Congress and the 
     Comptroller General of the United States that describes the 
     plan for implementation of the amendments made by this 
     section. The Comptroller General shall conduct an evaluation 
     of such plan and shall submit to Congress, not later than 6 
     months after the date the report is received, a report on 
     such evaluation and shall include in such report such 
     recommendations as the Comptroller General deems appropriate.
       (2) Status of implementation.--The Secretary shall submit a 
     report to Congress not later than October 1, 2007, that 
     describes the status of implementation of such amendments and 
     that includes a description of the following:
       (A) The number of contracts that have been competitively 
     bid as of such date.
       (B) The distribution of functions among contracts and 
     contractors.
       (C) A timeline for complete transition to full competition.
       (D) A detailed description of how the Secretary has 
     modified oversight and management of medicare contractors to 
     adapt to full competition.

     SEC. 812. REQUIREMENTS FOR INFORMATION SECURITY FOR MEDICARE 
                   ADMINISTRATIVE CONTRACTORS.

       (a) In General.--Section 1874A, as added by section 
     811(a)(1), is amended by adding at the end the following new 
     subsection:
       ``(e) Requirements for Information Security.--
       ``(1) Development of information security program.--A 
     medicare administrative contractor that performs the 
     functions referred to in subparagraphs (A) and (B) of 
     subsection (a)(4) (relating to determining and making 
     payments) shall implement a contractor-wide information 
     security program to provide information security for the 
     operation and assets of the contractor with respect to such 
     functions under this title. An information security program 
     under this paragraph shall meet the requirements for 
     information security programs imposed on Federal agencies 
     under section 3534(b)(2) of title 44, United States Code 
     (other than requirements under subparagraphs (B)(ii), 
     (F)(iii), and (F)(iv) of such section).
       ``(2) Independent audits.--
       ``(A) Performance of annual evaluations.--Each year a 
     medicare administrative contractor that performs the 
     functions referred to in subparagraphs (A) and (B) of 
     subsection (a)(4) (relating to determining and making 
     payments) shall undergo an evaluation of the information 
     security of the contractor with respect to such functions 
     under this title. The evaluation shall--
       ``(i) be performed by an entity that meets such 
     requirements for independence as the Inspector General of the 
     Department of Health and Human Services may establish; and
       ``(ii) test the effectiveness of information security 
     control techniques for an appropriate subset of the 
     contractor's information systems (as defined in section 
     3502(8) of title 44, United States Code) relating to such 
     functions under this title and an assessment of compliance 
     with the requirements of this subsection and related 
     information security policies, procedures, standards and 
     guidelines.
       ``(B) Deadline for initial evaluation.--
       ``(i) New contractors.--In the case of a medicare 
     administrative contractor covered by this subsection that has 
     not previously performed the functions referred to in 
     subparagraphs (A) and (B) of subsection (a)(4) (relating to 
     determining and making payments) as a fiscal intermediary or 
     carrier under section 1816 or 1842, the first independent 
     evaluation conducted pursuant to subparagraph (A) shall be 
     completed prior to commencing such functions.
       ``(ii) Other contractors.--In the case of a medicare 
     administrative contractor covered by this subsection that is 
     not described in clause (i), the first independent evaluation 
     conducted pursuant subparagraph (A) shall be completed within 
     1 year after the date the contractor commences functions 
     referred to in clause (i) under this section.
       ``(C) Reports on evaluations.--
       ``(i) To the inspector general.--The results of independent 
     evaluations under subparagraph (A) shall be submitted 
     promptly to the Inspector General of the Department of Health 
     and Human Services.
       ``(ii) To congress.--The Inspector General of the 
     Department of Health and Human Services shall submit to 
     Congress annual reports on the results of such 
     evaluations.''.
       (b) Application of Requirements to Fiscal Intermediaries 
     and Carriers.--
       (1) In general.--The provisions of section 1874A(e)(2) of 
     the Social Security Act (other than subparagraph (B)), as 
     added by subsection (a), shall apply to each fiscal 
     intermediary under section 1816 of the Social Security Act 
     (42 U.S.C. 1395h) and each carrier under section 1842 of such 
     Act (42 U.S.C. 1395u) in the same manner as they apply to 
     medicare administrative contractors under such provisions.
       (2) Deadline for initial evaluation.--In the case of such a 
     fiscal intermediary or carrier with an agreement or contract 
     under such respective section in effect as of the date of the 
     enactment of this Act, the first evaluation under section 
     1874A(e)(2)(A) of the Social Security Act (as added by 
     subsection (a)), pursuant to paragraph (1), shall be 
     completed (and a report on the evaluation submitted to the 
     Secretary) by not later than 1 year after such date.

[[Page 11893]]



                   Subtitle C--Education and Outreach

     SEC. 821. 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 (g), including under section 1893) in order to 
     maximize the effectiveness of Federal education efforts for 
     providers of services and suppliers.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on the date of the enactment of this Act.
       (3) Report.--Not later than October 1, 2003, 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 
     811(a)(1) and as amended by section 812(a), is amended by 
     adding at the end the following new subsection:
       ``(f) Incentives To Improve Contractor Performance in 
     Provider Education and Outreach.--In order to give medicare 
     administrative contractors an incentive to implement 
     effective education and outreach programs for providers of 
     services and suppliers, the Secretary shall develop and 
     implement a methodology to measure the specific claims 
     payment error rates of such contractors in the processing or 
     reviewing of medicare claims.''.
       (2) Application to fiscal intermediaries and carriers.--The 
     provisions of section 1874A(f) of the Social Security Act, as 
     added by paragraph (1), shall apply to each fiscal 
     intermediary under section 1816 of the Social Security Act 
     (42 U.S.C. 1395h) and each carrier under section 1842 of such 
     Act (42 U.S.C. 1395u) in the same manner as they apply to 
     medicare administrative contractors under such provisions.
       (3) GAO report on adequacy of methodology.--Not later than 
     October 1, 2003, the Comptroller General of the United States 
     shall submit to Congress and to the Secretary a report on the 
     adequacy of the methodology under section 1874A(f)) of the 
     Social Security Act, as added by paragraph (1), and shall 
     include in the report such recommendations as the Comptroller 
     General determines appropriate with respect to the 
     methodology.
       (4) Report on Use of methodology in assessing contractor 
     performance.--Not later than October 1, 2003, the Secretary 
     shall submit to Congress a report that describes how the 
     Secretary intends to use such methodology in assessing 
     medicare contractor performance in implementing effective 
     education and outreach programs, including whether to use 
     such methodology as a basis for performance bonuses. The 
     report shall include an analysis of the sources of identified 
     errors and potential changes in systems of contractors and 
     rules of the Secretary that could reduce claims error rates.
       (c) Provision of Access to and Prompt Responses From 
     Medicare Administrative Contractors.--
       (1) In general.--Section 1874A, as added by section 
     811(a)(1) and as amended by section 812(a) and subsection 
     (b), is further amended by adding at the end the following 
     new subsection:
       ``(g) Communications with Beneficiaries, Providers of 
     Services and Suppliers.--
       ``(1) Communication strategy.--The Secretary shall develop 
     a strategy for communications with individuals entitled to 
     benefits under part A or enrolled under part B, or both, and 
     with providers of services and suppliers under this title.
       ``(2) Response to written inquiries.--Each medicare 
     administrative contractor shall, for those providers of 
     services and suppliers which submit claims to the contractor 
     for claims processing and for those individuals entitled to 
     benefits under part A or enrolled under part B, or both, with 
     respect to whom claims are submitted for claims processing, 
     provide general written responses (which may be through 
     electronic transmission) in a clear, concise, and accurate 
     manner to inquiries of providers of services, suppliers and 
     individuals entitled to benefits under part A or enrolled 
     under part B, or both, concerning the programs under this 
     title within 45 business days of the date of receipt of such 
     inquiries.
       ``(3) Response to toll-free lines.--The Secretary shall 
     ensure that each medicare administrative contractor shall 
     provide, for those providers of services and suppliers which 
     submit claims to the contractor for claims processing and for 
     those individuals entitled to benefits under part A or 
     enrolled under part B, or both, with respect to whom claims 
     are submitted for claims processing, a toll-free telephone 
     number at which such individuals, providers of services and 
     suppliers may obtain information regarding billing, coding, 
     claims, coverage, and other appropriate information under 
     this title.
       ``(4) Monitoring of contractor responses.--
       ``(A) In general.--Each medicare administrative contractor 
     shall, consistent with standards developed by the Secretary 
     under subparagraph (B)--
       ``(i) maintain a system for identifying who provides the 
     information referred to in paragraphs (2) and (3); and
       ``(ii) monitor the accuracy, consistency, and timeliness of 
     the information so provided.
       ``(B) Development of standards.--
       ``(i) In general.--The Secretary shall establish and make 
     public standards to monitor the accuracy, consistency, and 
     timeliness of the information provided in response to written 
     and telephone inquiries under this subsection. Such standards 
     shall be consistent with the performance requirements 
     established under subsection (b)(3).
       ``(ii) Evaluation.--In conducting evaluations of individual 
     medicare administrative contractors, the Secretary shall take 
     into account the results of the monitoring conducted under 
     subparagraph (A) taking into account as performance 
     requirements the standards established under clause (i). The 
     Secretary shall, in consultation with organizations 
     representing providers of services, suppliers, and 
     individuals entitled to benefits under part A or enrolled 
     under part B, or both, establish standards relating to the 
     accuracy, consistency, and timeliness of the information so 
     provided.''.
       ``(C) Direct monitoring.--Nothing in this paragraph shall 
     be construed as preventing the Secretary from directly 
     monitoring the accuracy, consistency, and timeliness of the 
     information so provided.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect October 1, 2003.
       (3) Application to fiscal intermediaries and carriers.--The 
     provisions of section 1874A(g) of the Social Security Act, as 
     added by paragraph (1), shall apply to each fiscal 
     intermediary under section 1816 of the Social Security Act 
     (42 U.S.C. 1395h) and each carrier under section 1842 of such 
     Act (42 U.S.C. 1395u) in the same manner as they apply to 
     medicare administrative contractors under such provisions.
       (d) Improved Provider Education and Training.--
       (1) In general.--Section 1889, as added by subsection (a), 
     is amended by adding at the end the following new 
     subsections:
       ``(b) Enhanced Education and Training.--
       ``(1) Additional resources.--There are authorized to be 
     appropriated to the Secretary (in appropriate part from the 
     Federal Hospital Insurance Trust Fund and the Federal 
     Supplementary Medical Insurance Trust Fund) $25,000,000 for 
     each of fiscal years 2004 and 2005 and such sums as may be 
     necessary for succeeding fiscal years.
       ``(2) Use.--The funds made available under paragraph (1) 
     shall be used to increase the conduct by medicare contractors 
     of education and training of providers of services and 
     suppliers regarding billing, coding, and other appropriate 
     items and may also be used to improve the accuracy, 
     consistency, and timeliness of contractor responses.
       ``(c) Tailoring Education and Training Activities for Small 
     Providers or Suppliers.--
       ``(1) In general.--Insofar as a medicare contractor 
     conducts education and training activities, it shall tailor 
     such activities to meet the special needs of small providers 
     of services or suppliers (as defined in paragraph (2)).
       ``(2) Small provider of services or supplier.--In this 
     subsection, the term `small provider of services or supplier' 
     means--
       ``(A) a provider of services with fewer than 25 full-time-
     equivalent employees; or
       ``(B) a supplier with fewer than 10 full-time-equivalent 
     employees.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on October 1, 2003.
       (e) Requirement To Maintain Internet Sites.--
       (1) In general.--Section 1889, as added by subsection (a) 
     and as amended by subsection (d), is further amended by 
     adding at the end the following new subsection:
       ``(d) Internet Sites; FAQs.--The Secretary, and each 
     medicare contractor insofar as it provides services 
     (including claims processing) for providers of services or 
     suppliers, shall maintain an Internet site which--
       ``(1) provides answers in an easily accessible format to 
     frequently asked questions, and
       ``(2) includes other published materials of the contractor,

     that relate to providers of services and suppliers under the 
     programs under this title (and title XI insofar as it relates 
     to such programs).''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on October 1, 2003.
       (f) Additional Provider Education Provisions.--
       (1) In general.--Section 1889, as added by subsection (a) 
     and as amended by subsections (d) and (e), is further amended 
     by adding at the end the following new subsections:

[[Page 11894]]

       ``(e) Encouragement of Participation in Education Program 
     Activities.--A medicare contractor may not use a record of 
     attendance at (or failure to attend) educational activities 
     or other information gathered during an educational program 
     conducted under this section or otherwise by the Secretary to 
     select or track providers of services or suppliers for the 
     purpose of conducting any type of audit or prepayment review.
       ``(f) Construction.--Nothing in this section or section 
     1893(g) shall be construed as providing for disclosure by a 
     medicare contractor of information that would compromise 
     pending law enforcement activities or reveal findings of law 
     enforcement-related audits.
       ``(g) Definitions.--For purposes of this section, the term 
     `medicare contractor' includes the following:
       ``(1) A medicare administrative contractor with a contract 
     under section 1874A, including a fiscal intermediary with a 
     contract under section 1816 and a carrier with a contract 
     under section 1842.
       ``(2) An eligible entity with a contract under section 
     1893.
     Such term does not include, with respect to activities of a 
     specific provider of services or supplier an entity that has 
     no authority under this title or title IX with respect to 
     such activities and such provider of services or supplier.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on the date of the enactment of this Act.

     SEC. 822. SMALL PROVIDER TECHNICAL ASSISTANCE DEMONSTRATION 
                   PROGRAM.

       (a) Establishment.--
       (1) In general.--The Secretary shall establish a 
     demonstration program (in this section referred to as the 
     ``demonstration program'') under which technical assistance 
     described in paragraph (2) is made available, upon request 
     and on a voluntary basis, to small providers of services or 
     suppliers in order to improve compliance with the applicable 
     requirements of the programs under medicare program under 
     title XVIII of the Social Security Act (including provisions 
     of title XI of such Act insofar as they relate to such title 
     and are not administered by the Office of the Inspector 
     General of the Department of Health and Human Services).
       (2) Forms of technical assistance.--The technical 
     assistance described in this paragraph is--
       (A) evaluation and recommendations regarding billing and 
     related systems; and
       (B) information and assistance regarding policies and 
     procedures under the medicare program, including coding and 
     reimbursement.
       (3) Small providers of services or suppliers.--In this 
     section, the term ``small providers of services or 
     suppliers'' means--
       (A) a provider of services with fewer than 25 full-time-
     equivalent employees; or
       (B) a supplier with fewer than 10 full-time-equivalent 
     employees.
       (b) Qualification of Contractors.--In conducting the 
     demonstration program, the Secretary shall enter into 
     contracts with qualified organizations (such as peer review 
     organizations or entities described in section 1889(g)(2) of 
     the Social Security Act, as inserted by section 5(f)(1)) with 
     appropriate expertise with billing systems of the full range 
     of providers of services and suppliers to provide the 
     technical assistance. In awarding such contracts, the 
     Secretary shall consider any prior investigations of the 
     entity's work by the Inspector General of Department of 
     Health and Human Services or the Comptroller General of the 
     United States.
       (c) Description of Technical Assistance.--The technical 
     assistance provided under the demonstration program shall 
     include a direct and in-person examination of billing systems 
     and internal controls of small providers of services or 
     suppliers to determine program compliance and to suggest more 
     efficient or effective means of achieving such compliance.
       (d) Avoidance of Recovery Actions for Problems Identified 
     as Corrected.--The Secretary shall provide that, absent 
     evidence of fraud and notwithstanding any other provision of 
     law, any errors found in a compliance review for a small 
     provider of services or supplier that participates in the 
     demonstration program shall not be subject to recovery action 
     if the technical assistance personnel under the program 
     determine that--
       (1) the problem that is the subject of the compliance 
     review has been corrected to their satisfaction within 30 
     days of the date of the visit by such personnel to the small 
     provider of services or supplier; and
       (2) such problem remains corrected for such period as is 
     appropriate.
     The previous sentence applies only to claims filed as part of 
     the demonstration program and lasts only for the duration of 
     such program and only as long as the small provider of 
     services or supplier is a participant in such program.
       (e) GAO Evaluation.--Not later than 2 years after the date 
     of the date the demonstration program is first implemented, 
     the Comptroller General, in consultation with the Inspector 
     General of the Department of Health and Human Services, shall 
     conduct an evaluation of the demonstration program. The 
     evaluation shall include a determination of whether claims 
     error rates are reduced for small providers of services or 
     suppliers who participated in the program and the extent of 
     improper payments made as a result of the demonstration 
     program. The Comptroller General shall submit a report to the 
     Secretary and the Congress on such evaluation and shall 
     include in such report recommendations regarding the 
     continuation or extension of the demonstration program.
       (f) Financial Participation by Providers.--The provision of 
     technical assistance to a small provider of services or 
     supplier under the demonstration program is conditioned upon 
     the small provider of services or supplier paying an amount 
     estimated (and disclosed in advance of a provider's or 
     supplier's participation in the program) to be equal to 25 
     percent of the cost of the technical assistance.
       (g) Authorization of Appropriations.--There are authorized 
     to be appropriated to the Secretary (in appropriate part from 
     the Federal Hospital Insurance Trust Fund and the Federal 
     Supplementary Medical Insurance Trust Fund) to carry out the 
     demonstration program--
       (1) for fiscal year 2004, $1,000,000, and
       (2) for fiscal year 2005, $6,000,000.

     SEC. 823. MEDICARE PROVIDER OMBUDSMAN; MEDICARE BENEFICIARY 
                   OMBUDSMAN.

       (a) Medicare Provider Ombudsman.--Section 1868 (42 U.S.C. 
     1395ee) is amended--
       (1) by adding at the end of the heading the following: ``; 
     medicare provider ombudsman'';
       (2) by inserting ``Practicing Physicians Advisory 
     Council.--(1)'' after ``(a)'';
       (3) in paragraph (1), as so redesignated under paragraph 
     (2), by striking ``in this section'' and inserting ``in this 
     subsection'';
       (4) by redesignating subsections (b) and (c) as paragraphs 
     (2) and (3), respectively; and
       (5) by adding at the end the following new subsection:
       ``(b) Medicare Provider Ombudsman.--The Secretary shall 
     appoint within the Department of Health and Human Services a 
     Medicare Provider Ombudsman. The Ombudsman shall--
       ``(1) provide assistance, on a confidential basis, to 
     providers of services and suppliers with respect to 
     complaints, grievances, and requests for information 
     concerning the programs under this title (including 
     provisions of title XI insofar as they relate to this title 
     and are not administered by the Office of the Inspector 
     General of the Department of Health and Human Services) and 
     in the resolution of unclear or conflicting guidance given by 
     the Secretary and medicare contractors to such providers of 
     services and suppliers regarding such programs and provisions 
     and requirements under this title and such provisions; and
       ``(2) submit recommendations to the Secretary for 
     improvement in the administration of this title and such 
     provisions, including--
       ``(A) recommendations to respond to recurring patterns of 
     confusion in this title and such provisions (including 
     recommendations regarding suspending imposition of sanctions 
     where there is widespread confusion in program 
     administration), and
       ``(B) recommendations to provide for an appropriate and 
     consistent response (including not providing for audits) in 
     cases of self-identified overpayments by providers of 
     services and suppliers.
     The Ombudsman shall not serve as an advocate for any 
     increases in payments or new coverage of services, but may 
     identify issues and problems in payment or coverage 
     policies.''.
       (b) Medicare Beneficiary Ombudsman.--Title XVIII, as 
     amended by sections 105 and 701, is amended by inserting 
     after section 1808 the following new section:


                    ``medicare beneficiary ombudsman

       ``Sec. 1809. (a) In General.--The Secretary shall appoint 
     within the Department of Health and Human Services a Medicare 
     Beneficiary Ombudsman who shall have expertise and experience 
     in the fields of health care and education of (and assistance 
     to) individuals entitled to benefits under this title.
       ``(b) Duties.--The Medicare Beneficiary Ombudsman shall--
       ``(1) receive complaints, grievances, and requests for 
     information submitted by individuals entitled to benefits 
     under part A or enrolled under part B, or both, with respect 
     to any aspect of the medicare program;
       ``(2) provide assistance with respect to complaints, 
     grievances, and requests referred to in paragraph (1), 
     including--
       ``(A) assistance in collecting relevant 
     information for such individuals, to seek 
     an appeal of a decision or determination 
     made by a fiscal intermediary, carrier, Medicare+Choice 
     organization, or the Secretary; and
       ``(B) assistance to such individuals with any problems 
     arising from disenrollment from a Medicare+Choice plan under 
     part C; and
       ``(3) submit annual reports to Congress and the Secretary 
     that describe the activities of the Office and that include 
     such recommendations for improvement in the administration of 
     this title as the Ombudsman determines appropriate.
     The Ombudsman shall not serve as an advocate for any 
     increases in payments or new

[[Page 11895]]

      coverage of services, but may identify issues and problems 
     in payment or coverage policies.
       ``(c) Working with Health Insurance Counseling Programs.--
     To the extent possible, the Ombudsman shall work with health 
     insurance counseling programs (receiving funding under 
     section 4360 of Omnibus Budget Reconciliation Act of 1990) to 
     facilitate the provision of information to individuals 
     entitled to benefits under part A or enrolled under part B, 
     or both regarding Medicare+Choice plans and changes to those 
     plans. Nothing in this subsection shall preclude further 
     collaboration between the Ombudsman and such programs.''.
       (c) Deadline for Appointment.--The Secretary shall appoint 
     the Medicare Provider Ombudsman and the Medicare Beneficiary 
     Ombudsman, under the amendments made by subsections (a) and 
     (b), respectively, by not later than 1 year after the date of 
     the enactment of this Act.
       (d) Funding.--There are authorized to be appropriated to 
     the Secretary (in appropriate part from the Federal Hospital 
     Insurance Trust Fund and the Federal Supplementary Medical 
     Insurance Trust Fund) to carry out the provisions of 
     subsection (b) of section 1868 of the Social Security Act 
     (relating to the Medicare Provider Ombudsman), as added by 
     subsection (a)(5) and section 1809 of such Act (relating to 
     the Medicare Beneficiary Ombudsman), as added by subsection 
     (b), such sums as are necessary for fiscal year 2003 and each 
     succeeding fiscal year.
       (e) Use of Central, Toll-Free Number (1-800-MEDICARE).--
       (1) Phone triage system; listing in medicare handbook 
     instead of other toll-free numbers.--Section 1804(b) (42 
     U.S.C. 1395b-2(b)) is amended by adding at the end the 
     following: ``The Secretary shall provide, through the toll-
     free number 1-800-MEDICARE, for a means by which individuals 
     seeking information about, or assistance with, such programs 
     who phone such toll-free number are transferred (without 
     charge) to appropriate entities for the provision of such 
     information or assistance. Such toll-free number shall be the 
     toll-free number listed for general information and 
     assistance in the annual notice under subsection (a) instead 
     of the listing of numbers of individual contractors.''.
       (2) Monitoring accuracy.--
       (A) Study.--The Comptroller General of the United States 
     shall conduct a study to monitor the accuracy and consistency 
     of information provided to individuals entitled to benefits 
     under part A or enrolled under part B, or both, through the 
     toll-free number 1-800-MEDICARE, including an assessment of 
     whether the information provided is sufficient to answer 
     questions of such individuals. In conducting the study, the 
     Comptroller General shall examine the education and training 
     of the individuals providing information through such number.
       (B) Report.--Not later than 1 year after the date of the 
     enactment of this Act, the Comptroller General shall submit 
     to Congress a report on the study conducted under 
     subparagraph (A).

     SEC. 824. BENEFICIARY OUTREACH DEMONSTRATION PROGRAM.

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

                    Subtitle D--Appeals and Recovery

     SEC. 831. TRANSFER OF RESPONSIBILITY FOR MEDICARE APPEALS.

       (a) Transition Plan.--
       (1) In general.--Not later than October 1, 2003, the 
     Commissioner of Social Security and the Secretary shall 
     develop and transmit to Congress and the Comptroller General 
     of the United States a plan under which the functions of 
     administrative law judges responsible for hearing cases under 
     title XVIII of the Social Security Act (and related 
     provisions in title XI of such Act) are transferred from the 
     responsibility of the Commissioner and the Social Security 
     Administration to the Secretary and the Department of Health 
     and Human Services.
       (2) GAO evaluation.--The Comptroller General of the United 
     States shall evaluate the plan and, not later than the date 
     that is 6 months after the date on which the plan is received 
     by the Comptroller General, shall submit to Congress a report 
     on such evaluation.
       (b) Transfer of Adjudication Authority.--
       (1) In general.--Not earlier than July 1, 2004, and not 
     later than October 1, 2004, the Commissioner of Social 
     Security and the Secretary shall implement the transition 
     plan under subsection (a) and transfer the administrative law 
     judge functions described in such subsection from the Social 
     Security Administration to the Secretary.
       (2) Assuring independence of judges.--The Secretary shall 
     assure the independence of administrative law judges 
     performing the administrative law judge functions transferred 
     under paragraph (1) from the Centers for Medicare & Medicaid 
     Services and its contractors.
       (3) Geographic distribution.--The Secretary shall provide 
     for an appropriate geographic distribution of administrative 
     law judges performing the administrative law judge functions 
     transferred under paragraph (1) throughout the United States 
     to ensure timely access to such judges.
       (4) Hiring authority.--Subject to the amounts provided in 
     advance in appropriations Act, the Secretary shall have 
     authority to hire administrative law judges to hear such 
     cases, giving priority to those judges with prior experience 
     in handling medicare appeals and in a manner consistent with 
     paragraph (3), and to hire support staff for such judges.
       (5) Financing.--Amounts payable under law to the 
     Commissioner for administrative law judges performing the 
     administrative law judge functions transferred under 
     paragraph (1) from the Federal Hospital Insurance Trust Fund 
     and the Federal Supplementary Medical Insurance Trust Fund 
     shall become payable to the Secretary for the functions so 
     transferred.
       (6) Shared resources.--The Secretary shall enter into such 
     arrangements with the Commissioner as may be appropriate with 
     respect to transferred functions of administrative law judges 
     to share office space, support staff, and other resources, 
     with appropriate reimbursement from the Trust Funds described 
     in paragraph (5).
       (c) Increased Financial Support.--In addition to any 
     amounts otherwise appropriated, to ensure timely action on 
     appeals before administrative law judges and the Departmental 
     Appeals Board consistent with section 1869 of the Social 
     Security Act (as amended by section 521 of BIPA, 114 Stat. 
     2763A-534), there are authorized to be appropriated (in 
     appropriate part from the Federal Hospital Insurance Trust 
     Fund and the Federal Supplementary Medical Insurance Trust 
     Fund) to the Secretary such sums as are necessary for fiscal 
     year 2004 and each subsequent fiscal year to--
       (1) increase the number of administrative law judges (and 
     their staffs) under subsection (b)(4);
       (2) improve education and training opportunities for 
     administrative law judges (and their staffs); and
       (3) increase the staff of the Departmental Appeals Board.
       (d) Conforming Amendment.--Section 1869(f)(2)(A)(i) (42 
     U.S.C. 1395ff(f)(2)(A)(i)), as added by section 522(a) of 
     BIPA (114 Stat. 2763A-543), is amended by striking ``of the 
     Social Security Administration''.

     SEC. 832. PROCESS FOR EXPEDITED ACCESS TO REVIEW.

       (a) Expedited Access to Judicial Review.--Section 1869(b) 
     (42 U.S.C. 1395ff(b)) as amended by BIPA, is amended--
       (1) in paragraph (1)(A), by inserting ``, subject to 
     paragraph (2),'' before ``to judicial review of the 
     Secretary's final decision'';
       (2) in paragraph (1)(F)--
       (A) by striking clause (ii);
       (B) by striking ``proceeding'' and all that follows through 
     ``determination'' and inserting ``determinations and 
     reconsiderations''; and
       (C) by redesignating subclauses (I) and (II) as clauses (i) 
     and (ii) and by moving the indentation of such subclauses 
     (and the matter that follows) 2 ems to the left; and
       (3) by adding at the end the following new paragraph:
       ``(2) Expedited access to judicial review.--
       ``(A) In general.--The Secretary shall establish a process 
     under which a provider of services or supplier that furnishes 
     an item or service or an individual entitled to benefits

[[Page 11896]]

     under part A or enrolled under part B, or both, who has filed 
     an appeal under paragraph (1) may obtain access to judicial 
     review when a review panel (described in subparagraph (D)), 
     on its own motion or at the request of the appellant, 
     determines that no entity in the administrative appeals 
     process has the authority to decide the question of law or 
     regulation relevant to the matters in controversy and that 
     there is no material issue of fact in dispute. The appellant 
     may make such request only once with respect to a question of 
     law or regulation in a case of an appeal.
       ``(B) Prompt determinations.--If, after or coincident with 
     appropriately filing a request for an administrative hearing, 
     the appellant requests a determination by the appropriate 
     review panel that no review panel has the authority to decide 
     the question of law or regulations relevant to the matters in 
     controversy and that there is no material issue of fact in 
     dispute and if such request is accompanied by the documents 
     and materials as the appropriate review panel shall require 
     for purposes of making such determination, such review panel 
     shall make a determination on the request in writing within 
     60 days after the date such review panel receives the request 
     and such accompanying documents and materials. Such a 
     determination by such review panel shall be considered a 
     final decision and not subject to review by the Secretary.
       ``(C) Access to judicial review.--
       ``(i) In general.--If the appropriate review panel--

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

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

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

       ``(iii) Venue.--Such action shall be brought in the 
     district court of the United States for the judicial district 
     in which the appellant is located (or, in the case of an 
     action brought jointly by more than one applicant, the 
     judicial district in which the greatest number of applicants 
     are located) or in the district court for the District of 
     Columbia.
       ``(iv) Interest on amounts in controversy.--Where a 
     provider of services or supplier seeks judicial review 
     pursuant to this paragraph, the amount in controversy shall 
     be subject to annual interest beginning on the first day of 
     the first month beginning after the 60-day period as 
     determined pursuant to clause (ii) and equal to the rate of 
     interest on obligations issued for purchase by the Federal 
     Hospital Insurance Trust Fund and by the Federal 
     Supplementary Medical Insurance Trust Fund for the month in 
     which the civil action authorized under this paragraph is 
     commenced, to be awarded by the reviewing court in favor of 
     the prevailing party. No interest awarded pursuant to the 
     preceding sentence shall be deemed income or cost for the 
     purposes of determining reimbursement due providers of 
     services or suppliers under this Act.
       ``(D) Review panels.--For purposes of this subsection, a 
     `review panel' is a panel consisting of 3 members (who shall 
     be administrative law judges, members of the Departmental 
     Appeals Board, or qualified individuals associated with a 
     qualified independent contractor (as defined in subsection 
     (c)(2)) or with another independent entity) designated by the 
     Secretary for purposes of making determinations under this 
     paragraph.''.
       (b) Application to Provider Agreement Determinations.--
     Section 1866(h)(1) (42 U.S.C. 1395cc(h)(1)) is amended--
       (1) by inserting ``(A)'' after ``(h)(1)''; and
       (2) by adding at the end the following new subparagraph:
       ``(B) An institution or agency described in subparagraph 
     (A) that has filed for a hearing under subparagraph (A) shall 
     have expedited access to judicial review under this 
     subparagraph in the same manner as providers of services, 
     suppliers, and individuals entitled to benefits under part A 
     or enrolled under part B, or both, may obtain expedited 
     access to judicial review under the process established under 
     section 1869(b)(2). Nothing in this subparagraph shall be 
     construed to affect the application of any remedy imposed 
     under section 1819 during the pendency of an appeal under 
     this subparagraph.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to appeals filed on or after October 1, 2003.
       (d) Expedited Review of Certain Provider Agreement 
     Determinations.--
       (1) Termination and certain other immediate remedies.--The 
     Secretary shall develop and implement a process to expedite 
     proceedings under sections 1866(h) of the Social Security Act 
     (42 U.S.C. 1395cc(h)) in which the remedy of termination of 
     participation, or a remedy described in clause (i) or (iii) 
     of section 1819(h)(2)(B) of such Act (42 U.S.C. 1395i-
     3(h)(2)(B)) which is applied on an immediate basis, has been 
     imposed. Under such process priority shall be provided in 
     cases of termination.
       (2) Increased financial support.--In addition to any 
     amounts otherwise appropriated, to reduce by 50 percent the 
     average time for administrative determinations on appeals 
     under section 1866(h) of the Social Security Act (42 U.S.C. 
     1395cc(h)), there are authorized to be appropriated (in 
     appropriate part from the Federal Hospital Insurance Trust 
     Fund and the Federal Supplementary Medical Insurance Trust 
     Fund) to the Secretary such additional sums for fiscal year 
     2004 and each subsequent fiscal year as may be necessary. The 
     purposes for which such amounts are available include 
     increasing the number of administrative law judges (and their 
     staffs) and the appellate level staff at the Departmental 
     Appeals Board of the Department of Health and Human Services 
     and educating such judges and staffs on long-term care 
     issues.

     SEC. 833. REVISIONS TO MEDICARE APPEALS PROCESS.

       (a) Requiring Full and Early Presentation of Evidence.--
       (1) In general.--Section 1869(b) (42 U.S.C. 1395ff(b)), as 
     amended by BIPA and as amended by section 832(a), is further 
     amended by adding at the end the following new paragraph:
       ``(3) Requiring full and early presentation of evidence by 
     providers.--A provider of services or supplier may not 
     introduce evidence in any appeal under this section that was 
     not presented at the reconsideration conducted by the 
     qualified independent contractor under subsection (c), unless 
     there is good cause which precluded the introduction of such 
     evidence at or before that reconsideration.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on October 1, 2003.
       (b) Use of Patients' Medical Records.--Section 
     1869(c)(3)(B)(i) (42 U.S.C. 1395ff(c)(3)(B)(i)), as amended 
     by BIPA, is amended by inserting ``(including the medical 
     records of the individual involved)'' after ``clinical 
     experience''.
       (c) Notice Requirements for Medicare Appeals.--
       (1) Initial determinations and redeterminations.--Section 
     1869(a) (42 U.S.C. 1395ff(a)), as amended by BIPA, is amended 
     by adding at the end the following new 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 include--
       ``(A) the specific reasons for the determination, 
     including--
       ``(i) upon request, the provision of the policy, manual, or 
     regulation used in making the determination; and
       ``(ii) as appropriate in the case of a redetermination, a 
     summary of the clinical or scientific evidence used in making 
     the determination;
       ``(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.
     The written notice on a redetermination shall be provided in 
     printed form and written in a manner calculated to be 
     understood by the individual entitled to benefits under part 
     A or enrolled under part B, or both.''.
       (2)Reconsiderations.--Section1869(c)(3)(E) (42 U.S.C. 
     1395ff(c)(3)(E)), as amended by BIPA, is amended--
       (A) by inserting ``be written in a manner calculated to be 
     understood by the individual entitled to benefits under part 
     A or enrolled under part B, or both, and shall include (to 
     the extent appropriate)'' after ``in writing, ''; and
       (B) by inserting ``and a notification of the right to 
     appeal such determination and instructions on how to initiate 
     such appeal under this section'' after ``such decision, ''.
       (3) Appeals.--Section 1869(d) (42 U.S.C. 1395ff(d)), as 
     amended by BIPA, is amended--
       (A) in the heading, by inserting ``; Notice'' after 
     ``Secretary''; and
       (B) by adding at the end the following new paragraph:
       ``(4) Notice.--Notice of the decision of an administrative 
     law judge shall be in writing in a manner calculated to be 
     understood by the individual entitled to benefits under part 
     A or enrolled under part B, or both, and shall include--
       ``(A) the specific reasons for the determination 
     (including, to the extent appropriate, a summary of the 
     clinical or scientific evidence used in making the 
     determination);
       ``(B) the procedures for obtaining additional information 
     concerning the decision; and
       ``(C) notification of the right to appeal the decision and 
     instructions on how to initiate such an appeal under this 
     section.''.
       (4) Submission of record for appeal.--Section 
     1869(c)(3)(J)(i) (42 U.S.C. 1395ff(c)(3)(J)(i)) by striking 
     ``prepare'' and

[[Page 11897]]

     inserting ``submit'' and by striking ``with respect to'' and 
     all that follows through ``and relevant policies''.
       (d) Qualified Independent Contractors.--
       (1) Eligibility requirements of qualified independent 
     contractors.--Section 1869(c)(3) (42 U.S.C. 1395ff(c)(3)), as 
     amended by BIPA, is amended--
       (A) in subparagraph (A), by striking ``sufficient training 
     and expertise in medical science and legal matters'' and 
     inserting ``sufficient medical, legal, and other expertise 
     (including knowledge of the program under this title) and 
     sufficient staffing''; and
       (B) by adding at the end the following new subparagraph:
       ``(K) Independence requirements.--
       ``(i) In general.--Subject to clause (ii), a qualified 
     independent contractor shall not conduct any activities in a 
     case unless the entity--

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

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

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

       ``(ii) prohibit an individual who has staff privileges at 
     the institution where the treatment involved takes place from 
     serving as a reviewer merely on the basis of having such 
     staff privileges if the existence of such privileges is 
     disclosed to the Secretary and such individual (or authorized 
     representative), and neither party objects; or
       ``(iii) prohibit receipt of compensation by a reviewing 
     professional from a contractor if the compensation is 
     provided consistent with paragraph (3).
     For purposes of this paragraph, the term `participation 
     agreement' means an agreement relating to the provision of 
     health care services by the individual and does not include 
     the provision of services as a reviewer under this 
     subsection.
       ``(3) Limitations on reviewer compensation.--Compensation 
     provided by a qualified independent contractor to a reviewer 
     in connection with a review under this section shall not be 
     contingent on the decision rendered by the reviewer.
       ``(4) Licensure and expertise.--Each reviewing professional 
     shall be--
       ``(A) a physician (allopathic or osteopathic) who is 
     appropriately credentialed or licensed in one or more States 
     to deliver health care services and has medical expertise in 
     the field of practice that is appropriate for the items or 
     services at issue; or
       ``(B) a health care professional who is legally authorized 
     in one or more States (in accordance with State law or the 
     State regulatory mechanism provided by State law) to furnish 
     the health care items or services at issue and has medical 
     expertise in the field of practice that is appropriate for 
     such items or services.
       ``(5) Related party defined.--For purposes of this section, 
     the term `related party' means, with respect to a case under 
     this title involving a specific individual entitled to 
     benefits under part A or enrolled under part B, or both, any 
     of the following:
       ``(A) The Secretary, the medicare administrative contractor 
     involved, or any fiduciary, officer, director, or employee of 
     the Department of Health and Human Services, or of such 
     contractor.
       ``(B) The individual (or authorized representative).
       ``(C) The health care professional that provides the items 
     or services involved in the case.
       ``(D) The institution at which the items or services (or 
     treatment) involved in the case are provided.
       ``(E) The manufacturer of any drug or other item that is 
     included in the items or services involved in the case.
       ``(F) Any other party determined under any regulations to 
     have a substantial interest in the case involved.''.
       (3) Effective date.--The amendments made by paragraphs (1) 
     and (2) shall be effective as if included in the enactment of 
     the respective provisions of subtitle C of title V of BIPA, 
     (114 Stat. 2763A-534).
       (4) Transition.--In applying section 1869(g) of the Social 
     Security Act (as added by paragraph (2)), any reference to a 
     medicare administrative contractor shall be deemed to include 
     a reference to a fiscal intermediary under section 1816 of 
     the Social Security Act (42 U.S.C. 1395h) and a carrier under 
     section 1842 of such Act (42 U.S.C. 1395u).

     SEC. 834. PREPAYMENT REVIEW.

       (a) In General.--Section 1874A, as added by section 
     811(a)(1) and as amended by sections 812(b), 821(b)(1), and 
     831(c)(1), is further amended by adding at the end the 
     following new subsection:
       ``(h) Conduct of Prepayment Review.--
       ``(1) Conduct of random prepayment review.--
       ``(A) In general.--A medicare administrative contractor may 
     conduct random prepayment review only to develop a 
     contractor-wide or program-wide claims payment error rates or 
     under such additional circumstances as may be provided under 
     regulations, developed in consultation with providers of 
     services and suppliers.
       ``(B) Use of standard protocols when conducting prepayment 
     reviews.--When a medicare administrative contractor conducts 
     a random prepayment review, the contractor may conduct such 
     review only in accordance with a standard protocol for random 
     prepayment audits developed by the Secretary.
       ``(C) Construction.--Nothing in this paragraph shall be 
     construed as preventing the denial of payments for claims 
     actually reviewed under a random prepayment review.
       ``(D) Random prepayment review.--For purposes of this 
     subsection, the term `random prepayment review' means a 
     demand for the production of records or documentation absent 
     cause with respect to a claim.
       ``(2) Limitations on non-random prepayment review.--
       ``(A) Limitations on initiation of non-random prepayment 
     review.--A medicare administrative contractor may not 
     initiate non-random prepayment review of a provider of 
     services or supplier based on the initial identification by 
     that provider of services or supplier of an improper billing 
     practice unless there is a likelihood of sustained or high 
     level of payment error (as defined in subsection (i)(3)(A)).
       ``(B) Termination of non-random prepayment review.--The 
     Secretary shall issue regulations relating to the 
     termination, including termination dates, of non-random 
     prepayment review. Such regulations may vary such a 
     termination date based upon the differences in the 
     circumstances triggering prepayment review.''.
       (b) Effective Date.--
       (1) In general.--Except as provided in this subsection, the 
     amendment made by subsection (a) shall take effect 1 year 
     after the date of the enactment of this Act.
       (2) Deadline for promulgation of certain regulations.--The 
     Secretary shall first issue regulations under section 
     1874A(h) of the Social Security Act, as added by subsection 
     (a), by not later than 1 year after the date of the enactment 
     of this Act.

[[Page 11898]]

       (3) Application of standard protocols for random prepayment 
     review.--Section 1874A(h)(1)(B) of the Social Security Act, 
     as added by subsection (a), shall apply to random prepayment 
     reviews conducted on or after such date (not later than 1 
     year after the date of the enactment of this Act) as the 
     Secretary shall specify.
       (c) Application to Fiscal Intermediaries and Carriers.--The 
     provisions of section 1874A(h) of the Social Security Act, as 
     added by subsection (a), shall apply to each fiscal 
     intermediary under section 1816 of the Social Security Act 
     (42 U.S.C. 1395h) and each carrier under section 1842 of such 
     Act (42 U.S.C. 1395u) in the same manner as they apply to 
     medicare administrative contractors under such provisions.

     SEC. 835. RECOVERY OF OVERPAYMENTS.

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

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

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

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

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

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

     The opportunity provided under clause (ii)(I) does not waive 
     any appeal rights with respect to the alleged overpayment 
     involved.
       ``(D) Consent settlement defined.--For purposes of this 
     paragraph, the term `consent settlement' means an agreement 
     between the Secretary and a provider of services or supplier 
     whereby both parties agree to settle a projected overpayment 
     based on less than a statistically valid sample of claims and 
     the provider of services or supplier agrees not to appeal the 
     claims involved.
       ``(6) Notice of over-utilization of codes.--The Secretary 
     shall establish, in consultation with organizations 
     representing the classes of providers of services and 
     suppliers, a process under which the Secretary provides for 
     notice to classes of providers of services and suppliers 
     served by the contractor in cases in which the contractor has 
     identified that particular billing codes may be overutilized 
     by that class of providers of services or suppliers under the 
     programs under this title (or provisions of title XI insofar 
     as they relate to such programs).
       ``(7) Payment audits.--
       ``(A) Written notice for post-payment audits.--Subject to 
     subparagraph (C), if a medicare contractor decides to conduct 
     a post-payment audit of a provider of services or supplier 
     under this title, the contractor shall provide the provider 
     of services or supplier with written notice (which may be in 
     electronic form) of the intent to conduct such an audit.
       ``(B) Explanation of findings for all audits.--Subject to 
     subparagraph (C), if a medicare contractor audits a provider 
     of services or supplier under this title, the contractor 
     shall--
       ``(i) give the provider of services or supplier a full 
     review and explanation of the findings of the audit in a 
     manner that is understandable to the provider of services or 
     supplier and permits the development of an appropriate 
     corrective action plan;
       ``(ii) inform the provider of services or supplier of the 
     appeal rights under this title as well as consent settlement 
     options (which are at the discretion of the Secretary);
       ``(iii) give the provider of services or supplier an 
     opportunity to provide additional information to the 
     contractor; and
       ``(iv) take into account information provided, on a timely 
     basis, by the provider of services or supplier under clause 
     (iii).
       ``(C) Exception.--Subparagraphs (A) and (B) shall not apply 
     if the provision of notice

[[Page 11899]]

     or findings would compromise pending law enforcement 
     activities, whether civil or criminal, or reveal findings of 
     law enforcement-related audits.
       ``(8) Standard methodology for probe sampling.--The 
     Secretary shall establish a standard methodology for medicare 
     contractors to use in selecting a sample of claims for review 
     in the case of an abnormal billing pattern.''.
       (b) Effective Dates and Deadlines.--
       (1) Use of repayment plans.--Section 1893(f)(1) of the 
     Social Security Act, as added by subsection (a), shall apply 
     to requests for repayment plans made after the date of the 
     enactment of this Act.
       (2) Limitation on recoupment.--Section 1893(f)(2) of the 
     Social Security Act, as added by subsection (a), shall apply 
     to actions taken after the date of the enactment of this Act.
       (3) Use of extrapolation.--Section 1893(f)(3) of the Social 
     Security Act, as added by subsection (a), shall apply to 
     statistically valid random samples initiated after the date 
     that is 1 year after the date of the enactment of this Act.
       (4) Provision of supporting documentation.--Section 
     1893(f)(4) of the Social Security Act, as added by subsection 
     (a), shall take effect on the date of the enactment of this 
     Act.
       (5) Consent settlement.--Section 1893(f)(5) of the Social 
     Security Act, as added by subsection (a), shall apply to 
     consent settlements entered into after the date of the 
     enactment of this Act.
       (6) Notice of overutilization.--Not later than 1 year after 
     the date of the enactment of this Act, the Secretary shall 
     first establish the process for notice of overutilization of 
     billing codes under section 1893A(f)(6) of the Social 
     Security Act, as added by subsection (a).
       (7) Payment audits.--Section 1893A(f)(7) of the Social 
     Security Act, as added by subsection (a), shall apply to 
     audits initiated after the date of the enactment of this Act.
       (8) Standard for abnormal billing patterns.--Not later than 
     1 year after the date of the enactment of this Act, the 
     Secretary shall first establish a standard methodology for 
     selection of sample claims for abnormal billing patterns 
     under section 1893(f)(8) of the Social Security Act, as added 
     by subsection (a).

     SEC. 836. PROVIDER ENROLLMENT PROCESS; RIGHT OF APPEAL.

       (a) In General.--Section 1866 (42 U.S.C. 1395cc) is 
     amended--
       (1) by adding at the end of the heading the following: ``; 
     enrollment processes''; and
       (2) by adding at the end the following new subsection:
       ``(j) Enrollment Process for Providers of Services and 
     Suppliers.--
       ``(1) Enrollment process.--
       ``(A) In general.--The Secretary shall establish by 
     regulation a process for the enrollment of providers of 
     services and suppliers under this title.
       ``(B) Deadlines.--The Secretary shall establish by 
     regulation procedures under which there are deadlines for 
     actions on applications for enrollment (and, if applicable, 
     renewal of enrollment). The Secretary shall monitor the 
     performance of medicare administrative contractors in meeting 
     the deadlines established under this subparagraph.
       ``(C) Consultation before changing provider enrollment 
     forms.--The Secretary shall consult with providers of 
     services and suppliers before making changes in the provider 
     enrollment forms required of such providers and suppliers to 
     be eligible to submit claims for which payment may be made 
     under this title.
       ``(2) Hearing rights in cases of denial or non-renewal.--A 
     provider of services or supplier whose application to enroll 
     (or, if applicable, to renew enrollment) under this title is 
     denied may have a hearing and judicial review of such denial 
     under the procedures that apply under subsection (h)(1)(A) to 
     a provider of services that is dissatisfied with a 
     determination by the Secretary.''.
       (b) Effective Dates.--
       (1) Enrollment process.--The Secretary shall provide for 
     the establishment of the enrollment process under section 
     1866(j)(1) of the Social Security Act, as added by subsection 
     (a)(2), within 6 months after the date of the enactment of 
     this Act.
       (2) Consultation.--Section 1866(j)(1)(C) of the Social 
     Security Act, as added by subsection (a)(2), shall apply with 
     respect to changes in provider enrollment forms made on or 
     after January 1, 2003.
       (3) Hearing rights.--Section 1866(j)(2) of the Social 
     Security Act, as added by subsection (a)(2), shall apply to 
     denials occurring on or after such date (not later than 1 
     year after the date of the enactment of this Act) as the 
     Secretary specifies.

     SEC. 837. PROCESS FOR CORRECTION OF MINOR ERRORS AND 
                   OMISSIONS ON CLAIMS WITHOUT PURSUING APPEALS 
                   PROCESS.

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

     SEC. 838. PRIOR DETERMINATION PROCESS FOR CERTAIN ITEMS AND 
                   SERVICES; ADVANCE BENEFICIARY NOTICES.

       (a) In General.--Section 1869 (42 U.S.C. 1395ff(b)), as 
     amended by sections 521 and 522 of BIPA and section 
     833(d)(2)(B), is further amended by adding at the end the 
     following new subsection:
       ``(h) Prior Determination Process for Certain Items and 
     Services.--
       ``(1) Establishment of process.--
       ``(A) In general.--With respect to a medicare 
     administrative contractor that has a contract under section 
     1874A that provides for making payments under this title with 
     respect to eligible items and services described in 
     subparagraph (C), the Secretary shall establish a prior 
     determination process that meets the requirements of this 
     subsection and that shall be applied by such contractor in 
     the case of eligible requesters.
       ``(B) Eligible requester.--For purposes of this subsection, 
     each of the following shall be an eligible requester:
       ``(i) A physician, but only with respect to eligible items 
     and services for which the physician may be paid directly.
       ``(ii) An individual entitled to benefits under this title, 
     but only with respect to an item or service for which the 
     individual receives, from the physician who may be paid 
     directly for the item or service, an advance beneficiary 
     notice under section 1879(a) that payment may not be made (or 
     may no longer be made) for the item or service under this 
     title.
       ``(C) Eligible items and services.--For purposes of this 
     subsection and subject to paragraph (2), eligible items and 
     services are items and services which are physicians' 
     services (as defined in paragraph (4)(A) of section 1848(f) 
     for purposes of calculating the sustainable growth rate under 
     such section).
       ``(2) Secretarial flexibility.--The Secretary shall 
     establish by regulation reasonable limits on the categories 
     of eligible items and services for which a prior 
     determination of coverage may be requested under this 
     subsection. In establishing such limits, the Secretary may 
     consider the dollar amount involved with respect to the item 
     or service, administrative costs and burdens, and other 
     relevant factors.
       ``(3) Request for prior determination.--
       ``(A) In general.--Subject to paragraph (2), under the 
     process established under this subsection an eligible 
     requester may submit to the contractor a request for a 
     determination, before the furnishing of an eligible item or 
     service involved as to whether the item or service is covered 
     under this title consistent with the applicable requirements 
     of section 1862(a)(1)(A) (relating to medical necessity).
       ``(B) Accompanying documentation.--The Secretary may 
     require that the request be accompanied by a description of 
     the item or service, supporting documentation relating to the 
     medical necessity for the item or service, and any other 
     appropriate documentation. In the case of a request submitted 
     by an eligible requester who is described in paragraph 
     (1)(B)(ii), the Secretary may require that the request also 
     be accompanied by a copy of the advance beneficiary notice 
     involved.
       ``(4) Response to request.--
       ``(A) In general.--Under such process, the contractor shall 
     provide the eligible requester with written notice of a 
     determination as to whether--
       ``(i) the item or service is so covered;
       ``(ii) the item or service is not so covered; or
       ``(iii) the contractor lacks sufficient information to make 
     a coverage determination.
     If the contractor makes the determination described in clause 
     (iii), the contractor shall include in the notice a 
     description of the additional information required to make 
     the coverage determination.
       ``(B) Deadline to respond.--Such notice shall be provided 
     within the same time period as the time period applicable to 
     the contractor providing notice of initial determinations on 
     a claim for benefits under subsection (a)(2)(A).
       ``(C) Informing beneficiary in case of physician request.--
     In the case of a request in which an eligible requester is 
     not the individual described in paragraph (1)(B)(ii), the 
     process shall provide that the individual to whom the item or 
     service is proposed to be furnished shall be informed of any 
     determination described in clause (ii) (relating to a 
     determination of non-coverage) and the right (referred to in 
     paragraph (6)(B)) to obtain the item or service and have a 
     claim submitted for the item or service.
       ``(5) Effect of determinations.--
       ``(A) Binding nature of positive determination.--If the 
     contractor makes the determination described in paragraph 
     (4)(A)(i), such determination shall be binding on the 
     contractor in the absence of fraud or evidence of 
     misrepresentation of facts presented to the contractor.
       ``(B) Notice and right to redetermination in case of a 
     denial.--
       ``(i) In general.--If the contractor makes the 
     determination described in paragraph (4)(A)(ii)--

[[Page 11900]]

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

       ``(ii) Deadline for redeterminations.--The contractor shall 
     complete and provide notice of such redetermination within 
     the same time period as the time period applicable to the 
     contractor providing notice of redeterminations relating to a 
     claim for benefits under subsection (a)(3)(C)(ii).
       ``(6) Limitation on further review.--
       ``(A) In general.--Contractor determinations described in 
     paragraph (4)(A)(ii) or (4)(A)(iii) (and redeterminations 
     made under paragraph (5)(B)), relating to pre-service claims 
     are not subject to further administrative appeal or judicial 
     review under this section or otherwise.
       ``(B) Decision not to seek prior determination or negative 
     determination does not impact right to obtain services, seek 
     reimbursement, or appeal rights.--Nothing in this subsection 
     shall be construed as affecting the right of an individual 
     who--
       ``(i) decides not to seek a prior determination under this 
     subsection with respect to items or services; or
       ``(ii) seeks such a determination and has received a 
     determination described in paragraph (4)(A)(ii)),
     from receiving (and submitting a claim for) such items 
     services and from obtaining administrative or judicial review 
     respecting such claim under the other applicable provisions 
     of this section. Failure to seek a prior determination under 
     this subsection with respect to items and services shall not 
     be taken into account in such administrative or judicial 
     review.
       ``(C) No prior determination after receipt of services.--
     Once an individual is provided items and services, there 
     shall be no prior determination under this subsection with 
     respect to such items or services.''.
       (b) Effective Date; Transition.--
       (1) Effective date.--The Secretary shall establish the 
     prior determination process under the amendment made by 
     subsection (a) in such a manner as to provide for the 
     acceptance of requests for determinations under such process 
     filed not later than 18 months after the date of the 
     enactment of this Act.
       (2) Transition.--During the period in which the amendment 
     made by subsection (a) has become effective but contracts are 
     not provided under section 1874A of the Social Security Act 
     with medicare administrative contractors, any reference in 
     section 1869(g) of such Act (as added by such amendment) to 
     such a contractor is deemed a reference to a fiscal 
     intermediary or carrier with an agreement under section 1816, 
     or contract under section 1842, respectively, of such Act.
       (3) Limitation on application to sgr.--For purposes of 
     applying section 1848(f)(2)(D) of the Social Security Act (42 
     U.S.C. 1395w-4(f)(2)(D)), the amendment made by subsection 
     (a) shall not be considered to be a change in law or 
     regulation.
       (c) Provisions Relating to Advance Beneficiary Notices; 
     Report on Prior Determination Process.--
       (1) Data collection.--The Secretary shall establish a 
     process for the collection of information on the instances in 
     which an advance beneficiary notice (as defined in paragraph 
     (4)) has been provided and on instances in which a 
     beneficiary indicates on such a notice that the beneficiary 
     does not intend to seek to have the item or service that is 
     the subject of the notice furnished.
       (2) Outreach and education.--The Secretary shall establish 
     a program of outreach and education for beneficiaries and 
     providers of services and other persons on the appropriate 
     use of advance beneficiary notices and coverage policies 
     under the medicare program.
       (3) GAO report on use of advance beneficiary notices.--Not 
     later than 18 months after the date on which section 1869(g) 
     of the Social Security Act (as added by subsection (a)) takes 
     effect, the Comptroller General of the United States shall 
     submit to Congress a report on the use of advance beneficiary 
     notices under title XVIII of such Act. Such report shall 
     include information concerning the providers of services and 
     other persons that have provided such notices and the 
     response of beneficiaries to such notices.
       (4) GAO report on use of prior determination process.--Not 
     later than 18 months after the date on which section 1869(g) 
     of the Social Security Act (as added by subsection (a)) takes 
     effect, the Comptroller General of the United States shall 
     submit to Congress a report on the use of the prior 
     determination process under such section. Such report shall 
     include--
       (A) information concerning the types of procedures for 
     which a prior determination has been sought, determinations 
     made under the process, and changes in receipt of services 
     resulting from the application of such process; and
       (B) an evaluation of whether the process was useful for 
     physicians (and other suppliers) and beneficiaries, whether 
     it was timely, and whether the amount of information required 
     was burdensome to physicians and beneficiaries.
       (5) Advance beneficiary notice defined.--In this 
     subsection, the term ``advance beneficiary notice'' means a 
     written notice provided under section 1879(a) of the Social 
     Security Act (42 U.S.C. 1395pp(a)) to an individual entitled 
     to benefits under part A or B of title XVIII of such Act 
     before items or services are furnished under such part in 
     cases where a provider of services or other person that would 
     furnish the item or service believes that payment will not be 
     made for some or all of such items or services under such 
     title.

                  Subtitle E--Miscellaneous Provisions

     SEC. 841. POLICY DEVELOPMENT REGARDING EVALUATION AND 
                   MANAGEMENT (E & M) DOCUMENTATION GUIDELINES.

       (a) In General.--The Secretary may not implement any new 
     documentation guidelines for evaluation and management 
     physician services under the title XVIII of the Social 
     Security Act on or after the date of the enactment of this 
     Act unless the Secretary--
       (1) has developed the guidelines in collaboration with 
     practicing physicians (including both generalists and 
     specialists) and provided for an assessment of the proposed 
     guidelines by the physician community;
       (2) has established a plan that contains specific goals, 
     including a schedule, for improving the use of such 
     guidelines;
       (3) has conducted appropriate and representative pilot 
     projects under subsection (b) to test modifications to the 
     evaluation and management documentation guidelines;
       (4) finds that the objectives described in subsection (c) 
     will be met in the implementation of such guidelines; and
       (5) has established, and is implementing, a program to 
     educate physicians on the use of such guidelines and that 
     includes appropriate outreach.
     The Secretary shall make changes to the manner in which 
     existing evaluation and management documentation guidelines 
     are implemented to reduce paperwork burdens on physicians.
       (b) Pilot Projects to Test Evaluation and Management 
     Documentation Guidelines.--
       (1) In general.--The Secretary shall conduct under this 
     subsection appropriate and representative pilot projects to 
     test new evaluation and management documentation guidelines 
     referred to in subsection (a).
       (2) Length and consultation.--Each pilot project under this 
     subsection shall--
       (A) be voluntary;
       (B) be of sufficient length as determined by the Secretary 
     to allow for preparatory physician and medicare contractor 
     education, analysis, and use and assessment of potential 
     evaluation and management guidelines; and
       (C) be conducted, in development and throughout the 
     planning and operational stages of the project, in 
     consultation with practicing physicians (including both 
     generalists and specialists).
       (3) Range of pilot projects.--Of the pilot projects 
     conducted under this subsection--
       (A) at least one shall focus on a peer review method by 
     physicians (not employed by a medicare contractor) which 
     evaluates medical record information for claims submitted by 
     physicians identified as statistical outliers relative to 
     definitions published in the Current Procedures Terminology 
     (CPT) code book of the American Medical Association;
       (B) at least one shall focus on an alternative method to 
     detailed guidelines based on physician documentation of face 
     to face encounter time with a patient;
       (C) at least one shall be conducted for services furnished 
     in a rural area and at least one for services furnished 
     outside such an area; and
       (D) at least one shall be conducted in a setting where 
     physicians bill under physicians' services in teaching 
     settings and at least one shall be conducted in a setting 
     other than a teaching setting.
       (4) Banning of targeting of pilot project participants.--
     Data collected under this subsection shall not be used as the 
     basis for overpayment demands or post-payment audits. Such 
     limitation applies only to claims filed as part of the pilot 
     project and lasts only for the duration of the pilot project 
     and only as long as the provider is a participant in the 
     pilot project.
       (5) Study of impact.--Each pilot project shall examine the 
     effect of the new evaluation and management documentation 
     guidelines on--
       (A) different types of physician practices, including those 
     with fewer than 10 full-time-equivalent employees (including 
     physicians); and
       (B) the costs of physician compliance, including education, 
     implementation, auditing, and monitoring.
       (6) Periodic reports.--The Secretary shall submit to 
     Congress periodic reports on the pilot projects under this 
     subsection.
       (c) Objectives for Evaluation and Management Guidelines.--
     The objectives for modified evaluation and management 
     documentation guidelines developed by the Secretary shall be 
     to--
       (1) identify clinically relevant documentation needed to 
     code accurately and assess coding levels accurately;

[[Page 11901]]

       (2) decrease the level of non-clinically pertinent and 
     burdensome documentation time and content in the physician's 
     medical record;
       (3) increase accuracy by reviewers; and
       (4) educate both physicians and reviewers.
       (d) Study of Simpler, Alternative Systems of Documentation 
     for Physician Claims.--
       (1) Study.--The Secretary shall carry out a study of the 
     matters described in paragraph (2).
       (2) Matters described.--The matters referred to in 
     paragraph (1) are--
       (A) the development of a simpler, alternative system of 
     requirements for documentation accompanying claims for 
     evaluation and management physician services for which 
     payment is made under title XVIII of the Social Security Act; 
     and
       (B) consideration of systems other than current coding and 
     documentation requirements for payment for such physician 
     services.
       (3) Consultation with practicing physicians.--In designing 
     and carrying out the study under paragraph (1), the Secretary 
     shall consult with practicing physicians, including 
     physicians who are part of group practices and including both 
     generalists and specialists.
       (4) Application of hipaa uniform coding requirements.--In 
     developing an alternative system under paragraph (2), the 
     Secretary shall consider requirements of administrative 
     simplification under part C of title XI of the Social 
     Security Act.
       (5) Report to congress.--(A) Not later than October 1, 
     2004, the Secretary shall submit to Congress a report on the 
     results of the study conducted under paragraph (1).
       (B) The Medicare Payment Advisory Commission shall conduct 
     an analysis of the results of the study included in the 
     report under subparagraph (A) and shall submit a report on 
     such analysis to Congress.
       (e) Study on Appropriate Coding of Certain Extended Office 
     Visits.--The Secretary shall conduct a study of the 
     appropriateness of coding in cases of extended office visits 
     in which there is no diagnosis made. Not later than October 
     1, 2004, the Secretary shall submit a report to Congress on 
     such study and shall include recommendations on how to code 
     appropriately for such visits in a manner that takes into 
     account the amount of time the physician spent with the 
     patient.
       (f) Definitions.--In this section--
       (1) the term ``rural area'' has the meaning given that term 
     in section 1886(d)(2)(D) 
     of the Social Security Act, 42 U.S.C. 1395ww(d)(2)(D); and
       (2) the term ``teaching settings'' are those settings 
     described in section 415.150 of title 42, Code of Federal 
     Regulations.

     SEC. 842. IMPROVEMENT IN OVERSIGHT OF TECHNOLOGY AND 
                   COVERAGE.

       (a) Improved Coordination Between FDA and CMS on Coverage 
     of Breakthrough Medical Devices.--
       (1) In general.--Upon request by an applicant and to the 
     extent feasible (as determined by the Secretary), the 
     Secretary shall, in the case of a class III medical device 
     that is subject to premarket approval under section 515 of 
     the Federal Food, Drug, and Cosmetic Act, ensure the sharing 
     of appropriate information from the review for application 
     for premarket approval conducted by the Food and Drug 
     Administration for coverage decisions under title XVIII of 
     the Social Security Act.
       (2) Publication of plan.--Not later than 6 months after the 
     date of the enactment of this Act, the Secretary shall submit 
     to appropriate Committees of Congress a report that contains 
     the plan for improving such coordination and for shortening 
     the time lag between the premarket approval by the Food and 
     Drug Administration and coding and coverage decisions by the 
     Centers for Medicare & Medicaid Services.
       (3) Construction.--Nothing in this subsection shall be 
     construed as changing the criteria for coverage of a medical 
     device under title XVIII of the Social Security Act nor 
     premarket approval by the Food and Drug Administration and 
     nothing in this subsection shall be construed to increase 
     premarket approval application requirements under the Federal 
     Food, Drug, and Cosmetic Act.
       (b) Council for Technology and Innovation.--Section 1868 
     (42 U.S.C. 1395ee), as amended by section 821(a), is amended 
     by adding at the end the following new subsection:
       ``(c) Council for Technology and Innovation.--
       ``(1) Establishment.--The Secretary shall establish a 
     Council for Technology and Innovation within the Centers for 
     Medicare & Medicaid Services (in this section referred to as 
     `CMS').
       ``(2) Composition.--The Council shall be composed of senior 
     CMS staff and clinicians and shall be chaired by the 
     Executive Coordinator for Technology and Innovation 
     (appointed or designated under paragraph (4)).
       ``(3) Duties.--The Council shall coordinate the activities 
     of coverage, coding, and payment processes under this title 
     with respect to new technologies and procedures, including 
     new drug therapies, and shall coordinate the exchange of 
     information on new technologies between CMS and other 
     entities that make similar decisions.
       ``(4) Executive coordinator for technology and 
     innovation.--The Secretary shall appoint (or designate) a 
     noncareer appointee (as defined in section 3132(a)(7) of 
     title 5, United States Code) who shall serve as the Executive 
     Coordinator for Technology and Innovation. Such executive 
     coordinator shall report to the Administrator of CMS, shall 
     chair the Council, shall oversee the execution of its duties, 
     and shall serve as a single point of contact for outside 
     groups and entities regarding the coverage, coding, and 
     payment processes under this title.''.
       (c) GAO Study on Improvements in External Data Collection 
     for Use in the Medicare Inpatient Payment System.--
       (1) Study.--The Comptroller General of the United States 
     shall conduct a study that analyzes which external data can 
     be collected in a shorter time frame by the Centers for 
     Medicare & Medicaid Services for use in computing payments 
     for inpatient hospital services. The study may include an 
     evaluation of the feasibility and appropriateness of using of 
     quarterly samples or special surveys or any other methods. 
     The study shall include an analysis of whether other 
     executive agencies, such as the Bureau of Labor Statistics in 
     the Department of Commerce, are best suited to collect this 
     information.
       (2) Report.--By not later than October 1, 2003, the 
     Comptroller General shall submit a report to Congress on the 
     study under paragraph (1).
       (d) IOM Study on Local Coverage Determinations.--
       (1) Study.--The Secretary shall enter into an arrangement 
     with the Institute of Medicine of the National Academy of 
     Sciences under which the Institute shall conduct a study on 
     local coverage determinations (including the application of 
     local medical review policies) under the medicare program 
     under title XVIII of the Social Security Act. Such study 
     shall examine--
       (A) the consistency of the definitions used in such 
     determinations;
       (B) the types of evidence on which such determinations are 
     based, including medical and scientific evidence;
       (C) the advantages and disadvantages of local coverage 
     decisionmaking, including the flexibility it offers for 
     ensuring timely patient access to new medical technology for 
     which data are still be collected;
       (D) the manner in which the local coverage determination 
     process is used to develop data needed for a national 
     coverage determination, including the need for collection of 
     such data within a protocol and informed consent by 
     individuals entitled to benefits under part A of title XVIII 
     of the Social Security Act, or enrolled under part B of such 
     title, or both; and
       (E) the advantages and disadvantages of maintaining local 
     medicare contractor advisory committees that can advise on 
     local coverage decisions based on an open, collaborative 
     public process.
       (2) Report.--Such arrangement shall provide that the 
     Institute shall submit to the Secretary a report on such 
     study by not later than 3 years after the date of the 
     enactment of this Act. The Secretary shall promptly transmit 
     a copy of such report to Congress.
       (e) Methods for Determining Payment Basis For New Lab 
     Tests.--Section 1833(h) (42 U.S.C. 1395l(h)) is amended by 
     adding at the end the following:
       ``(8)(A) The Secretary shall establish by regulation 
     procedures for determining the basis for, and amount of, 
     payment under this subsection for any clinical diagnostic 
     laboratory test with respect to which a new or substantially 
     revised HCPCS code is assigned on or after January 1, 2004 
     (in this paragraph referred to as `new tests').
       ``(B) Determinations under subparagraph (A) shall be made 
     only after the Secretary--
       ``(i) makes available to the public (through an Internet 
     site and other appropriate mechanisms) a list that includes 
     any such test for which establishment of a payment amount 
     under this subsection is being considered for a year;
       ``(ii) on the same day such list is made available, causes 
     to have published in the Federal Register notice of a meeting 
     to receive comments and recommendations (and data on which 
     recommendations are based) from the public on the appropriate 
     basis under this subsection for establishing payment amounts 
     for the tests on such list;
       ``(iii) not less than 30 days after publication of such 
     notice convenes a meeting, that includes representatives of 
     officials of the Centers for Medicare & Medicaid Services 
     involved in determining payment amounts, to receive such 
     comments and recommendations (and data on which the 
     recommendations are based);
       ``(iv) taking into account the comments and recommendations 
     (and accompanying data) received at such meeting, develops 
     and makes available to the public (through an Internet site 
     and other appropriate mechanisms) a list of proposed 
     determinations with respect to the appropriate basis for 
     establishing a payment amount under this subsection for each 
     such code, together with an explanation of the reasons for 
     each such determination, the data on which the determinations 
     are based, and a request for public written comments on the 
     proposed determination; and

[[Page 11902]]

       ``(v) taking into account the comments received during the 
     public comment period, develops and makes available to the 
     public (through an Internet site and other appropriate 
     mechanisms) a list of final determinations of the payment 
     amounts for such tests under this subsection, together with 
     the rationale for each such determination, the data on which 
     the determinations are based, and responses to comments and 
     suggestions received from the public.
       ``(C) Under the procedures established pursuant to 
     subparagraph (A), the Secretary shall--
       ``(i) set forth the criteria for making determinations 
     under subparagraph (A); and
       ``(ii) make available to the public the data (other than 
     proprietary data) considered in making such determinations.
       ``(D) The Secretary may convene such further public 
     meetings to receive public comments on payment amounts for 
     new tests under this subsection as the Secretary deems 
     appropriate.
       ``(E) For purposes of this paragraph:
       ``(i) The term `HCPCS' refers to the Health Care Procedure 
     Coding System.
       ``(ii) A code shall be considered to be `substantially 
     revised' if there is a substantive change to the definition 
     of the test or procedure to which the code applies (such as a 
     new analyte or a new methodology for measuring an existing 
     analyte-specific test).''.

     SEC. 843. TREATMENT OF HOSPITALS FOR CERTAIN SERVICES UNDER 
                   MEDICARE SECONDARY PAYOR (MSP) PROVISIONS.

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

     SEC. 844. EMTALA IMPROVEMENTS.

       (a) Payment for EMTALA-Mandated Screening and Stabilization 
     Services.--
       (1) In general.--Section 1862 (42 U.S.C. 1395y) is amended 
     by inserting after subsection (c) the following new 
     subsection:
       ``(d) For purposes of subsection (a)(1)(A), in the case of 
     any item or service that is required to be provided pursuant 
     to section 1867 to an individual who is entitled to benefits 
     under this title, determinations as to whether the item or 
     service is reasonable and necessary shall be made on the 
     basis of the information available to the treating physician 
     or practitioner (including the patient's presenting symptoms 
     or complaint) at the time the item or service was ordered or 
     furnished by the physician or practitioner (and not on the 
     patient's principal diagnosis). When making such 
     determinations with respect to such an item or service, the 
     Secretary shall not consider the frequency with which the 
     item or service was provided to the patient before or after 
     the time of the admission or visit.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to items and services furnished on or after 
     January 1, 2003.
       (b) Notification of Providers When EMTALA Investigation 
     Closed.--Section 1867(d) (42 U.S.C. 42 U.S.C. 1395dd(d)) is 
     amended by adding at the end the following new paragraph:
       ``(4) Notice upon closing an investigation.--The Secretary 
     shall establish a procedure to notify hospitals and 
     physicians when an investigation under this section is 
     closed.''.
       (c) Prior Review by Peer Review Organizations in EMTALA 
     Cases Involving Termination of Participation.--
       (1) In general.--Section 1867(d)(3) (42 U.S.C. 
     1395dd(d)(3)) is amended--
       (A) in the first sentence, by inserting ``or in terminating 
     a hospital's participation under this title'' after ``in 
     imposing sanctions under paragraph (1)''; and
       (B) by adding at the end the following new sentences: 
     ``Except in the case in which a delay would jeopardize the 
     health or safety of individuals, the Secretary shall also 
     request such a review before making a compliance 
     determination as part of the process of terminating a 
     hospital's participation under this title for violations 
     related to the appropriateness of a medical screening 
     examination, stabilizing treatment, or an appropriate 
     transfer as required by this section, and shall provide a 
     period of 5 days for such review. The Secretary shall provide 
     a copy of the report on the organization's report to the 
     hospital or physician consistent with confidentiality 
     requirements imposed on the organization under such part 
     B.''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply to terminations of participation initiated on or 
     after the date of the enactment of this Act.

     SEC. 845. EMERGENCY MEDICAL TREATMENT AND ACTIVE LABOR ACT 
                   (EMTALA) TECHNICAL ADVISORY GROUP.

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

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

     SEC. 846. AUTHORIZING USE OF ARRANGEMENTS WITH OTHER HOSPICE 
                   PROGRAMS 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 
     new subparagraph:
       ``(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.''.
       (b) Conforming Payment Provision.--Section 1814(i) (42 
     U.S.C. 1395f(i)) is amended by adding at the end the 
     following new paragraph:
       ``(4) In the case of hospice care provided by a hospice 
     program under arrangements under section 1861(dd)(5)(D) made 
     by another hospice program, the hospice program that made the 
     arrangements shall bill and be paid for the hospice care.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to hospice care provided on or after the date of 
     the enactment of this Act.

     SEC. 847. APPLICATION OF OSHA BLOODBORNE PATHOGENS STANDARD 
                   TO CERTAIN HOSPITALS.

       (a) In General.--Section 1866 (42 U.S.C. 1395cc) is 
     amended--
       (1) in subsection (a)(1)--
       (A) in subparagraph (R), by striking ``and'' at the end;
       (B) in subparagraph (S), by striking the period at the end 
     and inserting ``, and''; and
       (C) by inserting after subparagraph (S) the following new 
     subparagraph:
       ``(T) in the case of hospitals that are not otherwise 
     subject to the Occupational Safety

[[Page 11903]]

     and Health Act of 1970, to comply with the Bloodborne 
     Pathogens standard under section 1910.1030 of title 29 of the 
     Code of Federal Regulations (or as subsequently 
     redesignated).''; and
       (B) by adding at the end of subsection (b) the following 
     new paragraph:
       ``(4)(A) A hospital that fails to comply with the 
     requirement of subsection (a)(1)(T) (relating to the 
     Bloodborne Pathogens standard) is subject to a civil money 
     penalty in an amount described in subparagraph (B), but is 
     not subject to termination of an agreement under this 
     section.
       ``(B) The amount referred to in subparagraph (A) is an 
     amount that is similar to the amount of civil penalties that 
     may be imposed under section 17 of the Occupational Safety 
     and Health Act of 1970 for a violation of the Bloodborne 
     Pathogens standard referred to in subsection (a)(1)(T) by a 
     hospital that is subject to the provisions of such Act.
       ``(C) A civil money penalty under this paragraph shall be 
     imposed and collected in the same manner as civil money 
     penalties under subsection (a) of section 1128A are imposed 
     and collected under that section.''.
       (b) Effective Date.--The amendments made by this subsection 
     (a) shall apply to hospitals as of July 1, 2003.

     SEC. 848. BIPA-RELATED TECHNICAL AMENDMENTS AND CORRECTIONS.

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

     SEC. 849. CONFORMING AUTHORITY TO WAIVE A PROGRAM EXCLUSION.

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

     SEC. 850. TREATMENT OF CERTAIN DENTAL CLAIMS.

       (a) In General.--Section 1862 (42 U.S.C. 1395y) is amended 
     by inserting after subsection (c) the following new 
     subsection:
       ``(d)(1) Subject to paragraph (2), a group health plan (as 
     defined in subsection (a)(1)(A)(v)) providing supplemental or 
     secondary coverage to individuals also entitled to services 
     under this title shall not require a medicare claims 
     determination under this title for dental benefits 
     specifically excluded under subsection (a)(12) as a condition 
     of making a claims determination for such benefits under the 
     group health plan.
       ``(2) A group health plan may require a claims 
     determination under this title in cases involving or 
     appearing to involve inpatient dental hospital services or 
     dental services expressly covered under this title pursuant 
     to actions taken by the Secretary.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect on the date that is 60 days after the date 
     of the enactment of this Act.

     SEC. 851. ANNUAL PUBLICATION OF LIST OF NATIONAL COVERAGE 
                   DETERMINATIONS.

       The Secretary shall provide, in an appropriate annual 
     publication available to the public, a list of national 
     coverage determinations made under title XVIII of the Social 
     Security Act in the previous year and information on how to 
     get more information with respect to such determinations.

     TITLE IX--MEDICAID, PUBLIC HEALTH, AND OTHER HEALTH PROVISIONS

                    Subtitle A--Medicaid Provisions

     SEC. 901. NATIONAL BIPARTISAN COMMISSION ON THE FUTURE OF 
                   MEDICAID.

       (a) Establishment.--There is established a commission to be 
     known as the National Bipartisan Commission on the Future of 
     Medicaid (in this section referred to as the ``Commission'').
       (b) Duties of the Commission.--The Commission shall--
       (1) review and analyze the long-term financial condition of 
     the medicaid program under title XIX of the Social Security 
     Act (42 U.S.C. 1396 et seq.);
       (2) identify the factors that are causing, and the 
     consequences of, increases in costs under the medicaid 
     program, including--
       (A) the impact of these cost increases upon State budgets, 
     funding for other State programs, and levels of State taxes 
     necessary to fund growing expenditures under the medicaid 
     program;
       (B) the financial obligations of the Federal government 
     arising from the Federal matching requirement for 
     expenditures under the medicaid program; and
       (C) the size and scope of the current program and how the 
     program has evolved over time;
       (3) analyze potential policies that will ensure both the 
     financial integrity of the medicaid program and the provision 
     of appropriate benefits under such program;
       (4) make recommendations for establishing incentives and 
     structures to promote enhanced efficiencies and ways of 
     encouraging innovative State policies under the medicaid 
     program;
       (5) make recommendations for establishing the appropriate 
     balance between benefits covered, payments to providers, 
     State and Federal contributions and, where appropriate, 
     recipient cost-sharing obligations;
       (6) make recommendations on the impact of promoting 
     increased utilization of competitive, private enterprise 
     models to contain program cost growth, through enhanced 
     utilization of private plans, pharmacy benefit managers, and 
     other methods currently being used to contain private sector 
     health-care costs;
       (7) make recommendations on the financing of prescription 
     drug benefits currently covered under medicaid programs, 
     including analysis of the current Federal manufacturer rebate 
     program, its impact upon both private market prices as well 
     as those paid by other government purchasers, recent State 
     efforts to negotiate additional supplemental manufacturer 
     rebates and the ability of pharmacy benefit managers to lower 
     drug costs;
       (8) review and analyze such other matters relating to the 
     medicaid program as the Commission deems appropriate; and
       (9) analyze the impact of impending demographic changes 
     upon medicaid benefits, including long term care services, 
     and make recommendations for how best to appropriately divide 
     State and Federal responsibilities for funding these 
     benefits.
       (c) Membership.--
       (1) Number and appointment.--The Commission shall be 
     composed of 17 members, of whom--
       (A) four shall be appointed by the President;
       (B) six shall be appointed by the Majority Leader of the 
     Senate, in consultation with the Minority Leader of the 
     Senate, of whom not more than 4 shall be of the same 
     political party;
       (C) six shall be appointed by the Speaker of the House of 
     Representatives, in consultation with the Minority Leader of 
     the House of Representatives, of whom not more than 4 shall 
     be of the same political party; and
       (D) one, who shall serve as Chairman of the Commission, 
     appointed jointly by the President, Majority Leader of the 
     Senate, and the Speaker of the House of Representatives.
       (2) Deadline for appointment.--Members of the Commission 
     shall be appointed by not later than December 1, 2002.
       (3) Terms of appointment.--The term of any appointment 
     under paragraph (1) to the Commission shall be for the life 
     of the Commission.
       (4) Meetings.--The Commission shall meet at the call of its 
     Chairman or a majority of its members.
       (5) Quorum.--A quorum shall consist of 8 members of the 
     Commission, except that 4 members may conduct a hearing under 
     subsection (e).
       (6) Vacancies.--A vacancy on the Commission shall be filled 
     in the same manner in which the original appointment was made 
     not later than 30 days after the Commission

[[Page 11904]]

     is given notice of the vacancy and shall not affect the power 
     of the remaining members to execute the duties of the 
     Commission.
       (7) Compensation.--Members of the Commission shall receive 
     no additional pay, allowances, or benefits by reason of their 
     service on the Commission.
       (8) Expenses.--Each member of the Commission shall receive 
     travel expenses and per diem in lieu of subsistence in 
     accordance with sections 5702 and 5703 of title 5, United 
     States Code.
       (d) Staff and Support Services.--
       (1) Executive director.--
       (A) Appointment.--The Chairman shall appoint an executive 
     director of the Commission.
       (B) Compensation.--The executive director shall be paid the 
     rate of basic pay for level V of the Executive Schedule.
       (2) Staff.--With the approval of the Commission, the 
     executive director may appoint such personnel as the 
     executive director considers appropriate.
       (3) Applicability of civil service laws.--The staff of the 
     Commission shall be appointed without regard to the 
     provisions of title 5, United States Code, governing 
     appointments in the competitive service, and shall be paid 
     without regard to the provisions of chapter 51 and subchapter 
     III of chapter 53 of such title (relating to classification 
     and General Schedule pay rates).
       (4) Experts and consultants.--With the approval of the 
     Commission, the executive director may procure temporary and 
     intermittent services under section 3109(b) of title 5, 
     United States Code.
       (5) Physical facilities.--The Administrator of the General 
     Services Administration shall locate suitable office space 
     for the operation of the Commission. The facilities shall 
     serve as the headquarters of the Commission and shall include 
     all necessary equipment and incidentals required for the 
     proper functioning of the Commission.
       (e) Powers of Commission.--
       (1) Hearings and other activities.--For the purpose of 
     carrying out its duties, the Commission may hold such 
     hearings and undertake such other activities as the 
     Commission determines to be necessary to carry out its 
     duties.
       (2) Studies by gao.--Upon the request of the Commission, 
     the Comptroller General shall conduct such studies or 
     investigations as the Commission determines to be necessary 
     to carry out its duties.
       (3) Cost estimates by congressional budget office and 
     office of the chief actuary of hcfa.--
       (A) The Director of the Congressional Budget Office or the 
     Chief Actuary of the Centers for Medicare & Medicaid 
     Services, or both, shall provide to the Commission, upon the 
     request of the Commission, such cost estimates as the 
     Commission determines to be necessary to carry out its 
     duties.
       (B) The Commission shall reimburse the Director of the 
     Congressional Budget Office for expenses relating to the 
     employment in the office of the Director of such additional 
     staff as may be necessary for the Director to comply with 
     requests by the Commission under subparagraph (A).
       (4) Detail of federal employees.--Upon the request of the 
     Commission, the head of any Federal agency is authorized to 
     detail, without reimbursement, any of the personnel of such 
     agency to the Commission to assist the Commission in carrying 
     out its duties. Any such detail shall not interrupt or 
     otherwise affect the civil service status or privileges of 
     the Federal employee.
       (5) Technical assistance.--Upon the request of the 
     Commission, the head of a Federal agency shall provide such 
     technical assistance to the Commission as the Commission 
     determines to be necessary to carry out its duties.
       (6) Use of mails.--The Commission may use the United States 
     mails in the same manner and under the same conditions as 
     Federal agencies and shall, for purposes of the frank, be 
     considered a commission of Congress as described in section 
     3215 of title 39, United States Code.
       (7) Obtaining information.--The Commission may secure 
     directly from any Federal agency information necessary to 
     enable it to carry out its duties, if the information may be 
     disclosed under section 552 of title 5, United States Code. 
     Upon request of the Chairman of the Commission, the head of 
     such agency shall furnish such information to the Commission.
       (8) Administrative support services.--Upon the request of 
     the Commission, the Administrator of General Services shall 
     provide to the Commission on a reimbursable basis such 
     administrative support services as the Commission may 
     request.
       (9) Printing.--For purposes of costs relating to printing 
     and binding, including the cost of personnel detailed from 
     the Government Printing Office, the Commission shall be 
     deemed to be a committee of the Congress.
       (f) Report.--Not later than March 1, 2004, the Commission 
     shall submit a report to the President and Congress which 
     shall contain a detailed statement of only those 
     recommendations, findings, and conclusions of the Commission.
       (g) Termination.--The Commission shall terminate 30 days 
     after the date of submission of the report required in 
     subsection (f).
       (h) Authorization of Appropriations.--There are authorized 
     to be appropriated $1,500,000 to carry out this section.

     SEC. 902. GAO STUDY ON MEDICAID DRUG PAYMENT SYSTEM.

       (a) Study.--The Comptroller General of the United States 
     shall conduct a study on the reimbursement under the medicaid 
     program for covered outpatient drugs. Such study shall 
     examine--
       (1) the extent to which such reimbursements for a drug 
     exceed the acquisition costs for that drug;
       (2) the services and resources associated with dispensing a 
     prescription and any additional payments available to 
     compensate for expenses for these services and resources; and
       (3) efforts undertaken by States to change the levels of 
     such reimbursement and the price data they use in effecting 
     such change.
       (b) Report.--Not later than 1 year after the date of the 
     enactment of this Act, the Comptroller General shall submit 
     to Congress a report on the study conducted under subsection 
     (a) and shall include in such report such recommendations for 
     changes for legislative or administrative action regarding 
     medicaid reimbursement methodologies for outpatient 
     prescription drugs, and their application to the medicare 
     program, as the Comptroller General deems appropriate.

                    Subtitle B--Internet Pharmacies

     SEC. 911. FINDINGS.

       The Congress finds as follows:
       (1) Legitimate Internet sellers of prescription drugs can 
     offer substantial benefits to consumers. These potential 
     benefits include convenience, privacy, valuable information, 
     competitive prices, and personalized services.
       (2) Unlawful Internet sellers of prescription drugs may 
     dispense inappropriate, contaminated, counterfeit, or 
     subpotent prescription drugs that could put at risk the 
     health and safety of consumers.
       (3) Unlawful Internet sellers have exposed consumers to 
     significant health risks by knowingly filling invalid 
     prescriptions, such as prescriptions based solely on an 
     online questionnaire, or by dispensing prescription drugs 
     without any prescription.
       (4) Consumers may have difficulty distinguishing legitimate 
     from unlawful Internet sellers, as well as foreign from 
     domestic Internet sellers, of prescription drugs.

     SEC. 912. AMENDMENT TO FEDERAL FOOD, DRUG, AND COSMETIC ACT.

       (a) In General.--Chapter V of the Federal Food, Drug, and 
     Cosmetic Act (21 U.S.C. 351 et seq.) is amended by inserting 
     after section 503A the following:

     ``SEC. 503B. INTERNET PRESCRIPTION DRUG SALES.

       ``(a) Definitions.--For purposes of this section:
       ``(1) Consumer.--The term `consumer' means a person (other 
     than an entity licensed or otherwise authorized under Federal 
     or State law as a pharmacy or to dispense or distribute 
     prescription drugs) that purchases or seeks to purchase 
     prescription drugs through the Internet.
       ``(2) Home page.--The term `home page' means the entry 
     point or main web page for an Internet site.
       ``(3) Internet.--The term `Internet' means collectively the 
     myriad of computer and telecommunications facilities, 
     including equipment and operating software, which comprise 
     the interconnected worldwide network of networks that employ 
     the Transmission Control Protocol/Internet Protocol, or any 
     predecessor or successor protocols to such protocol, to 
     communicate information of all kinds by wire or radio, 
     including electronic mail.
       ``(4) Interstate internet seller.--
       ``(A) In general.--The term `interstate Internet seller' 
     means a person whether in the United States or abroad, that 
     engages in, offers to engage in, or causes the delivery or 
     sale of a prescription drug through the Internet and has such 
     drug delivered directly to the consumer via the Postal 
     Service, or any private or commercial interstate carrier to a 
     consumer in the United States who is residing in a State 
     other than the State in which the seller's place of business 
     is located. This definition excludes a person who only 
     delivers a prescription drug to a consumer, such as an 
     interstate carrier service.
       ``(B) Exemption.--With respect to the consumer involved, 
     the term `interstate Internet seller' does not include a 
     person described in subparagraph (A) whose place of business 
     is located within 75 miles of the consumer.
       ``(5) Link.--The term `link' means either a textual or 
     graphical marker on a web page that, when clicked on, takes 
     the consumer to another part of the Internet, such as to 
     another web page or a different area on the same web page, or 
     from an electronic message to a web page.
       ``(6) Pharmacy.--The term `pharmacy' means any place 
     licensed or otherwise authorized as a pharmacy under State 
     law.
       ``(7) Prescriber.--The term `prescriber' means an 
     individual, licensed or otherwise authorized under applicable 
     Federal and State law to issue prescriptions for prescription 
     drugs.
       ``(8) Prescription drug.--The term `prescription drug' 
     means a drug under section 503(b)(1).

[[Page 11905]]

       ``(9) Valid prescription.--The term `valid prescription' 
     means a prescription that meets the requirements of section 
     503(b)(1) and other applicable Federal and State law.
       ``(10) Web site; site.--The terms `web site' and `site' 
     mean a specific location on the Internet that is determined 
     by Internet protocol numbers or by a domain name.
       ``(b) Requirements for Interstate Internet Sellers.--
       ``(1) In general.--Each interstate Internet seller shall 
     comply with the requirements of this subsection with respect 
     to the sale of, or the offer to sell, prescription drugs 
     through the Internet and shall at all times display on its 
     web site information in accordance with paragraph (2).
       ``(2) Web site disclosure information.--An interstate 
     Internet seller shall post in a visible and clear manner (as 
     determined by regulation) on the home page of its web site, 
     or on a page directly linked to such home page--
       ``(A) the street address of the interstate Internet 
     seller's place of business, and the telephone number of such 
     place of business;
       ``(B) each State in which the interstate Internet seller is 
     licensed or otherwise authorized as a pharmacy, or if the 
     interstate Internet seller is not licensed or otherwise 
     authorized by a State as a pharmacy, each State in which the 
     interstate Internet seller is licensed or otherwise 
     authorized to dispense prescription drugs, and the type of 
     State license or authorization;
       ``(C) in the case of an interstate Internet seller that 
     makes referrals to or solicits on behalf of a prescriber, the 
     name of each prescriber, the street address of each such 
     prescriber's place of business, the telephone number of such 
     place of business, each State in which each such prescriber 
     is licensed or otherwise authorized to prescribe prescription 
     drugs, and the type of such license or authorization; and
       ``(D) a statement that the interstate Internet seller will 
     dispense prescription drugs only upon a valid prescription.
       ``(3) Date of posting.--Information required to be posted 
     under paragraph (2) shall be posted by an interstate Internet 
     seller--
       ``(A) not later than 90 days after the effective date of 
     this section if the web site of such seller is in operation 
     as of such date; or
       ``(B) on the date of the first day of operation of such 
     seller's web site if such site goes into operation after such 
     date.
       ``(4) Qualifying statements.--An interstate Internet seller 
     shall not indicate in any manner that posting disclosure 
     information on its web site signifies that the Federal 
     Government has made any determination on the legitimacy of 
     the interstate Internet seller or its business.
       ``(5) Disclosure to state licensing boards.--An interstate 
     Internet seller licensed or otherwise authorized to dispense 
     prescription drugs in accordance with applicable State law 
     shall notify each State entity that granted such licensure or 
     authorization that it is an interstate Internet seller, the 
     name of its business, the Internet address of its business, 
     the street address of its place of business, and the 
     telephone number of such place of business.
       ``(6) Regulations.--The Secretary is authorized to 
     promulgate such regulations as are necessary to carry out the 
     provisions of this subsection. In issuing such regulations, 
     the Secretary--
       ``(A) shall take into consideration disclosure formats used 
     by existing interstate Internet seller certification 
     programs; and
       ``(B) shall in defining the term `place of business' 
     include provisions providing that such place is a single 
     location at which employees of the business perform job 
     functions, and not a post office box or similar locale.''.
       (b) Prohibited Acts.--Section 301 of the Federal Food, 
     Drug, and Cosmetic Act (21 U.S.C. 331) is amended by adding 
     at the end the following:
       ``(bb) The failure to post information required under 
     section 503B(b)(2) or for knowingly making a materially false 
     statement when posting such information as required under 
     such section or violating section 503B(b)(4).''.

     SEC. 913. PUBLIC EDUCATION.

       The Secretary of Health and Human Services shall engage in 
     activities to educate the public about the dangers of 
     purchasing prescription drugs from unlawful Internet sources. 
     The Secretary should educate the public about effective 
     public and private sector consumer protection efforts, as 
     appropriate, with input from the public and private sectors, 
     as appropriate.

     SEC. 914. STUDY REGARDING COORDINATION OF REGULATORY 
                   ACTIVITIES.

       Not later than 180 days after the date of enactment of this 
     Act, the Secretary of Health and Human Services, after 
     consultation with the Attorney General, shall submit to 
     Congress a report providing recommendations for coordinating 
     the activities of Federal agencies regarding interstate 
     Internet sellers that operate from foreign countries and for 
     coordinating the activities of the Federal Government with 
     the activities of governments of foreign countries regarding 
     such interstate Internet sellers.

     SEC. 915. EFFECTIVE DATE.

       The amendments made by this subtitle shall take effect 1 
     year after the date of enactment of this Act, except that the 
     authority of the Secretary of Health and Human Services to 
     commence the process of rulemaking is effective on the date 
     of enactment of this Act.

            Subtitle C--Promotion of Electronic Prescription

     SEC. 921. PROGRAM OF GRANTS TO HEALTH CARE PROVIDERS TO 
                   IMPLEMENT ELECTRONIC PRESCRIPTION DRUG 
                   PROGRAMS.

       Part P of title III of the Public Health Service Act is 
     amended by inserting after section 399N the following new 
     section:

     ``SEC. 399O. GRANTS TO HEALTH CARE PROVIDERS TO IMPLEMENT 
                   ELECTRONIC PRESCRIPTION DRUG PROGRAMS

       ``(a) In General.--The Secretary is authorized to make 
     grants for the purpose of assisting health care providers who 
     prescribe drugs and biologicals in implementing electronic 
     prescription programs described in section 1860C(d)(3) of the 
     Social Security Act.
       ``(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 fiscal year 2004, such sums 
     as may be appropriate to carry out this section.''.

                 Subtitle D--Treatment of Rare Diseases

     SEC. 931. NIH OFFICE OF RARE DISEASES AT NATIONAL INSTITUTES 
                   OF HEALTH.

       Title IV of the Public Health Service Act (42 U.S.C. 281 et 
     seq.), as amended by Public Law 107-84, is amended by 
     inserting after section 404E the following:


                       ``office of rare diseases

       ``Sec. 404F. (a) Establishment.--There is established 
     within the Office of the Director of NIH an office to be 
     known as the Office of Rare Diseases (in this section 
     referred to as the `Office'), which shall be headed by a 
     Director (in this section referred to as the `Director'), 
     appointed by the Director of NIH.
       ``(b) Duties.--
       ``(1) In general.--The Director of the Office shall carry 
     out the following:
       ``(A) The Director shall recommend an agenda for conducting 
     and supporting research on rare diseases through the national 
     research institutes and centers. The agenda shall provide for 
     a broad range of research and education activities, including 
     scientific workshops and symposia to identify research 
     opportunities for rare diseases.
       ``(B) The Director shall, with respect to rare diseases, 
     promote coordination and cooperation among the national 
     research institutes and centers and entities whose research 
     is supported by such institutes.
       ``(C) The Director, in collaboration with the directors of 
     the other relevant institutes and centers of the National 
     Institutes of Health, may enter into cooperative agreements 
     with and make grants for regional centers of excellence on 
     rare diseases in accordance with section 404G.
       ``(D) The Director shall promote the sufficient allocation 
     of the resources of the National Institutes of Health for 
     conducting and supporting research on rare diseases.
       ``(E) The Director shall promote and encourage the 
     establishment of a centralized clearinghouse for rare and 
     genetic disease information that will provide understandable 
     information about these diseases to the public, medical 
     professionals, patients and families.
       ``(F) The Director shall biennially prepare a report that 
     describes the research and education activities on rare 
     diseases being conducted or supported through the national 
     research institutes and centers, and that identifies 
     particular projects or types of projects that should in the 
     future be conducted or supported by the national research 
     institutes and centers or other entities in the field of 
     research on rare diseases.
       ``(G) The Director shall prepare the NIH Director's annual 
     report to Congress on rare disease research conducted by or 
     supported through the national research institutes and 
     centers.
       ``(2) Principal advisor regarding orphan diseases.--With 
     respect to rare diseases, the Director shall serve as the 
     principal advisor to the Director of NIH and shall provide 
     advice to other relevant agencies. The Director shall provide 
     liaison with national and international patient, health and 
     scientific organizations concerned with rare diseases.
       ``(c) Definition.--For purposes of this section, the term 
     `rare disease' means any disease or condition that affects 
     less than 200,000 persons in the United States.
       ``(d) Authorization of Appropriations.--For the purpose of 
     carrying out this section, there are authorized to be 
     appropriated such sums as already have been appropriated for 
     fiscal year 2002, and $4,000,000 for each of the fiscal years 
     2003 through 2006.''.

     SEC. 932. RARE DISEASE REGIONAL CENTERS OF EXCELLENCE.

       Title IV of the Public Health Service Act (42 U.S.C. 281 et 
     seq.), as amended by section 1021, is further amended by 
     inserting after section 404F the following:


             ``rare disease regional centers of excellence

       ``Sec. 404G. (a) Cooperative Agreements and Grants.--
       ``(1) In general.--The Director of the Office of Rare 
     Diseases (in this section referred

[[Page 11906]]

     to as the `Director'), in collaboration with the directors of 
     the other relevant institutes and centers of the National 
     Institutes of Health, may enter into cooperative agreements 
     with and make grants to public or private nonprofit entities 
     to pay all or part of the cost of planning, establishing, or 
     strengthening, and providing basic operating support for 
     regional centers of excellence for clinical research into, 
     training in, and demonstration of diagnostic, prevention, 
     control, and treatment methods for rare diseases.
       ``(2) Policies.--A cooperative agreement or grant under 
     paragraph (1) shall be entered into in accordance with 
     policies established by the Director of NIH.
       ``(b) Coordination With Other Institutes.--The Director 
     shall coordinate the activities under this section with 
     similar activities conducted by other national research 
     institutes, centers and agencies of the National Institutes 
     of Health and by the Food and Drug Administration to the 
     extent that such institutes, centers and agencies have 
     responsibilities that are related to rare diseases.
       ``(c) Uses for Federal Payments Under Cooperative 
     Agreements or Grants.--Federal payments made under a 
     cooperative agreement or grant under subsection (a) may be 
     used for--
       ``(1) staffing, administrative, and other basic operating 
     costs, including such patient care costs as are required for 
     research;
       ``(2) clinical training, including training for allied 
     health professionals, continuing education for health 
     professionals and allied health professions personnel, and 
     information programs for the public with respect to rare 
     diseases; and
       ``(3) clinical research and demonstration programs.
       ``(d) Period of Support; Additional Periods.--Support of a 
     center under subsection (a) may be for a period of not to 
     exceed 5 years. Such period may be extended by the Director 
     for additional periods of not more than 5 years if the 
     operations of such center have been reviewed by an 
     appropriate technical and scientific peer review group 
     established by the Director and if such group has recommended 
     to the Director that such period should be extended.
       ``(e) Authorization of Appropriations.--For the purpose of 
     carrying out this section, there are authorized to be 
     appropriated such sums as already have been appropriated for 
     fiscal year 2002, and $20,000,000 for each of the fiscal 
     years 2003 through 2006.''.

             Subtitle E--Other Provisions Relating to Drugs

     SEC. 941. GAO STUDY REGARDING DIRECT-TO-CONSUMER ADVERTISING 
                   OF PRESCRIPTION DRUGS.

       (a) In General.--The Comptroller General of the United 
     States shall conduct a study for the purpose of determining--
       (1) whether and to what extent there have been increases in 
     utilization rates of prescription drugs that are attributable 
     to guidance regarding direct-to-consumer advertising of such 
     drugs that has been issued by the Food and Drug 
     Administration under section 502(n) of the Federal Food, 
     Drug, and Cosmetic Act; and
       (2) if so, whether and to what extent such increased 
     utilization rates have resulted in increases in the costs of 
     public or private health plans, health insurance, or other 
     health programs.
       (b) Certain Determinations.--The study under subsection (a) 
     shall include determinations of the following:
       (1) The extent to which advertisements referred to in such 
     subsection have resulted in effective consumer education 
     about the prescription drugs involved, including an 
     understanding of the risks of the drugs relative to the 
     benefits.
       (2) The extent of consumer satisfaction with such 
     advertisements.
       (3) The extent of physician satisfaction with the 
     advertisements, including determining whether physicians 
     believe that the advertisements interfere with the exercise 
     of their medical judgment by influencing consumers to prefer 
     advertised drugs over alternative therapies.
       (4) The extent to which the advertisements have resulted in 
     increases in health care costs for taxpayers, for employers, 
     or for consumers due to consumer decisions to seek advertised 
     drugs rather than lower-costs alternative therapies.
       (5) The extent to which the advertisements have resulted in 
     decreases in health care costs for taxpayers, for employers, 
     or for consumers due to decreased hospitalization rates, 
     fewer physician visits (not related to hospitalization), 
     lower treatment costs, or reduced instances of employee 
     absences to care for family members with diseases or 
     disorders.
       (c) Report.--Not later than two years after the date of the 
     enactment of this Act, the Comptroller General of the United 
     States shall submit to the Congress a report providing the 
     findings of the study under subsection (a).

     SEC. 942. CERTAIN HEALTH PROFESSIONS PROGRAMS REGARDING 
                   PRACTICE OF PHARMACY.

       Part E of title VII of the Public Health Service Act (42 
     U.S.C. 294n et seq.) is amended by adding at the end the 
     following subpart:

               ``Subpart 3--Pharmacist Workforce Programs

     ``SEC. 771. PUBLIC SERVICE ANNOUNCEMENTS.

       ``(a) Public Service Announcements.--
       ``(1) In general.--The Secretary shall develop and issue 
     public service announcements that advertise and promote the 
     pharmacist profession, highlight the advantages and rewards 
     of being a pharmacist, and encourage individuals to enter the 
     pharmacist profession.
       ``(2) Method.--The public service announcements described 
     in subsection (a) shall be broadcast through appropriate 
     media outlets, including television or radio, in a manner 
     intended to reach as wide and diverse an audience as 
     possible.
       ``(b) State and Local Public Service Announcements.--
       ``(1) In general.--The Secretary shall award grants to 
     entities to support State and local advertising campaigns 
     through appropriate media outlets to promote the pharmacist 
     profession, highlight the advantages and rewards of being a 
     pharmacist, and encourage individuals to enter the pharmacist 
     profession.
       ``(2) Use of funds.--An entity that receives a grant under 
     subsection (a) shall use funds received through such grant to 
     acquire local television and radio time, place advertisements 
     in local newspapers, and post information on billboards or on 
     the Internet, in order to--
       ``(A) advertise and promote the pharmacist profession;
       ``(B) promote pharmacist education programs;
       ``(C) inform the public of public assistance regarding such 
     education programs;
       ``(D) highlight individuals in the community that are 
     presently practicing as pharmacists to recruit new 
     pharmacists; and
       ``(E) provide any other information to recruit individuals 
     for the pharmacist profession.
       ``(3) Method.--The campaigns described in subsection (a) 
     shall be broadcast on television or radio, placed in 
     newspapers as advertisements, or posted on billboards or the 
     Internet, in a manner intended to reach as wide and diverse 
     an audience as possible.

     ``SEC. 772. DEMONSTRATION PROJECT.

       ``(a) In General.--The Secretary shall establish a 
     demonstration project to enhance the participation of 
     individuals who are pharmacists in the National Health 
     Service Corps Loan Repayment Program described in section 
     338B.
       ``(b) Services.--Services that may be provided by 
     pharmacists pursuant to the demonstration project established 
     under this section include medication therapy management 
     services to assure that medications are used appropriately by 
     patients, to enhance patients' understanding of the 
     appropriate use of medications, to increase patients' 
     adherence to prescription medication regimens, to reduce the 
     risk of adverse events associated with medications, and to 
     reduce the need for other costly medical services through 
     better management of medication therapy. Such services may 
     include case management, disease management, drug therapy 
     management, patient training and education, counseling, drug 
     therapy problem resolution, medication administration, the 
     provision of special packaging, or other services that 
     enhance the use of prescription medications.
       ``(c) Procedure.--The Secretary may not provide assistance 
     to an individual under this section unless the individual 
     agrees to comply with all requirements described in sections 
     338B and 338D.
       ``(d) Limitations.--The demonstration project described in 
     this section shall provide for the participation of--
       ``(1) individuals to provide services in rural and urban 
     areas; and
       ``(2) enough individuals to allow the Secretary to properly 
     analyze the effectiveness of such project.
       ``(e) Designations.--The demonstration project described in 
     this section, and any pharmacists who are selected to 
     participate in such project, shall not be considered by the 
     Secretary in the designation of a health professional 
     shortage area under section 332 during fiscal years 2003 
     through 2005.
       ``(f) Rule of Construction.--This section shall not be 
     construed to require any State to participate in the project 
     described in this section.
       ``(g) Report.--The Secretary shall prepare and submit a 
     report on the project to--
       ``(A) the Committee on Health, Education, Labor, and 
     Pensions of the Senate;
       ``(B) the Subcommittee on Labor, Health and Human Services, 
     and Education of the Committee on Appropriations of the 
     Senate;
       ``(C) the Committee on Energy and Commerce of the House of 
     Representatives; and
       ``(D) the Subcommittee on Labor, Health and Human Services, 
     and Education of the Committee on Appropriations of the House 
     of Representatives.

     ``SEC. 773. INFORMATION TECHNOLOGY.

       ``(a) Grants and Contracts.--The Secretary may make awards 
     of grants or contracts to qualifying schools of pharmacy for 
     the purpose of assisting such schools in acquiring and 
     installing computer-based systems to provide pharmaceutical 
     education. Education provided through such systems

[[Page 11907]]

     may be graduate education, professional education, or 
     continuing education. The computer-based systems may be 
     designed to provide on-site education, or education at remote 
     sites (commonly referred to as distance learning), or both.
       ``(b) Qualifying School of Pharmacy.--For purposes of this 
     section, the term `qualifying school of pharmacy' means a 
     school of pharmacy (as defined in section 799B) that requires 
     students to serve in a clinical rotation in which pharmacist 
     services are part of the curriculum.

     ``SEC. 774. AUTHORIZATION OF APPROPRIATIONS.

       ``For the purpose of carrying out this subpart, there are 
     authorized to be appropriated such sums as may be necessary 
     for each of the fiscal years 2003 through 2006.''.

              TITLE X--HEALTH-CARE RELATED TAX PROVISIONS

     SEC. 1001. ELIGIBILITY FOR ARCHER MSA'S EXTENDED TO ACCOUNT 
                   HOLDERS OF MEDICARE+CHOICE MSA'S.

       (a) In General.--Subparagraph (B) of section 220(c)(2) of 
     the Internal Revenue Code of 1986 is amended by adding at the 
     end the following new clause:
       ``(iii) Medicare+choice msa's.--In the case of an 
     individual who is covered under an MSA plan (as defined in 
     section 1859(b)(3) of the Social Security Act) which such 
     individual elected under section 1851(a)(2)(B) of such Act--

       ``(I) such plan shall be treated as a high deductible 
     health plan for purposes of this section,
       ``(II) subsection (b)(2)(A) shall be applied by 
     substituting `100 percent' for `65 percent' with respect to 
     such individual,
       ``(III) with respect to such individual, the limitation 
     under subsection (d)(1)(A)(ii) shall be 100 percent of the 
     highest annual deductible limitation under section 
     1859(b)(3)(B) of the Social Security Act,
       ``(IV) paragraphs (4), (5), and (7) of subsection (b) and 
     paragraph (1)(A)(iii) of this subsection shall not apply with 
     respect to such individual, and
       ``(V) the limitation which would (but for this subclause) 
     apply under subsection (b)(1) with respect to such individual 
     for any taxable year shall be reduced (but not below zero) by 
     the amount which would (but for subsection 106(b)) be 
     includible in such individual's gross income for the taxable 
     year.''.

       (b) Accounts not Counted Against Numerical Limits.--
       (1) In general.--Paragraph (3) of section 220(j) of such 
     Code is amended--
       (A) in the heading, by striking ``Previously uninsured'' 
     and inserting ``Certain'',
       (B) in subparagraph (A), by striking ``by not counting the 
     Archer MSA of any previously uninsured individual.'' and 
     inserting ``by not counting--
       ``(i) the Archer MSA of any previously uninsured 
     individual, and
       ``(ii) the Archer MSA of any eligible individual who 
     qualifies as such an individual by reason of subsection 
     (c)(2)(B)(iii).''.
       (2) Reporting requirement.--Subparagraph (A) of section 
     220(j)(4) of such Code is amended in clause (ii) by striking 
     ``and'' at the end, in clause (iii) by striking the period 
     and inserting ``, and'', and by adding at the end the 
     following new clause:
       ``(iv) the number of such accounts which are accounts of 
     eligible individuals who qualify as such individuals by 
     reason of subsection (c)(2)(B)(iii).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.

     SEC. 1002. ADJUSTMENT OF EMPLOYER CONTRIBUTIONS TO COMBINED 
                   BENEFIT FUND TO REFLECT MEDICARE PRESCRIPTION 
                   DRUG SUBSIDY PAYMENTS.

       Section 9704(b) of the Internal Revenue Code of 1986 
     (relating to health benefit premium) is amended by adding at 
     the end the following new paragraph:
       ``(4) Adjustments for medicare prescription drug 
     subsidies.--The trustees of the Combined Fund shall decrease 
     the per beneficiary premium for each plan year in which a 
     subsidy payment is provided to it under section 1860H of the 
     Social Security Act by the amount which would place the 
     Combined Fund in the same financial position as if such 
     subsidy payment had not been received.''.

     SEC. 1003. EXPANSION OF HUMAN CLINICAL TRIALS QUALIFYING FOR 
                   ORPHAN DRUG CREDIT.

       (a) In General.--Paragraph (2) of section 45C(b) of the 
     Internal Revenue Code of 1986 is amended by adding at the end 
     the following new subparagraph:
       ``(C) Treatment of certain expenses incurred before 
     designation.--For purposes of subparagraph (A)(ii)(I), if a 
     drug is designated under section 526 of the Federal Food, 
     Drug, and Cosmetic Act not later than the due date (including 
     extensions) for filing the return of tax under this subtitle 
     for the taxable year in which the application for such 
     designation of such drug was filed, such drug shall be 
     treated as having been designated on the date that such 
     application was filed.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to expenses incurred after the date of the 
     enactment of this Act.

  The SPEAKER pro tempore. In lieu of the amendment recommended by the 
Committee on Ways and Means, the amendment in the nature of a 
substitute printed in House Report 107-553 is adopted.
  The text of the amendment in the nature of a substitute printed in 
House Report 107-553 is as follows:
       Strike all after the enacting clause and insert the 
     following:

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

       (a) Short Title.--This Act may be cited as the ``Medicare 
     Modernization and Prescription Drug Act of 2002''.
       (b) Amendments to Social Security Act.--Except as otherwise 
     specifically provided, whenever in this Act an amendment is 
     expressed in terms of an amendment to or repeal of a section 
     or other provision, the reference shall be considered to be 
     made to that section or other provision of the Social 
     Security Act.
       (c) BIPA; Secretary.--In this Act:
       (1) BIPA.--The term ``BIPA'' means the Medicare, Medicaid, 
     and SCHIP Benefits Improvement and Protection Act of 2000, as 
     enacted into law by section 1(a)(6) of Public Law 106-554.
       (2) Secretary.--The term ``Secretary'' means the Secretary 
     of Health and Human Services.
       (d) Table of Contents.--The table of contents of this Act 
     is as follows:

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

              TITLE I--MEDICARE PRESCRIPTION DRUG BENEFIT

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

         ``Part D--Voluntary Prescription Drug Benefit Program

``Sec. 1860A. Benefits; eligibility; enrollment; and coverage period.
``Sec. 1860B. Requirements for qualified prescription drug coverage.
``Sec. 1860C. Beneficiary protections for qualified prescription drug 
              coverage.
``Sec. 1860D. Requirements for prescription drug plan (PDP) sponsors; 
              contracts; establishment of standards.
``Sec. 1860E. Process for beneficiaries to select qualified 
              prescription drug coverage.
``Sec. 1860F. Submission of bids and premiums.
``Sec. 1860G. Premium and cost-sharing subsidies for low-income 
              individuals.
``Sec. 1860H. Subsidies for all medicare beneficiaries for qualified 
              prescription drug coverage.
``Sec. 1860I. Medicare Prescription Drug Trust Fund.
``Sec. 1860J. Definitions; treatment of references to provisions in 
              part C.
Sec. 102. Offering of qualified prescription drug coverage under the 
              Medicare+Choice program.
Sec. 103. Medicaid amendments.
Sec. 104. Medigap transition.
Sec. 105. Medicare prescription drug discount card endorsement program.
Sec. 106. GAO study of the effectiveness of the new prescription drug 
              program.

     TITLE II--MEDICARE+CHOICE REVITALIZATION AND MEDICARE+CHOICE 
                          COMPETITION PROGRAM

               Subtitle A--Medicare+Choice Revitalization

Sec. 201. Medicare+Choice improvements.
Sec. 202. Making permanent change in Medicare+Choice reporting 
              deadlines and annual, coordinated election period.
Sec. 203. Avoiding duplicative State regulation.
Sec. 204. Specialized Medicare+Choice plans for special needs 
              beneficiaries.
Sec. 205. Medicare MSAs.
Sec. 206. Extension of reasonable cost and SHMO contracts.

            Subtitle B--Medicare+Choice Competition Program

Sec. 211. Medicare+Choice competition program.
Sec. 212. Demonstration program for competitive-demonstration areas.
Sec. 213. Conforming amendments.

               TITLE III--RURAL HEALTH CARE IMPROVEMENTS

Sec. 301. Reference to full market basket increase for sole community 
              hospitals.
Sec. 302. Enhanced disproportionate share hospital (DSH) treatment for 
              rural hospitals and urban hospitals with fewer than 100 
              beds.
Sec. 303. 2-year phased-in increase in the standardized amount in rural 
              and small urban areas to achieve a single, uniform 
              standardized amount.
Sec. 304. More frequent update in weights used in hospital market 
              basket.

[[Page 11908]]

Sec. 305. Improvements to critical access hospital program.
Sec. 306. Extension of temporary increase for home health services 
              furnished in a rural area.
Sec. 307. Reference to 10 percent increase in payment for hospice care 
              furnished in a frontier area and rural hospice 
              demonstration project.
Sec. 308. Reference to priority for hospitals located in rural or small 
              urban areas in redistribution of unused graduate medical 
              education residencies.
Sec. 309. GAO study of geographic differences in payments for 
              physicians' services.
Sec. 310. Providing safe harbor for certain collaborative efforts that 
              benefit medically underserved populations.
Sec. 311. Relief for certain non-teaching hospitals.

                TITLE IV--PROVISIONS RELATING TO PART A

                Subtitle A--Inpatient Hospital Services

Sec. 401. Revision of acute care hospital payment updates.
Sec. 402. 2-year increase in level of adjustment for indirect costs of 
              medical education (IME).
Sec. 403. Recognition of new medical technologies under inpatient 
              hospital PPS.
Sec. 404. Phase-in of Federal rate for hospitals in Puerto Rico.
Sec. 405. Reference to provision relating to enhanced disproportionate 
              share hospital (DSH) payments for rural hospitals and 
              urban hospitals with fewer than 100 beds.
Sec. 406. Reference to provision relating to 2-year phased-in increase 
              in the standardized amount in rural and small urban areas 
              to achieve a single, uniform standardized amount.
Sec. 407. Reference to provision for more frequent updates in the 
              weights used in hospital market basket.
Sec. 408. Reference to provision making improvements to critical access 
              hospital program.
Sec. 409. GAO study on improving the hospital wage index.

             Subtitle B--Skilled Nursing Facility Services

Sec. 411. Payment for covered skilled nursing facility services.

                          Subtitle C--Hospice

Sec. 421. Coverage of hospice consultation services.
Sec. 422. 10 percent increase in payment for hospice care furnished in 
              a frontier area.
Sec. 423. Rural hospice demonstration project.

                      Subtitle D--Other Provisions

Sec. 431. Demonstration project for use of recovery audit contractors 
              for part A services.

                 TITLE V--PROVISIONS RELATING TO PART B

                    Subtitle A--Physicians' Services

Sec. 501. Revision of updates for physicians' services.
Sec. 502. Studies on access to physicians' services.
Sec. 503. MedPAC report on payment for physicians' services.
Sec. 504. 1-year extension of treatment of certain physician pathology 
              services under medicare.
Sec. 505. Physician fee schedule wage index revision.

                       Subtitle B--Other Services

Sec. 511. Competitive acquisition of certain items and services.
Sec. 512. Payment for ambulance services.
Sec. 513. 2-year extension of moratorium on therapy caps; provisions 
              relating to reports.
Sec. 514. Coverage of an initial preventive physical examination.
Sec. 515. Renal dialysis services.
Sec. 516. Improved payment for certain mammography services.
Sec. 517. Waiver of part B late enrollment penalty for certain military 
              retirees; special enrollment period.
Sec. 518. Coverage of cholesterol and blood lipid screening.

             TITLE VI--PROVISIONS RELATING TO PARTS A AND B

                    Subtitle A--Home Health Services

Sec. 601. Elimination of 15 percent reduction in payment rates under 
              the prospective payment system.
Sec. 602. Update in home health services.
Sec. 603. OASIS Task Force; suspension of certain OASIS data collection 
              requirements pending Task Force submittal of report.
Sec. 604. MedPAC study on medicare margins of home health agencies.
Sec. 605. Clarification of treatment of occasional absences in 
              determining whether an individual is confined to the 
              home.

             Subtitle B--Direct Graduate Medical Education

Sec. 611. Extension of update limitation on high cost programs.
Sec. 612. Redistribution of unused resident positions.

                      Subtitle C--Other Provisions

Sec. 621. Modifications to Medicare Payment Advisory Commission 
              (MedPAC).
Sec. 622. Demonstration project for disease management for certain 
              medicare beneficiaries with diabetes.
Sec. 623. Demonstration project for medical adult day care services.
Sec. 624. Publication on final written guidance concerning prohibitions 
              against discrimination by national origin with respect to 
              health care services.

              TITLE VII--MEDICARE BENEFITS ADMINISTRATION

Sec. 701. Establishment of Medicare Benefits Administration.

        TITLE VIII--REGULATORY REDUCTION AND CONTRACTING REFORM

                     Subtitle A--Regulatory Reform

Sec. 801. Construction; definition of supplier.
Sec. 802. Issuance of regulations.
Sec. 803. Compliance with changes in regulations and policies.
Sec. 804. Reports and studies relating to regulatory reform.

                     Subtitle B--Contracting Reform

Sec. 811. Increased flexibility in medicare administration.
Sec. 812. Requirements for information security for medicare 
              administrative contractors.

                   Subtitle C--Education and Outreach

Sec. 821. Provider education and technical assistance.
Sec. 822. Small provider technical assistance demonstration program.
Sec. 823. Medicare provider ombudsman; medicare beneficiary ombudsman.
Sec. 824. Beneficiary outreach demonstration program.

                    Subtitle D--Appeals and Recovery

Sec. 831. Transfer of responsibility for medicare appeals.
Sec. 832. Process for expedited access to review.
Sec. 833. Revisions to medicare appeals process.
Sec. 834. Prepayment review.
Sec. 835. Recovery of overpayments.
Sec. 836. Provider enrollment process; right of appeal.
Sec. 837. Process for correction of minor errors and omissions on 
              claims without pursuing appeals process.
Sec. 838. Prior determination process for certain items and services; 
              advance beneficiary notices.

                  Subtitle E--Miscellaneous Provisions

Sec. 841. Policy development regarding evaluation and management (E & 
              M) documentation guidelines.
Sec. 842. Improvement in oversight of technology and coverage.
Sec. 843. Treatment of hospitals for certain services under medicare 
              secondary payor (MSP) provisions.
Sec. 844. EMTALA improvements.
Sec. 845. Emergency Medical Treatment and Labor Act (EMTALA) Technical 
              Advisory Group.
Sec. 846. Authorizing use of arrangements with other hospice programs 
              to provide core hospice services in certain 
              circumstances.
Sec. 847. Application of OSHA bloodborne pathogens standard to certain 
              hospitals.
Sec. 848. BIPA-related technical amendments and corrections.
Sec. 849. Conforming authority to waive a program exclusion.
Sec. 850. Treatment of certain dental claims.
Sec. 851. Annual publication of list of national coverage 
              determinations.

                     TITLE IX--MEDICAID PROVISIONS

Sec. 901. National Bipartisan Commission on the Future of Medicaid.
Sec. 902. Disproportionate share hospital (DSH) payments.
Sec. 903. Medicaid pharmacy assistance program.

              TITLE I--MEDICARE PRESCRIPTION DRUG BENEFIT

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

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

         ``Part D--Voluntary Prescription Drug Benefit Program

     ``SEC. 1860A. BENEFITS; ELIGIBILITY; ENROLLMENT; AND COVERAGE 
                   PERIOD.

       ``(a) Provision of Qualified Prescription Drug Coverage 
     Through Enrollment in Plans.--Subject to the succeeding 
     provisions of this part, each individual who is entitled to 
     benefits under part A or is enrolled under part B is entitled 
     to obtain qualified prescription drug coverage (described in 
     section 1860B(a)) as follows:

[[Page 11909]]

       ``(1) Medicare+choice plan.--If the individual is eligible 
     to enroll in a Medicare+Choice plan that provides qualified 
     prescription drug coverage under section 1851(j), the 
     individual may enroll in the plan and obtain coverage through 
     such plan.
       ``(2) Prescription drug plan.--If the individual is not 
     enrolled in a Medicare+Choice plan that provides qualified 
     prescription drug coverage, the individual may enroll under 
     this part in a prescription drug plan (as defined in section 
     1860J(a)(5)).

     Such individuals shall have a choice of such plans under 
     section 1860E(d).
       ``(b) General Election Procedures.--
       ``(1) In general.--An individual eligible to make an 
     election under subsection (a) may elect to enroll in a 
     prescription drug plan under this part, or elect the option 
     of qualified prescription drug coverage under a 
     Medicare+Choice plan under part C, and to change such 
     election only in such manner and form as may be prescribed by 
     regulations of the Administrator of the Medicare Benefits 
     Administration (appointed under section 1808(b)) (in this 
     part referred to as the `Medicare Benefits Administrator') 
     and only during an election period prescribed in or under 
     this subsection.
       ``(2) Election periods.--
       ``(A) In general.--Except as provided in this paragraph, 
     the election periods under this subsection shall be the same 
     as the coverage election periods under the Medicare+Choice 
     program under section 1851(e), including--
       ``(i) annual coordinated election periods; and
       ``(ii) special election periods.

     In applying the last sentence of section 1851(e)(4) (relating 
     to discontinuance of a Medicare+Choice election during the 
     first year of eligibility) under this subparagraph, in the 
     case of an election described in such section in which the 
     individual had elected or is provided qualified prescription 
     drug coverage at the time of such first enrollment, the 
     individual shall be permitted to enroll in a prescription 
     drug plan under this part at the time of the election of 
     coverage under the original fee-for-service plan.
       ``(B) Initial election periods.--
       ``(i) Individuals currently covered.--In the case of an 
     individual who is entitled to benefits under part A or 
     enrolled under part B as of November 1, 2004, there shall be 
     an initial election period of 6 months beginning on that 
     date.
       ``(ii) Individual covered in future.--In the case of an 
     individual who is first entitled to benefits under part A or 
     enrolled under part B after such date, there shall be an 
     initial election period which is the same as the initial 
     enrollment period under section 1837(d).
       ``(C) Additional special election periods.--The 
     Administrator shall establish special election periods--
       ``(i) in cases of individuals who have and involuntarily 
     lose prescription drug coverage described in subsection 
     (c)(2)(C);
       ``(ii) in cases described in section 1837(h) (relating to 
     errors in enrollment), in the same manner as such section 
     applies to part B;
       ``(iii) in the case of an individual who meets such 
     exceptional conditions (including conditions provided under 
     section 1851(e)(4)(D)) as the Administrator may provide; and
       ``(iv) in cases of individuals (as determined by the 
     Administrator) who become eligible for prescription drug 
     assistance under title XIX under section 1935(d).
       ``(3) Information on plans.--Information described in 
     section 1860C(b)(1) on prescription drug plans shall be made 
     available during open enrollment periods.
       ``(c) Guaranteed Issue; Community Rating; and 
     Nondiscrimination.--
       ``(1) Guaranteed issue.--
       ``(A) In general.--An eligible individual who is eligible 
     to elect qualified prescription drug coverage under a 
     prescription drug plan or Medicare+Choice plan at a time 
     during which elections are accepted under this part with 
     respect to the plan shall not be denied enrollment based on 
     any health status-related factor (described in section 
     2702(a)(1) of the Public Health Service Act) or any other 
     factor.
       ``(B) Medicare+choice limitations permitted.--The 
     provisions of paragraphs (2) and (3) (other than subparagraph 
     (C)(i), relating to default enrollment) of section 1851(g) 
     (relating to priority and limitation on termination of 
     election) shall apply to PDP sponsors under this subsection.
       ``(2) Community-rated premium.--
       ``(A) In general.--In the case of an individual who 
     maintains (as determined under subparagraph (C)) continuous 
     prescription drug coverage since the date the individual 
     first qualifies to elect prescription drug coverage under 
     this part, a PDP sponsor or Medicare+Choice organization 
     offering a prescription drug plan or Medicare+Choice plan 
     that provides qualified prescription drug coverage and in 
     which the individual is enrolled may not deny, limit, or 
     condition the coverage or provision of covered prescription 
     drug benefits or vary or increase the premium under the plan 
     based on any health status-related factor described in 
     section 2702(a)(1) of the Public Health Service Act or any 
     other factor.
       ``(B) Late enrollment penalty.--In the case of an 
     individual who does not maintain such continuous prescription 
     drug coverage (as described in subparagraph (C)), a PDP 
     sponsor or Medicare+Choice organization may (notwithstanding 
     any provision in this title) adjust the premium otherwise 
     applicable or impose a pre-existing condition exclusion with 
     respect to qualified prescription drug coverage in a manner 
     that reflects additional actuarial risk involved. Such a risk 
     shall be established through an appropriate actuarial opinion 
     of the type described in subparagraphs (A) through (C) of 
     section 2103(c)(4).
       ``(C) Continuous prescription drug coverage.--An individual 
     is considered for purposes of this part to be maintaining 
     continuous prescription drug coverage on and after the date 
     the individual first qualifies to elect prescription drug 
     coverage under this part if the individual establishes that 
     as of such date the individual is covered under any of the 
     following prescription drug coverage and before the date that 
     is the last day of the 63-day period that begins on the date 
     of termination of the particular prescription drug coverage 
     involved (regardless of whether the individual subsequently 
     obtains any of the following prescription drug coverage):
       ``(i) Coverage under prescription drug plan or 
     medicare+choice plan.--Qualified prescription drug coverage 
     under a prescription drug plan or under a Medicare+Choice 
     plan.
       ``(ii) Medicaid prescription drug coverage.--Prescription 
     drug coverage under a medicaid plan under title XIX, 
     including through the Program of All-inclusive Care for the 
     Elderly (PACE) under section 1934, through a social health 
     maintenance organization (referred to in section 4104(c) of 
     the Balanced Budget Act of 1997), or through a 
     Medicare+Choice project that demonstrates the application of 
     capitation payment rates for frail elderly medicare 
     beneficiaries through the use of a interdisciplinary team and 
     through the provision of primary care services to such 
     beneficiaries by means of such a team at the nursing facility 
     involved.
       ``(iii) Prescription drug coverage under group health 
     plan.--Any outpatient prescription drug coverage under a 
     group health plan, including a health benefits plan under the 
     Federal Employees Health Benefit Plan under chapter 89 of 
     title 5, United States Code, and a qualified retiree 
     prescription drug plan as defined in section 1860H(f)(1), but 
     only if (subject to subparagraph (E)(ii)) the coverage 
     provides benefits at least equivalent to the benefits under a 
     qualified prescription drug plan.
       ``(iv) Prescription drug coverage under certain medigap 
     policies.--Coverage under a medicare supplemental policy 
     under section 1882 that provides benefits for prescription 
     drugs (whether or not such coverage conforms to the standards 
     for packages of benefits under section 1882(p)(1)), but only 
     if the policy was in effect on January 1, 2005, and if 
     (subject to subparagraph (E)(ii)) the coverage provides 
     benefits at least equivalent to the benefits under a 
     qualified prescription drug plan.
       ``(v) State pharmaceutical assistance program.--Coverage of 
     prescription drugs under a State pharmaceutical assistance 
     program, but only if (subject to subparagraph (E)(ii)) the 
     coverage provides benefits at least equivalent to the 
     benefits under a qualified prescription drug plan.
       ``(vi) Veterans' coverage of prescription drugs.--Coverage 
     of prescription drugs for veterans under chapter 17 of title 
     38, United States Code, but only if (subject to subparagraph 
     (E)(ii)) the coverage provides benefits at least equivalent 
     to the benefits under a qualified prescription drug plan.
       ``(D) Certification.--For purposes of carrying out this 
     paragraph, the certifications of the type described in 
     sections 2701(e) of the Public Health Service Act and in 
     section 9801(e) of the Internal Revenue Code shall also 
     include a statement for the period of coverage of whether the 
     individual involved had prescription drug coverage described 
     in subparagraph (C).
       ``(E) Disclosure.--
       ``(i) In general.--Each entity that offers coverage of the 
     type described in clause (iii), (iv), (v), or (vi) of 
     subparagraph (C) shall provide for disclosure, consistent 
     with standards established by the Administrator, of whether 
     such coverage provides benefits at least equivalent to the 
     benefits under a qualified prescription drug plan.
       ``(ii) Waiver of limitations.--An individual may apply to 
     the Administrator to waive the requirement that coverage of 
     such type provide benefits at least equivalent to the 
     benefits under a qualified prescription drug plan, if the 
     individual establishes that the individual was not adequately 
     informed that such coverage did not provide such level of 
     benefits.
       ``(F) Construction.--Nothing in this section shall be 
     construed as preventing the disenrollment of an individual 
     from a prescription drug plan or a Medicare+Choice plan based 
     on the termination of an election described in section 
     1851(g)(3), including for non-payment of premiums or for 
     other reasons specified in subsection (d)(3), which takes 
     into account a grace period described in section 
     1851(g)(3)(B)(i).

[[Page 11910]]

       ``(3) Nondiscrimination.--A PDP sponsor offering a 
     prescription drug plan shall not establish a service area in 
     a manner that would discriminate based on health or economic 
     status of potential enrollees.
       ``(d) Effective Date of Elections.--
       ``(1) In general.--Except as provided in this section, the 
     Administrator shall provide that elections under subsection 
     (b) take effect at the same time as the Administrator 
     provides that similar elections under section 1851(e) take 
     effect under section 1851(f).
       ``(2) No election effective before 2005.--In no case shall 
     any election take effect before January 1, 2005.
       ``(3) Termination.--The Administrator shall provide for the 
     termination of an election in the case of--
       ``(A) termination of coverage under both part A and part B; 
     and
       ``(B) termination of elections described in section 
     1851(g)(3) (including failure to pay required premiums).

     ``SEC. 1860B. REQUIREMENTS FOR QUALIFIED PRESCRIPTION DRUG 
                   COVERAGE.

       ``(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 coverage with access to negotiated prices.--
     Standard coverage (as defined in subsection (b)) and access 
     to negotiated prices under subsection (d).
       ``(B) Actuarially equivalent coverage with access to 
     negotiated prices.--Coverage of covered outpatient drugs 
     which meets the alternative coverage requirements of 
     subsection (c) and access to negotiated prices under 
     subsection (d), but only if it is approved by the 
     Administrator, as provided under subsection (c).
       ``(2) Permitting additional outpatient prescription drug 
     coverage.--
       ``(A) In general.--Subject to subparagraph (B), nothing in 
     this part shall be construed as preventing qualified 
     prescription drug coverage from including coverage of covered 
     outpatient drugs that exceeds the coverage required under 
     paragraph (1), but any such additional coverage shall be 
     limited to coverage of covered outpatient drugs.
       ``(B) Disapproval authority.--The Administrator shall 
     review the offering of qualified prescription drug coverage 
     under this part or part C. If the Administrator finds that, 
     in the case of a qualified prescription drug coverage under a 
     prescription drug plan or a Medicare+Choice plan, that the 
     organization or sponsor offering the coverage is engaged in 
     activities intended to discourage enrollment of classes of 
     eligible medicare beneficiaries obtaining coverage through 
     the plan on the basis of their higher likelihood of utilizing 
     prescription drug coverage, the Administrator may terminate 
     the contract with the sponsor or organization under this part 
     or part C.
       ``(3) Application of secondary payor provisions.--The 
     provisions of section 1852(a)(4) shall apply under this part 
     in the same manner as they apply under part C.
       ``(b) Standard Coverage.--For purposes of this part, the 
     `standard coverage' is coverage of covered outpatient drugs 
     (as defined in subsection (f)) that meets the following 
     requirements:
       ``(1) Deductible.--The coverage has an annual deductible--
       ``(A) for 2005, that is equal to $250; or
       ``(B) for a subsequent year, that is equal to the amount 
     specified under this paragraph for the previous year 
     increased by the percentage specified in paragraph (5) for 
     the year involved.

     Any amount determined under subparagraph (B) that is not a 
     multiple of $10 shall be rounded to the nearest multiple of 
     $10.
       ``(2) Limits on cost-sharing.--
       ``(A) In general.--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)) as 
     follows:
       ``(i) First copayment range.--For costs above the annual 
     deductible specified in paragraph (1) and up to amount 
     specified in subparagraph (C), the cost-sharing--

       ``(I) is equal to 20 percent; or
       ``(II) is actuarially equivalent (using processes 
     established under subsection (e)) to an average expected 
     payment of 20 percent of such costs.

       ``(ii) Secondary copayment range.--For costs above the 
     amount specified in subparagraph (C) and up to the initial 
     coverage limit, the cost-sharing--

       ``(I) is equal to 50 percent; or
       ``(II) is actuarially consistent (using processes 
     established under subsection (e)) with an average expected 
     payment of 50 percent of such costs.

       ``(B) Use of tiered copayments.--Nothing in this part shall 
     be construed as preventing a PDP sponsor from applying tiered 
     copayments, so long as such tiered copayments are consistent 
     with subparagraph (A).
       ``(C) Initial copayment threshold.--The amount specified in 
     this subparagraph--
       ``(i) for 2005, is equal to $1,000; 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.

     Any amount determined under clause (ii) that is not a 
     multiple of $10 shall be rounded to the nearest multiple of 
     $10.
       ``(3) Initial coverage limit.--Subject to paragraph (4), 
     the coverage has an initial coverage limit on the maximum 
     costs that may be recognized for payment purposes--
       ``(A) for 2005, that is equal to $2,000; or
       ``(B) for a subsequent year, that is equal to the amount 
     specified in this paragraph for the previous year, increased 
     by the annual percentage increase described in paragraph (5) 
     for the year involved.

     Any amount determined under subparagraph (B) that is not a 
     multiple of $25 shall be rounded to the nearest multiple of 
     $25.
       ``(4) Catastrophic protection.--
       ``(A) In general.--Notwithstanding paragraph (3), the 
     coverage provides benefits with no cost-sharing after the 
     individual has incurred costs (as described in subparagraph 
     (C)) for covered outpatient drugs in a year equal to the 
     annual out-of-pocket threshold specified in subparagraph (B).
       ``(B) Annual out-of-pocket threshold.--For purposes of this 
     part, the `annual out-of-pocket threshold' specified in this 
     subparagraph--
       ``(i) for 2005, 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.

     Any amount determined under clause (ii) that is not a 
     multiple of $100 shall be rounded to the nearest multiple of 
     $100.
       ``(C) Application.--In applying subparagraph (A)--
       ``(i) incurred costs shall only include costs incurred for 
     the annual deductible (described in paragraph (1)), cost-
     sharing (described in paragraph (2)), and amounts for which 
     benefits are not provided because of the application of the 
     initial coverage limit described in paragraph (3); and
       ``(ii) such costs shall be treated as incurred only if they 
     are paid by the individual (or by another individual, such as 
     a family member, on behalf of the individual), under section 
     1860G, or under title XIX and the individual (or other 
     individual) is not reimbursed through insurance or otherwise, 
     a group health plan, or other third-party payment arrangement 
     for such costs.
       ``(5) Annual percentage increase.--For purposes of this 
     part, the annual percentage increase specified in this 
     paragraph for a year is equal to the annual percentage 
     increase in average per capita aggregate expenditures for 
     covered outpatient drugs in the United States for medicare 
     beneficiaries, as determined by the Administrator for the 12-
     month period ending in July of the previous year.
       ``(c) Alternative Coverage Requirements.--A prescription 
     drug plan or Medicare+Choice plan may provide a different 
     prescription drug benefit design from the standard coverage 
     described in subsection (b) so long as the Administrator 
     determines (based on an actuarial analysis by the 
     Administrator) that the following requirements are met and 
     the plan applies for, and receives, the approval of the 
     Administrator for such benefit design:
       ``(1) Assuring at least actuarially equivalent coverage.--
       ``(A) Assuring equivalent value of total coverage.--The 
     actuarial value of the total coverage (as determined under 
     subsection (e)) is at least equal to the actuarial value (as 
     so determined) of standard coverage.
       ``(B) Assuring equivalent unsubsidized value of coverage.--
     The unsubsidized value of the coverage is at least equal to 
     the unsubsidized value of standard coverage. For purposes of 
     this subparagraph, the unsubsidized value of coverage is the 
     amount by which the actuarial value of the coverage (as 
     determined under subsection (e)) exceeds the actuarial value 
     of the subsidy payments under section 1860H with respect to 
     such coverage.
       ``(C) Assuring standard payment for costs at initial 
     coverage limit.--The coverage is designed, based upon an 
     actuarially representative pattern of utilization (as 
     determined under subsection (e)), to provide for the payment, 
     with respect to costs incurred that are equal to the initial 
     coverage limit under subsection (b)(3), of an amount equal to 
     at least the sum of the following products:
       ``(i) First copayment range.--The product of--

       ``(I) the amount by which the initial copayment threshold 
     described in subsection (b)(2)(C) exceeds the deductible 
     described in subsection (b)(1); and
       ``(II) 100 percent minus the cost-sharing percentage 
     specified in subsection (b)(2)(A)(i)(I).

       ``(ii) Secondary copayment range.--The product of--

       ``(I) the amount by which the initial coverage limit 
     described in subsection (b)(3) exceeds the initial copayment 
     threshold described in subsection (b)(2)(C); and
       ``(II) 100 percent minus the cost-sharing percentage 
     specified in subsection (b)(2)(A)(ii)(I).

       ``(2) Catastrophic protection.--The coverage provides for 
     beneficiaries the catastrophic protection described in 
     subsection (b)(4).
       ``(d) Access to Negotiated Prices.--
       ``(1) In general.--Under qualified prescription drug 
     coverage offered by a PDP sponsor

[[Page 11911]]

     or a Medicare+Choice organization, the sponsor or 
     organization shall provide beneficiaries with access to 
     negotiated prices (including applicable discounts) used for 
     payment for covered outpatient drugs, regardless of the fact 
     that no benefits may be payable under the coverage with 
     respect to such drugs because of the application of cost-
     sharing or an initial coverage limit (described in subsection 
     (b)(3)). Insofar as a State elects to provide medical 
     assistance under title XIX for a drug based on the prices 
     negotiated by a prescription drug plan under this part, the 
     requirements of section 1927 shall not apply to such drugs. 
     The prices negotiated by a prescription drug plan under this 
     part, by a Medicare+Choice plan with respect to covered 
     outpatient drugs, or by a qualified retiree prescription drug 
     plan (as defined in section 1860H(f)(1)) with respect to such 
     drugs on behalf of individuals entitled to benefits under 
     part A or enrolled under part B, shall (notwithstanding any 
     other provision of law) not be taken into account for the 
     purposes of establishing the best price under section 
     1927(c)(1)(C).
       ``(2) Disclosure.--The PDP sponsor or Medicare+Choice 
     organization shall disclose to the Administrator (in a manner 
     specified by the Administrator) the extent to which discounts 
     or rebates made available to the sponsor or organization by a 
     manufacturer are passed through to enrollees through 
     pharmacies and other dispensers or otherwise. The provisions 
     of section 1927(b)(3)(D) shall apply to information disclosed 
     to the Administrator under this paragraph in the same manner 
     as such provisions apply to information disclosed under such 
     section.
       ``(e) Actuarial Valuation; Determination of Annual 
     Percentage Increases.--
       ``(1) Processes.--For purposes of this section, the 
     Administrator shall establish processes and methods--
       ``(A) for determining the actuarial valuation of 
     prescription drug coverage, including--
       ``(i) an actuarial valuation of standard coverage and of 
     the reinsurance subsidy payments under section 1860H;
       ``(ii) the use of generally accepted actuarial principles 
     and methodologies; and
       ``(iii) applying the same methodology for determinations of 
     alternative coverage under subsection (c) as is used with 
     respect to determinations of standard coverage under 
     subsection (b); and
       ``(B) for determining annual percentage increases described 
     in subsection (b)(5).
       ``(2) Use of outside actuaries.--Under the processes under 
     paragraph (1)(A), PDP sponsors and Medicare+Choice 
     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).
       ``(f) Covered Outpatient Drugs Defined.--
       ``(1) In general.--Except as provided in this subsection, 
     for purposes of this part, the term `covered outpatient drug' 
     means--
       ``(A) a drug that may be dispensed only upon a prescription 
     and that is described in subparagraph (A)(i) or (A)(ii) of 
     section 1927(k)(2); or
       ``(B) a biological product described in clauses (i) through 
     (iii) of subparagraph (B) of such section or insulin 
     described in subparagraph (C) of such section,

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

     Such exclusions are determinations subject to reconsideration 
     and appeal pursuant to section 1860C(f).

     ``SEC. 1860C. BENEFICIARY PROTECTIONS FOR QUALIFIED 
                   PRESCRIPTION DRUG COVERAGE.

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

     Such information shall also be made available on request to 
     prospective enrollees during annual open enrollment periods.
       ``(2) Disclosure upon request of general coverage, 
     utilization, and grievance information.--Upon request of an 
     individual eligible to enroll under a prescription drug plan, 
     the PDP sponsor shall provide the information described in 
     section 1852(c)(2) (other than subparagraph (D)) to such 
     individual.
       ``(3) Response to beneficiary questions.--Each PDP sponsor 
     offering a prescription drug plan shall have a mechanism for 
     providing specific information to enrollees upon request. The 
     sponsor shall make available on a timely basis, through an 
     Internet website and in writing upon request, information on 
     specific changes in its formulary.
       ``(4) Claims information.--Each PDP sponsor offering a 
     prescription drug plan must furnish to enrolled individuals 
     in a form easily understandable to such individuals an 
     explanation of benefits (in accordance with section 1806(a) 
     or in a comparable manner) and a notice of the benefits in 
     relation to initial coverage limit and annual out-of-pocket 
     threshold for the current year, whenever prescription drug 
     benefits are provided under this part (except that such 
     notice need not be provided more often than monthly).
       ``(c) Access to Covered Benefits.--
       ``(1) Assuring pharmacy access.--
       ``(A) In general.--The PDP sponsor of the 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 under section 1860D(e) 
     that ensure such convenient access.
       ``(B) Use of point-of-service system.--A PDP sponsor 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 premiums and copayments any additional costs 
     associated with the point-of-service option.

     The additional copayments so charged shall not count toward 
     the application of section 1860B(b).
       ``(2) Use of standardized technology.--
       ``(A) In general.--The PDP sponsor of a prescription drug 
     plan shall issue (and reissue, as appropriate) such a card 
     (or other technology) that may be used by an enrolled 
     beneficiary to assure access to negotiated prices under 
     section 1860B(d) for the purchase of prescription drugs for 
     which coverage is not otherwise provided under the 
     prescription drug plan.
       ``(B) Standards.--
       ``(i) Development.--The Administrator shall provide for the 
     development of national standards relating to a standardized 
     format for the card or other technology referred to in 
     subparagraph (A). Such standards shall be compatible with 
     standards established under part C of title XI.
       ``(ii) Application of advisory task force.--The advisory 
     task force established under subsection (d)(3)(B)(ii) shall 
     provide recommendations to the Administrator under such 
     subsection regarding the standards developed under clause 
     (i).
       ``(3) Requirements on development and application of 
     formularies.--If a PDP sponsor of a prescription drug plan 
     uses a formulary, the following requirements must be met:
       ``(A) Pharmacy and therapeutic (p&t) committee.--The 
     sponsor must establish a pharmacy and therapeutic committee 
     that develops and reviews the formulary. Such committee shall 
     include at least one practicing physician and at least one 
     practicing pharmacist both with expertise in the care of 
     elderly or disabled persons and a majority of its members 
     shall consist of individuals who are a practicing physician 
     or a practicing pharmacist (or both).

[[Page 11912]]

       ``(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 such 
     other information as the committee determines to be 
     appropriate.
       ``(C) Inclusion of drugs in all therapeutic categories.--
     The formulary must include drugs within each therapeutic 
     category and class of covered outpatient drugs (although not 
     necessarily for all drugs within such categories and 
     classes).
       ``(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 
     and physicians.
       ``(F) Grievances and appeals relating to application of 
     formularies.--For provisions relating to grievances and 
     appeals of coverage, see subsections (e) and (f).
       ``(d) Cost and Utilization Management; Quality Assurance; 
     Medication Therapy Management Program.--
       ``(1) In general.--The PDP sponsor shall have in place with 
     respect to covered outpatient drugs--
       ``(A) an effective cost and drug utilization management 
     program, including medically appropriate incentives to use 
     generic drugs and therapeutic interchange, when appropriate;
       ``(B) quality assurance measures and systems to reduce 
     medical errors and adverse drug interactions, including a 
     medication therapy management program described in paragraph 
     (2) and for years beginning with 2006, an electronic 
     prescription program described in paragraph (3); and
       ``(C) a program to control fraud, abuse, and waste.

     Nothing in this section shall be construed as impairing a PDP 
     sponsor 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, and congestive heart 
     failure) or multiple prescriptions, that covered outpatient 
     drugs under the prescription drug plan are appropriately used 
     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 PDP sponsor of 
     a prescription drug program 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) Electronic prescription program.--
       ``(A) In general.--An electronic prescription drug program 
     described in this paragraph is a program that includes at 
     least the following components, consistent with national 
     standards established under subparagraph (B):
       ``(i) Electronic transmittal of prescriptions.--
     Prescriptions are only received electronically, except in 
     emergency cases and other exceptional circumstances 
     recognized by the Administrator.
       ``(ii) Provision of information to prescribing health care 
     professional.--The program provides, upon transmittal of a 
     prescription by a prescribing health care professional, for 
     transmittal by the pharmacist to the professional of 
     information that includes--

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

     To the extent feasible, such program shall permit the 
     prescribing health care professional to provide (and be 
     provided) related information on an interactive, real-time 
     basis.
       ``(B) Standards.--
       ``(i) Development.--The Administrator shall provide for the 
     development of national standards relating to the electronic 
     prescription drug program described in subparagraph (A). Such 
     standards shall be compatible with standards established 
     under part C of title XI.
       ``(ii) Advisory task force.--In developing such standards 
     and the standards described in subsection (c)(2)(B)(i) the 
     Administrator shall establish a task force that includes 
     representatives of physicians, hospitals, pharmacists, and 
     technology experts and representatives of the Departments of 
     Veterans Affairs and Defense and other appropriate Federal 
     agencies to provide recommendations to the Administrator on 
     such standards, including recommendations relating to the 
     following:

       ``(I) The range of available computerized prescribing 
     software and hardware and their costs to develop and 
     implement.
       ``(II) The extent to which such systems reduce medication 
     errors and can be readily implemented by physicians and 
     hospitals.
       ``(III) Efforts to develop a common software platform for 
     computerized prescribing.
       ``(IV) The cost of implementing such systems in the range 
     of hospital and physician office settings, including 
     hardware, software, and training costs.
       ``(V) Implementation issues as they relate to part C of 
     title XI, and current Federal and State prescribing laws and 
     regulations and their impact on implementation of 
     computerized prescribing.

       ``(iii) Deadlines.--

       ``(I) The Administrator shall constitute the task force 
     under clause (ii) by not later than April 1, 2003.
       ``(II) Such task force shall submit recommendations to 
     Administrator by not later than January 1, 2004.
       ``(III) The Administrator shall develop and promulgate the 
     national standards referred to in clause (ii) by not later 
     than January 1, 2005.

       ``(C) Reference to availability of grant funds.--Grant 
     funds are authorized under section 399O of the Public Health 
     Service Act to provide assistance to health care providers in 
     implementing electronic prescription drug programs.
       ``(4) Treatment of accreditation.--Section 1852(e)(4) 
     (relating to treatment of accreditation) shall apply to 
     prescription drug plans under this part with respect to the 
     following requirements, in the same manner as they apply to 
     Medicare+Choice plans under part C with respect to the 
     requirements described in a clause of section 1852(e)(4)(B):
       ``(A) Paragraph (1) (including quality assurance), 
     including medication therapy management program under 
     paragraph (2).
       ``(B) Subsection (c)(1) (relating to access to covered 
     benefits).
       ``(C) Subsection (g) (relating to confidentiality and 
     accuracy of enrollee records).
       ``(5) Public disclosure of pharmaceutical prices for 
     equivalent drugs.--Each PDP sponsor shall provide that each 
     pharmacy or other dispenser that arranges for the dispensing 
     of a covered outpatient drug shall inform the beneficiary at 
     the time of purchase of the drug of any differential between 
     the price of the prescribed drug to the enrollee and the 
     price of the lowest cost generic drug covered under the plan 
     that is therapeutically equivalent and bioequivalent.
       ``(e) Grievance Mechanism, Coverage Determinations, and 
     Reconsiderations.--
       ``(1) In general.--Each PDP sponsor shall provide 
     meaningful procedures for hearing and resolving grievances 
     between the organization (including any entity or individual 
     through which the sponsor provides covered benefits) and 
     enrollees with prescription drug plans of the sponsor under 
     this part in accordance with section 1852(f).
       ``(2) Application of coverage determination and 
     reconsideration provisions.--A PDP sponsor shall meet the 
     requirements of paragraphs (1) through (3) of section 1852(g) 
     with respect to covered benefits under the prescription drug 
     plan it offers under this part in the same manner as such 
     requirements apply to a Medicare+Choice organization with 
     respect to benefits it offers under a Medicare+Choice plan 
     under part C.
       ``(3) Request for review of tiered formulary 
     determinations.--In the case of a prescription drug plan 
     offered by a PDP sponsor 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.
       ``(f) Appeals.--
       ``(1) In general.--Subject to paragraph (2), a PDP sponsor 
     shall meet the requirements of paragraphs (4) and (5) of 
     section 1852(g) with respect to drugs not included on any 
     formulary in the same manner as such requirements apply to a 
     Medicare+Choice organization with respect to benefits it 
     offers under a Medicare+Choice plan under part C.

[[Page 11913]]

       ``(2) Formulary determinations.--An individual who is 
     enrolled in a prescription drug plan offered by a PDP sponsor 
     may appeal to obtain coverage for a covered outpatient drug 
     that is not on a formulary of the sponsor 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.
       ``(g) Confidentiality and Accuracy of Enrollee Records.--A 
     PDP sponsor shall meet the requirements of section 1852(h) 
     with respect to enrollees under this part in the same manner 
     as such requirements apply to a Medicare+Choice organization 
     with respect to enrollees under part C.

     ``SEC. 1860D. REQUIREMENTS FOR PRESCRIPTION DRUG PLAN (PDP) 
                   SPONSORS; CONTRACTS; ESTABLISHMENT OF 
                   STANDARDS.

       ``(a) General Requirements.--Each PDP sponsor of a 
     prescription drug plan shall meet the following requirements:
       ``(1) Licensure.--Subject to subsection (c), the sponsor is 
     organized and licensed under State law as a risk-bearing 
     entity eligible to offer health insurance or health benefits 
     coverage in each State in which it offers a prescription drug 
     plan.
       ``(2) Assumption of financial risk for unsubsidized 
     coverage.--
       ``(A) In general.--Subject to subparagraph (B) and section 
     1860E(d)(2), the entity assumes full financial risk on a 
     prospective basis for qualified prescription drug coverage 
     that it offers under a prescription drug plan and that is not 
     covered under section 1860H.
       ``(B) Reinsurance permitted.--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 sponsors.--In the case of a 
     sponsor that is not described in paragraph (1), the sponsor 
     shall meet solvency standards established by the 
     Administrator under subsection (d).
       ``(b) Contract Requirements.--
       ``(1) In general.--The Administrator shall not permit the 
     election under section 1860A of a prescription drug plan 
     offered by a PDP sponsor under this part, and the sponsor 
     shall not be eligible for payments under section 1860G or 
     1860H, unless the Administrator has entered into a contract 
     under this subsection with the sponsor with respect to the 
     offering of such plan. Such a contract with a sponsor may 
     cover more than one prescription drug plan. Such contract 
     shall provide that the sponsor agrees to comply with the 
     applicable requirements and standards of this part and the 
     terms and conditions of payment as provided for in this part.
       ``(2) Negotiation regarding terms and conditions.--The 
     Administrator shall have the same authority to negotiate the 
     terms and conditions of prescription drug plans under this 
     part as the Director of the Office of Personnel Management 
     has with respect to health benefits plans under chapter 89 of 
     title 5, United States Code. In negotiating the terms and 
     conditions regarding premiums for which information is 
     submitted under section 1860F(a)(2), the Administrator shall 
     take into account the subsidy payments under section 1860H 
     and the adjusted community rate (as defined in section 
     1854(f)(3)) for the benefits covered.
       ``(3) Incorporation of certain medicare+choice contract 
     requirements.--The following provisions of section 1857 shall 
     apply, subject to subsection (c)(5), to contracts under this 
     section in the same manner as they apply to contracts under 
     section 1857(a):
       ``(A) Minimum enrollment.--Paragraphs (1) and (3) of 
     section 1857(b).
       ``(B) Contract period and effectiveness.--Paragraphs (1) 
     through (3) and (5) of section 1857(c).
       ``(C) Protections against fraud and beneficiary 
     protections.--Section 1857(d).
       ``(D) Additional contract terms.--Section 1857(e); except 
     that in applying section 1857(e)(2) under this part--
       ``(i) such section shall be applied separately to costs 
     relating to this part (from costs under part C);
       ``(ii) in no case shall the amount of the fee established 
     under this subparagraph for a plan exceed 20 percent of the 
     maximum amount of the fee that may be established under 
     subparagraph (B) of such section; and
       ``(iii) no fees shall be applied under this subparagraph 
     with respect to Medicare+Choice plans.
       ``(E) Intermediate sanctions.--Section 1857(g).
       ``(F) Procedures for termination.--Section 1857(h).
       ``(4) Rules of application for intermediate sanctions.--In 
     applying paragraph (3)(E)--
       ``(A) the reference in section 1857(g)(1)(B) to section 
     1854 is deemed a reference to this part; and
       ``(B) the reference in section 1857(g)(1)(F) to section 
     1852(k)(2)(A)(ii) shall not be applied.
       ``(c) Waiver of Certain Requirements to Expand Choice.--
       ``(1) In general.--In the case of an entity that seeks to 
     offer a prescription drug plan in a State, the Administrator 
     shall waive the requirement of subsection (a)(1) that the 
     entity be licensed in that State if the Administrator 
     determines, based on the application and other evidence 
     presented to the Administrator, that any of the grounds for 
     approval of the application described in paragraph (2) has 
     been met.
       ``(2) Grounds for approval.--The grounds for approval under 
     this paragraph are the grounds for approval described in 
     subparagraph (B), (C), and (D) of section 1855(a)(2), and 
     also include the application by a State of any grounds other 
     than those required under Federal law.
       ``(3) Application of waiver procedures.--With respect to an 
     application for a waiver (or a waiver granted) under this 
     subsection, the provisions of subparagraphs (E), (F), and (G) 
     of section 1855(a)(2) shall apply.
       ``(4) Licensure does not substitute for or constitute 
     certification.--The fact that an entity is licensed in 
     accordance with subsection (a)(1) does not deem the entity to 
     meet other requirements imposed under this part for a PDP 
     sponsor.
       ``(5) References to certain provisions.--For purposes of 
     this subsection, in applying provisions of section 1855(a)(2) 
     under this subsection to prescription drug plans and PDP 
     sponsors--
       ``(A) any reference to a waiver application under section 
     1855 shall be treated as a reference to a waiver application 
     under paragraph (1); and
       ``(B) any reference to solvency standards shall be treated 
     as a reference to solvency standards established under 
     subsection (d).
       ``(d) Solvency Standards for Non-Licensed Sponsors.--
       ``(1) Establishment.--The Administrator shall establish, by 
     not later than October 1, 2003, financial solvency and 
     capital adequacy standards that an entity that does not meet 
     the requirements of subsection (a)(1) must meet to qualify as 
     a PDP sponsor under this part.
       ``(2) Compliance with standards.--Each PDP sponsor that is 
     not licensed by a State under subsection (a)(1) and for which 
     a waiver application has been approved under subsection (c) 
     shall meet solvency and capital adequacy standards 
     established under paragraph (1). The Administrator shall 
     establish certification procedures for such PDP sponsors with 
     respect to such solvency standards in the manner described in 
     section 1855(c)(2).
       ``(e) Other Standards.--The Administrator shall establish 
     by regulation other standards (not described in subsection 
     (d)) for PDP sponsors and plans consistent with, and to carry 
     out, this part. The Administrator shall publish such 
     regulations by October 1, 2003.
       ``(f) Relation to State Laws.--
       ``(1) In general.--The standards established under this 
     part shall supersede any State law or regulation (other than 
     State licensing laws or State laws relating to plan solvency, 
     except as provided in subsection (d)) with respect to 
     prescription drug plans which are offered by PDP sponsors 
     under this part.
       ``(2) Prohibition of state imposition of premium taxes.--No 
     State may impose a premium tax or similar tax with respect to 
     premiums paid to PDP sponsors for prescription drug plans 
     under this part, or with respect to any payments made to such 
     a sponsor by the Administrator under this part.

     ``SEC. 1860E. PROCESS FOR BENEFICIARIES TO SELECT QUALIFIED 
                   PRESCRIPTION DRUG COVERAGE.

       ``(a) In General.--The Administrator shall establish a 
     process for the selection of the prescription drug plan or 
     Medicare+Choice plan which offer qualified prescription drug 
     coverage through which eligible individuals elect qualified 
     prescription drug coverage under this part.
       ``(b) Elements.--Such process shall include the following:
       ``(1) Annual, coordinated election periods, in which such 
     individuals can change the qualifying plans through which 
     they obtain coverage, in accordance with section 1860A(b)(2).
       ``(2) Active dissemination of information to promote an 
     informed selection among qualifying plans based upon price, 
     quality, and other features, in the manner described in (and 
     in coordination with) section 1851(d), including the 
     provision of annual comparative information, maintenance of a 
     toll-free hotline, and the use of non-Federal entities.
       ``(3) Coordination of elections through filing with a 
     Medicare+Choice organization or a PDP sponsor, in the manner 
     described in (and in coordination with) section 1851(c)(2).
       ``(c) Medicare+Choice Enrollee In Plan Offering 
     Prescription Drug Coverage May Only Obtain Benefits Through 
     the Plan.--An individual who is enrolled under a 
     Medicare+Choice plan that offers qualified prescription drug 
     coverage may only elect to receive qualified prescription 
     drug coverage under this part through such plan.
       ``(d) Assuring Access to a Choice of Qualified Prescription 
     Drug Coverage.--
       ``(1) Choice of at least two plans in each area.--
       ``(A) In general.--The Administrator shall assure that each 
     individual who is entitled to benefits under part A or 
     enrolled under part B and who is residing in an area in the 
     United States has available, consistent with subparagraph 
     (B), a choice of enrollment in at least two qualifying plans 
     (as defined in paragraph (5)) in the area in which the 
     individual resides, at least one of which is a prescription 
     drug plan.

[[Page 11914]]

       ``(B) Requirement for different plan sponsors.--The 
     requirement in subparagraph (A) is not satisfied with respect 
     to an area if only one PDP sponsor or Medicare+Choice 
     organization offers all the qualifying plans in the area.
       ``(2) Guaranteeing access to coverage.--In order to assure 
     access under paragraph (1) and consistent with paragraph (3), 
     the Administrator may provide financial incentives (including 
     partial underwriting of risk) for a PDP sponsor to expand the 
     service area under an existing prescription drug plan to 
     adjoining or additional areas or to establish such a plan 
     (including offering such a plan on a regional or nationwide 
     basis), but only so long as (and to the extent) necessary to 
     assure the access guaranteed under paragraph (1).
       ``(3) Limitation on authority.--In exercising authority 
     under this subsection, the Administrator--
       ``(A) shall not provide for the full underwriting of 
     financial risk for any PDP sponsor;
       ``(B) shall not provide for any underwriting of financial 
     risk for a public PDP sponsor with respect to the offering of 
     a nationwide prescription drug plan; and
       ``(C) shall seek to maximize the assumption of financial 
     risk by PDP sponsors or Medicare+Choice organizations.
       ``(4) Reports.--The Administrator shall, in each annual 
     report to Congress under section 1808(f), include information 
     on the exercise of authority under this subsection. The 
     Administrator also shall include such recommendations as may 
     be appropriate to minimize the exercise of such authority, 
     including minimizing the assumption of financial risk.
       ``(5) Qualifying plan defined.--For purposes of this 
     subsection, the term `qualifying plan' means a prescription 
     drug plan or a Medicare+Choice plan that includes qualified 
     prescription drug coverage.

     ``SEC. 1860F. SUBMISSION OF BIDS AND PREMIUMS.

       ``(a) Submission of Bids, Premiums, and Related 
     Information.--
       ``(1) In general.--Each PDP sponsor shall submit to the 
     Administrator the information described in paragraph (2) in 
     the same manner as information is submitted by a 
     Medicare+Choice organization under section 1854(a)(1).
       ``(2) Information submitted.--The information described in 
     this paragraph is the following:
       ``(A) Coverage provided.--Information on the qualified 
     prescription drug coverage to be provided.
       ``(B) Actuarial value.--Information on the actuarial value 
     of the coverage.
       ``(C) Bid and premium.--Information on the bid and the 
     premium for the coverage, including an actuarial 
     certification of--
       ``(i) the actuarial basis for such bid and premium;
       ``(ii) the portion of such bid and premium attributable to 
     benefits in excess of standard coverage; and
       ``(iii) the reduction in such bid and premium resulting 
     from the subsidy payments provided under section 1860H.
       ``(D) Additional information.--Such other information as 
     the Administrator may require to carry out this part.
       ``(3) Review of information and approval of premiums.--The 
     Administrator shall review the information filed under 
     paragraph (2) for the purpose of conducting negotiations 
     under section 1860D(b)(2). The Administrator, using the 
     information provided (including the actuarial certification 
     under paragraph (2)(C)) shall approve the premium submitted 
     under this subsection only if the premium accurately reflects 
     both (A) the actuarial value of the benefits provided, and 
     (B) the 67 percent subsidy provided under section 1860H for 
     the standard benefit. The Administrator shall apply actuarial 
     principles to approval of a premium under this part in a 
     manner similar to the manner in which those principles are 
     applied in establishing the monthly part B premium under 
     section 1839.
       ``(b) Uniform Bid and Premium.--
       ``(1) In general.--The bid and premium for a prescription 
     drug plan under this section may not vary among individuals 
     enrolled in the plan in the same service area.
       ``(2) Construction.--Nothing in paragraph (1) shall be 
     construed as preventing the imposition of a late enrollment 
     penalty under section 1860A(c)(2)(B).
       ``(c) Collection.--
       ``(1) Beneficiary's option of payment through withholding 
     from social security payment or use of electronic funds 
     transfer mechanism.--In accordance with regulations, a PDP 
     sponsor shall permit each enrollee, at the enrollee's option, 
     to make payment of premiums under this part through 
     withholding from benefit payments in the manner provided 
     under section 1840 with respect to monthly premiums under 
     section 1839 or through an electronic funds transfer 
     mechanism (such as automatic charges of an account at a 
     financial institution or a credit or debit card account) or 
     otherwise. All such amounts shall be credited to the Medicare 
     Prescription Drug Trust Fund.
       ``(2) Offsetting.--Reductions in premiums for coverage 
     under parts A and B as a result of a selection of a 
     Medicare+Choice plan may be used to reduce the premium 
     otherwise imposed under paragraph (1).
       ``(3) Payment of plans.--PDP plans shall receive payment 
     based on bid amounts in the same manner as Medicare+Choice 
     organizations receive payment based on bid amounts under 
     section 1853(a)(1)(A)(ii) except that such payment shall be 
     made from the Medicare Prescription Drug Trust Fund.
       ``(d) Acceptance of Benchmark Amount as Full Premium for 
     Subsidized Low-Income Individuals if No Standard (or 
     Equivalent) Coverage in an Area.--
       ``(1) In general.--If there is no standard prescription 
     drug coverage (as defined in paragraph (2)) offered in an 
     area, in the case of an individual who is eligible for a 
     premium subsidy under section 1860G and resides in the area, 
     the PDP sponsor of any prescription drug plan offered in the 
     area (and any Medicare+Choice organization that offers 
     qualified prescription drug coverage in the area) shall 
     accept the benchmark bid amount (under section 1860G(b)(2)) 
     as payment in full for the premium charge for qualified 
     prescription drug coverage.
       ``(2) Standard prescription drug coverage defined.--For 
     purposes of this subsection, the term `standard prescription 
     drug coverage' means qualified prescription drug coverage 
     that is standard coverage or that has an actuarial value 
     equivalent to the actuarial value for standard coverage.

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

       ``(a) Income-Related Subsidies for Individuals With Income 
     Below 175 Percent of Federal Poverty Level.--
       ``(1) Full premium subsidy and reduction of cost-sharing 
     for individuals with income below 150 percent of federal 
     poverty level.--In the case of a subsidy eligible individual 
     (as defined in paragraph (4)) who is determined to have 
     income that does not exceed 150 percent of the Federal 
     poverty level, the individual is entitled under this 
     section--
       ``(A) to an income-related premium subsidy equal to 100 
     percent of the amount described in subsection (b)(1); and
       ``(B) subject to subsection (c), to the substitution for 
     the beneficiary cost-sharing described in paragraphs (1) and 
     (2) of section 1860B(b) (up to the initial coverage limit 
     specified in paragraph (3) of such section) of amounts that 
     do not exceed $2 for a multiple source or generic drug (as 
     described in section 1927(k)(7)(A)) and $5 for a non-
     preferred drug.
       ``(2) Sliding scale premium subsidy and reduction of cost-
     sharing for individuals with income above 150, but below 175 
     percent, of federal poverty level.--In the case of a subsidy 
     eligible individual who is determined to have income that 
     exceeds 150 percent, but does not exceed 175 percent, of the 
     Federal poverty level, the individual is entitled under this 
     section to--
       ``(A) an income-related premium subsidy determined on a 
     linear sliding scale ranging from 100 percent of the amount 
     described in subsection (b)(1) for individuals with incomes 
     at 150 percent of such level to 0 percent of such amount for 
     individuals with incomes at 175 percent of such level; and
       ``(B) subject to subsection (c), to the substitution for 
     the beneficiary cost-sharing described in paragraphs (1) and 
     (2) of section 1860B(b) (up to the initial coverage limit 
     specified in paragraph (3) of such section) of amounts that 
     do not exceed $2 for a multiple source or generic drug (as 
     described in section 1927(k)(7)(A)) and $5 for a non-
     preferred drug.
       ``(3) Construction.--Nothing in this section shall be 
     construed as preventing a PDP sponsor from reducing to 0 the 
     cost-sharing otherwise applicable to generic drugs.
       ``(4) Determination of eligibility.--
       ``(A) Subsidy eligible individual defined.--For purposes of 
     this section, subject to subparagraph (D), the term `subsidy 
     eligible individual' means an individual who--
       ``(i) is eligible to elect, and has elected, to obtain 
     qualified prescription drug coverage under this part;
       ``(ii) has income below 175 percent of the Federal poverty 
     line; and
       ``(iii) meets the resources requirement described in 
     section 1905(p)(1)(C).
       ``(B) Determinations.--The determination of whether an 
     individual residing in a State is a subsidy eligible 
     individual and the amount of such individual's income shall 
     be determined under the State medicaid plan for the State 
     under section 1935(a) or by the Social Security 
     Administration. In the case of a State that does not operate 
     such a medicaid plan (either under title XIX or under a 
     statewide waiver granted under section 1115), such 
     determination shall be made under arrangements made by the 
     Administrator. There are authorized to be appropriated to the 
     Social Security Administration such sums as may be necessary 
     for the determination of eligibility under this subparagraph.
       ``(C) Income determinations.--For purposes of applying this 
     section--
       ``(i) income shall be determined in the manner described in 
     section 1905(p)(1)(B); and
       ``(ii) the term `Federal poverty line' means the official 
     poverty line (as defined by the Office of Management and 
     Budget, and revised annually in accordance with section 
     673(2) of the Omnibus Budget Reconciliation

[[Page 11915]]

     Act of 1981) applicable to a family of the size involved.
       ``(D) Treatment of territorial residents.--In the case of 
     an individual who is not a resident of the 50 States or the 
     District of Columbia, the individual is not eligible to be a 
     subsidy eligible individual but may be eligible for financial 
     assistance with prescription drug expenses under section 
     1935(e).
       ``(E) Treatment of conforming medigap policies.--For 
     purposes of this section, the term `qualified prescription 
     drug coverage' includes a medicare supplemental policy 
     described in section 1860H(b)(4).
       ``(5) Indexing dollar amounts.--
       ``(A) For 2006.--The dollar amounts applied under 
     paragraphs (1)(B) and (2)(B) for 2006 shall be the dollar 
     amounts specified in such paragraph increased by the annual 
     percentage increase described in section 1860B(b)(5) for 
     2006.
       ``(B) For subsequent years.--The dollar amounts applied 
     under paragraphs (1)(B) and (2)(B) for a year after 2006 
     shall be the amounts (under this paragraph) applied under 
     paragraph (1)(B) or (2)(B) for the preceding year increased 
     by the annual percentage increase described in section 
     1860B(b)(5) (relating to growth in medicare prescription drug 
     costs per beneficiary) for the year involved.
       ``(b) Premium Subsidy Amount.--
       ``(1) In general.--The premium subsidy amount described in 
     this subsection for an individual residing in an area is the 
     benchmark bid amount (as defined in paragraph (2)) for 
     qualified prescription drug coverage offered by the 
     prescription drug plan or the Medicare+Choice plan in which 
     the individual is enrolled.
       ``(2) Benchmark bid amount defined.--For purposes of this 
     subsection, the term `benchmark bid amount' means, with 
     respect to qualified prescription drug coverage offered 
     under--
       ``(A) a prescription drug plan that--
       ``(i) provides standard coverage (or alternative 
     prescription drug coverage the actuarial value is equivalent 
     to that of standard coverage), the bid amount for enrollment 
     under the plan under this part (determined without regard to 
     any subsidy under this section or any late enrollment penalty 
     under section 1860A(c)(2)(B)); or
       ``(ii) provides alternative prescription drug coverage the 
     actuarial value of which is greater than that of standard 
     coverage, the bid amount described in clause (i) multiplied 
     by the ratio of (I) the actuarial value of standard coverage, 
     to (II) the actuarial value of the alternative coverage; or
       ``(B) a Medicare+Choice plan, the portion of the bid amount 
     that is attributable to statutory drug benefits (described in 
     section 1853(a)(1)(A)(ii)(II)).
       ``(c) Rules in Applying Cost-Sharing Subsidies.--
       ``(1) In general.--In applying subsections (a)(1)(B) and 
     (a)(2)(B), nothing in this part shall be construed as 
     preventing a plan or provider from waiving or reducing the 
     amount of cost-sharing otherwise applicable.
       ``(2) Limitation on charges.--In the case of an individual 
     receiving cost-sharing subsidies under subsection (a)(1)(B) 
     or (a)(2)(B), the PDP sponsor may not charge more than $5 per 
     prescription.
       ``(3) Application of indexing rules.--The provisions of 
     subsection (a)(4) shall apply to the dollar amount specified 
     in paragraph (2) in the same manner as they apply to the 
     dollar amounts specified in subsections (a)(1)(B) and 
     (a)(2)(B).
       ``(d) Administration of Subsidy Program.--The Administrator 
     shall provide a process whereby, in the case of an individual 
     who is determined to be a subsidy eligible individual and who 
     is enrolled in prescrip-
     tion drug plan or is enrolled in a Medicare+Choice plan under 
     which qualified prescription drug coverage is provided--
       ``(1) the Administrator provides for a 
     notification of the PDP sponsor or Medicare+Choice 
     organization involved that the individual is eligible for a 
     subsidy and the amount of the subsidy under subsection (a);
       ``(2) the sponsor or organization involved reduces the 
     premiums or cost-sharing otherwise imposed by the amount of 
     the applicable subsidy and submits to the Administrator 
     information on the amount of such reduction; and
       ``(3) the Administrator periodically and on a timely basis 
     reimburses the sponsor or organization for the amount of such 
     reductions.

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

     ``SEC. 1860H. SUBSIDIES FOR ALL MEDICARE BENEFICIARIES FOR 
                   QUALIFIED PRESCRIPTION DRUG COVERAGE.

       ``(a) Subsidy Payment.--In order to reduce premium levels 
     applicable to qualified prescription drug coverage for all 
     medicare beneficiaries consistent with an overall subsidy 
     level of 67 percent, to reduce adverse selection among 
     prescription drug plans and Medicare+Choice plans that 
     provide qualified prescription drug coverage, and to promote 
     the participation of PDP sponsors under this part, the 
     Administrator shall provide in accordance with this section 
     for payment to a qualifying entity (as defined in subsection 
     (b)) of the following subsidies:
       ``(1) Direct subsidy.--In the case of an individual 
     enrolled in a prescription drug plan, Medicare+Choice plan 
     that provides qualified prescription drug coverage, or 
     qualified retiree prescription drug plan, a direct subsidy 
     equal to 37 percent of the total payments made by a 
     qualifying entity for standard coverage under the respective 
     plan.
       ``(2) Subsidy through reinsurance.--The reinsurance payment 
     amount (as defined in subsection (c)), which in the aggregate 
     is 30 percent of such total payments, for excess costs 
     incurred in providing qualified prescription drug coverage--
       ``(A) for individuals enrolled with a prescription drug 
     plan under this part;
       ``(B) for individuals enrolled with a Medicare+Choice plan 
     that provides qualified prescription drug coverage; and
       ``(C) for individuals who are enrolled in a qualified 
     retiree prescription drug plan.

     This section constitutes budget authority in advance of 
     appropriations Acts and represents the obligation of the 
     Administrator to provide for the payment of amounts provided 
     under this section.
       ``(b) Qualifying Entity Defined.--For purposes of this 
     section, the term `qualifying entity' means any of the 
     following that has entered into an agreement with the 
     Administrator to provide the Administrator with such 
     information as may be required to carry out this section:
       ``(1) A PDP sponsor offering a prescription drug plan under 
     this part.
       ``(2) A Medicare+Choice organization that provides 
     qualified prescription drug coverage under a Medicare+Choice 
     plan under part C.
       ``(3) The sponsor of a qualified retiree prescription drug 
     plan (as defined in subsection (f)).
       ``(c) Reinsurance Payment Amount.--
       ``(1) In general.--Subject to subsection (d)(1)(B) and 
     paragraph (4), the reinsurance payment amount under this 
     subsection for a qualifying covered individual (as defined in 
     subsection (g)(1)) for a coverage year (as defined in 
     subsection (g)(2)) is equal to the sum of the following:
       ``(A) For the portion of the individual's gross covered 
     prescription drug costs (as defined in paragraph (3)) for the 
     year that exceeds the initial copayment threshold specified 
     in section 1860B(b)(2)(C), but does not exceed the initial 
     coverage limit specified in section 1860B(b)(3), an amount 
     equal to 30 percent of the allowable costs (as defined in 
     paragraph (2)) attributable to such gross covered 
     prescription drug costs.
       ``(B) For the portion of the individual's gross covered 
     prescription drug costs for the year that exceeds the annual 
     out-of-pocket threshold specified in 1860B(b)(4)(B), an 
     amount equal to 80 percent of the allowable costs 
     attributable to such gross covered prescription drug costs.
       ``(2) Allowable costs.--For purposes of this section, the 
     term `allowable costs' means, with respect to gross covered 
     prescription drug costs under a plan described in subsection 
     (b) offered by a qualifying entity, the part of such costs 
     that are actually paid (net of average percentage rebates) 
     under the plan, but in no case more than the part of such 
     costs that would have been paid under the plan if the 
     prescription drug coverage under the plan were standard 
     coverage.
       ``(3) Gross covered prescription drug costs.--For purposes 
     of this section, the term `gross covered prescription drug 
     costs' means, with respect to an enrollee with a qualifying 
     entity under a plan described in subsection (b) during a 
     coverage year, the costs incurred under the plan (including 
     costs attributable to administrative costs) for covered 
     prescription drugs dispensed during the year, including costs 
     relating to the deductible, whether paid by the enrollee or 
     under the plan, regardless of whether the coverage under the 
     plan exceeds standard coverage and regardless of when the 
     payment for such drugs is made.
       ``(4) Indexing dollar amounts.--
       ``(A) Amounts for 2005.--The dollar amounts applied under 
     paragraph (1) for 2005 shall be the dollar amounts specified 
     in such paragraph.
       ``(B) For 2006.--The dollar amounts applied under paragraph 
     (1) for 2006 shall be the dollar amounts specified in such 
     paragraph increased by the annual percentage increase 
     described in section 1860B(b)(5) for 2006.
       ``(C) For subsequent years.--The dollar amounts applied 
     under paragraph (1) for a

[[Page 11916]]

     year after 2006 shall be the amounts (under this paragraph) 
     applied under paragraph (1) for the preceding year increased 
     by the annual percentage increase described in section 
     1860B(b)(5) (relating to growth in medicare prescription drug 
     costs per beneficiary) for the year involved.
       ``(D) Rounding.--Any amount, determined under the preceding 
     provisions of this paragraph for a year, which is not a 
     multiple of $10 shall be rounded to the nearest multiple of 
     $10.
       ``(d) Adjustment of Payments.--
       ``(1) Adjustment of reinsurance payments to assure 30 
     percent level of subsidy through reinsurance.--
       ``(A) Estimation of payments.--The Administrator shall 
     estimate--
       ``(i) the total payments to be made (without regard to this 
     subsection) during a year under subsections (a)(2) and (c); 
     and
       ``(ii) the total payments to be made by qualifying entities 
     for standard coverage under plans described in subsection (b) 
     during the year.
       ``(B) Adjustment.--The Administrator shall proportionally 
     adjust the payments made under subsections (a)(2) and (c) for 
     a coverage year in such manner so that the total of the 
     payments made under such subsections for the year is equal to 
     30 percent of the total payments described in subparagraph 
     (A)(ii).
       ``(2) Risk adjustment for direct subsidies.--To the extent 
     the Administrator determines it appropriate to avoid risk 
     selection, the payments made for direct subsidies under 
     subsection (a)(1) are subject to adjustment based upon risk 
     factors specified by the Administrator. Any such risk 
     adjustment shall be designed in a manner as to not result in 
     a change in the aggregate payments made under such 
     subsection.
       ``(e) Payment Methods.--
       ``(1) In general.--Payments under this section shall be 
     based on such a method as the Administrator determines. The 
     Administrator may establish a payment method by which interim 
     payments of amounts under this section are made during a year 
     based on the Administrator's best estimate of amounts that 
     will be payable after obtaining all of the information.
       ``(2) Source of payments.--Payments under this section 
     shall be made from the Medicare Prescription Drug Trust Fund.
       ``(f) Qualified Retiree Prescription Drug Plan Defined.--
       ``(1) In general.--For purposes of this section, the term 
     `qualified retiree prescription drug plan' means employment-
     based retiree health coverage (as defined in paragraph 
     (3)(A)) if, with respect to an individual enrolled (or 
     eligible to be enrolled) under this part who is covered under 
     the plan, the following requirements are met:
       ``(A) 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.
       ``(B) Audits.--The sponsor (and the plan) shall maintain, 
     and afford the Administrator access to, such records as the 
     Administrator may require for purposes of audits and other 
     oversight activities necessary to ensure the adequacy of 
     prescription drug coverage, and the accuracy of payments 
     made.
       ``(C) Provision of certification of prescription drug 
     coverage.--The sponsor of the plan shall provide for issuance 
     of certifications of the type described in section 
     1860A(c)(2)(D).
       ``(2) Limitation on benefit eligibility.--No payment shall 
     be provided under this section with respect to an individual 
     who is enrolled under a qualified retiree prescription drug 
     plan unless the individual is--
       ``(A) enrolled under this part;
       ``(B) is covered under the plan; and
       ``(C) is eligible to obtain qualified prescription drug 
     coverage under section 1860A but did not elect such coverage 
     under this part (either through a prescription drug plan or 
     through a Medicare+Choice plan).
       ``(3) Definitions.--As used in this section:
       ``(A) Employment-based retiree health coverage.--The term 
     `employment-based retiree health coverage' means health 
     insurance or other coverage of health care costs for 
     individuals enrolled under this part (or for such individuals 
     and their spouses and dependents) based on their status as 
     former employees or labor union members.
       ``(B) Sponsor.--The term `sponsor' means a plan sponsor, as 
     defined in section 3(16)(B) of the Employee Retirement Income 
     Security Act of 1974.
       ``(g) General Definitions.--For purposes of this section:
       ``(1) Qualifying covered individual.--The term `qualifying 
     covered individual' means an individual who--
       ``(A) is enrolled with a prescription drug plan under this 
     part;
       ``(B) is enrolled with a Medicare+Choice plan that provides 
     qualified prescription drug coverage under part C; or
       ``(C) is enrolled for benefits under this title and is 
     covered under a qualified retiree prescription drug plan.
       ``(2) Coverage year.--The term `coverage year' means a 
     calendar year in which covered outpatient drugs are dispensed 
     if a claim for payment is made under the plan for such drugs, 
     regardless of when the claim is paid.

     ``SEC. 1860I. MEDICARE PRESCRIPTION DRUG TRUST FUND.

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

     ``SEC. 1860J. DEFINITIONS; TREATMENT OF REFERENCES TO 
                   PROVISIONS IN PART C.

       ``(a) Definitions.--For purposes of this part:
       ``(1) Covered outpatient drugs.--The term `covered 
     outpatient drugs' is defined in section 1860B(f).
       ``(2) Initial coverage limit.--The term `initial coverage 
     limit' means such limit as established under section 
     1860B(b)(3), or, in the case of coverage that is not standard 
     coverage, the comparable limit (if any) established under the 
     coverage.
       ``(3) Medicare prescription drug trust fund.--The term 
     `Medicare Prescription Drug Trust Fund' means the Trust Fund 
     created under section 1860I(a).
       ``(4) PDP sponsor.--The term `PDP sponsor' means an entity 
     that is certified under this part as meeting the requirements 
     and standards of this part for such a sponsor.
       ``(5) Prescription drug plan.--The term `prescription drug 
     plan' means health benefits coverage that--
       ``(A) is offered under a policy, contract, or plan by a PDP 
     sponsor pursuant to, and in accordance with, a contract 
     between the Administrator and the sponsor under section 
     1860D(b);
       ``(B) provides qualified prescription drug coverage; and
       ``(C) meets the applicable requirements of the section 
     1860C for a prescription drug plan.
       ``(6) Qualified prescription drug coverage.--The term 
     `qualified prescription drug coverage' is defined in section 
     1860B(a).
       ``(7) Standard coverage.--The term `standard coverage' is 
     defined in section 1860B(b).
       ``(b) Application of Medicare+Choice Provisions Under This 
     Part.--For purposes of applying provisions of part C under 
     this part with respect to a prescription drug plan and a PDP 
     sponsor, unless otherwise provided in this part such 
     provisions shall be applied as if--
       ``(1) any reference to a Medicare+Choice plan included a 
     reference to a prescription drug plan;
       ``(2) any reference to a provider-sponsored organization 
     included a reference to a PDP sponsor;
       ``(3) any reference to a contract under section 1857 
     included a reference to a contract under section 1860D(b); 
     and
       ``(4) any reference to part C included a reference to this 
     part.''.
       (b) Additional Conforming Changes.--
       (1) Conforming references to previous part d.--Any 
     reference in law (in effect before the date of the enactment 
     of this Act) to

[[Page 11917]]

     part D of title XVIII of the Social Security Act is deemed a 
     reference to part E of such title (as in effect after such 
     date).
       (2) Conforming amendment permitting waiver of cost-
     sharing.--Section 1128B(b)(3) (42 U.S.C. 1320a-7b(b)(3)) is 
     amended--
       (A) by striking ``and'' at the end of subparagraph (E);
       (B) by striking the period at the end of subparagraph (F) 
     and inserting ``; and''; and
       (C) by adding at the end the following new subparagraph:
       ``(G) the waiver or reduction of any cost-sharing imposed 
     under part D of title XVIII.''.
       (3) Submission of legislative proposal.--Not later than 6 
     months after the date of the enactment of this Act, the 
     Secretary of Health and Human Services shall submit to the 
     appropriate committees of Congress a legislative proposal 
     providing for such technical and conforming amendments in the 
     law as are required by the provisions of this subtitle.
       (c) Study on Transitioning Part B Prescription Drug 
     Coverage.--Not later than January 1, 2004, the Medicare 
     Benefits Administrator shall submit a report to Congress that 
     makes recommendations regarding methods for providing 
     benefits under part D of title XVIII of the Social Security 
     Act for outpatient prescription drugs for which benefits are 
     provided under part B of such title.

     SEC. 102. OFFERING OF QUALIFIED PRESCRIPTION DRUG COVERAGE 
                   UNDER THE MEDICARE+CHOICE PROGRAM.

       (a) In General.--Section 1851 (42 U.S.C. 1395w-21) is 
     amended by adding at the end the following new subsection:
       ``(j) Availability of Prescription Drug Benefits.--
       ``(1) Offer of qualified prescription drug coverage.--
       ``(A) In general.--A Medicare+Choice organization may not 
     offer prescription drug coverage (other than that required 
     under parts A and B) to an enrollee under a Medicare+Choice 
     plan unless such drug coverage is at least qualified 
     prescription drug coverage and unless the requirements of 
     this subsection with respect to such coverage are met.
       ``(B) Construction.--Nothing in this subsection shall be 
     construed as--
       ``(i) requiring a Medicare+Choice plan to include coverage 
     of qualified prescription drug coverage; or
       ``(ii) permitting a Medicare+Choice organization from 
     providing such coverage to an individual who has not elected 
     such coverage under section 1860A(b).

     For purposes of this part, an individual who has not elected 
     qualified prescription drug coverage under section 1860A(b) 
     shall be treated as being ineligible to enroll in a 
     Medicare+Choice plan under this part that offers such 
     coverage.
       ``(2) Compliance with additional beneficiary protections.--
     With respect to the offering of qualified prescription drug 
     coverage by a Medicare+Choice organization under a 
     Medicare+Choice plan, the organization and plan shall meet 
     the requirements of section 1860C, including requirements 
     relating to information dissemination and grievance and 
     appeals, in the same manner as they apply to a PDP sponsor 
     and a prescription drug plan under part D and shall submit to 
     the Administrator the information described in section 
     1860F(a)(2). The Administrator shall waive such requirements 
     to the extent the Administrator determines that such 
     requirements duplicate requirements otherwise applicable to 
     the organization or plan under this part.
       ``(3) Availability of premium and cost-sharing subsidies 
     for low-income enrollees and direct and reinsurance subsidy 
     payments for organizations.--For provisions--
       ``(A) providing premium and cost-sharing subsidies to low-
     income individuals receiving qualified prescription drug 
     coverage through a Medicare+Choice plan, see section 1860G; 
     and
       ``(B) providing a Medicare+Choice organization with direct 
     and insurance subsidy payments for providing qualified 
     prescription drug coverage under this part, see section 
     1860H.
       ``(4) Transition in initial enrollment period.--
     Notwithstanding any other provision of this part, the annual, 
     coordinated election period under subsection (e)(3)(B) for 
     2005 shall be the 6-month period beginning with November 
     2004.
       ``(5) Qualified prescription drug coverage; standard 
     coverage.--For purposes of this part, the terms `qualified 
     prescription drug coverage' and `standard coverage' have the 
     meanings given such terms in section 1860B.''.
       (b) Conforming Amendments.--Section 1851 (42 U.S.C. 1395w-
     21) is amended--
       (1) in subsection (a)(1)--
       (A) by inserting ``(other than qualified prescription drug 
     benefits)'' after ``benefits'';
       (B) by striking the period at the end of subparagraph (B) 
     and inserting a comma; and
       (C) by adding after and below subparagraph (B) the 
     following:

     ``and may elect qualified prescription drug coverage in 
     accordance with section 1860A.''; and
       (2) in subsection (g)(1), by inserting ``and section 
     1860A(c)(2)(B)'' after ``in this subsection''.
       (c) Effective Date.--The amendments made by this section 
     apply to coverage provided on or after January 1, 2005.

     SEC. 103. MEDICAID AMENDMENTS.

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


  ``special provisions relating to medicare prescription drug benefit

       ``Sec. 1935. (a) Requirement for Making Eligibility 
     Determinations for Low-Income Subsidies.--As a condition of 
     its State plan under this title under section 1902(a)(66) and 
     receipt of any Federal financial assistance under section 
     1903(a), a State shall--
       ``(1) make determinations of eligibility for premium and 
     cost-sharing subsidies under (and in accordance with) section 
     1860G;
       ``(2) inform the Administrator of the Medicare Benefits 
     Administration of such determinations in cases in which such 
     eligibility is established; and
       ``(3) otherwise provide such Administrator with such 
     information as may be required to carry out part D of title 
     XVIII (including section 1860G).
       ``(b) Payments for Additional Administrative Costs.--
       ``(1) In general.--The amounts expended by a State in 
     carrying out subsection (a) are, subject to paragraph (2), 
     expenditures reimbursable under the appropriate paragraph of 
     section 1903(a); except that, notwithstanding any other 
     provision of such section, the applicable Federal matching 
     rates with respect to such expenditures under such section 
     shall be increased as follows (but in no case shall the rate 
     as so increased exceed 100 percent):
       ``(A) For expenditures attributable to costs incurred 
     during 2005, the otherwise applicable Federal matching rate 
     shall be increased by 10 percent of the percentage otherwise 
     payable (but for this subsection) by the State.
       ``(B)(i) For expenditures attributable to costs incurred 
     during 2006 and each subsequent year through 2013, the 
     otherwise applicable Federal matching rate shall be increased 
     by the applicable percent (as defined in clause (ii)) of the 
     percentage otherwise payable (but for this subsection) by the 
     State.
       ``(ii) For purposes of clause (i), the `applicable percent' 
     for--
       ``(I) 2006 is 20 percent; or
       ``(II) a subsequent year is the applicable percent under 
     this clause for the previous year increased by 10 percentage 
     points.
       ``(C) For expenditures attributable to costs incurred after 
     2013, the otherwise applicable Federal matching rate shall be 
     increased to 100 percent.
       ``(2) Coordination.--The State shall provide the 
     Administrator with such information as may be necessary to 
     properly allocate administrative expenditures described in 
     paragraph (1) that may otherwise be made for similar 
     eligibility determinations.''.
       (b) Phased-In Federal Assumption of Medicaid Responsibility 
     for Premium and Cost-Sharing Subsidies for Dually Eligible 
     Individuals.--
       (1) In general.--Section 1903(a)(1) (42 U.S.C. 1396b(a)(1)) 
     is amended by inserting before the semicolon the following: 
     ``, reduced by the amount computed under section 1935(c)(1) 
     for the State and the quarter''.
       (2) Amount described.--Section 1935, as inserted by 
     subsection (a)(2), is amended by adding at the end the 
     following new subsection:
       ``(c) Federal Assumption of Medicaid Prescription Drug 
     Costs for Dually-Eligible Beneficiaries.--
       ``(1) In general.--For purposes of section 1903(a)(1), for 
     a State that is one of the 50 States or the District of 
     Columbia for a calendar quarter in a year (beginning with 
     2005) the amount computed under this subsection is equal to 
     the product of the following:
       ``(A) Medicare subsidies.--The total amount of payments 
     made in the quarter under section 1860G (relating to premium 
     and cost-sharing prescription drug subsidies for low-income 
     medicare beneficiaries) that are attributable to individuals 
     who are residents of the State and are entitled to benefits 
     with respect to prescribed drugs under the State plan under 
     this title (including such a plan operating under a waiver 
     under section 1115).
       ``(B) State matching rate.--A proportion computed by 
     subtracting from 100 percent the Federal medical assistance 
     percentage (as defined in section 1905(b)) applicable to the 
     State and the quarter.

[[Page 11918]]

       ``(C) Phase-out proportion.--The phase-out proportion (as 
     defined in paragraph (2)) for the quarter.
       ``(2) Phase-out proportion.--For purposes of paragraph 
     (1)(C), the `phase-out proportion' for a calendar quarter 
     in--
       ``(A) 2005 is 90 percent;
       ``(B) a subsequent year before 2014, is the phase-out 
     proportion for calendar quarters in the previous year 
     decreased by 10 percentage points; or
       ``(C) a year after 2013 is 0 percent.''.
       (c) Medicaid Providing Wrap-Around Benefits.--Section 1935, 
     as so inserted and amended, is further amended by adding at 
     the end the following new subsection:
       ``(d) Additional Provisions.--
       ``(1) Medicaid as secondary payor.--In the case of an 
     individual who is entitled to qualified prescription drug 
     coverage under a prescription drug plan under part D of title 
     XVIII (or under a Medicare+Choice plan under part C of such 
     title) and medical assistance for prescribed drugs under this 
     title, medical assistance shall continue to be provided under 
     this title for prescribed drugs to the extent payment is not 
     made under the prescription drug plan or the Medicare+Choice 
     plan selected by the individual.
       ``(2) Condition.--A State may require, as a condition for 
     the receipt of medical assistance under this title with 
     respect to prescription drug benefits for an individual 
     eligible to obtain qualified prescription drug coverage 
     described in paragraph (1), that the individual elect 
     qualified prescription drug coverage under section 1860A.''.
       (d) Treatment of Territories.--
       (1) In general.--Section 1935, as so inserted and amended, 
     is further amended--
       (A) in subsection (a) in the matter preceding paragraph 
     (1), by inserting ``subject to subsection (e)'' after 
     ``section 1903(a)'';
       (B) in subsection (c)(1), by inserting ``subject to 
     subsection (e)'' after ``1903(a)(1)''; and
       (C) by adding at the end the following new subsection:
       ``(e) Treatment of Territories.--
       ``(1) In general.--In the case of a State, other than the 
     50 States and the District of Columbia--
       ``(A) the previous provisions of this section shall not 
     apply to residents of such State; and
       ``(B) if the State establishes a plan described in 
     paragraph (2) (for providing medical assistance with respect 
     to the provision of prescription drugs to medicare 
     beneficiaries), the amount otherwise determined under section 
     1108(f) (as increased under section 1108(g)) for the State 
     shall be increased by the amount specified in paragraph (3).
       ``(2) Plan.--The plan described in this paragraph is a plan 
     that--
       ``(A) provides medical assistance with respect to the 
     provision of covered outpatient drugs (as defined in section 
     1860B(f)) to low-income medicare beneficiaries; and
       ``(B) assures that additional amounts received by the State 
     that are attributable to the operation of this subsection are 
     used only for such assistance.
       ``(3) Increased amount.--
       ``(A) In general.--The amount specified in this paragraph 
     for a State for a year is equal to the product of--
       ``(i) the aggregate amount specified in subparagraph (B); 
     and
       ``(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) 2005, is equal to $20,000,000; or
       ``(ii) a subsequent year, is equal to the aggregate amount 
     specified in this subparagraph for the previous year 
     increased by annual percentage increase specified in section 
     1860B(b)(5) for the year involved.
       ``(4) Report.--The Administrator shall submit to Congress a 
     report on the application of this subsection and may include 
     in the report such recommendations as the Administrator deems 
     appropriate.''.
       (2) Conforming amendment.--Section 1108(f) (42 U.S.C. 
     1308(f)) is amended by inserting ``and section 
     1935(e)(1)(B)'' after ``Subject to subsection (g)''.
       (e) Amendment to Best Price.--Section 1927(c)(1)(C)(i) (42 
     U.S.C. 1396r-8(c)(1)(C)(i)) is amended--
       (1) by striking ``and'' at the end of subclause (III);
       (2) by striking the period at the end of subclause (IV) and 
     inserting ``; and''; and
       (3) by adding at the end the following new subclause:

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

     SEC. 104. MEDIGAP TRANSITION.

       (a) In General.--Section 1882 (42 U.S.C. 1395ss) is amended 
     by adding at the end the following new subsection:
       ``(v) Coverage of Prescription Drugs.--
       ``(1) In general.--Notwithstanding any other provision of 
     law, except as provided in paragraph (3) no new medicare 
     supplemental policy that provides coverage of expenses for 
     prescription drugs may be issued under this section on or 
     after January 1, 2005, to an individual unless it replaces a 
     medicare supplemental policy that was issued to that 
     individual and that provided some coverage of expenses for 
     prescription drugs.
       ``(2) Issuance of substitute policies if obtain 
     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', 
     or `G' (under the standards established under subsection 
     (p)(2)) and that is offered and is available for issuance to 
     new enrollees by such issuer;
       ``(ii) may not discriminate in the pricing of such policy, 
     because of health status, claims experience, receipt of 
     health care, or medical condition; and
       ``(iii) may not impose an exclusion of benefits based on a 
     pre-existing condition under such policy,

     in the case of an individual described in subparagraph (B) 
     who seeks to enroll under the policy not later than 63 days 
     after the date of the termination of enrollment described in 
     such paragraph and who submits evidence of the date of 
     termination or disenrollment along with the application for 
     such medicare supplemental policy.
       ``(B) Individual covered.--An individual described in this 
     subparagraph is an individual who--
       ``(i) enrolls in a prescription drug plan under part D; and
       ``(ii) at the time of such enrollment was enrolled and 
     terminates enrollment in a medicare supplemental policy which 
     has a benefit package classified as `H', `I', or `J' under 
     the standards referred to in subparagraph (A)(i) or 
     terminates enrollment in a policy to which such standards do 
     not apply but which provides benefits for prescription drugs.
       ``(C) Enforcement.--The provisions of paragraph (4) of 
     subsection (s) shall apply with respect to the requirements 
     of this paragraph in the same manner as they apply to the 
     requirements of such subsection.
       ``(3) New standards.--In applying subsection (p)(1)(E) 
     (including permitting the NAIC to revise its model 
     regulations in response to changes in law) with respect to 
     the change in benefits resulting from title I of the Medicare 
     Modernization and Prescription Drug Act of 2002, with respect 
     to policies issued to individuals who are enrolled under part 
     D, the changes in standards shall only provide for 
     substituting for the benefit packages that included coverage 
     for prescription drugs two benefit packages that may provide 
     for coverage of cost-sharing with respect to qualified 
     prescription drug coverage under such part, except that such 
     coverage may not cover the prescription drug deductible under 
     such part. The two benefit packages shall be consistent with 
     the following:
       ``(A) First new policy.--The policy described in this 
     subparagraph has the following benefits, notwithstanding any 
     other provision of this section relating to a core benefit 
     package:
       ``(i) Coverage of 50 percent of the cost-sharing otherwise 
     applicable, except coverage of 100 percent of any cost-
     sharing otherwise applicable for preventive benefits.
       ``(ii) No coverage of the part B deductible.
       ``(iii) Coverage for all hospital coinsurance for long 
     stays (as in the current core benefit package).
       ``(iv) A limitation on annual out-of-pocket expenditures to 
     $4,000 in 2005 (or, in a subsequent year, to such limitation 
     for the previous year increased by an appropriate inflation 
     adjustment specified by the Secretary).
       ``(B) Second new policy.--The policy described in this 
     subparagraph has the same benefits as the policy described in 
     subparagraph (A), except as follows:
       ``(i) Substitute `75 percent' for `50 percent' in clause 
     (i) of such subparagraph.
       ``(ii) Substitute `$2,000' for `$4,000' in clause (iv) of 
     such subparagraph.
       ``(4) Construction.--Any provision in this section or in a 
     medicare supplemental policy relating to guaranteed 
     renewability of coverage shall be deemed to have been met 
     through the offering of other coverage under this 
     subsection.''.

     SEC. 105. MEDICARE PRESCRIPTION DRUG DISCOUNT CARD 
                   ENDORSEMENT PROGRAM.

       (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) In General.--The Secretary (or the 
     Medicare Benefits Administrator pursuant to section 
     1808(c)(3)(C)) shall establish a program--
       ``(1) to endorse prescription drug discount card programs 
     that meet the requirements of this section; and
       ``(2) to make available to medicare beneficiaries 
     information regarding such endorsed programs.
       ``(b) Requirements for Endorsement.--The Secretary may not 
     endorse a prescription drug discount card program under this

[[Page 11919]]

     section unless the program meets the following requirements:
       ``(1) Savings to medicare beneficiaries.--The program 
     passes on to medicare beneficiaries who enroll in the program 
     discounts on prescription drugs, including discounts 
     negotiated with manufacturers.
       ``(2) Prohibition on application only to mail order.--The 
     program applies to drugs that are available other than solely 
     through mail order.
       ``(3) Beneficiary services.--The program provides 
     pharmaceutical support services, such as education and 
     counseling, and services to prevent adverse drug 
     interactions.
       ``(4) Information.--The program makes available to medicare 
     beneficiaries through the Internet and otherwise information, 
     including information on enrollment fees, prices charged to 
     beneficiaries, and services offered under the program, that 
     the Secretary identifies as being necessary to provide for 
     informed choice by beneficiaries among endorsed programs.
       ``(5) Demonstrated experience.--The entity operating the 
     program has demonstrated experience and expertise in 
     operating such a program or a similar program.
       ``(6) Quality assurance.--The entity has in place adequate 
     procedures for assuring quality service under the program.
       ``(7) Operation of assistance program.--The entity meets 
     such requirements relating to solvency, compliance with 
     financial reporting requirements, audit compliance, and 
     contractual guarantees as the Secretary finds necessary for 
     the participation of the sponsor in the low-income assistance 
     program under section 1807A.
       ``(8) Enrollment fees.--The program may charge an annual 
     enrollment fee, but the amount of such annual fee may not 
     exceed $25.
       ``(9) Additional beneficiary protections.--The program 
     meets such additional requirements as the Secretary 
     identifies to protect and promote the interest of medicare 
     beneficiaries, including requirements that ensure that 
     beneficiaries are not charged more than the lower of the 
     negotiated retail price or the usual and customary price.

     The prices negotiated by a prescription drug discount card 
     program endorsed under this section shall (notwithstanding 
     any other provision of law) not be taken into account for the 
     purposes of establishing the best price under section 
     1927(c)(1)(C).
       ``(c) Program Operation.--The Secretary shall operate the 
     program under this section consistent with the following:
       ``(1) Promotion of informed choice.--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 prices and 
     services of such programs in a manner coordinated with the 
     dissemination of educational information on Medicare+Choice 
     plans under part C.
       ``(2) Oversight.--The Secretary shall provide appropriate 
     oversight to ensure compliance of endorsed programs with the 
     requirements of this section, including verification of the 
     discounts and services provided.
       ``(3) 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 program and programs endorsed under 
     this section.
       ``(4) Sanctions for abusive practices.--The Secretary may 
     implement intermediate sanctions or may revoke the 
     endorsement of a program in the case 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.
       ``(5) Enrollment practices.--A medicare beneficiary may not 
     be enrolled in more than one endorsed program at any time. A 
     medicare beneficiary may change the endorsed program in which 
     the beneficiary is enrolled, but may not make such change 
     until the beneficiary has been enrolled in a program for a 
     minimum period of time specified by the Secretary.
       ``(d) Transition.--The Secretary shall provide for an 
     appropriate transition and discontinuation of the program 
     under this section at the time prescription drug benefits 
     first become available under part D.
       ``(e) Endorsement Condition.--The Secretary shall require, 
     as condition of endorsement under of a prescription drug 
     discount card program under this section that the program 
     implement policies and procedures to safeguard the use and 
     disclosure of program beneficiaries' individually 
     identifiable health information in a manner consistent with 
     the Federal regulations (concerning the privacy of 
     individually identifiable health information) promulgated 
     under section 264(c) of the Health Insurance Portability and 
     Accountability Act of 1996.
       ``(f) Authorization of Appropriations.--There are 
     authorized to be appropriated such sums as may be necessary 
     to carry out the program under this section and section 
     1807A.


  ``transitional prescription drug assistance program for low-income 
                             beneficiaries

       ``Sec. 1807A. (a) Purpose.--The purpose of this section is 
     to provide low-income medicare beneficiaries with immediate 
     assistance in the purchase of covered outpatient prescription 
     drugs during the period before the program under part D 
     becomes effective.
       ``(b) Funds Available; Allotments.--
       ``(1) Appropriations; total allotments.--
       ``(A) Appropriations.--For the purpose of carrying out this 
     section, there is appropriated, out of any money in the 
     Treasury not otherwise appropriated--
       ``(i) for fiscal year 2003, $300,000,000;
       ``(ii) for fiscal year 2004, $2,100,000,000; and
       ``(iii) for fiscal year 2005, $500,000,000.
       ``(2) Allotments.--
       ``(A) Among residents of 50 states and the district of 
     columbia.--Subject to subparagraph (B), the amount 
     appropriated under subparagraph (A) for each fiscal year 
     shall be allotted among the 50 States and the District of 
     Columbia based upon the Secretary's estimate of each State's 
     or District's proportion of the total number of medicare 
     beneficiaries with income below 175 percent of the Federal 
     poverty line residing in all such States and the District. 
     The Secretary shall determine the amount of the allotment for 
     each such State and District not later than July 1, 2003.
       ``(B) Among residents of territories.--Of the amount 
     appropriated under subparagraph (A) for a fiscal year, the 
     Secretary shall allot a percentage (determined consistent 
     with the allotment provided to territories under the State 
     children's health insurance program under section 2104(c)) 
     among the commonwealths and territories described in section 
     2104(c)(3) in the same proportion as the allotment proportion 
     under such program is allowed among such commonwealths and 
     territories.
       ``(3) Availability of amounts allotted.--Amounts allotted 
     with respect to a State pursuant to this subsection for a 
     fiscal year shall remain available for expenditure through 
     the end of the fiscal year in which benefits are first 
     available under part D. Any funds allotted to States that are 
     not obligated revert to the General Fund of the Treasury.
       ``(4) Limitation.--In no case shall the total amount of 
     payments for assistance to eligible individuals (and 
     administrative costs) in a State for a fiscal year (and 
     previous fiscal years) under this section exceed the amount 
     of the allotments with respect to that State in that year 
     (and previous fiscal years). Nothing in this section shall be 
     construed as preventing a State from providing, with its own 
     funds, pharmaceutical assistance that is in addition to the 
     assistance funded under this section.
       ``(c) Eligibility.--
       ``(1) In general.--Taking into account the amounts allotted 
     with respect to each State under subsection (b) and the 
     minimum dollar value on assistance per eligible individual 
     specified by the Secretary under subsection (d)(3), the 
     Secretary shall establish guidelines for the establishment by 
     each State of eligibility standards consistent with paragraph 
     (2).
       ``(2) Eligibility restrictions.--In no case shall an 
     individual residing in a State be eligible for assistance 
     under this section unless the individual--
       ``(A) is entitled to benefits under part A or enrolled 
     under part B;
         ``(B) has income that is at or below a percentage 
     (specified under the State eligibility plan under paragraph 
     (1), but not to exceed 175 percent) of the Federal poverty 
     line; and
       ``(C) meets the resources requirement described in section 
     1905(p)(1)(C);
       ``(D) is enrolled under a prescription drug discount card 
     program (or under an alternative program authorized under 
     subsection (d)(1)(B)); and
       ``(E) is not eligible for coverage of, or assistance for, 
     outpatient prescription drugs under any of the following:
       ``(i) A medicaid plan under title XIX (including under any 
     waiver approved under section 1115).
       ``(ii) Enrollment under a group health plan or health 
     insurance coverage.
       ``(iii) Enrollment under a medicare supplemental insurance 
     policy.
       ``(iv) Chapter 55 of title 10, United States Code (relating 
     to medical and dental care for members of the uniformed 
     services).
       ``(v) Chapter 17 of title 38, United States Code (relating 
     to Veterans' medical care).
       ``(vi) Enrollment under a plan under chapter 89 of title 5, 
     United States Code (relating to the Federal employees' health 
     benefits program).
       ``(vii) The Indian Health Care Improvement Act (25 U.S.C. 
     1601 et seq.).
       ``(3) Income determinations.--The provisions of section 
     1860G(4)(C) shall apply for purposes of applying this 
     subsection.
       ``(d) Form of Assistance and Amount of Benefits.--
       ``(1) In general.--
       ``(A) Through program sponsor.--Subject to subparagraph 
     (B), the assistance under this section to an eligible 
     individual shall be in the form of a discount (as identified 
     by the sponsor to the Secretary) provided by the sponsor of a 
     prescription drug discount card program to eligible 
     individuals who are enrolled in such program.
       ``(B) Through alternative state program.--A State may apply 
     to the Secretary for authorization to provide the assistance 
     under this section to an eligible individual through a State 
     pharmaceutical assistance

[[Page 11920]]

     program or private program of pharmaceutical assistance. The 
     Secretary shall not authorize the use of such a program 
     unless the Secretary finds that the program--
       ``(i) was in existence before the date of the enactment of 
     this section; and
       ``(ii) is reasonably designed to provide for pharmaceutical 
     assistance for a number of individuals, and in a scope, that 
     is not less than the number of individuals, and minimum 
     required amount, that would occur if the provisions of this 
     subparagraph had not applied in the State.
       ``(2) Guidance; minimum level of assistance.--The Secretary 
     shall establish guidelines for how the program under this 
     section will operate. Based upon the aggregate amount 
     appropriated in each fiscal year and other relevant factors, 
     the Secretary shall establish a minimum amount of assistance 
     that is available, subject to paragraph (4)(B), to each 
     eligible individual for each calendar quarter (or other 
     period specified by the Secretary) and provide guidance to 
     sponsors regarding how assistance funds may be provided to 
     eligible individuals consistent with such amount and funding 
     limitations.
       ``(3) Relationship to discounts.--The assistance provided 
     under this section is in addition to the discount otherwise 
     available to individuals enrolled in prescription drug 
     discount card programs who are not eligible individuals.
       ``(4) Limitation on assistance.--
       ``(A) In general.--The assistance under this section for an 
     eligible individual shall be limited to assistance--
       ``(i) for covered outpatient drugs (as defined in section 
     1860B(f)) and for enrollment fees imposed under prescription 
     drug discount card programs; and
       ``(ii) for expenses incurred--

       ``(I) on and after the date the individual is both enrolled 
     in the prescription drug discount card program and determined 
     to be an eligible individual under this section; and
       ``(II) before the date benefits are first available under 
     the program under part D.

       ``(B) Authority.--The Secretary shall take such steps as 
     may be necessary to assure compliance with the expenditure 
     limitations described in subsection (b)(4).
       ``(e) Payment of Federal Subsidy to Sponsors.--
       ``(1) In general.--The Secretary shall make payment (within 
     the allotments for each State, less the administrative 
     payments made subsection (f)(2) to each State) to the sponsor 
     of the prescription drug discount card program (or to a State 
     or other entity operating a program under subsection 
     (d)(1)(B)) in which an eligible individual is enrolled of the 
     amount of the assistance provided by the sponsor pursuant to 
     this section.
       ``(2) Periodic payments.--Payments under this subsection 
     (and subsection (f)(2)) shall be made on a monthly or other 
     periodic installment basis, based upon estimates of the 
     Secretary and shall be reduced or increased to the extent of 
     any overpayment or underpayment which the Secretary 
     determines was made under this section for any prior period 
     and with respect to which adjustment has not already been 
     made under this paragraph.
       ``(f) State Responsibilities.--
       ``(1) Eligibility determinations.--As a condition for the 
     payment of Federal financial participation to a State under 
     section 1903(a) for periods during which assistance is 
     available under this section, the State must submit to the 
     Secretary an eligibility plan under which the State--
       ``(A) establishes eligibility standards consistent with the 
     provisions of this section;
       ``(B) conducts determinations of eligibility and income in 
     the same manner as the State is required to make eligibility 
     and income determinations described in section 1860G(a)(4); 
     and
       ``(C) communicates to the Secretary (or the Secretary's 
     designee) determinations of eligibility or discontinuation of 
     eligibility under this section.

     The Secretary shall provide a method for communicating with 
     sponsors concerning the identity of eligible individuals.
       ``(2) Coverage of administrative costs.--Of the amount 
     allotted with respect to a State under subsection (b), the 
     Secretary shall pay to the State the amount of its 
     administrative costs in carrying out this subsection, but not 
     to exceed 10 percent of the amount of such allotment to the 
     State. The provisions of subsection (e)(2) shall apply to 
     such payments.
       ``(g) Definitions.--For purposes of this section:
       ``(1) Eligible individual.--The term `eligible individual' 
     means an individual who is determined by a State to be 
     eligible for assistance under this section.
       ``(2) Prescription drug discount card program.--The term 
     `prescription drug discount card program' means such a 
     program that is endorsed under section 1807.
       ``(3) Sponsor.--The term `sponsor' means the sponsor of a 
     prescription drug discount card program, or, in the case of a 
     program authorized under subsection (d)(1)(B), the State or 
     other entity operating the program.
       ``(4) State.--The term `State' has the meaning given such 
     term for purposes of title XIX.''.
       (b) Conforming Amendment.--Section 1927(c)(1)(C)(i)(V) (42 
     U.S.C. 1396r-8(c)(1)(C)(i)(V)), as added by section 103(e), 
     is amended by striking ``or by a qualified retiree 
     prescription drug plan (as defined in section 1860H(f)(1))'' 
     and inserting ``by a qualified retiree prescription drug plan 
     (as defined in section 1860H(f)(1)), or by a prescription 
     drug discount card program endorsed under section 1807''.

     SEC. 106. GAO STUDY OF THE EFFECTIVENESS OF THE NEW 
                   PRESCRIPTION DRUG PROGRAM.

       (a) Study.--The Comptroller General of the United States 
     shall conduct a study on the effectiveness of the 
     prescription drug program provided under part D of title 
     XVIII of the Social Security Act. Such study shall--
       (1) report--
       (A) the percentage of eligible individuals who enrolled in 
     the program;
       (B) the demographic characteristics (including health 
     status) of such enrollees;
       (C) the number and type of qualified prescription drug 
     coverage available to such individuals; and
       (D) the premiums imposed for enrollment in different areas;
       (2) evaluate the processes and methods developed by the 
     Administrator and the decisions reached by outside actuaries 
     to determine the actuarial valuation of prescription drug 
     coverage; and
       (3) assess whether the subsidy payments under such part 
     accomplished its stated goals of reducing premium levels for 
     all beneficiaries, reducing adverse selection, and promoting 
     participation of PDP sponsors.
       (b) Report.--Not later January 1, 2006, the Comptroller 
     General shall submit a report to Congress on the study 
     conducted under subsection (a).

     TITLE II--MEDICARE+CHOICE REVITALIZATION AND MEDICARE+CHOICE 
                          COMPETITION PROGRAM

               Subtitle A--Medicare+Choice Revitalization

     SEC. 201. MEDICARE+CHOICE IMPROVEMENTS.

       (a) Equalizing Payments Between Fee-For-Service and 
     Medicare+Choice.--
       (1) In general.--Section 1853(c)(1) (42 U.S.C. 1395w-
     23(c)(1)) is amended by adding at the end the following:
       ``(D) Based on 100 percent of fee-for-service costs.--
       ``(i) In general.--For 2003 and 2004, the adjusted average 
     per capita cost for the year involved, determined under 
     section 1876(a)(4) for the Medicare+Choice payment area for 
     services covered under parts A and B for individuals entitled 
     to benefits under part A and enrolled under part B who are 
     not enrolled in a Medicare+Choice plan under this part for 
     the year, but adjusted to exclude costs attributable to 
     payments under section 1886(h).
       ``(ii) Inclusion of costs of va and dod military facility 
     services to medicare-eligible beneficiaries.--In determining 
     the adjusted average per capita cost under clause (i) for a 
     year, such cost shall be adjusted to include the Secretary's 
     estimate, on a per capita basis, of the amount of additional 
     payments that would have been made in the area involved under 
     this title if individuals entitled to benefits under this 
     title had not received services from facilities of the 
     Department of Veterans Affairs or the Department of 
     Defense.''.
       (2) Conforming amendment.--Such section is further amended, 
     in the matter before subparagraph (A), by striking ``or (C)'' 
     and inserting ``(C), or (D)''.
       (b) Revision of Blend.--
       (1) Revision of national average used in calculation of 
     blend.--Section 1853(c)(4)(B)(i)(II) (42 U.S.C. 1395w-
     23(c)(4)(B)(i)(II)) is amended by inserting ``who (with 
     respect to determinations for 2003 and for 2004) are enrolled 
     in a Medicare+Choice plan'' after ``the average number of 
     medicare beneficiaries''.
       (2) Change in budget neutrality.--Section 1853(c) (42 
     U.S.C. 1395w-23(c)) is amended--
       (A) in paragraph (1)(A), by inserting ``(for a year before 
     2003)'' after ``multiplied''; and
       (B) in paragraph (5), by inserting ``(before 2003)'' after 
     ``for each year''.
       (c) Revision in Minimum Percentage Increase for 2003 and 
     2004.--Section 1853(c)(1)(C) (42 U.S.C. 1395w-23(c)(1)(C)) is 
     amended by striking clause (iv) and inserting the following:
       ``(iv) For 2002, 102 percent of the annual Medicare+Choice 
     capitation rate under this paragraph for the area for 2001.
       ``(v) For 2003 and 2004, 103 percent of the annual 
     Medicare+Choice capitation rate under this paragraph for the 
     area for the previous year.
       ``(vi) For 2005 and each succeeding year, 102 percent of 
     the annual Medicare+Choice capitation rate under this 
     paragraph for the area for the previous year.''.
       (d) Inclusion of Costs of DOD and VA Military Facility 
     Services to Medicare-eligible Beneficiaries in Calculation of 
     Medicare+Choice Payment Rates.--Section 1853(c)(3) (42 U.S.C. 
     1395w-23(c)(3)) is amended--
       (1) in subparagraph (A), by striking ``subparagraph (B)'' 
     and inserting ``subparagraphs (B) and (E)'', and
       (2) by adding at the end the following new subparagraph:

[[Page 11921]]

       ``(E) Inclusion of costs of dod and va military facility 
     services to medicare-eligible beneficiaries.--In determining 
     the area-specific Medicare+Choice capitation rate under 
     subparagraph (A) for a year (beginning with 2003), the annual 
     per capita rate of payment for 1997 determined under section 
     1876(a)(1)(C) shall be adjusted to include in the rate the 
     Secretary's estimate, on a per capita basis, of the amount of 
     additional payments that would have been made in the area 
     involved under this title if individuals entitled to benefits 
     under this title had not received services from facilities of 
     the Department of Defense or the Department of Veterans 
     Affairs.''.
       (e) Announcement of Revised Medicare+Choice Payment 
     Rates.--Within 4 weeks after the date of the enactment of 
     this Act, the Secretary shall determine, and shall announce 
     (in a manner intended to provide notice to interested 
     parties) Medicare+Choice capitation rates under section 1853 
     of the Social Security Act (42 U.S.C. 1395w-23) for 2003, 
     revised in accordance with the provisions of this section.
       (f) MedPAC Study of AAPCC.--
       (1) Study.--The Medicare Payment Advisory Commission shall 
     conduct a study that assesses the method used for determining 
     the adjusted average per capita cost (AAPCC) under section 
     1876(a)(4) of the Social Security Act (42 U.S.C. 
     1395mm(a)(4)). Such study shall examine--
       (A) the bases for variation in such costs between different 
     areas, including differences in input prices, utilization, 
     and practice patterns;
       (B) the appropriate geographic area for payment under the 
     Medicare+Choice program under part C of title XVIII of such 
     Act; and
       (C) the accuracy of risk adjustment methods in reflecting 
     differences in costs of providing care to different groups of 
     beneficiaries served under such program.
       (2) Report.--Not later than 9 months after the date of the 
     enactment of this Act, the Commission shall submit to 
     Congress a report on the study conducted under paragraph (1). 
     Such report shall include recommendations regarding changes 
     in the methods for computing the adjusted average per capita 
     cost among different areas.
       (g) Report on Impact of Increased Financial Assistance to 
     Medicare+Choice Plans.--Not later than July 1, 2003, the 
     Secretary of Health and Human Services shall submit to 
     Congress a report that describes the impact of additional 
     financing provided under this Act and other Acts (including 
     the Medicare, Medicaid, and SCHIP Balanced Budget Refinement 
     Act of 1999 and BIPA) on the availability of Medicare+Choice 
     plans in different areas and its impact on lowering premiums 
     and increasing benefits under such plans.

     SEC. 202. MAKING PERMANENT CHANGE IN MEDICARE+CHOICE 
                   REPORTING DEADLINES AND ANNUAL, COORDINATED 
                   ELECTION PERIOD.

       (a) Change in Reporting Deadline.--Section 1854(a)(1) (42 
     U.S.C. 1395w-24(a)(1)), as amended by section 532(b)(1) of 
     the Public Health Security and Bioterrorism Preparedness and 
     Response Act of 2002, is amended by striking ``2002, 2003, 
     and 2004 (or July 1 of each other year)'' and inserting 
     ``2002 and each subsequent year (or July 1 of each year 
     before 2002)''.
       (b) Delay in Annual, Coordinated Election Period.--Section 
     1851(e)(3)(B) (42 U.S.C. 1395w-21(e)(3)(B)), as amended by 
     section 532(c)(1)(A) of the Public Health Security and 
     Bioterrorism Preparedness and Response Act of 2002, is 
     amended by striking ``and after 2005, the month of November 
     before such year and with respect to 2003, 2004, and 2005'' 
     and inserting ``, the month of November before such year and 
     with respect to 2003 and any subsequent year''.
       (c) Annual Announcement of Payment Rates.--Section 
     1853(b)(1) (42 U.S.C. 1395w-23(b)(1)), as amended by section 
     532(d)(1) of the Public Health Security and Bioterrorism 
     Preparedness and Response Act of 2002, is amended by striking 
     ``and after 2005 not later than March 1 before the calendar 
     year concerned and for 2004 and 2005'' and inserting ``not 
     later than March 1 before the calendar year concerned and for 
     2004 and each subsequent year''.
       (d) Requiring Provision of Available Information Comparing 
     Plan Options.--The first sentence of section 
     1851(d)(2)(A)(ii) (42 U.S.C. 1395w-21(d)(2)(A)(ii)) is 
     amended by inserting before the period the following: ``to 
     the extent such information is available at the time of 
     preparation of materials for the mailing''.

     SEC. 203. AVOIDING DUPLICATIVE STATE REGULATION.

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

     SEC. 204. SPECIALIZED MEDICARE+CHOICE PLANS FOR SPECIAL NEEDS 
                   BENEFICIARIES.

       (a) Treatment as Coordinated Care Plan.--Section 
     1851(a)(2)(A) (42 U.S.C. 1395w-21(a)(2)(A)) is amended by 
     adding at the end the following new sentence: ``Specialized 
     Medicare+Choice plans for special needs beneficiaries (as 
     defined in section 1859(b)(4)) may be any type of coordinated 
     care plan.''.
       (b) Specialized Medicare+Choice Plan for Special Needs 
     Beneficiaries Defined.--Section 1859(b) (42 U.S.C. 1395w-
     29(b)) is amended by adding at the end the following new 
     paragraph:
       ``(4) Specialized medicare+choice plans for special needs 
     beneficiaries.--
       ``(A) In general.--The term `specialized Medicare+Choice 
     plan for special needs beneficiaries' means a Medicare+Choice 
     plan that exclusively serves special needs beneficiaries (as 
     defined in subparagraph (B)).
       ``(B) Special needs beneficiary.--The term `special needs 
     beneficiary' means a Medicare+Choice eligible individual 
     who--
       ``(i) is institutionalized (as defined by the Secretary);
       ``(ii) is entitled to medical assistance under a State plan 
     under title XIX; or
       ``(iii) meets such requirements as the Secretary may 
     determine would benefit from enrollment in such a specialized 
     Medicare+Choice plan described in subparagraph (A) for 
     individuals with severe or disabling chronic conditions.''.
       (c) Restriction on Enrollment Permitted.--Section 1859 (42 
     U.S.C. 1395w-29) is amended by adding at the end the 
     following new subsection:
       ``(f) Restriction on Enrollment for Specialized 
     Medicare+Choice Plans for Special Needs Beneficiaries.--In 
     the case of a specialized Medicare+Choice plan (as defined in 
     subsection (b)(4)), notwithstanding any other provision of 
     this part and in accordance with regulations of the Secretary 
     and for periods before January 1, 2007, the plan may restrict 
     the enrollment of individuals under the plan to individuals 
     who are within one or more classes of special needs 
     beneficiaries.''.
       (d) Report to Congress.--Not later than December 31, 2005, 
     the Medicare Benefits Administrator shall submit to Congress 
     a report that assesses the impact of specialized 
     Medicare+Choice plans for special needs beneficiaries on the 
     cost and quality of services provided to enrollees. Such 
     report shall include an assessment of the costs and savings 
     to the medicare program as a result of amendments made by 
     subsections (a), (b), and (c).
       (e) Effective Dates.--
       (1) In general.--The amendments made by subsections (a), 
     (b), and (c) shall take effect upon the date of the enactment 
     of this Act.
       (2) Deadline for issuance of requirements for special needs 
     beneficiaries; transition.--No later than 6 months after the 
     date of the enactment of this Act, the Secretary of Health 
     and Human Services shall issue final regulations to establish 
     requirements for special needs beneficiaries under section 
     1859(b)(4)(B)(iii) of the Social Security Act, as added by 
     subsection (b).

     SEC. 205. MEDICARE MSAS.

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

     SEC. 206. EXTENSION OF REASONABLE COST AND SHMO CONTRACTS.

       (a) Reasonable Cost Contracts.--
       (1) In general.--Section 1876(h)(5)(C) (42 U.S.C. 
     1395mm(h)(5)(C)) is amended--
       (A) by inserting ``(i)'' after ``(C)'';
       (B) by inserting before the period the following: ``, 
     except (subject to clause (ii)) in the case of a contract for 
     an area which is not covered in the service area of 1 or more 
     coordinated care Medicare+Choice plans under part C''; and
       (C) by adding at the end the following new clause:
       ``(ii) In the case in which--

[[Page 11922]]

       ``(I) a reasonable cost reimbursement contract includes an 
     area in its service area as of a date that is after December 
     31, 2003;
       ``(II) such area is no longer included in such service area 
     after such date by reason of the operation of clause (i) 
     because of the inclusion of such area within the service area 
     of a Medicare+Choice plan; and
       ``(III) all Medicare+Choice plans subsequently terminate 
     coverage in such area;
     such reasonable cost reimbursement contract may be extended 
     and renewed to cover such area (so long as it is not included 
     in the service area of any Medicare+Choice plan).''.
       (2) Study.--The Medicare Benefits Administrator shall 
     conduct a study of an appropriate transition for plans 
     offered under reasonable cost contracts under section 1876 of 
     the Social Security Act on and after January 1, 2005. Such a 
     transition may take into account whether there are one or 
     more coordinated care Medicare+Choice plans being offered in 
     the areas involved. Not later than February 1, 2004, the 
     Administrator shall submit to Congress a report on such study 
     and shall include recommendations regarding any changes in 
     the amendment made by paragraph (1) as the Administrator 
     determines to be appropriate.
       (b) Extension of Social Health Maintenance Organization 
     (SHMO) Demonstration Project.--
       (1) In general.--Section 4018(b)(1) of the Omnibus Budget 
     Reconciliation Act of 1987 is amended by striking ``the date 
     that is 30 months after the date that the Secretary submits 
     to Congress the report described in section 4014(c) of the 
     Balanced Budget Act of 1997'' and inserting ``December 31, 
     2004''.
       (2) SHMOs offering medicare+choice plans.--Nothing in such 
     section 4018 shall be construed as preventing a social health 
     maintenance organization from offering a Medicare+Choice plan 
     under part C of title XVIII of the Social Security Act.

            Subtitle B--Medicare+Choice Competition Program

     SEC. 211. MEDICARE+CHOICE COMPETITION PROGRAM.

       (a) Submission of Bid Amounts.--Section 1854 (42 U.S.C. 
     1395w-24) is amended--
       (1) in the heading by inserting ``and bid amounts'' after 
     ``premiums'';
       (2) in subsection (a)(1)(A)--
       (A) by striking ``(A)'' and inserting ``(A)(i) if the 
     following year is before 2005,''; and
       (B) by inserting before the semicolon at the end the 
     following: ``or (ii) if the following year is 2005 or later, 
     the information described in paragraph (6)(A)''; and
       (3) by adding at the end of subsection (a) the following:
       ``(6) Submission of bid amounts by medicare+choice 
     organizations.--
       ``(A) Information to be submitted.--The information 
     described in this subparagraph is as follows:
       ``(i) The monthly aggregate bid amount for provision of all 
     items and services under this part and the actuarial basis 
     for determining such amount.
       ``(ii) The proportions of such bid amount that are 
     attributable to--

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

     and the actuarial basis for determining such proportions.
       ``(iii) Such additional information as the Administrator 
     may require to verify the actuarial bases described in 
     clauses (i) and (ii).
       ``(B) Statutory benefits defined.--For purposes of this 
     part:
       ``(i) The term `statutory non-drug benefits' means benefits 
     under parts A and B.
       ``(ii) The term `statutory prescription drug benefits' 
     means benefits under part D.
       ``(iii) The term `statutory benefits' means statutory 
     prescription drug benefits and statutory non-drug benefits.
       ``(C) Acceptance and negotiation of bid amounts.--The 
     Administrator has the authority to negotiate regarding 
     monthly bid amounts submitted under subparagraph (A) (and the 
     proportion described in subparagraph (A)(ii)). The 
     Administrator may reject such a bid amount or proportion if 
     the Administrator determines that such amount or proportion 
     is not supported by the actuarial bases provided under 
     subparagraph (A).''.
       (b) Providing for Beneficiary Savings for Certain Plans.--
       (1) In general.--Section 1854(b) (42 U.S.C. 1395w-24(b)) is 
     amended--
       (A) by adding at the end of paragraph (1) the following new 
     subparagraph:
       ``(C) Beneficiary rebate rule.--
       ``(i) Requirement.--The Medicare+Choice plan shall provide 
     to the enrollee a monthly rebate equal to 75 percent of the 
     average per capita savings (if any) described in paragraph 
     (3) applicable to the plan and year involved.
       ``(iii) Form of rebate.--A rebate required under this 
     subparagraph shall be provided--

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

     or any combination thereof.''; and
       (B) by adding at the end the following new paragraph:
       ``(3) Computation of average per capita monthly savings.--
     For purposes of paragraph (1)(C)(i), the average per capita 
     monthly savings referred to in such paragraph for a 
     Medicare+Choice plan and year is computed as follows:
       ``(A) Determination of state-wide average risk 
     adjustment.--
       ``(i) In general.--The Medicare Benefits Administrator 
     shall determine, at the same time rates are promulgated under 
     section 1853(b)(1) (beginning with 2005), for each State the 
     average of the risk adjustment factors to be applied to 
     enrollees under section 1853(a)(1)(A) in that State. In the 
     case of a State in which a Medicare+Choice plan was offered 
     in the previous year, the Administrator may compute such 
     average based upon risk adjustment factors applied in that 
     State in a previous year.
       ``(ii) Treatment of new states.--In the case of a State in 
     which no Medicare+Choice plan was offered in the previous 
     year, the Administrator shall estimate such average. In 
     making such estimate, the Administrator may use average risk 
     adjustment factors applied to comparable States or applied on 
     a national basis.
       ``(B) Determination of risk adjusted benchmark and risk-
     adjusted bid.--For each Medicare+Choice plan offered in a 
     State, the Administrator shall--
       ``(i) adjust the fee-for-service area-specific non-drug 
     benchmark amount by the applicable average risk adjustment 
     factor computed under subparagraph (A); and
       ``(ii) adjust the unadjusted non-drug monthly bid amount by 
     such applicable average risk adjustment factor.
       ``(C) Determination of average per capita monthly 
     savings.--The average per capita monthly savings described in 
     this subparagraph is equal to the amount (if any) by which--
       ``(i) the risk-adjusted benchmark amount computed under 
     subparagraph (B)(i), exceeds
       ``(ii) the risk-adjusted bid computed under subparagraph 
     (B)(ii).
       ``(D) Authority to determine risk adjustment for areas 
     other than states.--The Administrator may provide for the 
     determination and application of risk adjustment factors 
     under this paragraph on the basis of areas other than 
     States.''.
       (2) Computation of fee-for-service area-specific non-drug 
     benchmark.--Section 1853 (42 U.S.C. 1395w-23) is amended by 
     adding at the end the following new subsection:
       ``(j) Computation of Fee-for-Service Area-Specific Non-Drug 
     Benchmark Amount.--For purposes of this part, the term `fee-
     for-service area-specific non-drug benchmark amount' means, 
     with respect to a Medicare+Choice payment area for a month in 
     a year, an amount equal to the greater of the following (but 
     in no case less than \1/12\ of the rate computed under 
     subsection (c)(1), without regard to subparagraph (A), for 
     the year):
       ``(1) Based on 100 percent of fee-for-service costs in the 
     area.--An amount equal to \1/12\ of 100 percent (for 2005 
     through 2007, or 95 percent for 2008 and years thereafter) of 
     the adjusted average per capita cost for the year involved, 
     determined under section 1876(a)(4) for the Medicare+Choice 
     payment area, for the area and the year involved, for 
     services covered under parts A and B for individuals entitled 
     to benefits under part A and enrolled under part B who are 
     not enrolled in a Medicare+Choice plan under this part for 
     the year, and adjusted to exclude from such cost the amount 
     the Medicare Benefits Administrator estimates is payable for 
     costs described in subclauses (I) and (II) of subsection 
     (c)(3)(C)(i) for the year involved and also adjusted in the 
     manner described in subsection (c)(1)(D)(ii) (relating to 
     inclusion of costs of VA and DOD military facility services 
     to medicare-eligible beneficiaries).
       ``(2) Minimum monthly amount.--The minimum amount specified 
     in this paragraph is the amount specified in subsection 
     (c)(1)(B)(iv) for the year involved.''.
       (c) Payment of Plans Based on Bid Amounts.--
       (1) In general.--Section 1853(a)(1)(A) (42 U.S.C. 1395w-23) 
     is amended by striking ``in an amount'' and all that follows 
     and inserting the following: ``in an amount determined as 
     follows:
       ``(i) Payment before 2005.--For years before 2005, the 
     payment amount shall be equal to \1/12\ of the annual 
     Medicare+Choice capitation rate (as calculated under 
     subsection (c)) with respect to that individual for that 
     area, reduced by the amount of any reduction elected under 
     section 1854(f)(1)(E) and adjusted under clause (iii).
       ``(ii) Payment for statutory non-drug benefits beginning 
     with 2005.--For years beginning with 2005--

       ``(I) Plans with bids below benchmark.--In the case of a 
     plan for which there are average per capita monthly savings 
     described in section 1854(b)(3)(C), the payment under this 
     subsection is equal to the unadjusted non-drug monthly bid 
     amount, adjusted

[[Page 11923]]

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

       ``(iii) Demographic adjustment, including adjustment for 
     health status.--The Administrator shall adjust the payment 
     amount under clause (i), the unadjusted non-drug monthly bid 
     amount under clause (ii)(I), and the fee-for-service area-
     specific non-drug benchmark amount under clause (ii)(II) for 
     such risk factors as age, disability status, gender, 
     institutional status, and such other factors as the 
     Administrator determines to be appropriate, including 
     adjustment for health status under paragraph (3), so as to 
     ensure actuarial equivalence. The Administrator may add to, 
     modify, or substitute for such adjustment factors if such 
     changes will improve the determination of actuarial 
     equivalence.
       ``(iv) Reference to subsidy payment for statutory drug 
     benefits.--In the case in which an enrollee is enrolled under 
     part D, the Medicare+Choice organization also is entitled to 
     a subsidy payment amount under section 1860H.''.
       (d) Conforming Amendments.--
       (1) Protection against beneficiary selection.--Section 
     1852(b)(1)(A) (42 U.S.C. 1395w-22(b)(1)(A)) is amended by 
     adding at the end the following: ``The Administrator shall 
     not approve a plan of an organization if the Administrator 
     determines that the benefits are designed to substantially 
     discourage enrollment by certain Medicare+Choice eligible 
     individuals with the organization.''.
       (2) Conforming amendment to premium terminology.--
     Subparagraphs (A) and (B) of section 1854(b)(2) (42 U.S.C. 
     1395w-24(b)(2)) are amended to read as follows:
       ``(A) Medicare+Choice monthly basic 
     beneficiary premium.--The term `Medi-
     care+Choice monthly basic beneficiary premium' means, with 
     respect to a Medicare+Choice plan--
       ``(i) described in section 1853(a)(1)(A)(ii)(I) (relating 
     to plans providing rebates), zero; or
       ``(ii)describedinsection1853(a)(1)(A)(ii)(II), the amount 
     (if any) by which the unadjusted non-drug monthly bid amount 
     exceeds the fee-for-service area-specific non-drug benchmark 
     amount.
       ``(B) Medicare+Choice monthly supplemental beneficiary 
     premium.--The term `Medicare+Choice monthly supplemental 
     beneficiary premium' means, with respect to a Medicare+Choice 
     plan, the portion of the aggregate monthly bid amount 
     submitted under clause (i) of subsection (a)(6)(A) for the 
     year that is attributable under such section to the provision 
     of nonstatutory benefits.''.
       (3) Requirement for uniform bid amounts.--Section 1854(c) 
     (42 U.S.C. 1395w-24(c)) is amended to read as follows:
       ``(c) Uniform Bid Amounts.--The Medicare+Choice monthly bid 
     amount submitted under subsection (a)(6) of a Medicare+Choice 
     organization under this part may not vary among individuals 
     enrolled in the plan.''.
       (4) Permitting beneficiary rebates.--
       (A) Section 1851(h)(4)(A) (42 U.S.C. 1395w-21(h)(4)(A)) is 
     amended by inserting ``except as provided under section 
     1854(b)(1)(C)'' after ``or otherwise''.
       (B) Section 1854(d) (42 U.S.C. 1395w-24(d)) is amended by 
     inserting ``, except as provided under subsection 
     (b)(1)(C),'' after ``and may not provide''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to payments and premiums for months beginning 
     with January 2005.

     SEC. 212. DEMONSTRATION PROGRAM FOR COMPETITIVE-DEMONSTRATION 
                   AREAS.

       (a) Identification of Competitive-Demonstration Areas for 
     Demonstration Program; Computation of Choice Non-Drug 
     Benchmarks.--Section 1853, as amended by section 211(b)(2), 
     is amended by adding at the end the following new subsection:
       ``(k) Establishment of Competitive Demonstration Program.--
       ``(1) Designation of competitive-demonstration areas as 
     part of program.--
       ``(A) In general.--For purposes of this part, the 
     Administrator shall establish a demonstration program under 
     which the Administrator designates Medicare+Choice areas as 
     competitive-demonstration areas consistent with the following 
     limitations:
       ``(i) Limitation on number of areas that may be 
     designated.--The Administrator may not designate more than 4 
     areas as competitive-demonstration areas.
       ``(ii) Limitation on period of designation of any area.--
     The Administrator may not designate any area as a 
     competitive-demonstration area for a period of more than 2 
     years.

     The Administrator has the discretion to decide whether or not 
     to designate as a competitive-demonstration area an area that 
     qualifies for such designation.
       ``(B) Qualifications for designation.--For purposes of this 
     title, a Medicare+Choice area (which is a metropolitan 
     statistical area or other area with a substantial number of 
     Medicare+Choice enrollees) may not be designated as a 
     `competitive-demonstration area' for a 2-year period 
     beginning with a year unless the Administrator determines, by 
     such date before the beginning of the year as the 
     Administrator determines appropriate, that--
       ``(i) there will be offered during the open enrollment 
     period under this part before the beginning of the year at 
     least 2 Medicare+Choice plans (in addition to the fee-for-
     service program under parts A and B), each offered by a 
     different Medicare+Choice organization; and
       ``(ii) during March of the previous year at least 50 
     percent of the number of Medicare+Choice eligible individuals 
     who reside in the area were enrolled in a Medicare+Choice 
     plan.
       ``(2) Choice non-drug benchmark amount.--For purposes of 
     this part, the term `choice non-drug benchmark amount' means, 
     with respect to a Medicare+Choice payment area for a month in 
     a year, the sum of the 2 components described in paragraph 
     (3) for the area and year. The Administrator shall compute 
     such benchmark amount for each competitive-demonstration area 
     before the beginning of each annual, coordinated election 
     period under section 1851(e)(3)(B) for each year (beginning 
     with 2005) in which it is designated as such an area.
       ``(3) 2 components.--For purposes of paragraph (2), the 2 
     components described in this paragraph for an area and a year 
     are the following:
       ``(A) Fee-for-service component weighted by national fee-
     for-service market share.--The product of the following:
       ``(i) National fee-for-service market share.--The national 
     fee-for-service market share percentage (determined under 
     paragraph (5)) for the year.
       ``(ii) Fee-for-service area-specific non-drug bid.--The 
     fee-for-service area-specific non-drug bid (as defined in 
     paragraph (6)) for the area and year.
       ``(B) M+C component weighted by national medicare+choice 
     market share.--The product of the following:
       ``(i) National medicare+choice market share.--1 minus the 
     national fee-for-service market share percentage for the 
     year.
       ``(ii) Weighted average of plan bids in area.--The weighted 
     average of the plan bids for the area and year (as determined 
     under paragraph (4)(A)).
       ``(4) Determination of weighted average bids for an area.--
       ``(A) In general.--For purposes of paragraph (3)(B)(ii), 
     the weighted average of plan bids for an area and a year is 
     the sum of the following products for Medicare+Choice plans 
     described in subparagraph (C) in the area and year:
       ``(i) Proportion of each plan's enrollees in the area.--The 
     number of individuals described in subparagraph (B), divided 
     by the total number of such individuals for all 
     Medicare+Choice plans described in subparagraph (C) for that 
     area and year.
       ``(ii) Monthly non-drug bid amount.--The unadjusted non-
     drug monthly bid amount.
       ``(B) Counting of individuals.--The Administrator shall 
     count, for each Medicare+Choice plan described in 
     subparagraph (C) for an area and year, the number of 
     individuals who reside in the area and who were enrolled 
     under such plan under this part during March of the previous 
     year.
       ``(C) Exclusion of plans not offered in previous year.--For 
     an area and year, the Medicare+Choice plans described in this 
     subparagraph are plans that are offered in the area and year 
     and were offered in the area in March of the previous year.
       ``(5) Computation of national fee-for-service market share 
     percentage.--The Administrator shall determine, for a year, 
     the proportion (in this subsection referred to as the 
     `national fee-for-service market share percentage') of 
     Medicare+Choice eligible individuals who during March of the 
     previous year were not enrolled in a Medicare+Choice plan.
       ``(6) Fee-for-service area-specific non-drug bid.--For 
     purposes of this part, the term `fee-for-service area-
     specific non-drug bid' means, for an area and year, the 
     amount described in section 1853(j)(1) for the area and year, 
     except that any reference to a percent of less than 100 
     percent shall be deemed a reference to 100 percent.''.
       (b) Application of Choice Non-Drug Benchmark in 
     Competitive-Demonstration Areas.--
       (1) In general.--Section 1854 is amended--
       (A) in subsection (b)(1)(C)(i), as added by section 
     211(b)(1)(A), by striking ``(i) Requirement.--The'' and 
     inserting ``(i) Require-
     ment for non-competitive-demonstration areas.--In the case of 
     a Medicare+Choice payment area that is not a competitive-
     demonstration area designated under section 1853(k)(1), 
     the'';
       (B) in subsection (b)(1)(C), as so added, by inserting 
     after clause (i) the following new clause:
       ``(ii) Requirement for competitive-demonstration areas.--In 
     the case of a Medicare+Choice payment area that is designated 
     as a competitive-demonstration area under section 1853(k)(1), 
     if there are average per capita monthly savings described in 
     paragraph (4) for a Medicare+Choice plan and year, the 
     Medicare+Choice plan shall provide to the enrollee a monthly 
     rebate equal to 75 percent of such savings.'';

[[Page 11924]]

       (C) by adding at the end of subsection (b), as amended by 
     section 211(b)(1), the following new paragraph:
       ``(4) Computation of average per capita monthly savings for 
     competitive-demonstration areas.--For purposes of paragraph 
     (1)(C)(ii), the average per capita monthly savings referred 
     to in such paragraph for a Medicare+Choice plan and year 
     shall be computed in the same manner as the average per 
     capita monthly savings is computed under paragraph (3) except 
     that the reference to the fee-for-service area-specific non-
     drug benchmark amount in paragraph (3)(B)(i) (or to the 
     benchmark amount as adjusted under paragraph (3)(C)(i)) is 
     deemed to be a reference to the choice non-drug benchmark 
     amount (or such amount as adjusted in the manner described in 
     paragraph (3)(B)(i)).''; and
       (D) in subsection (d), as amended by section 211(d)(4), by 
     inserting ``and subsection (b)(1)(D)'' after ``subsection 
     (b)(1)(C)''.
       (2) Conforming amendments.--
       (A) Payment of plans.--Section 1853(a)(1)(A)(ii), as 
     amended by section 211(c)(1), is amended--
       (i) in subclause (I), by inserting ``(or, in the case of a 
     competitive-demonstration area, the choice non-drug benchmark 
     amount)'' after ``unadjusted non-drug monthly bid amount''; 
     and
       (ii) in subclauses (I) and (II), by inserting ``(or, in the 
     case of a competitive-demonstration area, described in 
     section 1854(b)(4))'' after ``section 1854(b)(3)(C)''.
       (B) Definition of monthly basic premium.--Section 
     1854(b)(2)(A)(ii), as amended by section 211(d)(2), is 
     amended by inserting ``(or, in the case of a competitive-
     demonstration area, the choice non-drug benchmark amount)'' 
     after ``benchmark amount''.
       (c) Premium Adjustment.--Section 1839 (42 U.S.C. 1395r) is 
     amended by adding at the end the following new subsection:
       ``(h)(1) In the case of an individual who resides in a 
     competitive-demonstration area designated under section 
     1851(k)(1) and who is not enrolled in a Medicare+Choice plan 
     under part C, the monthly premium otherwise applied under 
     this part (determined without regard to subsections (b) and 
     (f) or any adjustment under this subsection) shall be 
     adjusted as follows: If the fee-for-service area-specific 
     non-drug bid (as defined in section 1853(k)(6)) for the 
     Medicare+Choice area in which the individual resides for a 
     month--
       ``(A) does not exceed the choice non-drug benchmark (as 
     determined under section 1853(k)(2)) for such area, the 
     amount of the premium for the individual for the month shall 
     be reduced by an amount equal to 75 percent of the amount by 
     which such benchmark exceeds such fee-for-service bid; or
       ``(B) exceeds such choice non-drug benchmark, the amount of 
     the premium for the individual for the month shall be 
     adjusted to ensure that--
       ``(i) the sum of the amount of the adjusted premium and the 
     choice non-drug benchmark for the area, is equal to
       ``(ii) the sum of the unadjusted premium plus amount of the 
     fee-for-service area-specific non-drug bid for the area.
       ``(2) Nothing in this subsection shall be construed as 
     preventing a reduction under paragraph (1)(A) in the premium 
     otherwise applicable under this part to zero or from 
     requiring the provision of a rebate to the extent such 
     premium would otherwise be required to be less than zero.
       ``(3) The adjustment in the premium under this subsection 
     shall be effected in such manner as the Medicare Benefits 
     Administrator determines appropriate.
       ``(4) In order to carry out this subsection (insofar as it 
     is effected through the manner of collection of premiums 
     under 1840(a)), the Medicare Benefits Administrator shall 
     transmit to the Commissioner of Social Security--
       ``(A) at the beginning of each year, the name, social 
     security account number, and the amount of the adjustment (if 
     any) under this subsection for each individual enrolled under 
     this part for each month during the year; and
       ``(B) periodically throughout the year, information to 
     update the information previously transmitted under this 
     paragraph for the year.''.
       (d) Conforming Amendment.--Section 1844(c) (42 U.S.C. 
     1395w(c)) is amended by inserting ``and without regard to any 
     premium adjustment effected under section 1839(h)'' before 
     the period at the end.
       (e) Report on Demonstration Program.--Not later than 6 
     months after the date on which the designation of the 4th 
     competitive-demonstration area under section 1851(k)(1) of 
     the Social Security Act ends, the Medicare Payment Advisory 
     Commission shall submit to Congress a report on the impact of 
     the demonstration program under the amendments made by this 
     section, including such impact on premiums of medicare 
     beneficiaries, savings to the medicare program, and on 
     adverse selection.
       (f) Effective Date.--The amendments made by this section 
     shall apply to payments and premiums for periods beginning on 
     or after January 1, 2005.

     SEC. 213. CONFORMING AMENDMENTS.

       (a) Conforming Amendments Relating to Bids.--
       (1) Section 1854 (42 U.S.C. 1395w-24) is amended--
       (A) in the heading of subsection (a), by inserting ``and 
     Bid Amounts'' after ``Premiums''; and
       (B) in subsection (a)(5)(A), by inserting ``paragraphs (2), 
     (3), and (4) of'' after ``filed under''.
       (b) Additional Conforming Amendments.--
       (1) Annual determination and announcement of certain 
     factors.--Section 1853(b) (42 U.S.C. 1395w-23(b)) is 
     amended--
       (A) in paragraph (1), by striking ``the respective calendar 
     year'' and all that follows and inserting the following: 
     ``the calendar year concerned with respect to each 
     Medicare+Choice payment area, the following:
       ``(A) Pre-competition information.--For years before 2005, 
     the following:
       ``(i) Medicare+choice capitation rates.--The annual 
     Medicare+Choice capitation rate for each Medicare+Choice 
     payment area for the year.
       ``(ii) Adjustment factors.--The risk and other factors to 
     be used in adjusting such rates under subsection (a)(1)(A) 
     for payments for months in that year.
       ``(B) Competition information.--For years beginning with 
     2005, the following:
       ``(i) Benchmarks.--The fee-for-service area-specific non-
     drug benchmark under section 1853(j) and, if applicable, the 
     choice non-drug benchmark under section 1853(k)(2), for the 
     year involved and, if applicable, the national fee-for-
     service market share percentage.
       ``(ii) Adjustment factors.--The adjustment factors applied 
     under section 1853(a)(1)(A)(iii) (relating to demographic 
     adjustment), section 1853(a)(1)(B) (relating to adjustment 
     for end-stage renal disease), and section 1853(a)(3) 
     (relating to health status adjustment).
       ``(iii) Projected fee-for-service bid.--In the case of a 
     competitive area, the projected fee-for-service area-specific 
     non-drug bid (as determined under subsection (k)(6)) for the 
     area.
       ``(iv) Individuals.--The number of individuals counted 
     under subsection (k)(4)(B) and enrolled in each 
     Medicare+Choice plan in the area.''; and
       (B) in paragraph (3), by striking ``in sufficient detail'' 
     and all that follows up to the period at the end.
       (2) Repeal of provisions relating to adjusted community 
     rate (acr).--
       (A) In general.--Subsections (e) and (f) of section 1854 
     (42 U.S.C. 1395w-24) are repealed.
       (B) Conforming amendment.--Section 1839(a)(2) (42 U.S.C. 
     1395r(a)(2)) is amended by striking ``, and to reflect'' and 
     all that follows and inserting a period.
       (3) Prospective implementation of national coverage 
     determinations.--Section 1852(a)(5) (42 U.S.C. 1395w-
     22(a)(5)) is amended to read as follows:
       ``(5) Prospective implementation of national coverage 
     determinations.--The Secretary shall only implement a 
     national coverage determination that will result in a 
     significant change in the costs to a Medicare+Choice 
     organization in a prospective manner that applies to 
     announcements made under section 1853(b) after the date of 
     the implementation of the determination.''.
       (4) Permitting geographic adjustment to consolidate 
     multiple medicare+choice payment areas in a state into a 
     single statewide medicare+choice payment area.--Section 
     1853(d)(3) (42 U.S.C. 1395w-23(e)(3)) is amended--
       (A) by amending clause (i) of subparagraph (A) to read as 
     follows:
       ``(i) to a single statewide Medicare+Choice payment 
     area,''; and
       (B) by amending subparagraph (B) to read as follows:
       ``(B) Budget neutrality adjustment.--In the case of a State 
     requesting an adjustment under this paragraph, the Medicare 
     Benefits Administrator shall initially (and annually 
     thereafter) adjust the payment rates otherwise established 
     under this section for Medicare+Choice 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 
     Medicare+Choice payment areas in the State in the absence of 
     the adjustment under this paragraph.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to payments and premiums for periods beginning on 
     or after January 1, 2005.

               TITLE III--RURAL HEALTH CARE IMPROVEMENTS

     SEC. 301. REFERENCE TO FULL MARKET BASKET INCREASE FOR SOLE 
                   COMMUNITY HOSPITALS.

       For provision eliminating any reduction from full market 
     basket in the update for inpatient hospital services for sole 
     community hospitals, see section 401.

     SEC. 302. ENHANCED DISPROPORTIONATE SHARE HOSPITAL (DSH) 
                   TREATMENT FOR RURAL HOSPITALS AND URBAN 
                   HOSPITALS WITH FEWER THAN 100 BEDS.

       (a) Blending of Payment Amounts.--
       (1) In general.--Section 1886(d)(5)(F) (42 U.S.C. 
     1395ww(d)(5)(F)) is amended by adding at the end the 
     following new clause:
       ``(xiv)(I) In the case of discharges in a fiscal year 
     beginning on or after October 1, 2002, subject to subclause 
     (II), there shall be substituted for the disproportionate 
     share

[[Page 11925]]

     adjustment percentage otherwise determined under clause (iv) 
     (other than subclause (I)) or under clause (viii), (x), (xi), 
     (xii), or (xiii), the old blend proportion (specified under 
     subclause (III)) of the disproportionate share adjustment 
     percentage otherwise determined under the respective clause 
     and 100 percent minus such old blend proportion of the 
     disproportionate share adjustment percentage determined under 
     clause (vii) (relating to large, urban hospitals).
       ``(II) Under subclause (I), the disproportionate share 
     adjustment percentage shall not exceed 10 percent for a 
     hospital that is not classified as a rural referral center 
     under subparagraph (C).
       ``(III) For purposes of subclause (I), the old blend 
     proportion for fiscal year 2003 is 80 percent, for each 
     subsequent year (through 2006) is the old blend proportion 
     under this subclause for the previous year minus 20 
     percentage points, and for each year beginning with 2007 is 0 
     percent.''.
       (2) Conforming amendments.--Section 1886(d)(5)(F) (42 
     U.S.C. 1395ww(d)(5)(F)) is amended--
       (A) in each of subclauses (II), (III), (IV), (V), and (VI) 
     of clause (iv), by inserting ``subject to clause (xiv) and'' 
     before ``for discharges occurring'';
       (B) in clause (viii), by striking ``The formula'' and 
     inserting ``Subject to clause (xiv), the formula''; and
       (C) in each of clauses (x), (xi), (xii), and (xiii), by 
     striking ``For purposes'' and inserting ``Subject to clause 
     (xiv), for purposes''.
       (b) Effective Date.--The amendments made by this section 
     shall apply with respect to discharges occurring on or after 
     October 1, 2002.

     SEC. 303. 2-YEAR PHASED-IN INCREASE IN THE STANDARDIZED 
                   AMOUNT IN RURAL AND SMALL URBAN AREAS TO 
                   ACHIEVE A SINGLE, UNIFORM STANDARDIZED AMOUNT.

       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 2003, 
     the average standardized amount for hospitals located other 
     than in a large urban area shall be increased by \1/2\ of the 
     difference between the average 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 2004, the Secretary shall compute an average 
     standardized amount for hospitals located in any area within 
     the United States and within each region equal to the average 
     standardized amount computed for the previous fiscal year 
     under this subparagraph for hospitals located in a large 
     urban area (or, beginning with fiscal year 2005, for 
     hospitals located in any area) increased by the applicable 
     percentage increase under subsection (b)(3)(B)(i).''.

     SEC. 304. MORE FREQUENT UPDATE IN WEIGHTS USED IN HOSPITAL 
                   MARKET BASKET.

       (a) More Frequent Updates in Weights.--After revising the 
     weights used in the hospital market basket under section 
     1886(b)(3)(B)(iii) of the Social Security Act (42 U.S.C. 
     1395ww(b)(3)(B)(iii)) to reflect the most current data 
     available, the Secretary shall establish a frequency for 
     revising such weights in such market basket to reflect the 
     most current data available more frequently than once every 5 
     years.
       (b) Report.--Not later than October 1, 2003, the Secretary 
     shall submit a report to Congress on the frequency 
     established under subsection (a), including an explanation of 
     the reasons for, and options considered, in determining such 
     frequency.

     SEC. 305. IMPROVEMENTS TO CRITICAL ACCESS HOSPITAL PROGRAM.

       (a) Reinstatement of Periodic Interim Payment (PIP).--
     Section 1815(e)(2) (42 U.S.C. 1395g(e)(2)) is amended--
       (1) by striking ``and'' at the end of subparagraph (C);
       (2) by adding ``and'' at the end of subparagraph (D); and
       (3) by inserting after subparagraph (D) the following new 
     subparagraph:
       ``(E) inpatient critical access hospital services;''.
       (b) Condition for Application of Special Physician Payment 
     Adjustment.--Section 1834(g)(2) (42 U.S.C. 1395m(g)(2)) is 
     amended by adding after and below subparagraph (B) the 
     following:

     ``The Secretary may not require, as a condition for applying 
     subparagraph (B) with respect to a critical access hospital, 
     that each physician providing professional services in the 
     hospital must assign billing rights with respect to such 
     services, except that such subparagraph shall not apply to 
     those physicians who have not assigned such billing 
     rights.''.
       (c) Flexibility in Bed Limitation for Hospitals.--Section 
     1820 (42 U.S.C. 1395i-4) is amended--
       (1) in subsection (c)(2)(B)(iii), by inserting ``subject to 
     paragraph (3)'' after ``(iii) provides'';
       (2) by adding at the end of subsection (c) the following 
     new paragraph:
       ``(3) Increase in maximum number of beds for hospitals with 
     strong seasonal census fluctuations.--
       ``(A) In general.--Subject to subparagraph (C), in the case 
     of a hospital that demonstrates that it meets the standards 
     established under subparagraph (B) and has not made the 
     election described in subsection (f)(2)(A), the bed 
     limitations otherwise applicable under paragraph (2)(B)(iii) 
     and subsection (f) shall be increased by 5 beds.
       ``(B) Standards.--The Secretary shall specify standards for 
     determining whether a critical access hospital has 
     sufficiently strong seasonal variations in patient admissions 
     to justify the increase in bed limitation provided under 
     subparagraph (A).''; and
       (3) in subsection (f)--
       (A) by inserting ``(1)'' after ``(f)''; and
       (B) by adding at the end the following new paragraph:
       ``(2)(A) A hospital may elect to treat the reference in 
     paragraph (1) to `15 beds' as a reference to `25 beds', but 
     only if no more than 10 beds in the hospital are at any time 
     used for non-acute care services. A hospital that makes such 
     an election is not eligible for the increase provided under 
     subsection (c)(3)(A).
       ``(B) The limitations in numbers of beds under the first 
     sentence of paragraph (1) are subject to adjustment under 
     subsection (c)(3).''.
       (d) 5-Year Extension of the Authorization for 
     Appropriations for Grant Program.--Section 1820(j) (42 U.S.C. 
     1395i-4(j)) is amended by striking ``through 2002'' and 
     inserting ``through 2007''.
       (e) Prohibition of Retroactive Recoupment.--The Secretary 
     shall not recoup (or otherwise seek to recover) overpayments 
     made for outpatient critical access hospital services under 
     part B of title XVIII of the Social Security Act, for 
     services furnished in cost reporting periods that began 
     before October 1, 2002, insofar as such overpayments are 
     attributable to payment being based on 80 percent of 
     reasonable costs (instead of 100 percent of reasonable costs 
     minus 20 percent of charges).
       (f) Effective Dates.--
       (1) Reinstatement of pip.--The amendments made by 
     subsection (a) shall apply to payments made on or after 
     January 1, 2003.
       (2) Physician payment adjustment condition.--The amendment 
     made by subsection (b) shall be effective as if included in 
     the enactment of section 403(d) of the Medicare, Medicaid, 
     and SCHIP Balanced Budget Refinement Act of 1999 (113 Stat. 
     1501A-371).
       (3) Flexibility in bed limitation.--The amendments made by 
     subsection (c) shall apply to designations made on or after 
     January 1, 2003, but shall not apply to critical access 
     hospitals that were designated as of such date.

     SEC. 306. EXTENSION OF TEMPORARY INCREASE FOR HOME HEALTH 
                   SERVICES FURNISHED IN A RURAL AREA.

       (a) In General.--Section 508(a) BIPA (114 Stat. 2763A-533) 
     is amended--
       (1) by striking ``24-Month Increase Beginning April 1, 
     2001'' and inserting ``In General''; and
       (2) by striking ``April 1, 2003'' and inserting ``January 
     1, 2005''.
       (b) Conforming Amendment.--Section 547(c)(2) of BIPA (114 
     Stat. 2763A-553) is amended by striking ``the period 
     beginning on April 1, 2001, and ending on September 30, 
     2002,'' and inserting ``a period under such section''.

     SEC. 307. REFERENCE TO 10 PERCENT INCREASE IN PAYMENT FOR 
                   HOSPICE CARE FURNISHED IN A FRONTIER AREA AND 
                   RURAL HOSPICE DEMONSTRATION PROJECT.

       For--
       (1) provision of 10 percent increase in payment for hospice 
     care furnished in a frontier area, see section 422; and
       (2) provision of a rural hospice demonstration project, see 
     section 423.

     SEC. 308. REFERENCE TO PRIORITY FOR HOSPITALS LOCATED IN 
                   RURAL OR SMALL URBAN AREAS IN REDISTRIBUTION OF 
                   UNUSED GRADUATE MEDICAL EDUCATION RESIDENCIES.

       For provision providing priority for hospitals located in 
     rural or small urban areas in redistribution of unused 
     graduate medical education residencies, see section 612.

     SEC. 309. GAO STUDY OF GEOGRAPHIC DIFFERENCES IN PAYMENTS FOR 
                   PHYSICIANS' SERVICES.

       (a) Study.--The Comptroller General of the United States 
     shall conduct a study of differences in payment amounts under 
     the physician fee schedule under section 1848 of the Social 
     Security Act (42 U.S.C. 1395w-4) for physicians' services in 
     different geographic areas. Such study shall include--
       (1) an assessment of the validity of the geographic 
     adjustment factors used for each component of the fee 
     schedule;
       (2) an evaluation of the measures used for such adjustment, 
     including the frequency of revisions; and
       (3) an evaluation of the methods used to determine 
     professional liability insurance costs used in computing the 
     malpractice component, including a review of increases in 
     professional liability insurance premiums and variation in 
     such increases by State and physician specialty and methods 
     used to update the geographic cost of practice index

[[Page 11926]]

     and relative weights for the malpractice component.
       (b) Report.--Not later than 1 year after the date of the 
     enactment of this Act, the Comptroller General shall submit 
     to Congress a report on the study conducted under subsection 
     (a). The report shall include recommendations regarding the 
     use of more current data in computing geographic cost of 
     practice indices as well as the use of data directly 
     representative of physicians' costs (rather than proxy 
     measures of such costs).

     SEC. 310. PROVIDING SAFE HARBOR FOR CERTAIN COLLABORATIVE 
                   EFFORTS THAT BENEFIT MEDICALLY UNDERSERVED 
                   POPULATIONS.

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

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

     SEC. 311. RELIEF FOR CERTAIN NON-TEACHING HOSPITALS.

       (a) In General.--In the case of a non-teaching hospital 
     that meets the condition of subsection (b), in each of fiscal 
     years 2003, 2004, and 2005 the amount of payment made to the 
     hospital under section 1886(d) of the Social Security Act for 
     discharges occurring during such fiscal year only shall be 
     increased as though the applicable percentage increase 
     (otherwise applicable to discharges occurring during such 
     fiscal year under section 1886(b)(3)(B)(i) of the Social 
     Security Act (42 U.S.C. 1395ww(b)(3)(B)(i)) had been 
     increased by 5 percentage points. The previous sentence shall 
     be applied for each such fiscal year separately without 
     regard to its application in a previous fiscal year and shall 
     not affect payment for discharges for any hospital occurring 
     during a fiscal year after fiscal year 2005.
       (b) Condition.--A non-teaching hospital meets the condition 
     of this subsection if--
       (1) it is located in a rural area and the amount of the 
     aggregate payments under subsection (d) of section 1886 of 
     the Social Security Act for hospitals located in rural areas 
     in the State for their cost reporting periods beginning 
     during fiscal year 1999 is less than the aggregate allowable 
     operating costs of inpatient hospital services (as defined in 
     subsection (a)(4) of such section) for all subsection (d) 
     hospitals in such areas in such State with respect to such 
     cost reporting periods; or
       (2) it is located in an urban area and the amount of the 
     aggregate payments under subsection (d) of such section for 
     hospitals located in urban areas in the State for their cost 
     reporting periods beginning during fiscal year 1999 is less 
     than 103 percent of the aggregate allowable operating costs 
     of inpatient hospital services (as defined in subsection 
     (a)(4) of such section) for all subsection (d) hospitals in 
     such areas in such State with respect to such cost reporting 
     periods.

     The amounts under paragraphs (1) and (2) shall be determined 
     by the Secretary of Health and Human Services based on data 
     of the Medicare Payment Advisory Commission.
       (c) Definitions.--For purposes of this section:
       (1) Non-teaching hospital.--The term ``non-teaching 
     hospital'' means, for a cost reporting period, a subsection 
     (d) hospital (as defined in subsection (d)(1)(B) of section 
     1886 of the Social Security Act, 42 U.S.C. 1395ww)) that is 
     not receiving any additional payment under subsection 
     (d)(5)(B) of such section or a payment under subsection (h) 
     of such section for discharges occurring during the period. A 
     subsection (d) hospital that receives additional payments 
     under subsection (d)(5)(B) or (h) of such section shall, for 
     purposes of this section, also be treated as a non-teaching 
     hospital unless a chairman of a department in the medical 
     school with which the hospital is affiliated is serving or 
     has been appointed as a clinical chief of service in the 
     hospital.
       (2) Rural; urban.--The terms ``rural'' and ``urban'' have 
     the meanings given such terms for purposes of section 1886(d) 
     of the Social Security Act (42 U.S.C. 1395ww(d)).

                TITLE IV--PROVISIONS RELATING TO PART A

                Subtitle A--Inpatient Hospital Services

     SEC. 401. REVISION OF ACUTE CARE HOSPITAL PAYMENT UPDATES.

       Subclause (XVIII) of section 1886(b)(3)(B)(i) (42 U.S.C. 
     1395ww(b)(3)(B)(i)) is amended to read as follows:
       ``(XVIII) for fiscal year 2003, the market basket 
     percentage increase for sole community hospitals and such 
     increase minus 0.25 percentage points for other hospitals, 
     and''.

     SEC. 402. 2-YEAR INCREASE IN LEVEL OF ADJUSTMENT FOR INDIRECT 
                   COSTS OF MEDICAL EDUCATION (IME).

       Section 1886(d)(5)(B)(ii) (42 U.S.C. 1395ww(d)(5)(B)(ii)) 
     is amended--
       (1) in subclause (VI) by striking ``and'' at the end;
       (2) by redesignating subclause (VII) as subclause (IX);
       (3) in subclause (IX) as so redesignated, by striking 
     ``2002'' and inserting ``2004''; and
       (4) by inserting after subclause (VI) the following new 
     subclause:
       ``(VII) during fiscal year 2003, `c' is equal to 1.47;
       ``(VIII) during fiscal year 2004, `c' is equal to 1.45; 
     and''.

     SEC. 403. RECOGNITION OF NEW MEDICAL TECHNOLOGIES UNDER 
                   INPATIENT HOSPITAL PPS.

       (a) Improving Timeliness of Data Collection.--Section 
     1886(d)(5)(K) (42 U.S.C. 1395ww(d)(5)(K)) is amended by 
     adding at the end the following new clause:
       ``(vii) Under the mechanism under this subparagraph, the 
     Secretary shall provide for the addition of new diagnosis and 
     procedure codes in April 1 of each year, but the addition of 
     such codes shall not require the Secretary to adjust the 
     payment (or diagnosis-related group classification) under 
     this subsection until the fiscal year that begins after such 
     date.''.
       (b) Eligibility Standard.--
       (1) Minimum period for recognition of new technologies.--
     Section 1886(d)(5)(K)(vi) (42 U.S.C. 1395ww(d)(5)(K)(vi)) is 
     amended--
       (A) by inserting ``(I)'' after ``(vi)''; and
       (B) by adding at the end the following new subclause:
       ``(II) Under such criteria, a service or technology shall 
     not be denied treatment as a new service or technology on the 
     basis of the period of time in which the service or 
     technology has been in use if such period ends before the end 
     of the 2-to-3-year period that begins on the effective date 
     of implementation of a code under ICD-9-CM (or a successor 
     coding methodology) that enables the identification of a 
     significant sample of specific discharges in which the 
     service or technology has been used.''.
       (2) Adjustment of threshold.--Section 1886(d)(5)(K)(ii)(I) 
     (42 U.S.C. 1395ww(d)(5)(K)(ii)(I)) is amended by inserting 
     ``(applying a threshold specified by the Secretary that is 
     the lesser of 50 percent of the national average standardized 
     amount for operating costs of inpatient hospital services for 
     all hospitals and all diagnosis-related groups or one 
     standard deviation for the diagnosis-related group 
     involved)'' after ``is inadequate''.
       (3) Criterion for substantial improvement.--Section 
     1886(d)(5)(K)(vi) (42 U.S.C. 1395ww(d)(5)(K)(vi)), as amended 
     by paragraph (1), is further amended by adding at the end the 
     following subclause:
       ``(III) The Secretary shall by regulation provide for 
     further clarification of the criteria applied to determine 
     whether a new service or technology represents an advance in 
     medical technology that substantially improves the diagnosis 
     or treatment of beneficiaries. Under such criteria, in 
     determining whether a new service or technology represents an 
     advance in medical technology that substantially improves the 
     diagnosis or treatment of beneficiaries, the Secretary

[[Page 11927]]

     shall deem a service or technology as meeting such 
     requirement if the service or technology is a drug or 
     biological that is designated under section 506 or 526 of the 
     Federal Food, Drug, and Cosmetic Act, approved under section 
     314.510 or 601.41 of title 21, Code of Federal Regulations, 
     or designated for priority review when the marketing 
     application for such drug or biological was filed or is a 
     medical device for which an exemption has been granted under 
     section 520(m) of such Act, or for which priority review has 
     been provided under section 515(d)(5) of such Act.''.
       (4) Process for public input.--Section 1886(d)(5)(K) (42 
     U.S.C. 1395ww(d)(5)(K)), as amended by paragraph (1), is 
     amended--
       (A) in clause (i), by adding at the end the following: 
     ``Such mechanism shall be modified to meet the requirements 
     of clause (viii).''; and
       (B) by adding at the end the following new clause:
       ``(viii) The mechanism established pursuant to clause (i) 
     shall be adjusted to provide, before publication of a 
     proposed rule, for public input regarding whether a new 
     service or technology not described in the second sentence of 
     clause (vi)(III) represents an advance in medical technology 
     that substantially improves the diagnosis or treatment of 
     beneficiaries as follows:
       ``(I) The Secretary shall make public and periodically 
     update a list of all the services and technologies for which 
     an application for additional payment under this subparagraph 
     is pending.
       ``(II) The Secretary shall accept comments, 
     recommendations, and data from the public regarding whether 
     the service or technology represents a substantial 
     improvement.
       ``(III) The Secretary shall provide for a meeting at which 
     organizations representing hospitals, physicians, medicare 
     beneficiaries, manufacturers, and any other interested party 
     may present comments, recommendations, and data to the 
     clinical staff of the Centers for Medicare & Medicaid 
     Services before publication of a notice of proposed 
     rulemaking regarding whether service or technology represents 
     a substantial improvement.''.
       (c) Preference for Use of DRG Adjustment.--Section 
     1886(d)(5)(K) (42 U.S.C. 1395ww(d)(5)(K)) is further amended 
     by adding at the end the following new clause:
       ``(ix) Before establishing any add-on payment under this 
     subparagraph with respect to a new technology, the Secretary 
     shall seek to identify one or more diagnosis-related groups 
     associated with such technology, based on similar clinical or 
     anatomical characteristics and the cost of the technology. 
     Within such groups the Secretary shall assign an eligible new 
     technology into a diagnosis-related group where the average 
     costs of care most closely approximate the costs of care of 
     using the new technology. In such case, no add-on payment 
     under this subparagraph shall be made with respect to such 
     new technology and this clause shall not affect the 
     application of paragraph (4)(C)(iii).''.
       (d) Improvement in Payment for New Technology.--Section 
     1886(d)(5)(K)(ii)(III) (42 U.S.C. 1395ww(d)(5)(K)(ii)(III)) 
     is amended by inserting after ``the estimated average cost of 
     such service or technology'' the following: ``(based on the 
     marginal rate applied to costs under subparagraph (A))''.
       (e) Effective Date.--
       (1) In general.--The Secretary shall implement the 
     amendments made by this section so that they apply to 
     classification for fiscal years beginning with fiscal year 
     2004.
       (2) Reconsiderations of applications for fiscal year 2003 
     that are denied.--In the case of an application for a 
     classification of a medical service or technology as a new 
     medical service or technology under section 1886(d)(5)(K) of 
     the Social Security Act (42 U.S.C. 1395ww(d)(5)(K)) that was 
     filed for fiscal year 2003 and that is denied--
       (A) the Secretary shall automatically reconsider the 
     application as an application for fiscal year 2004 under the 
     amendments made by this section; and
       (B) the maximum time period otherwise permitted for such 
     classification of the service or technology shall be extended 
     by 12 months.

     SEC. 404. PHASE-IN 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, 
     2003, the applicable Puerto Rico percentage is 50 percent and 
     the applicable Federal percentage is 50 percent;
       ``(iii) during fiscal year 2004, the applicable Puerto Rico 
     percentage is 45 percent and the applicable Federal 
     percentage is 55 percent;
       ``(iv) during fiscal year 2005, the applicable Puerto Rico 
     percentage is 40 percent and the applicable Federal 
     percentage is 60 percent;
       ``(v) during fiscal year 2006, the applicable Puerto Rico 
     percentage is 35 percent and the applicable Federal 
     percentage is 65 percent;
       ``(vi) during fiscal year 2007, the applicable Puerto Rico 
     percentage is 30 percent and the applicable Federal 
     percentage is 70 percent; and
       ``(vii) on or after October 1, 2007, the applicable Puerto 
     Rico percentage is 25 percent and the applicable Federal 
     percentage is 75 percent.''.

     SEC. 405. REFERENCE TO PROVISION RELATING TO ENHANCED 
                   DISPROPORTIONATE SHARE HOSPITAL (DSH) PAYMENTS 
                   FOR RURAL HOSPITALS AND URBAN HOSPITALS WITH 
                   FEWER THAN 100 BEDS.

       For provision enhancing disproportionate share hospital 
     (DSH) treatment for rural hospitals and urban hospitals with 
     fewer than 100 beds, see section 302.

     SEC. 406. REFERENCE TO PROVISION RELATING TO 2-YEAR PHASED-IN 
                   INCREASE IN THE STANDARDIZED AMOUNT IN RURAL 
                   AND SMALL URBAN AREAS TO ACHIEVE A SINGLE, 
                   UNIFORM STANDARDIZED AMOUNT.

       For provision phasing in over a 2-year period an increase 
     in the standardized amount for rural and small urban areas to 
     achieve a single, uniform, standardized amount, see section 
     303.

     SEC. 407. REFERENCE TO PROVISION FOR MORE FREQUENT UPDATES IN 
                   THE WEIGHTS USED IN HOSPITAL MARKET BASKET.

       For provision providing for more frequent updates in the 
     weights used in hospital market basket, see section 304.

     SEC. 408. REFERENCE TO PROVISION MAKING IMPROVEMENTS TO 
                   CRITICAL ACCESS HOSPITAL PROGRAM.

       For provision providing making improvements to critical 
     access hospital program, see section 305.

     SEC. 409. GAO STUDY ON IMPROVING THE HOSPITAL WAGE INDEX.

       (a) Study.--
       (1) In general.--The Comptroller General of the United 
     States shall conduct a study on the improvements that can be 
     made in the measurement of regional differences in hospital 
     wages reflected in the hospital wage index under section 
     1886(d) of the Social Security Act (42 U.S.C. 1395ww(d)).
       (2) Examination of use of metropolitan statistical areas 
     (msas).--The study shall specifically examine the use of 
     metropolitan statistical areas for purposes of computing and 
     applying the wage index and whether the boundaries of such 
     areas accurately reflect local labor markets. In addition, 
     the study shall examine whether regional inequities are 
     created as a result of infrequent updates of such boundaries 
     and policies of the Bureau of the Census relating to 
     commuting criteria.
       (3) Wage data.--The study shall specifically examine the 
     portions of the hospital cost reports relating to wages, and 
     methods for improving the accuracy of the wage data and for 
     reducing inequities resulting from differences among 
     hospitals in the reporting of wage data.
       (b) Consultation with OMB.--The Comptroller General shall 
     consult with the Director of Office of Management and Budget 
     in conducting the study under subsection (a)(2).
       (c) Report.--Not later than May 1, 2003, the Comptroller 
     General shall submit to Congress a report on the study 
     conducted under subsection (a) and shall include in the 
     report such recommendations as may be appropriate on--
       (1) changes in the definition of labor market areas used 
     for purposes of the area wage index under section 1886 of the 
     Social Security Act; and
       (2) improvements in methods for the collection of wage 
     data.

             Subtitle B--Skilled Nursing Facility Services

     SEC. 411. PAYMENT FOR COVERED SKILLED NURSING FACILITY 
                   SERVICES.

       (a) Temporary Increase in Nursing Component of PPS Federal 
     Rate.--Section 312(a) of BIPA is amended by adding at the end 
     the following new sentence: ``The Secretary of Health and 
     Human Services shall increase by 12, 10, and 8 percent the 
     nursing component of the case-mix adjusted Federal 
     prospective payment rate specified in Tables 3 and 4 of the 
     final rule published in the Federal Register by the Health 
     Care Financing Administration on July 31, 2000 (65 Fed. Reg. 
     46770) and as subsequently updated under section 
     1888(e)(4)(E)(ii) of the Social Security Act (42 U.S.C. 
     1395yy(e)(4)(E)(ii)), effective for services furnished during 
     fiscal years 2003, 2004, and 2005, respectively.''.
       (b) Adjustment to RUGs for AIDS Residents.--
       (1) In general.--Paragraph (12) of section 1888(e) (42 
     U.S.C. 1395yy(e)) is amended to read as follows:
       ``(12) Adjustment for residents with aids.--

[[Page 11928]]

       ``(A) In general.--Subject to subparagraph (B), in the case 
     of a resident of a skilled nursing facility who is afflicted 
     with acquired immune deficiency syndrome (AIDS), the per diem 
     amount of payment otherwise applicable shall be increased by 
     128 percent to reflect increased costs associated with such 
     residents.
       ``(B) Sunset.--Subparagraph (A) shall not apply on and 
     after such date as the Secretary certifies that there is an 
     appropriate adjustment in the case mix under paragraph 
     (4)(G)(i) to compensate for the increased costs associated 
     with residents described in such subparagraph.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to services furnished on or after October 1, 
     2003.

                          Subtitle C--Hospice

     SEC. 421. COVERAGE OF HOSPICE CONSULTATION SERVICES.

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

     SEC. 422. 10 PERCENT INCREASE IN PAYMENT FOR HOSPICE CARE 
                   FURNISHED IN A FRONTIER AREA.

       (a) In General.--Section 1814(i)(1) (42 U.S.C. 1395f(i)(1)) 
     is amended by adding at the end the following new 
     subparagraph:
       ``(D) With respect to hospice care furnished in a frontier 
     area on or after January 1, 2003, and before January 1, 2008, 
     the payment rates otherwise established for such care shall 
     be increased by 10 percent. For purposes of this 
     subparagraph, the term `frontier area' means a county in 
     which the population density is less than 7 persons per 
     square mile.''.
       (b) Report on Costs.--Not later than January 1, 2007, the 
     Comptroller General of the United States shall submit to 
     Congress a report on the costs of furnishing hospice care in 
     frontier areas. Such report shall include recommendations 
     regarding the appropriateness of extending, and modifying, 
     the payment increase provided under the amendment made by 
     subsection (a).

     SEC. 423. RURAL HOSPICE DEMONSTRATION PROJECT.

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

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

                      Subtitle D--Other Provisions

     SEC. 431. DEMONSTRATION PROJECT FOR USE OF RECOVERY AUDIT 
                   CONTRACTORS.

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

                 TITLE V--PROVISIONS RELATING TO PART B

                    Subtitle A--Physicians' Services

     SEC. 501. REVISION OF UPDATES FOR PHYSICIANS' SERVICES.

       (a) Update for 2003 through 2005.--
       (1) In general.--Section 1848(d) (42 U.S.C. 1395w-4(d)) is 
     amended by adding at the end the following new paragraphs:
       ``(5) Update for 2003.--The update to the single conversion 
     factor established in paragraph (1)(C) for 2003 is 2 percent.
       ``(6) Special rules for update for 2004 and 2005.--The 
     following rules apply in determining the update adjustment 
     factors under paragraph (4)(B) for 2004 and 2005:
       ``(A) Use of 2002 data in determining allowable costs.--
       ``(i) The reference in clause (ii)(I) of such paragraph to 
     April 1, 1996, is deemed to be a reference to January 1, 
     2002.
       ``(ii) The allowed expenditures for 2002 is deemed to be 
     equal to the actual expenditures for physicians' services 
     furnished during 2002, as estimated by the Secretary.
       ``(B) 1 percentage point increase in gdp under sgr.--The 
     annual average percentage growth in real gross domestic 
     product per capita under subsection (f)(2)(C) for each of 
     2003, 2004, and 2005 is deemed to be increased by 1 
     percentage point.''.
       (2) Conforming amendment.--Paragraph (4)(B) of such section 
     is amended, in the matter before clause (i), by inserting 
     ``and paragraph (6)'' after ``subparagraph (D)''.
       (3) Not treated as change in law and regulation in 
     sustainable growth rate determination.--The amendments made 
     by this subsection shall not be treated as a change in law 
     for purposes of applying section 1848(f)(2)(D) of the Social 
     Security Act (42 U.S.C. 1395w-4(f)(2)(D)).
       (b) Use of 10-Year Rolling Average in Computing Gross 
     Domestic Product.--
       (1) In general.--Section 1848(f)(2)(C) (42 U.S.C. 1395w-
     4(f)(2)(C)) is amended--

[[Page 11929]]

       (A) by striking ``projected'' and inserting ``annual 
     average''; and
       (B) by striking ``from the previous applicable period to 
     the applicable period involved'' and inserting ``during the 
     10-year period ending with the applicable period involved''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to computations of the sustainable growth rate 
     for years beginning with 2002.
       (c) Elimination of Transitional Adjustment.--Section 
     1848(d)(4)(F) (42 U.S.C. 1395w-4(d)(4)(F)) is amended by 
     striking ``subparagraph (A)'' and all that follows and 
     inserting ``subparagraph (A), for each of 2001 and 2002, of 
     -0.2 percent.''
       (d) GAO Study of Medicare Payment for Inhalation Therapy.--
       (1) Study.--The Comptroller General of the United States 
     shall conduct a study to examine the adequacy of current 
     reimbursements for inhalation therapy under the medicare 
     program.
       (2) Report.--Not later than May 1, 2003, the Comptroller 
     General shall submit to Congress a report on the study 
     conducted under paragraph (1).

     SEC. 502. STUDIES ON ACCESS TO PHYSICIANS' SERVICES.

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

     SEC. 503. MEDPAC REPORT ON PAYMENT FOR PHYSICIANS' SERVICES.

       Not later than 1 year after the date of the enactment of 
     this Act, the Medicare Payment Advisory Commission shall 
     submit to Congress a report on the effect of refinements to 
     the practice expense component of payments for physicians' 
     services, after the transition to a full resource-based 
     payment system in 2002, under section 1848 of the Social 
     Security Act (42 U.S.C. 1395w-4). Such report shall examine 
     the following matters by physician specialty:
       (1) The effect of such refinements on payment for 
     physicians' services.
       (2) The interaction of the practice expense component with 
     other components of and adjustments to payment for 
     physicians' services under such section.
       (3) The appropriateness of the amount of compensation by 
     reason of such refinements.
       (4) The effect of such refinements on access to care by 
     medicare beneficiaries to physicians' services.
       (5) The effect of such refinements on physician 
     participation under the medicare program.

     SEC. 504. 1-YEAR EXTENSION OF TREATMENT OF CERTAIN PHYSICIAN 
                   PATHOLOGY SERVICES UNDER MEDICARE.

       Section 542(c) of BIPA is amended by striking ``2-year 
     period'' and inserting ``3-year period''.

     SEC. 505. PHYSICIAN FEE SCHEDULE WAGE INDEX REVISION.

       (a) Index Revision.--
       (1) In general.--Subject to paragraph (2), notwithstanding 
     any other provision of law, for purposes of payment under the 
     physician fee schedule under section 1848 of the Social 
     Security Act (42 U.S.C. 1395w-4) for physicians' services 
     furnished during 2004, in no case may the work geographic 
     index otherwise calculated under subsection (e)(1)(A)(iii) of 
     such section be less than 0.985.
       (2) Secretarial discretion.--Paragraph (1) shall not take 
     effect or be in force if the Secretary determines, taking 
     into account the report of the Comptroller General under 
     subsection (b)(2), that there is no sound economic rationale 
     for the implementation of such paragraph.
       (3) Exemption from limitation on annual adjustments.--Any 
     increase in expenditures attributable to paragraph (1) during 
     2004 shall not be taken into account in applying section 
     1848(c)(2)(B)(ii)(II) of the Social Security Act (42 U.S.C. 
     1395w-4(c)(2)(B)(ii)(II)) for that year.
       (b) GAO Report.--
       (1) Evaluation.--As part of the study on geographic 
     differences in payments for physicians' services conducted 
     under section 309, the Comptroller General shall evaluate the 
     following:
       (A) Whether there is a sound economic basis for the 
     implementation of the adjustment under subsection (a)(1) in 
     those areas in which the adjustment applies.
       (B) The effect of such adjustment on physician location and 
     retention in areas affected by such adjustment, taking into 
     account--
       (i) differences in recruitment costs and retention rates 
     for physicians, including specialists, between large urban 
     areas and other areas; and
       (ii) the mobility of physicians, including specialists, 
     over the last decade.
       (C) The appropriateness of establishing a floor of 1.0 for 
     the work geographic index.
       (2) Report.--By not later than September 1, 2003, the 
     Comptroller General shall submit to Congress and to the 
     Secretary a report on the evaluation conducted under 
     paragraph (1).

                       Subtitle B--Other Services

     SEC. 511. COMPETITIVE ACQUISITION OF CERTAIN ITEMS AND 
                   SERVICES.

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


        ``competitive acquisition of certain items and services

       ``Sec. 1847. (a) Establishment of Competitive Acquisition 
     Programs.--
       ``(1) Implementation of programs.--
       ``(A) In general.--The Secretary shall establish and 
     implement programs under which competitive acquisition areas 
     are established throughout the United States for contract 
     award purposes for the furnishing under this part of 
     competitively priced items and services (described in 
     paragraph (2)) for which payment is made under this part. 
     Such areas may differ for different items and services.
       ``(B) Phased-in implementation.--The programs shall be 
     phased-in among competitive acquisition areas over a period 
     of not longer than 3 years in a manner so that the 
     competition under the programs occurs in--
       ``(i) at least \1/3\ of such areas in 2004; and
       ``(ii) at least \2/3\ of such areas in 2005.
       ``(C) Waiver of certain provisions.--In carrying out the 
     programs, the Secretary may waive such provisions of the 
     Federal Acquisition Regulation as are necessary for the 
     efficient implementation of this section, other than 
     provisions relating to confidentiality of information and 
     such other provisions as the Secretary determines 
     appropriate.
       ``(2) Items and services described.--The items and services 
     referred to in paragraph (1) are the following:
       ``(A) Durable medical equipment and inhalation drugs used 
     in connection with durable medical equipment.--Covered items 
     (as defined in section 1834(a)(13)) for which payment is 
     otherwise made under section 1834(a), other than items used 
     in infusion, and inhalation drugs used in conjunction with 
     durable medical equipment.
       ``(B) Off-the-shelf orthotics.--Orthotics (described in 
     section 1861(s)(9)) for which payment is otherwise made under 
     section 1834(h) which require minimal self-adjustment for 
     appropriate use and does not require expertise in trimming, 
     bending, molding, assembling, or customizing to fit to the 
     patient.
       ``(3) Exemption authority.--In carrying out the programs 
     under this section, the Secretary may exempt--
       ``(A) areas that are not competitive due to low population 
     density; and
       ``(B) items and services for which the application of 
     competitive acquisition is not likely to result in 
     significant savings.
       ``(b) Program Requirements.--
       ``(1) In general.--The Secretary shall conduct a 
     competition among entities supplying items and services 
     described in subsection (a)(2) for each competitive 
     acquisition area in which the program is implemented under 
     subsection (a) with respect to such items and services.
       ``(2) Conditions for awarding contract.--
       ``(A) In general.--The Secretary may not award a contract 
     to any entity under the competition conducted in an 
     competitive acquisition area pursuant to paragraph (1) to 
     furnish such items or services unless the Secretary finds all 
     of the following:
       ``(i) The entity meets quality and financial standards 
     specified by the Secretary or developed by accreditation 
     entities or organizations recognized by the Secretary.
       ``(ii) The total amounts to be paid under the contract 
     (including costs associated with the administration of the 
     contract) are expected to be less than the total amounts that 
     would otherwise be paid.
       ``(iii) Beneficiary access to a choice of multiple 
     suppliers in the area is maintained.

[[Page 11930]]

       ``(iv) Beneficiary liability is limited to the applicable 
     percentage of contract award price.
       ``(B) Quality standards.--The quality standards specified 
     under subparagraph (A)(i) shall not be less than the quality 
     standards that would otherwise apply if this section did not 
     apply and shall include consumer services standards. The 
     Secretary shall consult with an expert outside advisory panel 
     composed of an appropriate selection of representatives of 
     physicians, practitioners, and suppliers to review (and 
     advise the Secretary concerning) such quality standards.
       ``(3) Contents of contract.--
       ``(A) In general.--A contract entered into with an entity 
     under the competition conducted pursuant to paragraph (1) is 
     subject to terms and conditions that the Secretary may 
     specify.
       ``(B) Term of contracts.--The Secretary shall rebid 
     contracts under this section not less often than once every 3 
     years.
       ``(4) Limit on number of contractors.--
       ``(A) In general.--The Secretary may limit the number of 
     contractors in a competitive acquisition area to the number 
     needed to meet projected demand for items and services 
     covered under the contracts. In awarding contracts, the 
     Secretary shall take into account the ability of bidding 
     entities to furnish items or services in sufficient 
     quantities to meet the anticipated needs of beneficiaries for 
     such items or services in the geographic area covered under 
     the contract on a timely basis.
       ``(B) Multiple winners.--The Secretary shall award 
     contracts to more than one entity submitting a bid in each 
     area for an item or service.
       ``(5) Participating contractors.--Payment shall not be made 
     for items and services described in subsection (a)(2) 
     furnished by a contractor and for which competition is 
     conducted under this section unless--
       ``(A) the contractor has submitted a bid for such items and 
     services under this section; and
       ``(B) the Secretary has awarded a contract to the 
     contractor for such items and services under this section.
       ``(6) Authority to contract for education, outreach and 
     complaint services.--The Secretary may enter into a contract 
     with an appropriate entity to address complaints from 
     beneficiaries who receive items and services from an entity 
     with a contract under this section and to conduct appropriate 
     education of and outreach to such beneficiaries with respect 
     to the program.
       ``(c) Annual Reports.--The Secretary shall submit to 
     Congress an annual management report on the programs under 
     this section. Each such report shall include information on 
     savings, reductions in cost-sharing, access to items and 
     services, and beneficiary satisfaction.
       ``(d) Demonstration Project for Clinical Laboratory 
     Services.--
       ``(1) In general.--The Secretary shall conduct a 
     demonstration project on the application of competitive 
     acquisition under this section to clinical diagnostic 
     laboratory tests--
       ``(A) for which payment is otherwise made under section 
     1833(h) or 1834(d)(1) (relating to colorectal cancer 
     screening tests); and
       ``(B) which are furnished without a face-to-face encounter 
     between the individual and the hospital or physician ordering 
     the tests.
       ``(2) Terms and conditions.--Such project shall be under 
     the same conditions as are applicable to items and services 
     described in subsection (a)(2).
       ``(3) Report.--The Secretary shall submit to Congress--
       ``(A) an initial report on the project not later than 
     December 31, 2004; and
       ``(B) such progress and final reports on the project after 
     such date as the Secretary determines appropriate.''.
       (b) Continuation of Certain Demonstration Projects.--
     Notwithstanding the amendment made by subsection (a), with 
     respect to demonstration projects implemented by the 
     Secretary under section 1847 of the Social Security Act (42 
     U.S.C. 1395w-3) (relating to the establishment of competitive 
     acquisition areas) that was in effect on the day before the 
     date of the enactment of this Act, each such demonstration 
     project may continue under the same terms and conditions 
     applicable under that section as in effect on that date.
       (c) Report on Differences in Payment for Laboratory 
     Services.--Not later than 18 months after the date of the 
     enactment of this Act, the Comptroller General of the United 
     States shall submit to Congress a report that analyzes 
     differences in reimbursement between public and private 
     payors for clinical diagnostic laboratory services.

     SEC. 512. PAYMENT FOR AMBULANCE SERVICES.

       (a) Phase-In Providing Floor Using Blend of Fee Schedule 
     and Regional Fee Schedules.--Section 1834(l) (42 U.S.C. 
     1395m(l)) is amended--
       (1) in paragraph (2)(E), by inserting ``consistent with 
     paragraph (10)'' after ``in an efficient and fair manner'';
       (2) by redesignating the paragraph (8) added by section 
     221(a) of BIPA as paragraph (9); and
       (3) by adding at the end the following new paragraph:
       ``(10) Phase-in providing floor using blend of fee schedule 
     and regional fee schedules.--In carrying out the phase-in 
     under paragraph (2)(E) for each level of service furnished in 
     a year before January 1, 2007, the portion of the payment 
     amount that is based on the fee schedule shall not be less 
     than the following blended rate of the fee schedule under 
     paragraph (1) and of a regional fee schedule for the region 
     involved:
       ``(A) For 2003, the blended rate shall be based 20 percent 
     on the fee schedule under paragraph (1) and 80 percent on the 
     regional fee schedule.
       ``(B) For 2004, the blended rate shall be based 40 percent 
     on the fee schedule under paragraph (1) and 60 percent on the 
     regional fee schedule.
       ``(C) For 2005, the blended rate shall be based 60 percent 
     on the fee schedule under paragraph (1) and 40 percent on the 
     regional fee schedule.
       ``(D) For 2006, the blended rate shall be based 80 percent 
     on the fee schedule under paragraph (1) and 20 percent on the 
     regional fee schedule.

     For purposes of this paragraph, the Secretary shall establish 
     a regional fee schedule for each of the 9 Census divisions 
     using the methodology (used in establishing the fee schedule 
     under paragraph (1)) to calculate a regional conversion 
     factor and a regional mileage payment rate and using the same 
     payment adjustments and the same relative value units as used 
     in the fee schedule under such paragraph.''.
       (b) Adjustment in Payment for Certain Long Trips.--Section 
     1834(l), as amended by subsection (a), is further amended by 
     adding at the end the following new paragraph:
       ``(11) Adjustment in payment for certain long trips.--In 
     the case of ground ambulance services furnished on or after 
     January 1, 2003, and before January 1, 2008, regardless of 
     where the transportation originates, the fee schedule 
     established under this subsection shall provide that, with 
     respect to the payment rate for mileage for a trip above 50 
     miles the per mile rate otherwise established shall be 
     increased by \1/4\ of the payment per mile otherwise 
     applicable to such miles.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to ambulance services furnished on or after 
     January 1, 2003.

     SEC. 513. 2-YEAR EXTENSION OF MORATORIUM ON THERAPY CAPS; 
                   PROVISIONS RELATING TO REPORTS.

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

[[Page 11931]]



     SEC. 514. COVERAGE OF AN INITIAL PREVENTIVE PHYSICAL 
                   EXAMINATION.

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

               ``Initial Preventive Physical Examination

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

     SEC. 515. RENAL DIALYSIS SERVICES.

       (a) Report on Differences in Costs in Different Settings.--
     Not later than 1 year after the date of the enactment of this 
     Act, the Comptroller General of the United States shall 
     submit to Congress a report containing--
       (1) an analysis of the differences in costs of providing 
     renal dialysis services under the medicare program in home 
     settings and in facility settings;
       (2) an assessment of the percentage of overhead costs in 
     home settings and in facility settings; and
       (3) an evaluation of whether the charges for home dialysis 
     supplies and equipment are reasonable and necessary.
       (b) Restoring Composite Rate Exceptions for Pediatric 
     Facilities.--
       (1) In general.--Section 422(a)(2) of BIPA is amended--
       (A) in subparagraph (A), by striking ``and (C)'' and 
     inserting ``, (C), and (D)'';
       (B) in subparagraph (B), by striking ``In the case'' and 
     inserting ``Subject to subparagraph (D), in the case''; and
       (C) by adding at the end the following new subparagraph:
       ``(D) Inapplicability to pediatric facilities.--
     Subparagraphs (A) and (B) shall not apply, as of October 1, 
     2002, to pediatric facilities that do not have an exception 
     rate described in subparagraph (C) in effect on such date. 
     For purposes of this subparagraph, the term `pediatric 
     facility' means a renal facility at least 50 percent of whose 
     patients are individuals under 18 years of age.''.
       (2) Conforming amendment.--The fourth sentence of section 
     1881(b)(7) (42 U.S.C. 1395rr(b)(7)) is amended by striking 
     ``The Secretary'' and inserting ``Subject to section 
     422(a)(2) of the Medicare, Medicaid, and SCHIP Benefits 
     Improvement and Protection Act of 2000, the Secretary''.
       (c) Increase in Renal Dialysis Composite Rate for Services 
     Furnished in 2004.--Notwithstanding any other provision of 
     law, with respect to payment under part B of title XVIII of 
     the Social Security Act for renal dialysis services furnished 
     in 2004, the composite payment rate otherwise established 
     under section 1881(b)(7) of such Act (42 U.S.C. 1395rr(b)(7)) 
     shall be increased by 1.2 percent.

     SEC. 516. IMPROVED PAYMENT FOR CERTAIN MAMMOGRAPHY SERVICES.

       (a) Exclusion from OPD Fee Schedule.--Section 
     1833(t)(1)(B)(iv) (42 U.S.C. 1395l(t)(1)(B)(iv)) is amended 
     by inserting before the period at the end the following: 
     ``and does not include screening mammography (as defined in 
     section 1861(jj)) and unilateral and bilateral diagnostic 
     mammography''.
       (b) Adjustment to Technical Component.--For diagnostic 
     mammography performed on or after January 1, 2004, for which 
     payment is made under the physician fee schedule under 
     section 1848 of the Social Security Act (42 U.S.C. 1395w-4), 
     the Secretary, based on the most recent cost data available, 
     shall provide for an appropriate adjustment in the payment 
     amount for the technical component of the diagnostic 
     mammography.
       (c) Effective Date.--The amendment made by subsection (a) 
     shall apply to mammography performed on or after January 1, 
     2004.

     SEC. 517. WAIVER OF PART B LATE ENROLLMENT PENALTY FOR 
                   CERTAIN MILITARY RETIREES; SPECIAL ENROLLMENT 
                   PERIOD.

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

       (a) Coverage.--Section 1861(s)(2) (42 U.S.C. 1395x(s)(2)), 
     as amended by section 514(a), is amended--
       (1) in subparagraph (V), by striking ``and'' at the end;
       (2) in subparagraph (W), by inserting ``and'' at the end; 
     and
       (3) by adding at the end the following new subparagraph:
       ``(X) cholesterol and other blood lipid screening tests (as 
     defined in subsection (XX));''.
       (b) Services Described.--Section 1861 (42 U.S.C. 1395x), as 
     amended by section 514(b), is amended by adding at the end 
     the following new subsection:

           ``Cholesterol and Other Blood Lipid Screening Test

       ``(xx)(1) The term `cholesterol and other blood lipid 
     screening test' means diagnostic testing of cholesterol and 
     other lipid levels of the blood for the purpose of early 
     detection of abnormal cholesterol and other lipid levels.
       ``(2) The Secretary shall establish standards, in 
     consultation with appropriate organizations, regarding the 
     frequency and type of cholesterol and other blood lipid 
     screening tests, except that such frequency may not be more 
     often than once every 2 years.''.
       (c) Frequency.--Section 1862(a)(1) (42 U.S.C. 1395y(a)(1)), 
     as amended by section 514(e), is amended
       (1) by striking ``and'' at the end of subparagraph (I);
       (2) by striking the semicolon at the end of subparagraph 
     (J) and inserting ``; and''; and
       (3) by adding at the end the following new subparagraph:
       ``(K) in the case of a cholesterol and other blood lipid 
     screening test (as defined in section 1861(xx)(1)), which is 
     performed more frequently than is covered under section 
     1861(xx)(2).''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to tests furnished on or after January 1, 2004.

[[Page 11932]]



             TITLE VI--PROVISIONS RELATING TO PARTS A AND B

                    Subtitle A--Home Health Services

     SEC. 601. ELIMINATION OF 15 PERCENT REDUCTION IN PAYMENT 
                   RATES UNDER THE PROSPECTIVE PAYMENT SYSTEM.

       (a) In General.--Section 1895(b)(3)(A) (42 U.S.C. 
     1395fff(b)(3)(A)) is amended to read as follows:
       ``(A) Initial basis.--Under such system the Secretary shall 
     provide for computation of a standard prospective payment 
     amount (or amounts) as follows:
       ``(i) Such amount (or amounts) shall initially be based on 
     the most current audited cost report data available to the 
     Secretary and shall be computed in a manner so that the total 
     amounts payable under the system for fiscal year 2001 shall 
     be equal to the total amount that would have been made if the 
     system had not been in effect and if section 
     1861(v)(1)(L)(ix) had not been enacted.
       ``(ii) For fiscal year 2002 and for the first quarter of 
     fiscal year 2003, such amount (or amounts) shall be equal to 
     the amount (or amounts) determined under this paragraph for 
     the previous fiscal year, updated under subparagraph (B).
       ``(iii) For 2003, such amount (or amounts) shall be equal 
     to the amount (or amounts) determined under this paragraph 
     for fiscal year 2002, updated under subparagraph (B) for 
     2003.
       ``(iv) For 2004 and each subsequent year, such amount (or 
     amounts) shall be equal to the amount (or amounts) determined 
     under this paragraph for the previous year, updated under 
     subparagraph (B).

     Each such amount shall be standardized in a manner that 
     eliminates the effect of variations in relative case mix and 
     area wage adjustments among different home health agencies in 
     a budget neutral manner consistent with the case mix and wage 
     level adjustments provided under paragraph (4)(A). Under the 
     system, the Secretary may recognize regional differences or 
     differences based upon whether or not the services or agency 
     are in an urbanized area.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect as if included in the amendments made by 
     section 501 of the Medicare, Medicaid, and SCHIP Benefits 
     Improvement and Protection Act of 2000 (as enacted into law 
     by section 1(a)(6) of Public Law 106-554).

     SEC. 602. UPDATE IN HOME HEALTH SERVICES.

       (a) Change to Calendar Year Update.--
       (1) In general.--Section 1895(b) (42 U.S.C. 1395fff(b)(3)) 
     is amended--
       (A) in paragraph (3)(B)(i)--
       (i) by striking ``each fiscal year (beginning with fiscal 
     year 2002)'' and inserting ``fiscal year 2002 and for each 
     subsequent year (beginning with 2003)''; and
       (ii) by inserting ``or year'' after ``the fiscal year'';
       (B) in paragraph (3)(B)(ii)--
       (i) in subclause (II), by striking ``fiscal year'' and 
     inserting ``year'' and by redesignating such subclause as 
     subclause (III); and
       (ii) in subclause (I), by striking ``each of fiscal years 
     2002 and 2003'' and inserting the following: ``fiscal year 
     2002, the home health market basket percentage increase (as 
     defined in clause (iii)) minus 1.1 percentage points;

       ``(II) 2003'';

       (C) in paragraph (3)(B)(iii), by inserting ``or year'' 
     after ``fiscal year'' each place it appears;
       (D) in paragraph (3)(B)(iv)--
       (i) by inserting ``or year'' after ``fiscal year'' each 
     place it appears; and
       (ii) by inserting ``or years'' after ``fiscal years''; and
       (E) in paragraph (5), by inserting ``or year'' after 
     ``fiscal year''.
       (2) Transition rule.--The standard prospective payment 
     amount (or amounts) under section 1895(b)(3) of the Social 
     Security Act for the calendar quarter beginning on October 1, 
     2002, shall be such amount (or amounts) for the previous 
     calendar quarter.
       (b) Changes in Updates for 2003, 2004, and 2005.--Section 
     1895(b)(3)(B)(ii) (42 U.S.C. 1395fff(b)(3)(B)(ii)), as 
     amended by subsection (a)(1)(B), is amended--
       (1) in subclause (II), by striking ``the home health market 
     basket percentage increase (as defined in clause (iii)) minus 
     1.1 percentage points'' and inserting ``2.0 percentage 
     points'';
       (2) by striking ``or'' at the end of subclause (II);
       (3) by redesignating subclause (III) as subclause (V); and
       (4) by inserting after subclause (II) the following new 
     subclause:

       ``(III) 2004, 1.1 percentage points;
       ``(IV) 2005, 2.7 percentage points; or''.

       (c) Payment Adjustment.--
       (1) In general.--Section 1895(b)(5) (42 U.S.C. 
     1395fff(b)(5)) is amended by striking ``5 percent'' and 
     inserting ``3 percent''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to years beginning with 2003.

     SEC. 603. OASIS TASK FORCE; SUSPENSION OF CERTAIN OASIS DATA 
                   COLLECTION REQUIREMENTS PENDING TASK FORCE 
                   SUBMITTAL OF REPORT.

       (a) Establishment.--The Secretary of Health and Human 
     Services shall establish and appoint a task force (to be 
     known as the ``OASIS Task Force'') to examine the data 
     collection and reporting requirements under OASIS. For 
     purposes of this section, the term ``OASIS'' means the 
     Outcome and Assessment Information Set required by reason of 
     section 4602(e) of Balanced Budget Act of 1997 (42 U.S.C. 
     1395fff note).
       (b) Composition.--The OASIS Task Force shall be composed of 
     the following:
       (1) Staff of the Centers for Medicare & Medicaid Services 
     with expertise in post-acute care.
       (2) Representatives of home health agencies.
       (3) Health care professionals and research and health care 
     quality experts outside the Federal Government with expertise 
     in post-acute care.
       (4) Advocates for individuals requiring home health 
     services.
       (c) Duties.--
       (1) Review and recommendations.--The OASIS Task Force shall 
     review and make recommendations to the Secretary regarding 
     changes in OASIS to improve and simplify data collection for 
     purposes of--
       (A) assessing the quality of home health services; and
       (B) providing consistency in classification of patients 
     into home health resource groups (HHRGs) for payment under 
     section 1895 of the Social Security Act (42 U.S.C. 1395fff).
       (2) Specific items.--In conducting the review under 
     paragraph (1), the OASIS Task Force shall specifically 
     examine--
       (A) the 41 outcome measures currently in use;
       (B) the timing and frequency of data collection; and
       (C) the collection of information on comorbidities and 
     clinical indicators.
       (3) Report.--The OASIS Task Force shall submit a report to 
     the Secretary containing its findings and recommendations for 
     changes in OASIS by not later than 18 months after the date 
     of the enactment of this Act.
       (d) Sunset.--The OASIS Task Force shall terminate 60 days 
     after the date on which the report is submitted under 
     subsection (c)(2).
       (e) Nonapplication of FACA.--The provisions of the Federal 
     Advisory Committee Act shall not apply to the OASIS Task 
     Force.
       (f) Suspension of OASIS Requirement for Collection of Data 
     on Non-Medicare and Non-Medicaid Patients Pending Task Force 
     Report.--
       (1) In general.--During the period described in paragraph 
     (2), the Secretary of Health and Human Services may not 
     require, under section 4602(e) of the Balanced Budget Act of 
     1997 or otherwise under OASIS, a home health agency to gather 
     or submit information that relates to an individual who is 
     not eligible for benefits under either title XVIII or title 
     XIX of the Social Security Act.
       (2) Period of suspension.--The period described in this 
     paragraph--
       (A) begins on January 1, 2003, and
       (B) ends on the last day of the 2nd month beginning after 
     the date the report is submitted under subsection (c)(2).

     SEC. 604. MEDPAC STUDY ON MEDICARE MARGINS OF HOME HEALTH 
                   AGENCIES.

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

     SEC. 605. CLARIFICATION OF TREATMENT OF OCCASIONAL ABSENCES 
                   IN DETERMINING WHETHER AN INDIVIDUAL IS 
                   CONFINED TO THE HOME.

       (a) In General.--The penultimate sentence of section 
     1814(a) (42 U.S.C. 1395f(a) and the penultimate sentence of 
     section 1835(a) (42 U.S.C. 1395n(a)) are each amended to read 
     as follows: ``Any other absence of an individual from the 
     home shall not so disqualify the individual if the absence is 
     infrequent or of relatively short duration, such as an 
     occasional trip to the barber or a walk around the block, and 
     is not inconsistent with the assessment underlying the 
     individual's plan of care for home health services.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall take effect on the date of the enactment of this Act.

             Subtitle B--Direct Graduate Medical Education

     SEC. 611. EXTENSION OF UPDATE LIMITATION ON HIGH COST 
                   PROGRAMS.

       Section 1886(h)(2)(D)(iv) (42 U.S.C. 1395ww(h)(2)(D)(iv)) 
     is amended--
       (1) in subclause (I)--
       (A) by striking ``and 2002'' and inserting ``through 
     2012'';
       (B) by striking ``during fiscal year 2001 or fiscal year 
     2002'' and inserting ``during the period beginning with 
     fiscal year 2001 and ending with fiscal year 2012''; and

[[Page 11933]]

       (C) by striking ``subject to subclause (III),'';
       (2) by striking subclause (II); and
       (3) in subclause (III)--
       (A) by redesignating such subclause as subclause (II); and
       (B) by striking ``or (II)''.

     SEC. 612. REDISTRIBUTION OF UNUSED RESIDENT POSITIONS.

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

       ``(I) In general.--If a hospital's resident level (as 
     defined in clause (iii)(I)) is less than the otherwise 
     applicable resident limit (as defined in clause (iii)(II)) 
     for each of the reference periods (as defined in subclause 
     (II)), effective for cost reporting periods beginning on or 
     after January 1, 2003, the otherwise applicable resident 
     limit shall be reduced by 75 percent of the difference 
     between such limit and the reference resident level specified 
     in subclause (III) (or subclause (IV) if applicable).
       ``(II) Reference periods defined.--In this clause, the term 
     `reference periods' means, for a hospital, the 3 most recent 
     consecutive cost reporting periods of the hospital for which 
     cost reports have been settled (or, if not, submitted) on or 
     before September 30, 2001.
       ``(III) Reference resident level.--Subject to subclause 
     (IV), the reference resident level specified in this 
     subclause for a hospital is the highest resident level for 
     the hospital during any of the reference periods.
       ``(IV) Adjustment process.--Upon the timely request of a 
     hospital, the Secretary may adjust the reference resident 
     level for a hospital to be the resident level for the 
     hospital for the cost reporting period that includes July 1, 
     2002.

       ``(ii) Redistribution.--

       ``(I) In general.--The Secretary is authorized to increase 
     the otherwise applicable resident limits for hospitals by an 
     aggregate number estimated by the Secretary that does not 
     exceed the aggregate reduction in such limits attributable to 
     clause (i) (without taking into account any adjustment under 
     subclause (IV) of such clause).
       ``(II) Effective date.--No increase under subclause (I) 
     shall be permitted or taken into account for a hospital for 
     any portion of a cost reporting period that occurs before 
     July 1, 2003, or before the date of the hospital's 
     application for an increase under this clause. No such 
     increase shall be permitted for a hospital unless the 
     hospital has applied to the Secretary for such increase by 
     December 31, 2004.
       ``(III) Considerations in redistribution.--In determining 
     for which hospitals the increase in the otherwise applicable 
     resident limit is provided under subclause (I), the Secretary 
     shall take into account the need for such an increase by 
     specialty and location involved, consistent with subclause 
     (IV).
       ``(IV) Priority for rural and small urban areas.--In 
     determining for which hospitals and residency training 
     programs an increase in the otherwise applicable resident 
     limit is provided under subclause (I), the Secretary shall 
     first distribute the increase to programs of hospitals 
     located in rural areas or in urban areas that are not large 
     urban areas (as defined for purposes of subsection (d)) on a 
     first-come-first-served basis (as determined by the 
     Secretary) based on a demonstration that the hospital will 
     fill the positions made available under this clause and not 
     to exceed an increase of 25 full-time equivalent positions 
     with respect to any hospital.
       ``(V) Application of locality adjusted national average per 
     resident amount.--With respect to additional residency 
     positions in a hospital attributable to the increase provided 
     under this clause, notwithstanding any other provision of 
     this subsection, the approved FTE resident amount is deemed 
     to be equal to the locality adjusted national average per 
     resident amount computed under subparagraph (E) for that 
     hospital.
       ``(VI) Construction.--Nothing in this clause shall be 
     construed as permitting the redistribution of reductions in 
     residency positions attributable to voluntary reduction 
     programs under paragraph (6) or as affecting the ability of a 
     hospital to establish new medical residency training programs 
     under subparagraph (H).

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

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

       (b) No Application of Increase to IME.--Section 
     1886(d)(5)(B)(v) (42 U.S.C. 1395ww(d)(5)(B)(v)) is amended by 
     adding at the end the following: ``The provisions of clause 
     (i) of subparagraph (I) of subsection (h)(4) shall apply with 
     respect to the first sentence of this clause in the same 
     manner as it applies with respect to subparagraph (F) of such 
     subsection, but the provisions of clause (ii) of such 
     subparagraph shall not apply.''.
       (c) Report on Extension of Applications Under 
     Redistribution Program.--Not later than July 1, 2004, the 
     Secretary shall submit to Congress a report containing 
     recommendations regarding whether to extend the deadline for 
     applications for an increase in resident limits under section 
     1886(h)(4)(I)(ii)(II) of the Social Security Act (as added by 
     subsection (a)).

                      Subtitle C--Other Provisions

     SEC. 621. MODIFICATIONS TO MEDICARE PAYMENT ADVISORY 
                   COMMISSION (MEDPAC).

       (a) Examination of Budget Consequences.--Section 1805(b) 
     (42 U.S.C. 1395b-6(b)) is amended by adding at the end the 
     following new paragraph:
       ``(8) Examination of budget consequences.--Before making 
     any recommendations, the Commission shall examine the budget 
     consequences of such recommendations, directly or through 
     consultation with appropriate expert entities.''.
       (b) Consideration of Efficient Provision of Services.--
     Section 1805(b)(2)(B)(i) (42 U.S.C. 1395b-6(b)(2)(B)(i)) is 
     amended by inserting ``the efficient provision of'' after 
     ``expenditures for''.
       (c) Additional Reports.--
       (1) Data needs and sources.--The Medicare Payment Advisory 
     Commission shall conduct a study, and submit a report to 
     Congress by not later than June 1, 2003, on the need for 
     current data, and sources of current data available, to 
     determine the solvency and financial circumstances of 
     hospitals and other medicare providers of services. The 
     Commission shall examine data on uncompensated care, as well 
     as the share of uncompensated care accounted for by the 
     expenses for treating illegal aliens.
       (2) Use of tax-related returns.--Using return information 
     provided under Form 990 of the Internal Revenue Service, the 
     Commission shall submit to Congress, by not later than June 
     1, 2003, a report on the following:
       (A) Investments and capital financing of hospitals 
     participating under the medicare program and related 
     foundations.
       (B) Access to capital financing for private and for not-
     for-profit hospitals.

     SEC. 622. DEMONSTRATION PROJECT FOR DISEASE MANAGEMENT FOR 
                   CERTAIN MEDICARE BENEFICIARIES WITH DIABETES.

       (a) In General.--The Secretary of Health and Human Services 
     shall conduct a demonstration project under this section (in 
     this section referred to as the ``project'') to demonstrate 
     the impact on costs and health outcomes of applying disease 
     management to certain medicare beneficiaries with diagnosed 
     diabetes. In no case may the number of participants in the 
     project exceed 30,000 at any time.
       (b) Voluntary Participation.--
       (1) Eligibility.--Medicare beneficiaries are eligible to 
     participate in the project only if--
       (A) they are a member of a health disparity population (as 
     defined in section 485E(d) of the Public Health Service Act), 
     such as Hispanics;
       (B) they meet specific medical criteria demonstrating the 
     appropriate diagnosis and the advanced nature of their 
     disease;
       (C) their physicians approve of participation in the 
     project; and
       (D) they are not enrolled in a Medicare+Choice plan.
       (2) Benefits.--A medicare beneficiary who is enrolled in 
     the project shall be eligible--
       (A) for disease management services related to their 
     diabetes; and
       (B) for payment for all costs for prescription drugs 
     without regard to whether or not they relate to the diabetes, 
     except that the project may provide for modest cost-sharing 
     with respect to prescription drug coverage.
       (c) Contracts With Disease Management Organizations.--
       (1) In general.--The Secretary of Health and Human Services 
     shall carry out the project through contracts with up to 
     three disease management organizations. The Secretary shall 
     not enter into such a contract with an organization unless 
     the organization demonstrates that it can produce improved 
     health outcomes and reduce aggregate medicare expenditures 
     consistent with paragraph (2).
       (2) Contract provisions.--Under such contracts--
       (A) such an organization shall be required to provide for 
     prescription drug coverage described in subsection (b)(2)(B);
       (B) such an organization shall be paid a fee negotiated and 
     established by the Secretary in a manner so that (taking into 
     account savings in expenditures under parts A and B of the 
     medicare program under title XVIII of the Social Security 
     Act) there will be no net increase, and to the extent 
     practicable, there

[[Page 11934]]

     will be a net reduction in expenditures under the medicare 
     program as a result of the project; and
       (C) such an organization shall guarantee, through an 
     appropriate arrangement with a reinsurance company or 
     otherwise, the prohibition on net increases in expenditures 
     described in subparagraph (B).
       (3) Payments.--Payments to such organizations shall be made 
     in appropriate proportion from the Trust Funds established 
     under title XVIII of the Social Security Act.
       (d) Application of Medigap Protections to Demonstration 
     Project Enrollees.--(1) Subject to paragraph (2), the 
     provisions of section 1882(s)(3) (other than clauses (i) 
     through (iv) of subparagraph (B)) and 1882(s)(4) of the 
     Social Security Act shall apply to enrollment (and 
     termination of enrollment) in the demonstration project under 
     this section, in the same manner as they apply to enrollment 
     (and termination of enrollment) with a Medicare+Choice 
     organization in a Medicare+Choice plan.
       (2) In applying paragraph (1)--
       (A) any reference in clause (v) or (vi) of section 
     1882(s)(3)(B) of such Act to 12 months is deemed a reference 
     to the period of the demonstration project; and
       (B) the notification required under section 1882(s)(3)(D) 
     of such Act shall be provided in a manner specified by the 
     Secretary of Health and Human Services.
       (e) Duration.--The project shall last for not longer than 3 
     years.
       (f) Waiver.--The Secretary of Health and Human Services 
     shall waive such provisions of title XVIII of the Social 
     Security Act as may be necessary to provide for payment for 
     services under the project in accordance with subsection 
     (c)(3).
       (g) Report.--The Secretary of Health and Human Services 
     shall submit to Congress an interim report on the project not 
     later than 2 years after the date it is first implemented and 
     a final report on the project not later than 6 months after 
     the date of its completion. Such reports shall include 
     information on the impact of the project on costs and health 
     outcomes and recommendations on the cost-effectiveness of 
     extending or expanding the project.
       (h) Working Group on Medicare Disease Management 
     Programs.--The Secretary shall establish within the 
     Department of Health and Human Services a working group 
     consisting of employees of the Department to carry out the 
     following:
       (1) To oversee the project.
       (2) To establish policy and criteria for medicare disease 
     management programs within the Department, including the 
     establishment of policy and criteria for such programs.
       (3) To identify targeted medical conditions and targeted 
     individuals.
       (4) To select areas in which such programs are carried out.
       (5) To monitor health outcomes under such programs.
       (6) To measure the effectiveness of such programs in 
     meeting any budget neutrality requirements.
       (7) Otherwise to serve as a central focal point within the 
     Department for dissemination of information on medicare 
     disease management programs.
       (i) GAO Study on Disease Management Programs.--The 
     Comptroller General of the United States shall conduct a 
     study that compares disease management programs under title 
     XVIII of the Social Security Act with such programs conducted 
     in the private sector, including the prevalence of such 
     programs and programs for case management. The study shall 
     identify the cost-effectiveness of such programs and any 
     savings achieved by such programs. The Comptroller General 
     shall submit a report on such study to Congress by not later 
     than 18 months after the date of the enactment of this Act.

     SEC. 623. DEMONSTRATION PROJECT FOR MEDICAL ADULT DAY CARE 
                   SERVICES.

       (a) Establishment.--Subject to the succeeding provisions of 
     this section, the Secretary of Health and Human Services 
     shall establish a demonstration project (in this section 
     referred to as the ``demonstration project'') under which the 
     Secretary shall, as part of a plan of an episode of care for 
     home health services established for a medicare beneficiary, 
     permit a home health agency, directly or under arrangements 
     with a medical adult day care facility, to provide medical 
     adult day care services as a substitute for a portion of home 
     health services that would otherwise be provided in the 
     beneficiary's home.
       (b) Payment.--
       (1) In general.--The amount of payment for an episode of 
     care for home health services, a portion of which consists of 
     substitute medical adult day care services, under the 
     demonstration project shall be made at a rate equal to 95 
     percent of the amount that would otherwise apply for such 
     home health services under section 1895 of the Social 
     Security Act (42 u.s.c. 1395fff). In no case may a home 
     health agency, or a medical adult day care facility under 
     arrangements with a home health agency, separately charge a 
     beneficiary for medical adult day care services furnished 
     under the plan of care.
       (2) Budget neutrality for demonstration project.--
     Notwithstanding any other provision of law, the Secretary 
     shall provide for an appropriate reduction in the aggregate 
     amount of additional payments made under section 1895 of the 
     Social Security Act (42 U.S.C. 1395fff) to reflect any 
     increase in amounts expended from the Trust Funds as a result 
     of the demonstration project conducted under this section.
       (c) Demonstration Project Sites.--The project established 
     under this section shall be conducted in not more than 5 
     States selected by the Secretary that license or certify 
     providers of services that furnish medical adult day care 
     services.
       (d) Duration.--The Secretary shall conduct the 
     demonstration project for a period of 3 years.
       (e) Voluntary Participation.--Participation of medicare 
     beneficiaries in the demonstration project shall be 
     voluntary. The total number of such beneficiaries that may 
     participate in the project at any given time may not exceed 
     15,000.
       (f) Preference in Selecting Agencies.--In selecting home 
     health agencies to participate under the demonstration 
     project, the Secretary shall give preference to those 
     agencies that are currently licensed or certified through 
     common ownership and control to furnish medical adult day 
     care services.
       (g) Waiver Authority.--The Secretary may waive such 
     requirements of title XVIII of the Social Security Act as may 
     be necessary for the purposes of carrying out the 
     demonstration project, other than waiving the requirement 
     that an individual be homebound in order to be eligible for 
     benefits for home health services.
       (h) Evaluation and Report.--The Secretary shall conduct an 
     evaluation of the clinical and cost effectiveness of the 
     demonstration project. Not later 30 months after the 
     commencement of the project, the Secretary shall submit to 
     Congress a report on the evaluation, and shall include in the 
     report the following:
       (1) An analysis of the patient outcomes and costs of 
     furnishing care to the medicare beneficiaries participating 
     in the project as compared to such outcomes and costs to 
     beneficiaries receiving only home health services for the 
     same health conditions.
       (2) Such recommendations regarding the extension, 
     expansion, or termination of the project as the Secretary 
     determines appropriate.
       (i) Definitions.--In this section:
       (1) Home health agency.--The term ``home health agency'' 
     has the meaning given such term in section 1861(o) of the 
     Social Security Act (42 U.S.C. 1395x(o)).
       (2) Medical adult day care facility.--The term ``medical 
     adult day care facility'' means a facility that--
       (A) has been licensed or certified by a State to furnish 
     medical adult day care services in the State for a continuous 
     2-year period;
       (B) is engaged in providing skilled nursing services and 
     other therapeutic services directly or under arrangement with 
     a home health agency;
       (C) meets such standards established by the Secretary to 
     assure quality of care and such other requirements as the 
     Secretary finds necessary in the interest of the health and 
     safety of individuals who are furnished services in the 
     facility; and
       (D) provides medical adult day care services.
       (3) Medical adult day care services.--The term ``medical 
     adult day care services'' means--
       (A) home health service items and services described in 
     paragraphs (1) through (7) of section 1861(m) furnished in a 
     medical adult day care facility;
       (B) a program of supervised activities furnished in a group 
     setting in the facility that--
       (i) meet such criteria as the Secretary determines 
     appropriate; and
       (ii) is designed to promote physical and mental health of 
     the individuals; and
       (C) such other services as the Secretary may specify.
       (4) Medicare beneficiary.--The term ``medicare 
     beneficiary'' means an individual entitled to benefits under 
     part A of this title, enrolled under part B of this title, or 
     both.

     SEC. 624. PUBLICATION ON FINAL WRITTEN GUIDANCE CONCERNING 
                   PROHIBITIONS AGAINST DISCRIMINATION BY NATIONAL 
                   ORIGIN WITH RESPECT TO HEALTH CARE SERVICES.

       Not later than January 1, 2003, the Secretary shall issue 
     final written guidance concerning the application of the 
     prohibition in title VI of the Civil Rights Act of 1964 
     against national origin discrimination as it affects persons 
     with limited English proficiency with respect to access to 
     health care services under the medicare program.

              TITLE VII--MEDICARE BENEFITS ADMINISTRATION

     SEC. 701. ESTABLISHMENT OF MEDICARE BENEFITS ADMINISTRATION.

       (a) In General.--Title XVIII (42 U.S.C. 1395 et seq.), as 
     amended by section 105, is amended by inserting after 1806 
     the following new section:


                   ``medicare benefits administration

       ``Sec. 1808. (a) Establishment.--There is established 
     within the Department of Health and Human Services an agency 
     to be known as the Medicare Benefits Administration.

[[Page 11935]]

       ``(b) Administrator; Deputy Administrator; Chief Actuary.--
       ``(1) Administrator.--
       ``(A) In general.--The Medicare Benefits Administration 
     shall be headed by an administrator to be known as the 
     `Medicare Benefits Administrator' (in this section referred 
     to as the `Administrator') who shall be appointed by the 
     President, by and with the advice and consent of the Senate. 
     The Administrator shall be in direct line of authority to the 
     Secretary.
       ``(B) Compensation.--The Administrator shall be paid at the 
     rate of basic pay payable for level III of the Executive 
     Schedule under section 5314 of title 5, United States Code.
       ``(C) Term of office.--The Administrator shall be appointed 
     for a term of 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 Administration, and shall have authority 
     and control over all personnel and activities thereof.
       ``(E) Rulemaking authority.--The Administrator may 
     prescribe such rules and regulations as the Administrator 
     determines necessary or appropriate to carry out the 
     functions of the Administration. The regulations prescribed 
     by the Administrator shall be subject to the rulemaking 
     procedures established under section 553 of title 5, United 
     States Code.
       ``(F) Authority to establish organizational units.--The 
     Administrator may establish, alter, consolidate, or 
     discontinue such organizational units or components within 
     the Administration as the Administrator considers necessary 
     or appropriate, except as specified in this section.
       ``(G) Authority to delegate.--The Administrator may assign 
     duties, and delegate, or authorize successive redelegations 
     of, authority to act and to render decisions, to such 
     officers and employees of the Administration as the 
     Administrator may find necessary. Within the limitations of 
     such delegations, redelegations, or assignments, all official 
     acts and decisions of such officers and employees shall have 
     the same force and effect as though performed or rendered by 
     the Administrator.
       ``(2) Deputy administrator.--
       ``(A) In general.--There shall be a Deputy Administrator of 
     the Medicare Benefits Administration who shall be appointed 
     by the President, by and with the advice and consent of the 
     Senate.
       ``(B) Compensation.--The Deputy Administrator shall be paid 
     at the rate of basic pay payable for level IV of the 
     Executive Schedule under section 5315 of title 5, United 
     States Code.
       ``(C) Term of office.--The Deputy Administrator shall be 
     appointed for a term of 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 Acting Administrator of the 
     Administration during the absence or disability of the 
     Administrator and, unless the President designates another 
     officer of the Government as Acting Administrator, in the 
     event of a vacancy in the office of the Administrator.
       ``(3) Chief actuary.--
       ``(A) In general.--There is established in the 
     Administration the position of Chief Actuary. The Chief 
     Actuary shall be appointed by, and in direct line of 
     authority to, the Administrator of such Administration. The 
     Chief Actuary shall be appointed from among individuals who 
     have demonstrated, by their education and experience, 
     superior expertise in the actuarial sciences. The Chief 
     Actuary may be removed only for cause.
       ``(B) Compensation.--The Chief Actuary shall be compensated 
     at the highest rate of basic pay for the Senior Executive 
     Service under section 5382(b) of title 5, United States Code.
       ``(C) Duties.--The Chief Actuary shall exercise such duties 
     as are appropriate for the office of the Chief Actuary and in 
     accordance with professional standards of actuarial 
     independence.
       ``(4) Secretarial coordination of program administration.--
     The Secretary shall ensure appropriate coordination between 
     the Administrator and the Administrator of the Centers for 
     Medicare & Medicaid Services in carrying out the programs 
     under this title.
       ``(c) Duties; Administrative Provisions.--
       ``(1) Duties.--
       ``(A) General duties.--The Administrator shall carry out 
     parts C and D, including--
       ``(i) negotiating, entering into, and enforcing, contracts 
     with plans for the offering of Medicare+Choice plans under 
     part C, including the offering of qualified prescription drug 
     coverage under such plans; and
       ``(ii) negotiating, entering into, and enforcing, contracts 
     with PDP sponsors for the offering of prescription drug plans 
     under part D.
       ``(B) Other duties.--The Administrator shall carry out any 
     duty provided for under part C or part D, including 
     demonstration projects carried out in part or in whole under 
     such parts, the programs of all-inclusive care for the 
     elderly (PACE program) under section 1894, the social health 
     maintenance organization (SHMO) demonstration projects 
     (referred to in section 4104(c) of the Balanced Budget Act of 
     1997), and through a Medicare+Choice project that 
     demonstrates the application of capitation payment rates for 
     frail elderly medicare beneficiaries through the use of a 
     interdisciplinary team and through the provision of primary 
     care services to such beneficiaries by means of such a team 
     at the nursing facility involved).
       ``(C) Prescription drug card.--The Administrator shall 
     carry out section 1807 (relating to the medicare prescription 
     drug discount card endorsement program).
       ``(D) Noninterference.--In carrying out its duties with 
     respect to the provision of qualified prescription drug 
     coverage to beneficiaries under this title, the Administrator 
     may not--
       ``(i) require a particular formulary or institute a price 
     structure for the reimbursement of covered outpatient drugs;
       ``(ii) interfere in any way with negotiations between PDP 
     sponsors and Medicare+Choice organizations and drug 
     manufacturers, wholesalers, or other suppliers of covered 
     outpatient drugs; and
       ``(iii) otherwise interfere with the competitive nature of 
     providing such coverage through such sponsors and 
     organizations.
       ``(E) Annual reports.--Not later March 31 of each year, the 
     Administrator shall submit to Congress and the President a 
     report on the administration of parts C and D during the 
     previous fiscal year.
       ``(2) Staff.--
       ``(A) In general.--The Administrator, with the approval of 
     the Secretary, may employ, without regard to chapter 31 of 
     title 5, United States Code, other than sections 3110 and 
     3112, such officers and employees as are necessary to 
     administer the activities to be carried out through the 
     Medicare Benefits Administration. The Administrator shall 
     employ staff with appropriate and necessary expertise in 
     negotiating contracts in the private sector.
       ``(B) Flexibility with respect to compensation.--
       ``(i) In general.--The staff of the Medicare Benefits 
     Administration shall, subject to clause (ii), be paid without 
     regard to the provisions of chapter 51 (other than section 
     5101) and chapter 53 (other than section 5301) of such title 
     (relating to classification and schedule pay rates).
       ``(ii) Maximum rate.--In no case may the rate of 
     compensation determined under clause (i) exceed the rate of 
     basic pay payable for level IV of the Executive Schedule 
     under section 5315 of title 5, United States Code.
       ``(C) Limitation on full-time equivalent staffing for 
     current cms functions being transferred.--The Administrator 
     may not employ under this paragraph a number of full-time 
     equivalent employees, to carry out functions that were 
     previously conducted by the Centers for Medicare & Medicaid 
     Services and that are conducted by the Administrator by 
     reason of this section, that exceeds the number of such full-
     time equivalent employees authorized to be employed by the 
     Centers for Medicare & Medicaid Services to conduct such 
     functions as of the date of the enactment of this Act.
       ``(3) Redelegation of certain functions of the centers for 
     medicare & medicaid services.--
       ``(A) In general.--The Secretary, the Administrator, and 
     the Administrator of the Centers for Medicare & Medicaid 
     Services shall establish an appropriate transition of 
     responsibility in order to redelegate the administration of 
     part C from the Secretary and the Administrator of the 
     Centers for Medicare & Medicaid Services to the Administrator 
     as is appropriate to carry out the purposes of this section.
       ``(B) Transfer of data and information.--The Secretary 
     shall ensure that the Administrator of the Centers for 
     Medicare & Medicaid Services transfers to the Administrator 
     of the Medicare Benefits Administration such information and 
     data in the possession of the Administrator of the Centers 
     for Medicare & Medicaid Services as the Administrator of the 
     Medicare Benefits Administration requires to carry out the 
     duties described in paragraph (1).
       ``(C) Construction.--Insofar as a responsibility of the 
     Secretary or the Administrator of the Centers for Medicare & 
     Medicaid Services is redelegated to the Administrator under 
     this section, any reference to the Secretary or the 
     Administrator of the Centers for Medicare & Medicaid Services 
     in this title or title XI with respect to such responsibility 
     is deemed to be a reference to the Administrator.
       ``(d) Office of Beneficiary Assistance.--

[[Page 11936]]

       ``(1) Establishment.--The Secretary shall establish within 
     the Medicare Benefits Administration an Office of Beneficiary 
     Assistance to coordinate functions relating to outreach and 
     education of medicare beneficiaries under this title, 
     including the functions described in paragraph (2). The 
     Office shall be separate operating division within the 
     Administration.
       ``(2) Dissemination of information on benefits and appeals 
     rights.--
       ``(A) Dissemination of benefits information.--The Office of 
     Beneficiary Assistance shall disseminate, directly or through 
     contract, to medicare beneficiaries, by mail, by posting on 
     the Internet site of the Medicare Benefits Administration and 
     through a toll-free telephone number, information with 
     respect to the following:
       ``(i) Benefits, and limitations on payment (including cost-
     sharing, stop-loss provisions, and formulary restrictions) 
     under parts C and D.
       ``(ii) Benefits, and limitations on payment under parts A 
     and B, including information on medicare supplemental 
     policies under section 1882.

     Such information shall be presented in a manner so that 
     medicare beneficiaries may compare benefits under parts A, B, 
     D, and medicare supplemental policies with benefits under 
     Medicare+Choice 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 Medicare+Choice program under part C, and 
     the Voluntary Prescription Drug Benefit Program under part D.
       ``(e) Medicare Policy Advisory Board.--
       ``(1) Establishment.--There is established within the 
     Medicare Benefits Administration the Medicare Policy Advisory 
     Board (in this section referred to the `Board'). The Board 
     shall advise, consult with, and make recommendations to the 
     Administrator of the Medicare Benefits Administration with 
     respect to the administration of parts C 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 of the Medicare Benefits 
     Administration such reports as the Board determines 
     appropriate. Each such report may contain such 
     recommendations as the Board determines appropriate for 
     legislative or administrative changes to improve the 
     administration of such parts, including the topics described 
     in subparagraph (B). Each such report shall be published in 
     the Federal Register.
       ``(B) Topics described.--Reports required under 
     subparagraph (A) may include the following topics:
       ``(i) Fostering competition.--Recommendations or proposals 
     to increase competition under parts C and D for services 
     furnished to medicare beneficiaries.
       ``(ii) Education and enrollment.--Recommendations for the 
     improvement to efforts to provide medicare beneficiaries 
     information and education on the program under this title, 
     and specifically parts C and D, and the program for 
     enrollment under the title.
       ``(iii) Implementation of risk-adjustment.--Evaluation of 
     the implementation under section 1853(a)(3)(C) of the risk 
     adjustment methodology to payment rates under that section to 
     Medicare+Choice organizations offering Medicare+Choice plans 
     that accounts for variations in per capita costs based on 
     health status and other demographic factors.
       ``(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 of medicare benefits 
     administration.--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 of the Medicare 
     Benefits Administration shall submit to Congress and the 
     President an analysis of recommendations made by the Board in 
     such report. Each such analysis shall be published in the 
     Federal Register.
       ``(4) Membership.--
       ``(A) Appointment.--Subject to the succeeding provisions of 
     this paragraph, the Board shall consist of seven members to 
     be appointed as follows:
       ``(i) Three members shall be appointed by the President.
       ``(ii) Two members shall be appointed by the Speaker of the 
     House of Representatives, with the advice of the chairmen and 
     the ranking minority members of the Committees on Ways and 
     Means and on Energy and Commerce of the House of 
     Representatives.
       ``(iii) Two members shall be appointed by the President pro 
     tempore of the Senate with the advice of the chairman and the 
     ranking minority member of the Senate Committee on Finance.
       ``(B) Qualifications.--The members shall be chosen on the 
     basis of their integrity, impartiality, and good judgment, 
     and shall be individuals who are, by reason of their 
     education and experience in health care benefits management, 
     exceptionally qualified to perform the duties of members of 
     the Board.
       ``(C) Prohibition on inclusion of federal employees.--No 
     officer or employee of the United States may serve as a 
     member of the Board.
       ``(5) Compensation.--Members of the Board shall receive, 
     for each day (including travel time) they are engaged in the 
     performance of the functions of the board, compensation at 
     rates not to exceed the daily equivalent to the annual rate 
     in effect for level IV of the Executive Schedule under 
     section 5315 of title 5, United States Code.
       ``(6) Terms of office.--
       ``(A) In general.--The term of office of members of the 
     Board shall be 3 years.
       ``(B) Terms of initial appointees.--As designated by the 
     President at the time of appointment, of the members first 
     appointed--
       ``(i) one shall be appointed for a term of 1 year;
       ``(ii) three shall be appointed for terms of 2 years; and
       ``(iii) three shall be appointed for terms of 3 years.
       ``(C) Reappointments.--Any person appointed as a member of 
     the Board may not serve for more than 8 years.
       ``(D) Vacancy.--Any member appointed to fill a vacancy 
     occurring before the expiration of the term for which the 
     member's predecessor was appointed shall be appointed only 
     for the remainder of that term. A member may serve after the 
     expiration of that member's term until a successor has taken 
     office. A vacancy in the Board shall be filled in the manner 
     in which the original appointment was made.
       ``(7) Chair.--The Chair of the Board shall be elected by 
     the members. The term of office of the Chair shall be 3 
     years.
       ``(8) Meetings.--The Board shall meet at the call of the 
     Chair, but in no event less than three times during each 
     fiscal year.
       ``(9) Director and staff.--
       ``(A) Appointment of director.--The Board shall have a 
     Director who shall be appointed by the Chair.
       ``(B) In general.--With the approval of the Board, the 
     Director may appoint, without regard to chapter 31 of title 
     5, United States Code, such additional personnel as the 
     Director considers appropriate.
       ``(C) Flexibility with respect to compensation.--
       ``(i) In general.--The Director and staff of the Board 
     shall, subject to clause (ii), be paid without regard to the 
     provisions of chapter 51 and chapter 53 of such title 
     (relating to classification and schedule pay rates).
       ``(ii) Maximum rate.--In no case may the rate of 
     compensation determined under clause (i) exceed the rate of 
     basic pay payable for level IV of the Executive Schedule 
     under section 5315 of title 5, United States Code.
       ``(D) Assistance from the administrator of the medicare 
     benefits administration.--The Administrator of the Medicare 
     Benefits Administration shall make available to the Board 
     such information and other assistance as it may require to 
     carry out its functions.
       ``(10) Contract authority.--The Board may contract with and 
     compensate government and private agencies or persons to 
     carry out its duties under this subsection, without regard to 
     section 3709 of the Revised Statutes (41 U.S.C. 5).
       ``(f) Funding.--There is authorized to be appropriated, in 
     appropriate part from the Federal Hospital Insurance Trust 
     Fund and from the Federal Supplementary Medical Insurance 
     Trust Fund (including the Medicare Prescription Drug 
     Account), such sums as are necessary to carry out this 
     section.''.
       (b) Effective Date.--
       (1) In general.--The amendment made by subsection (a) shall 
     take effect on the date of the enactment of this Act.
       (2) Timing of initial appointments.--The Administrator and 
     Deputy Administrator of the Medicare Benefits Administration 
     may not be appointed before March 1, 2003.
       (3) Duties with respect to eligibility determinations and 
     enrollment.--The Administrator of the Medicare Benefits 
     Administration shall carry out enrollment under title XVIII 
     of the Social Security Act, make eligibility determinations 
     under such title, and carry out part C of such title for 
     years beginning or after January 1, 2005.
       (4) Transition.--Before the date the Administrator of the 
     Medicare Benefits Administration is appointed and assumes 
     responsibilities under this section and section 1807 of the 
     Social Security Act, the Secretary of Health and Human 
     Services shall provide for the conduct of any 
     responsibilities of such Administrator that are otherwise 
     provided under law.
       (c) Miscellaneous Administrative Provisions.--

[[Page 11937]]

       (1) Administrator as member of the board of trustees of the 
     medicare trust funds.--Section 1817(b) and section 1841(b) 
     (42 U.S.C. 1395i(b), 1395t(b)) are each amended by striking 
     ``and the Secretary of Health and Human Services, all ex 
     officio,'' and inserting ``the Secretary of Health and Human 
     Services, and the Administrator of the Medicare Benefits 
     Administration, all ex officio,''.
       (2) Increase in grade to executive level iii for the 
     administrator of the centers for medicare & medicaid 
     services; level for medicare benefits administrator.--
       (A) In general.--Section 5314 of title 5, United States 
     Code, by adding at the end the following:
       ``Administrator of the Centers for Medicare & Medicaid 
     Services .
       ``Administrator of the Medicare Benefits Administration.''.
       (B) Conforming amendment.--Section 5315 of such title is 
     amended by striking ``Administrator of the Health Care 
     Financing Administration.''.
       (C) Effective date.--The amendments made by this paragraph 
     take effect on January 1, 2003.

        TITLE VIII--REGULATORY REDUCTION AND CONTRACTING REFORM

                     Subtitle A--Regulatory Reform

     SEC. 801. CONSTRUCTION; DEFINITION OF SUPPLIER.

       (a) Construction.--Nothing in this title shall be 
     construed--
       (1) to compromise or affect existing legal remedies for 
     addressing fraud or abuse, whether it be criminal 
     prosecution, civil enforcement, or administrative remedies, 
     including under sections 3729 through 3733 of title 31, 
     United States Code (known as the False Claims Act); or
       (2) to prevent or impede the Department of Health and Human 
     Services in any way from its ongoing efforts to eliminate 
     waste, fraud, and abuse in the medicare program.

     Furthermore, the consolidation of medicare administrative 
     contracting set forth in this Act does not constitute 
     consolidation of the Federal Hospital Insurance Trust Fund 
     and the Federal Supplementary Medical Insurance Trust Fund or 
     reflect any position on that issue.
       (b) Definition of Supplier.--Section 1861 (42 U.S.C. 1395x) 
     is amended by inserting after subsection (c) the following 
     new subsection:

                               ``Supplier

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

     SEC. 802. ISSUANCE OF REGULATIONS.

       (a) Consolidation of Promulgation to Once a Month.--
       (1) In general.--Section 1871 (42 U.S.C. 1395hh) is amended 
     by adding at the end the following new subsection:
       ``(d)(1) Subject to paragraph (2), the Secretary shall 
     issue proposed or final (including interim final) regulations 
     to carry out this title only on one business day of every 
     month.
       ``(2) The Secretary may issue a proposed or final 
     regulation described in paragraph (1) on any other day than 
     the day described in paragraph (1) if the Secretary--
       ``(A) finds that issuance of such regulation on another day 
     is necessary to comply with requirements under law; or
       ``(B) finds that with respect to that regulation the 
     limitation of issuance on the date described in paragraph (1) 
     is contrary to the public interest.

     If the Secretary makes a finding under this paragraph, the 
     Secretary shall include such finding, and brief statement of 
     the reasons for such finding, in the issuance of such 
     regulation.
       ``(3) The Secretary shall coordinate issuance of new 
     regulations described in paragraph (1) relating to a category 
     of provider of services or suppliers based on an analysis of 
     the collective impact of regulatory changes on that category 
     of providers or suppliers.''.
       (2) GAO report on publication of regulations on a quarterly 
     basis.--Not later than 3 years after the date of the 
     enactment of this Act, the Comptroller General of the United 
     States shall submit to Congress a report on the feasibility 
     of requiring that regulations described in section 1871(d) of 
     the Social Security Act be promulgated on a quarterly basis 
     rather than on a monthly basis.
       (3) Effective date.--The amendment made by paragraph (1) 
     shall apply to regulations promulgated on or after the date 
     that is 30 days after the date of the enactment of this Act.
       (b) Regular Timeline for Publication of Final Rules.--
       (1) In general.--Section 1871(a) (42 U.S.C. 1395hh(a)) is 
     amended by adding at the end the following new paragraph:
       ``(3)(A) The Secretary, in consultation with the Director 
     of the Office of Management and Budget, shall establish and 
     publish a regular timeline for the publication of final 
     regulations based on the previous publication of a proposed 
     regulation or an interim final regulation.
       ``(B) Such timeline may vary among different regulations 
     based on differences in the complexity of the regulation, the 
     number and scope of comments received, and other relevant 
     factors, but shall not be longer than 3 years except under 
     exceptional circumstances. If the Secretary intends to vary 
     such timeline with respect to the publication of a final 
     regulation, the Secretary shall cause to have published in 
     the Federal Register notice of the different timeline by not 
     later than the timeline previously established with respect 
     to such regulation. Such notice shall include a brief 
     explanation of the justification for such variation.
       ``(C) In the case of interim final regulations, upon the 
     expiration of the regular timeline established under this 
     paragraph for the publication of a final regulation after 
     opportunity for public comment, the interim final regulation 
     shall not continue in effect unless the Secretary publishes 
     (at the end of the regular timeline and, if applicable, at 
     the end of each succeeding 1-year period) a notice of 
     continuation of the regulation that includes an explanation 
     of why the regular timeline (and any subsequent 1-year 
     extension) was not complied with. If such a notice is 
     published, the regular timeline (or such timeline as 
     previously extended under this paragraph) for publication of 
     the final regulation shall be treated as having been extended 
     for 1 additional year.
       ``(D) The Secretary shall annually submit to Congress a 
     report that describes the instances in which the Secretary 
     failed to publish a final regulation within the applicable 
     regular timeline under this paragraph and that provides an 
     explanation for such failures.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on the date of the enactment of this Act. 
     The Secretary shall provide for an appropriate transition to 
     take into account the backlog of previously published interim 
     final regulations.
       (c) Limitations on New Matter in Final Regulations.--
       (1) In general.--Section 1871(a) (42 U.S.C. 1395hh(a)), as 
     amended by subsection (b), is further amended by adding at 
     the end the following new paragraph:
       ``(4) If the Secretary publishes notice of proposed 
     rulemaking relating to a regulation (including an interim 
     final regulation), insofar as such final regulation includes 
     a provision that is not a logical outgrowth of such notice of 
     proposed rulemaking, that provision shall be treated as a 
     proposed regulation and shall not take effect until there is 
     the further opportunity for public comment and a publication 
     of the provision again as a final regulation.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to final regulations published on or after the 
     date of the enactment of this Act.

     SEC. 803. COMPLIANCE WITH CHANGES IN REGULATIONS AND 
                   POLICIES.

       (a) No Retroactive Application of Substantive Changes.--
       (1) In general.--Section 1871 (42 U.S.C. 1395hh), as 
     amended by section 802(a), is amended by adding at the end 
     the following new subsection:
       ``(e)(1)(A) A substantive change in regulations, manual 
     instructions, interpretative rules, statements of policy, or 
     guidelines of general applicability under this title shall 
     not be applied (by extrapolation or otherwise) retroactively 
     to items and services furnished before the effective date of 
     the change, unless the Secretary determines that--
       ``(i) such retroactive application is necessary to comply 
     with statutory requirements; or
       ``(ii) failure to apply the change retroactively would be 
     contrary to the public interest.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to substantive changes issued on or after the 
     date of the enactment of this Act.
       (b) Timeline for Compliance With Substantive Changes After 
     Notice.--
       (1) In general.--Section 1871(e)(1), as added by subsection 
     (a), is amended by adding at the end the following:
       ``(B)(i) Except as provided in clause (ii), a substantive 
     change referred to in subparagraph (A) shall not become 
     effective before the end of the 30-day period that begins on 
     the date that the Secretary has issued or published, as the 
     case may be, the substantive change.
       ``(ii) The Secretary may provide for such a substantive 
     change to take effect on a date that precedes the end of the 
     30-day period under clause (i) if the Secretary finds that 
     waiver of such 30-day period is necessary to comply with 
     statutory requirements or that the application of such 30-day 
     period is contrary to the public interest. If the Secretary 
     provides for an earlier effective date pursuant to this 
     clause, the Secretary shall include in the issuance or 
     publication of the substantive change a finding described in 
     the first sentence, and a brief statement of the reasons for 
     such finding.
       ``(C) No action shall be taken against a provider of 
     services or supplier with respect to noncompliance with such 
     a substantive change for items and services furnished before 
     the effective date of such a change.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to compliance actions undertaken on or after the 
     date of the enactment of this Act.

[[Page 11938]]

       (c) Reliance on Guidance.--
       (1) In general.--Section 1871(e), as added by subsection 
     (a), is further amended by adding at the end the following 
     new paragraph:
       ``(2)(A) If--
       ``(i) a provider of services or supplier follows the 
     written guidance (which may be transmitted electronically) 
     provided by the Secretary or by a medicare contractor (as 
     defined in section 1889(g)) acting within the scope of the 
     contractor's contract authority, with respect to the 
     furnishing of items or services and submission of a claim for 
     benefits for such items or services with respect to such 
     provider or supplier;
       ``(ii) the Secretary determines that the provider of 
     services or supplier has accurately presented the 
     circumstances relating to such items, services, and claim to 
     the contractor in writing; and
       ``(iii) the guidance was in error;

     the provider of services or supplier shall not be subject to 
     any sanction (including any penalty or requirement for 
     repayment of any amount) if the provider of services or 
     supplier reasonably relied on such guidance.
       ``(B) Subparagraph (A) shall not be construed as preventing 
     the recoupment or repayment (without any additional penalty) 
     relating to an overpayment insofar as the overpayment was 
     solely the result of a clerical or technical operational 
     error.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on the date of the enactment of this Act 
     but shall not apply to any sanction for which notice was 
     provided on or before the date of the enactment of this Act.

     SEC. 804. REPORTS AND STUDIES RELATING TO REGULATORY REFORM.

       (a) GAO Study on Advisory Opinion Authority.--
       (1) Study.--The Comptroller General of the United States 
     shall conduct a study to determine the feasibility and 
     appropriateness of establishing in the Secretary authority to 
     provide legally binding advisory opinions on appropriate 
     interpretation and application of regulations to carry out 
     the medicare program under title XVIII of the Social Security 
     Act. Such study shall examine the appropriate timeframe for 
     issuing such advisory opinions, as well as the need for 
     additional staff and funding to provide such opinions.
       (2) Report.--The Comptroller General shall submit to 
     Congress a report on the study conducted under paragraph (1) 
     by not later than January 1, 2004.
       (b) Report on Legal and Regulatory Inconsistencies.--
     Section 1871 (42 U.S.C. 1395hh), as amended by section 
     803(a), is amended by adding at the end the following new 
     subsection:
       ``(f)(1) Not later than 2 years after the date of the 
     enactment of this subsection, and every 2 years thereafter, 
     the Secretary shall submit to Congress a report with respect 
     to the administration of this title and areas of 
     inconsistency or conflict among the various provisions under 
     law and regulation.
       ``(2) In preparing a report under paragraph (1), the 
     Secretary shall collect--
       ``(A) information from individuals entitled to benefits 
     under part A or enrolled under part B, or both, providers of 
     services, and suppliers and from the Medicare Beneficiary 
     Ombudsman and the Medicare Provider Ombudsman with respect to 
     such areas of inconsistency and conflict; and
       ``(B) information from medicare contractors that tracks the 
     nature of written and telephone inquiries.
       ``(3) A report under paragraph (1) shall include a 
     description of efforts by the Secretary to reduce such 
     inconsistency or conflicts, and recommendations for 
     legislation or administrative action that the Secretary 
     determines appropriate to further reduce such inconsistency 
     or conflicts.''.

                     Subtitle B--Contracting Reform

     SEC. 811. INCREASED FLEXIBILITY IN MEDICARE ADMINISTRATION.

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


          ``contracts with medicare administrative contractors

       ``Sec. 1874A. (a) Authority.--
       ``(1) Authority to enter into contracts.--The Secretary may 
     enter into contracts with any eligible entity to serve as a 
     medicare administrative contractor with respect to the 
     performance of any or all of the functions described in 
     paragraph (4) or parts of those functions (or, to the extent 
     provided in a contract, to secure performance thereof by 
     other entities).
       ``(2) Eligibility of entities.--An entity is eligible to 
     enter into a contract with respect to the performance of a 
     particular function described in paragraph (4) only if--
       ``(A) the entity has demonstrated capability to carry out 
     such function;
       ``(B) the entity complies with such conflict of interest 
     standards as are generally applicable to Federal acquisition 
     and procurement;
       ``(C) the entity has sufficient assets to financially 
     support the performance of such function; and
       ``(D) the entity meets such other requirements as the 
     Secretary may impose.
       ``(3) Medicare administrative contractor defined.--For 
     purposes of this title and title XI--
       ``(A) In general.--The term `medicare administrative 
     contractor' means an agency, organization, or other person 
     with a contract under this section.
       ``(B) Appropriate medicare administrative contractor.--With 
     respect to the performance of a particular function in 
     relation to an individual entitled to benefits under part A 
     or enrolled under part B, or both, a specific provider of 
     services or supplier (or class of such providers of services 
     or suppliers), the `appropriate' medicare administrative 
     contractor is the medicare administrative contractor that has 
     a contract under this section with respect to the performance 
     of that function in relation to that individual, provider of 
     services or supplier or class of provider of services or 
     supplier.
       ``(4) Functions described.--The functions referred to in 
     paragraphs (1) and (2) are payment functions, provider 
     services functions, and functions relating to services 
     furnished to individuals entitled to benefits under part A or 
     enrolled under part B, or both, as follows:
       ``(A) Determination of payment amounts.--Determining 
     (subject to the provisions of section 1878 and to such review 
     by the Secretary as may be provided for by the contracts) the 
     amount of the payments required pursuant to this title to be 
     made to providers of services, suppliers and individuals.
       ``(B) Making payments.--Making payments described in 
     subparagraph (A) (including receipt, disbursement, and 
     accounting for funds in making such payments).
       ``(C) Beneficiary education and assistance.--Providing 
     education and outreach to individuals entitled to benefits 
     under part A or enrolled under part B, or both, and providing 
     assistance to those individuals with specific issues, 
     concerns or problems.
       ``(D) Provider consultative services.--Providing 
     consultative services to institutions, agencies, and other 
     persons to enable them to establish and maintain fiscal 
     records necessary for purposes of this title and otherwise to 
     qualify as providers of services or suppliers.
       ``(E) Communication with providers.--Communicating to 
     providers of services and suppliers any information or 
     instructions furnished to the medicare administrative 
     contractor by the Secretary, and facilitating communication 
     between such providers and suppliers and the Secretary.
       ``(F) Provider education and technical assistance.--
     Performing the functions relating to provider education, 
     training, and technical assistance.
       ``(G) Additional functions.--Performing such other 
     functions as are necessary to carry out the purposes of this 
     title.
       ``(5) Relationship to mip contracts.--
       ``(A) Nonduplication of duties.--In entering into contracts 
     under this section, the Secretary shall assure that functions 
     of medicare administrative contractors in carrying out 
     activities under parts A and B do not duplicate activities 
     carried out under the Medicare Integrity Program under 
     section 1893. The previous sentence shall not apply with 
     respect to the activity described in section 1893(b)(5) 
     (relating to prior authorization of certain items of durable 
     medical equipment under section 1834(a)(15)).
       ``(B) Construction.--An entity shall not be treated as a 
     medicare administrative contractor merely by reason of having 
     entered into a contract with the Secretary under section 
     1893.
       ``(6) Application of federal acquisition regulation.--
     Except to the extent inconsistent with a specific requirement 
     of this title, the Federal Acquisition Regulation applies to 
     contracts under this title.
       ``(b) Contracting Requirements.--
       ``(1) Use of competitive procedures.--
       ``(A) In general.--Except as provided in laws with general 
     applicability to Federal acquisition and procurement or in 
     subparagraph (B), the Secretary shall use competitive 
     procedures when entering into contracts with medicare 
     administrative contractors under this section, taking into 
     account performance quality as well as price and other 
     factors.
       ``(B) Renewal of contracts.--The Secretary may renew a 
     contract with a medicare administrative contractor under this 
     section from term to term without regard to section 5 of 
     title 41, United States Code, or any other provision of law 
     requiring competition, if the medicare administrative 
     contractor has met or exceeded the performance requirements 
     applicable with respect to the contract and contractor, 
     except that the Secretary shall provide for the application 
     of competitive procedures under such a contract not less 
     frequently than once every five years.
       ``(C) Transfer of functions.--The Secretary may transfer 
     functions among medicare administrative contractors 
     consistent with the provisions of this paragraph. The 
     Secretary shall ensure that performance quality is considered 
     in such transfers. The Secretary shall provide public notice 
     (whether in the Federal Register or otherwise) of any such 
     transfer (including a description of the functions so 
     transferred, a description of the providers of services and 
     suppliers affected by such transfer, and contact information 
     for the contractors involved).

[[Page 11939]]

       ``(D) Incentives for quality.--The Secretary shall provide 
     incentives for medicare administrative contractors to provide 
     quality service and to promote efficiency.
       ``(2) Compliance with requirements.--No contract under this 
     section shall be entered into with any medicare 
     administrative contractor unless the Secretary finds that 
     such medicare administrative contractor will perform its 
     obligations under the contract efficiently and effectively 
     and will meet such requirements as to financial 
     responsibility, legal authority, quality of services 
     provided, and other matters as the Secretary finds pertinent.
       ``(3) Performance requirements.--
       ``(A) Development of specific performance requirements.--In 
     developing contract performance requirements, the Secretary 
     shall develop performance requirements applicable to 
     functions described in subsection (a)(4).
       ``(B) Consultation.-- In developing such requirements, the 
     Secretary may consult with providers of services and 
     suppliers, organizations representing individuals entitled to 
     benefits under part A or enrolled under part B, or both, and 
     organizations and agencies performing functions necessary to 
     carry out the purposes of this section with respect to such 
     performance requirements.
       ``(C) Inclusion in contracts.--All contractor performance 
     requirements shall be set forth in the contract between the 
     Secretary and the appropriate medicare administrative 
     contractor. Such performance requirements--
       ``(i) shall reflect the performance requirements developed 
     under subparagraph (A), but may include additional 
     performance requirements;
       ``(ii) shall be used for evaluating contractor performance 
     under the contract; and
       ``(iii) shall be consistent with the written statement of 
     work provided under the contract.
       ``(4) Information requirements.--The Secretary shall not 
     enter into a contract with a medicare administrative 
     contractor under this section unless the contractor agrees--
       ``(A) to furnish to the Secretary such timely information 
     and reports as the Secretary may find necessary in performing 
     his functions under this title; and
       ``(B) to maintain such records and afford such access 
     thereto as the Secretary finds necessary to assure the 
     correctness and verification of the information and reports 
     under subparagraph (A) and otherwise to carry out the 
     purposes of this title.
       ``(5) Surety bond.--A contract with a medicare 
     administrative contractor under this section may require the 
     medicare administrative contractor, and any of its officers 
     or employees certifying payments or disbursing funds pursuant 
     to the contract, or otherwise participating in carrying out 
     the contract, to give surety bond to the United States in 
     such amount as the Secretary may deem appropriate.
       ``(c) Terms and Conditions.--
       ``(1) In general.--A contract with any medicare 
     administrative contractor under this section may contain such 
     terms and conditions as the Secretary finds necessary or 
     appropriate and may provide for advances of funds to the 
     medicare administrative contractor for the making of payments 
     by it under subsection (a)(4)(B).
       ``(2) Prohibition on mandates for certain data 
     collection.--The Secretary may not require, as a condition of 
     entering into, or renewing, a contract under this section, 
     that the medicare administrative contractor match data 
     obtained other than in its activities under this title with 
     data used in the administration of this title for purposes of 
     identifying situations in which the provisions of section 
     1862(b) may apply.
       ``(d) Limitation on Liability of Medicare Administrative 
     Contractors and Certain Officers.--
       ``(1) Certifying officer.--No individual designated 
     pursuant to a contract under this section as a certifying 
     officer shall, in the absence of gross negligence or intent 
     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 gross negligence or intent 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 payment or in the 
     supervision of or selection of such officer the medicare 
     administrative contractor acted with gross negligence.
       ``(4) Indemnification by secretary.--
       ``(A) In general.--Subject to subparagraphs (B) and (D), in 
     the case of a medicare administrative contractor (or a person 
     who is a director, officer, or employee of such a contractor 
     or who is engaged by the contractor to participate directly 
     in the claims administration process) who is made a party to 
     any judicial or administrative proceeding arising from or 
     relating directly to the claims administration process under 
     this title, the Secretary may, to the extent the Secretary 
     determines to be appropriate and as specified in the contract 
     with the contractor, indemnify the contractor and such 
     persons.
       ``(B) Conditions.--The Secretary may not provide 
     indemnification under subparagraph (A) insofar as the 
     liability for such costs arises directly from conduct that is 
     determined by the judicial proceeding or by the Secretary to 
     be criminal in nature, fraudulent, or grossly negligent. If 
     indemnification is provided by the Secretary with respect to 
     a contractor before a determination that such costs arose 
     directly from such conduct, the contractor shall reimburse 
     the Secretary for costs of indemnification.
       ``(C) Scope of indemnification.--Indemnification by the 
     Secretary under subparagraph (A) may include payment of 
     judgments, settlements (subject to subparagraph (D)), awards, 
     and costs (including reasonable legal expenses).
       ``(D) Written approval for settlements.--A contractor or 
     other person described in subparagraph (A) may not propose to 
     negotiate a settlement or compromise of a proceeding 
     described in such subparagraph without the prior written 
     approval of the Secretary to negotiate such settlement or 
     compromise. Any indemnification under subparagraph (A) with 
     respect to amounts paid under a settlement or compromise of a 
     proceeding described in such subparagraph are conditioned 
     upon prior written approval by the Secretary of the final 
     settlement or compromise.
       ``(E) Construction.--Nothing in this paragraph shall be 
     construed--
       ``(i) to change any common law immunity that may be 
     available to a medicare administrative contractor or person 
     described in subparagraph (A); or
       ``(ii) to permit the payment of costs not otherwise 
     allowable, reasonable, or allocable under the Federal 
     Acquisition Regulations.''.
       (2) Consideration of incorporation of current law 
     standards.--In developing contract performance requirements 
     under section 1874A(b) of the Social Security Act, as 
     inserted by paragraph (1), the Secretary shall consider 
     inclusion of the performance standards described in sections 
     1816(f)(2) of such Act (relating to timely processing of 
     reconsiderations and applications for exemptions) and section 
     1842(b)(2)(B) of such Act (relating to timely review of 
     determinations and fair hearing requests), as such sections 
     were in effect before the date of the enactment of this Act.
       (b) Conforming Amendments to Section 1816 (Relating to 
     Fiscal Intermediaries).--Section 1816 (42 U.S.C. 1395h) is 
     amended as follows:
       (1) The heading is amended to read as follows:


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

       (2) Subsection (a) is amended to read as follows:
       ``(a) The administration of this part shall be conducted 
     through contracts with medicare administrative contractors 
     under section 1874A.''.
       (3) Subsection (b) is repealed.
       (4) Subsection (c) is amended--
       (A) by striking paragraph (1); and
       (B) in each of paragraphs (2)(A) and (3)(A), by striking 
     ``agreement under this section'' and inserting ``contract 
     under section 1874A that provides for making payments under 
     this part''.
       (5) Subsections (d) through (i) are repealed.
       (6) Subsections (j) and (k) are each amended--
       (A) by striking ``An agreement with an agency or 
     organization under this section'' and inserting ``A contract 
     with a medicare administrative contractor under section 1874A 
     with respect to the administration of this part''; and
       (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'';

[[Page 11940]]

       (ii) by striking ``will'' the first place it appears in 
     each of subparagraphs (A), (B), (F), (G), (H), and (L) and 
     inserting ``shall'';
       (iii) in subparagraph (B), in the matter before clause (i), 
     by striking ``to the policyholders and subscribers of the 
     carrier'' and inserting ``to the policyholders and 
     subscribers of the medicare administrative contractor'';
       (iv) by striking subparagraphs (C), (D), and (E);
       (v) in subparagraph (H)--

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

       (vi) by striking subparagraph (I);
       (vii) in subparagraph (L), by striking the semicolon and 
     inserting a period;
       (viii) in the first sentence, after subparagraph (L), by 
     striking ``and shall contain'' and all that follows through 
     the period; and
       (ix) in the seventh sentence, by inserting ``medicare 
     administrative contractor,'' after ``carrier,''; and
       (D) by striking paragraph (5);
       (E) in paragraph (6)(D)(iv), by striking ``carrier'' and 
     inserting ``medicare administrative contractor''; and
       (F) in paragraph (7), by striking ``the carrier'' and 
     inserting ``the Secretary'' each place it appears.
       (4) Subsection (c) is amended--
       (A) by striking paragraph (1);
       (B) in paragraph (2)(A), by striking ``contract under this 
     section which provides for the disbursement of funds, as 
     described in subsection (a)(1)(B),'' and inserting ``contract 
     under section 1874A that provides for making payments under 
     this part'';
       (C) in paragraph (3)(A), by striking ``subsection 
     (a)(1)(B)'' and inserting ``section 1874A(a)(3)(B)'';
       (D) in paragraph (4), in the matter preceding subparagraph 
     (A), by striking ``carrier'' and inserting ``medicare 
     administrative contractor''; and
       (E) by striking paragraphs (5) and (6).
       (5) Subsections (d), (e), and (f) are repealed.
       (6) Subsection (g) is amended by striking ``carrier or 
     carriers'' and inserting ``medicare administrative contractor 
     or contractors''.
       (7) Subsection (h) is amended--
       (A) in paragraph (2)--
       (i) by striking ``Each carrier having an agreement with the 
     Secretary under subsection (a)'' and inserting ``The 
     Secretary''; and
       (ii) by striking ``Each such carrier'' and inserting ``The 
     Secretary'';
       (B) in paragraph (3)(A)--
       (i) by striking ``a carrier having an agreement with the 
     Secretary under subsection (a)'' and inserting ``medicare 
     administrative contractor having a contract under section 
     1874A that provides for making payments under this part''; 
     and
       (ii) by striking ``such carrier'' and inserting ``such 
     contractor'';
       (C) in paragraph (3)(B)--
       (i) by striking ``a carrier'' and inserting ``a medicare 
     administrative contractor'' each place it appears; and
       (ii) by striking ``the carrier'' and inserting ``the 
     contractor'' each place it appears; and
       (D) in paragraphs (5)(A) and (5)(B)(iii), by striking 
     ``carriers'' and inserting ``medicare administrative 
     contractors'' each place it appears.
       (8) Subsection (l) is amended--
       (A) in paragraph (1)(A)(iii), by striking ``carrier'' and 
     inserting ``medicare administrative contractor''; and
       (B) in paragraph (2), by striking ``carrier'' and inserting 
     ``medicare administrative contractor''.
       (9) Subsection (p)(3)(A) is amended by striking ``carrier'' 
     and inserting ``medicare administrative contractor''.
       (10) Subsection (q)(1)(A) is amended by striking 
     ``carrier''.
       (d) Effective Date; Transition Rule.--
       (1) Effective date.--
       (A) In general.--Except as otherwise provided in this 
     subsection, the amendments made by this section shall take 
     effect on October 1, 2004, and the Secretary is authorized to 
     take such steps before such date as may be necessary to 
     implement such amendments on a timely basis.
       (B) Construction for current contracts.--Such amendments 
     shall not apply to contracts in effect before the date 
     specified under subparagraph (A) that continue to retain the 
     terms and conditions in effect on such date (except as 
     otherwise provided under this Act, other than under this 
     section) until such date as the contract is let out for 
     competitive bidding under such amendments.
       (C) Deadline for competitive bidding.--The Secretary shall 
     provide for the letting by competitive bidding of all 
     contracts for functions of medicare administrative 
     contractors for annual contract periods that begin on or 
     after October 1, 2009.
       (D) Waiver of provider nomination provisions during 
     transition.--During the period beginning on the date of the 
     enactment of this Act and before the date specified under 
     subparagraph (A), the Secretary may enter into new agreements 
     under section 1816 of the Social Security Act (42 U.S.C. 
     1395h) without regard to any of the provider nomination 
     provisions of such section.
       (2) General transition rules.--The Secretary shall take 
     such steps, consistent with paragraph (1)(B) and (1)(C), as 
     are necessary to provide for an appropriate transition from 
     contracts under section 1816 and section 1842 of the Social 
     Security Act (42 U.S.C. 1395h, 1395u) to contracts under 
     section 1874A, as added by subsection (a)(1).
       (3) Authorizing continuation of mip functions under current 
     contracts and agreements and under rollover contracts.--The 
     provisions contained in the exception in section 1893(d)(2) 
     of the Social Security Act (42 U.S.C. 1395ddd(d)(2)) shall 
     continue to apply notwithstanding the amendments made by this 
     section, and any reference in such provisions to an agreement 
     or contract shall be deemed to include a contract under 
     section 1874A of such Act, as inserted by subsection (a)(1), 
     that continues the activities referred to in such provisions.
       (e) References.--On and after the effective date provided 
     under subsection (d)(1), any reference to a fiscal 
     intermediary or carrier under title XI or XVIII of the Social 
     Security Act (or any regulation, manual instruction, 
     interpretative rule, statement of policy, or guideline issued 
     to carry out such titles) shall be deemed a reference to an 
     appropriate medicare administrative contractor (as provided 
     under section 1874A of the Social Security Act).
       (f) Reports on Implementation.--
       (1) Plan for implementation.--By not later than October 1, 
     2003, the Secretary shall submit a report to Congress and the 
     Comptroller General of the United States that describes the 
     plan for implementation of the amendments made by this 
     section. The Comptroller General shall conduct an evaluation 
     of such plan and shall submit to Congress, not later than 6 
     months after the date the report is received, a report on 
     such evaluation and shall include in such report such 
     recommendations as the Comptroller General deems appropriate.
       (2) Status of implementation.--The Secretary shall submit a 
     report to Congress not later than October 1, 2007, that 
     describes the status of implementation of such amendments and 
     that includes a description of the following:
       (A) The number of contracts that have been competitively 
     bid as of such date.
       (B) The distribution of functions among contracts and 
     contractors.
       (C) A timeline for complete transition to full competition.
       (D) A detailed description of how the Secretary has 
     modified oversight and management of medicare contractors to 
     adapt to full competition.

     SEC. 812. REQUIREMENTS FOR INFORMATION SECURITY FOR MEDICARE 
                   ADMINISTRATIVE CONTRACTORS.

       (a) In General.--Section 1874A, as added by section 
     811(a)(1), is amended by adding at the end the following new 
     subsection:
       ``(e) Requirements for Information Security.--
       ``(1) Development of information security program.--A 
     medicare administrative contractor that performs the 
     functions referred to in subparagraphs (A) and (B) of 
     subsection (a)(4) (relating to determining and making 
     payments) shall implement a contractor-wide information 
     security program to provide information security for the 
     operation and assets of the contractor with respect to such 
     functions under this title. An information security program 
     under this paragraph shall meet the requirements for 
     information security programs imposed on Federal agencies 
     under section 3534(b)(2) of title 44, United States Code 
     (other than requirements under subparagraphs (B)(ii), 
     (F)(iii), and (F)(iv) of such section).
       ``(2) Independent audits.--
       ``(A) Performance of annual evaluations.--Each year a 
     medicare administrative contractor that performs the 
     functions referred to in subparagraphs (A) and (B) of 
     subsection (a)(4) (relating to determining and making 
     payments) shall undergo an evaluation of the information 
     security of the contractor with respect to such functions 
     under this title. The evaluation shall--
       ``(i) be performed by an entity that meets such 
     requirements for independence as the Inspector General of the 
     Department of Health and Human Services may establish; and
       ``(ii) test the effectiveness of information security 
     control techniques for an appropriate subset of the 
     contractor's information systems (as defined in section 
     3502(8) of title 44, United States Code) relating to such 
     functions under this title and an assessment of compliance 
     with the requirements of this subsection and related 
     information security policies, procedures, standards and 
     guidelines.
       ``(B) Deadline for initial evaluation.--
       ``(i) New contractors.--In the case of a medicare 
     administrative contractor covered by this subsection that has 
     not previously performed the functions referred to in 
     subparagraphs (A) and (B) of subsection (a)(4) (relating to 
     determining and making payments) as a fiscal intermediary or 
     carrier under section 1816 or 1842, the first independent 
     evaluation conducted pursuant subparagraph (A) shall be 
     completed prior to commencing such functions.

[[Page 11941]]

       ``(ii) Other contractors.--In the case of a medicare 
     administrative contractor covered by this subsection that is 
     not described in clause (i), the first independent evaluation 
     conducted pursuant subparagraph (A) shall be completed within 
     1 year after the date the contractor commences functions 
     referred to in clause (i) under this section.
       ``(C) Reports on evaluations.--
       ``(i) To the inspector general.--The results of independent 
     evaluations under subparagraph (A) shall be submitted 
     promptly to the Inspector General of the Department of Health 
     and Human Services.
       ``(ii) To congress.--The Inspector General of Department of 
     Health and Human Services shall submit to Congress annual 
     reports on the results of such evaluations.''.
       (b) Application of Requirements to Fiscal Intermediaries 
     and Carriers.--
       (1) In general.--The provisions of section 1874A(e)(2) of 
     the Social Security Act (other than subparagraph (B)), as 
     added by subsection (a), shall apply to each fiscal 
     intermediary under section 1816 of the Social Security Act 
     (42 U.S.C. 1395h) and each carrier under section 1842 of such 
     Act (42 U.S.C. 1395u) in the same manner as they apply to 
     medicare administrative contractors under such provisions.
       (2) Deadline for initial evaluation.--In the case of such a 
     fiscal intermediary or carrier with an agreement or contract 
     under such respective section in effect as of the date of the 
     enactment of this Act, the first evaluation under section 
     1874A(e)(2)(A) of the Social Security Act (as added by 
     subsection (a)), pursuant to paragraph (1), shall be 
     completed (and a report on the evaluation submitted to the 
     Secretary) by not later than 1 year after such date.

                   Subtitle C--Education and Outreach

     SEC. 821. 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 (g), including under section 1893) in order to 
     maximize the effectiveness of Federal education efforts for 
     providers of services and suppliers.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on the date of the enactment of this Act.
       (3) Report.--Not later than October 1, 2003, 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 
     811(a)(1) and as amended by section 812(a), is amended by 
     adding at the end the following new subsection:
       ``(f) Incentives To Improve Contractor Performance in 
     Provider Education and Outreach.--In order to give medicare 
     administrative contractors an incentive to implement 
     effective education and outreach programs for providers of 
     services and suppliers, the Secretary shall develop and 
     implement a methodology to measure the specific claims 
     payment error rates of such contractors in the processing or 
     reviewing of medicare claims.''.
       (2) Application to fiscal intermediaries and carriers.--The 
     provisions of section 1874A(f) of the Social Security Act, as 
     added by paragraph (1), shall apply to each fiscal 
     intermediary under section 1816 of the Social Security Act 
     (42 U.S.C. 1395h) and each carrier under section 1842 of such 
     Act (42 U.S.C. 1395u) in the same manner as they apply to 
     medicare administrative contractors under such provisions.
       (3) GAO report on adequacy of methodology.--Not later than 
     October 1, 2003, the Comptroller General of the United States 
     shall submit to Congress and to the Secretary a report on the 
     adequacy of the methodology under section 1874A(f) of the 
     Social Security Act, as added by paragraph (1), and shall 
     include in the report such recommendations as the Comptroller 
     General determines appropriate with respect to the 
     methodology.
       (4) Report on use of methodology in assessing contractor 
     performance.--Not later than October 1, 2003, the Secretary 
     shall submit to Congress a report that describes how the 
     Secretary intends to use such methodology in assessing 
     medicare contractor performance in implementing effective 
     education and outreach programs, including whether to use 
     such methodology as a basis for performance bonuses. The 
     report shall include an analysis of the sources of identified 
     errors and potential changes in systems of contractors and 
     rules of the Secretary that could reduce claims error rates.
       (c) Provision of Access to and Prompt Responses From 
     Medicare Administrative Contractors.--
       (1) In general.--Section 1874A, as added by section 
     811(a)(1) and as amended by section 812(a) and subsection 
     (b), is further amended by adding at the end the following 
     new subsection:
       ``(g) Communications with Beneficiaries, Providers of 
     Services and Suppliers.--
       ``(1) Communication strategy.--The Secretary shall develop 
     a strategy for communications with individuals entitled to 
     benefits under part A or enrolled under part B, or both, and 
     with providers of services and suppliers under this title.
       ``(2) Response to written inquiries.--Each medicare 
     administrative contractor shall, for those providers of 
     services and suppliers which submit claims to the contractor 
     for claims processing and for those individuals entitled to 
     benefits under part A or enrolled under part B, or both, with 
     respect to whom claims are submitted for claims processing, 
     provide general written responses (which may be through 
     electronic transmission) in a clear, concise, and accurate 
     manner to inquiries of providers of services, suppliers and 
     individuals entitled to benefits under part A or enrolled 
     under part B, or both, concerning the programs under this 
     title within 45 business days of the date of receipt of such 
     inquiries.
       ``(3) Response to toll-free lines.--The Secretary shall 
     ensure that each medicare administrative contractor shall 
     provide, for those providers of services and suppliers which 
     submit claims to the contractor for claims processing and for 
     those individuals entitled to benefits under part A or 
     enrolled under part B, or both, with respect to whom claims 
     are submitted for claims processing, a toll-free telephone 
     number at which such individuals, providers of services and 
     suppliers may obtain information regarding billing, coding, 
     claims, coverage, and other appropriate information under 
     this title.
       ``(4) Monitoring of contractor responses.--
       ``(A) In general.--Each medicare administrative contractor 
     shall, consistent with standards developed by the Secretary 
     under subparagraph (B)--
       ``(i) maintain a system for identifying who provides the 
     information referred to in paragraphs (2) and (3); and
       ``(ii) monitor the accuracy, consistency, and timeliness of 
     the information so provided.
       ``(B) Development of standards.--
       ``(i) In general.--The Secretary shall establish and make 
     public standards to monitor the accuracy, consistency, and 
     timeliness of the information provided in response to written 
     and telephone inquiries under this subsection. Such standards 
     shall be consistent with the performance requirements 
     established under subsection (b)(3).
       ``(ii) Evaluation.--In conducting evaluations of individual 
     medicare administrative contractors, the Secretary shall take 
     into account the results of the monitoring conducted under 
     subparagraph (A) taking into account as performance 
     requirements the standards established under clause (i). The 
     Secretary shall, in consultation with organizations 
     representing providers of services, suppliers, and 
     individuals entitled to benefits under part A or enrolled 
     under part B, or both, establish standards relating to the 
     accuracy, consistency, and timeliness of the information so 
     provided.
       ``(C) Direct monitoring.--Nothing in this paragraph shall 
     be construed as preventing the Secretary from directly 
     monitoring the accuracy, consistency, and timeliness of the 
     information so provided.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect October 1, 2003.
       (3) Application to fiscal intermediaries and carriers.--The 
     provisions of section 1874A(g) of the Social Security Act, as 
     added by paragraph (1), shall apply to each fiscal 
     intermediary under section 1816 of the Social Security Act 
     (42 U.S.C. 1395h) and each carrier under section 1842 of such 
     Act (42 U.S.C. 1395u) in the same manner as they apply to 
     medicare administrative contractors under such provisions.
       (d) Improved Provider Education and Training.--
       (1) In general.--Section 1889, as added by subsection (a), 
     is amended by adding at the end the following new 
     subsections:
       ``(b) Enhanced Education and Training.--
       ``(1) Additional resources.--There are authorized to be 
     appropriated to the Secretary (in appropriate part from the 
     Federal Hospital Insurance Trust Fund and the Federal 
     Supplementary Medical Insurance Trust Fund) $25,000,000 for 
     each of fiscal years 2004 and 2005 and such sums as may be 
     necessary for succeeding fiscal years.
       ``(2) Use.--The funds made available under paragraph (1) 
     shall be used to increase the conduct by medicare contractors 
     of education and training of providers of services and 
     suppliers regarding billing, coding, and other appropriate 
     items and may also be used to improve the accuracy, 
     consistency, and timeliness of contractor responses.
       ``(c) Tailoring Education and Training Activities for Small 
     Providers or Suppliers.--
       ``(1) In general.--Insofar as a medicare contractor 
     conducts education and training activities, it shall tailor 
     such activities to meet the special needs of small providers 
     of services or suppliers (as defined in paragraph (2)).

[[Page 11942]]

       ``(2) Small provider of services or supplier.--In this 
     subsection, the term `small provider of services or supplier' 
     means--
       ``(A) a provider of services with fewer than 25 full-time-
     equivalent employees; or
       ``(B) a supplier with fewer than 10 full-time-equivalent 
     employees.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on October 1, 2003.
       (e) Requirement To Maintain Internet Sites.--
       (1) In general.--Section 1889, as added by subsection (a) 
     and as amended by subsection (d), is further amended by 
     adding at the end the following new subsection:
       ``(d) Internet Sites; FAQs.--The Secretary, and each 
     medicare contractor insofar as it provides services 
     (including claims processing) for providers of services or 
     suppliers, shall maintain an Internet site which--
       ``(1) provides answers in an easily accessible format to 
     frequently asked questions, and
       ``(2) includes other published materials of the contractor,

     that relate to providers of services and suppliers under the 
     programs under this title (and title XI insofar as it relates 
     to such programs).''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on October 1, 2003.
       (f) Additional Provider Education Provisions.--
       (1) In general.--Section 1889, as added by subsection (a) 
     and as amended by subsections (d) and (e), is further amended 
     by adding at the end the following new subsections:
       ``(e) Encouragement of Participation in Education Program 
     Activities.--A medicare contractor may not use a record of 
     attendance at (or failure to attend) educational activities 
     or other information gathered during an educational program 
     conducted under this section or otherwise by the Secretary to 
     select or track providers of services or suppliers for the 
     purpose of conducting any type of audit or prepayment review.
       ``(f) Construction.--Nothing in this section or section 
     1893(g) shall be construed as providing for disclosure by a 
     medicare contractor of information that would compromise 
     pending law enforcement activities or reveal findings of law 
     enforcement-related audits.
       ``(g) Definitions.--For purposes of this section, the term 
     `medicare contractor' includes the following:
       ``(1) A medicare administrative contractor with a contract 
     under section 1874A, including a fiscal intermediary with a 
     contract under section 1816 and a carrier with a contract 
     under section 1842.
       ``(2) An eligible entity with a contract under section 
     1893.

     Such term does not include, with respect to activities of a 
     specific provider of services or supplier an entity that has 
     no authority under this title or title IX with respect to 
     such activities and such provider of services or supplier.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on the date of the enactment of this Act.

     SEC. 822. SMALL PROVIDER TECHNICAL ASSISTANCE DEMONSTRATION 
                   PROGRAM.

       (a) Establishment.--
       (1) In general.--The Secretary shall establish a 
     demonstration program (in this section referred to as the 
     ``demonstration program'') under which technical assistance 
     described in paragraph (2) is made available, upon request 
     and on a voluntary basis, to small providers of services or 
     suppliers in order to improve compliance with the applicable 
     requirements of the programs under medicare program under 
     title XVIII of the Social Security Act (including provisions 
     of title XI of such Act insofar as they relate to such title 
     and are not administered by the Office of the Inspector 
     General of the Department of Health and Human Services).
       (2) Forms of technical assistance.--The technical 
     assistance described in this paragraph is--
       (A) evaluation and recommendations regarding billing and 
     related systems; and
       (B) information and assistance regarding policies and 
     procedures under the medicare program, including coding and 
     reimbursement.
       (3) Small providers of services or suppliers.--In this 
     section, the term ``small providers of services or 
     suppliers'' means--
       (A) a provider of services with fewer than 25 full-time-
     equivalent employees; or
       (B) a supplier with fewer than 10 full-time-equivalent 
     employees.
       (b) Qualification of Contractors.--In conducting the 
     demonstration program, the Secretary shall enter into 
     contracts with qualified organizations (such as peer review 
     organizations or entities described in section 1889(g)(2) of 
     the Social Security Act, as inserted by section 5(f)(1)) with 
     appropriate expertise with billing systems of the full range 
     of providers of services and suppliers to provide the 
     technical assistance. In awarding such contracts, the 
     Secretary shall consider any prior investigations of the 
     entity's work by the Inspector General of Department of 
     Health and Human Services or the Comptroller General of the 
     United States.
       (c) Description of Technical Assistance.--The technical 
     assistance provided under the demonstration program shall 
     include a direct and in-person examination of billing systems 
     and internal controls of small providers of services or 
     suppliers to determine program compliance and to suggest more 
     efficient or effective means of achieving such compliance.
       (d) Avoidance of Recovery Actions for Problems Identified 
     as Corrected.--The Secretary shall provide that, absent 
     evidence of fraud and notwithstanding any other provision of 
     law, any errors found in a compliance review for a small 
     provider of services or supplier that participates in the 
     demonstration program shall not be subject to recovery action 
     if the technical assistance personnel under the program 
     determine that--
       (1) the problem that is the subject of the compliance 
     review has been corrected to their satisfaction within 30 
     days of the date of the visit by such personnel to the small 
     provider of services or supplier; and
       (2) such problem remains corrected for such period as is 
     appropriate.

     The previous sentence applies only to claims filed as part of 
     the demonstration program and lasts only for the duration of 
     such program and only as long as the small provider of 
     services or supplier is a participant in such program.
       (e) GAO Evaluation.--Not later than 2 years after the date 
     of the date the demonstration program is first implemented, 
     the Comptroller General, in consultation with the Inspector 
     General of the Department of Health and Human Services, shall 
     conduct an evaluation of the demonstration program. The 
     evaluation shall include a determination of whether claims 
     error rates are reduced for small providers of services or 
     suppliers who participated in the program and the extent of 
     improper payments made as a result of the demonstration 
     program. The Comptroller General shall submit a report to the 
     Secretary and the Congress on such evaluation and shall 
     include in such report recommendations regarding the 
     continuation or extension of the demonstration program.
       (f) Financial Participation by Providers.--The provision of 
     technical assistance to a small provider of services or 
     supplier under the demonstration program is conditioned upon 
     the small provider of services or supplier paying an amount 
     estimated (and disclosed in advance of a provider's or 
     supplier's participation in the program) to be equal to 25 
     percent of the cost of the technical assistance.
       (g) Authorization of Appropriations.--There are authorized 
     to be appropriated to the Secretary (in appropriate part from 
     the Federal Hospital Insurance Trust Fund and the Federal 
     Supplementary Medical Insurance Trust Fund) to carry out the 
     demonstration program--
       (1) for fiscal year 2004, $1,000,000, and
       (2) for fiscal year 2005, $6,000,000.

     SEC. 823. MEDICARE PROVIDER OMBUDSMAN; MEDICARE BENEFICIARY 
                   OMBUDSMAN.

       (a) Medicare Provider Ombudsman.--Section 1868 (42 U.S.C. 
     1395ee) is amended--
       (1) by adding at the end of the heading the following: ``; 
     medicare provider ombudsman'';
       (2) by inserting ``Practicing Physicians Advisory 
     Council.--(1)'' after ``(a)'';
       (3) in paragraph (1), as so redesignated under paragraph 
     (2), by striking ``in this section'' and inserting ``in this 
     subsection'';
       (4) by redesignating subsections (b) and (c) as paragraphs 
     (2) and (3), respectively; and
       (5) by adding at the end the following new subsection:
       ``(b) Medicare Provider Ombudsman.--The Secretary shall 
     appoint within the Department of Health and Human Services a 
     Medicare Provider Ombudsman. The Ombudsman shall--
       ``(1) provide assistance, on a confidential basis, to 
     providers of services and suppliers with respect to 
     complaints, grievances, and requests for information 
     concerning the programs under this title (including 
     provisions of title XI insofar as they relate to this title 
     and are not administered by the Office of the Inspector 
     General of the Department of Health and Human Services) and 
     in the resolution of unclear or conflicting guidance given by 
     the Secretary and medicare contractors to such providers of 
     services and suppliers regarding such programs and provisions 
     and requirements under this title and such provisions; and
       ``(2) submit recommendations to the Secretary for 
     improvement in the administration of this title and such 
     provisions, including--
       ``(A) recommendations to respond to recurring patterns of 
     confusion in this title and such provisions (including 
     recommendations regarding suspending imposition of sanctions 
     where there is widespread confusion in program 
     administration), and
       ``(B) recommendations to provide for an appropriate and 
     consistent response (including not providing for audits) in 
     cases of self-identified overpayments by providers of 
     services and suppliers.

     The Ombudsman shall not serve as an advocate for any 
     increases in payments or new coverage of services, but may 
     identify issues and problems in payment or coverage 
     policies.''.

[[Page 11943]]

       (b) Medicare Beneficiary Ombudsman.--Title XVIII, as 
     amended by sections 105 and 701, is amended by inserting 
     after section 1808 the following new section:


                    ``medicare beneficiary ombudsman

       ``Sec. 1809. (a) In General.--The Secretary shall appoint 
     within the Department of Health and Human Services a Medicare 
     Beneficiary Ombudsman who shall have expertise and experience 
     in the fields of health care and education of (and assistance 
     to) individuals entitled to benefits under this title.
       ``(b) Duties.--The Medicare Beneficiary Ombudsman shall--
       ``(1) receive complaints, grievances, and requests for 
     information submitted by individuals entitled to benefits 
     under part A or enrolled under part B, or both, with respect 
     to any aspect of the medicare program;
       ``(2) provide assistance with respect to complaints, 
     grievances, and requests referred to in paragraph (1), 
     including--
       ``(A) assistance in collecting relevant information for 
     such individuals, to seek an appeal of a decision or 
     determination made by a fiscal intermediary, carrier, 
     Medicare+Choice organization, or the Secretary; and
       ``(B) assistance to such individuals with any problems 
     arising from disenrollment from a Medicare+Choice plan under 
     part C; and
       ``(3) submit annual reports to Congress and the Secretary 
     that describe the activities of the Office and that include 
     such recommendations for improvement in the administration of 
     this title as the Ombudsman determines appropriate.

     The Ombudsman shall not serve as an advocate for any 
     increases in payments or new coverage of services, but may 
     identify issues and problems in payment or coverage policies.
       ``(c) Working with Health Insurance Counseling Programs.--
     To the extent possible, the Ombudsman shall work with health 
     insurance counseling programs (receiving funding under 
     section 4360 of Omnibus Budget Reconciliation Act of 1990) to 
     facilitate the provision of information to individuals 
     entitled to benefits under part A or enrolled under part B, 
     or both regarding Medicare+Choice plans and changes to those 
     plans. Nothing in this subsection shall preclude further 
     collaboration between the Ombudsman and such programs.''.
       (c) Deadline for Appointment.--The Secretary shall appoint 
     the Medicare Provider Ombudsman and the Medicare Beneficiary 
     Ombudsman, under the amendments made by subsections (a) and 
     (b), respectively, by not later than 1 year after the date of 
     the enactment of this Act.
       (d) Funding.--There are authorized to be appropriated to 
     the Secretary (in appropriate part from the Federal Hospital 
     Insurance Trust Fund and the Federal Supplementary Medical 
     Insurance Trust Fund) to carry out the provisions of 
     subsection (b) of section 1868 of the Social Security Act 
     (relating to the Medicare Provider Ombudsman), as added by 
     subsection (a)(5) and section 1809 of such Act (relating to 
     the Medicare Beneficiary Ombudsman), as added by subsection 
     (b), such sums as are necessary for fiscal year 2003 and each 
     succeeding fiscal year.
       (e) Use of Central, Toll-Free Number (1-800-MEDICARE).--
       (1) Phone triage system; listing in medicare handbook 
     instead of other toll-free numbers.--Section 1804(b) (42 
     U.S.C. 1395b-2(b)) is amended by adding at the end the 
     following: ``The Secretary shall provide, through the toll-
     free number 1-800-MEDICARE, for a means by which individuals 
     seeking information about, or assistance with, such programs 
     who phone such toll-free number are transferred (without 
     charge) to appropriate entities for the provision of such 
     information or assistance. Such toll-free number shall be the 
     toll-free number listed for general information and 
     assistance in the annual notice under subsection (a) instead 
     of the listing of numbers of individual contractors.''.
       (2) Monitoring accuracy.--
       (A) Study.--The Comptroller General of the United States 
     shall conduct a study to monitor the accuracy and consistency 
     of information provided to individuals entitled to benefits 
     under part A or enrolled under part B, or both, through the 
     toll-free number 1-800-MEDICARE, including an assessment of 
     whether the information provided is sufficient to answer 
     questions of such individuals. In conducting the study, the 
     Comptroller General shall examine the education and training 
     of the individuals providing information through such number.
       (B) Report.--Not later than 1 year after the date of the 
     enactment of this Act, the Comptroller General shall submit 
     to Congress a report on the study conducted under 
     subparagraph (A).

     SEC. 824. BENEFICIARY OUTREACH DEMONSTRATION PROGRAM.

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

                    Subtitle D--Appeals and Recovery

     SEC. 831. TRANSFER OF RESPONSIBILITY FOR MEDICARE APPEALS.

       (a) Transition Plan.--
       (1) In general.--Not later than October 1, 2003, the 
     Commissioner of Social Security and the Secretary shall 
     develop and transmit to Congress and the Comptroller General 
     of the United States a plan under which the functions of 
     administrative law judges responsible for hearing cases under 
     title XVIII of the Social Security Act (and related 
     provisions in title XI of such Act) are transferred from the 
     responsibility of the Commissioner and the Social Security 
     Administration to the Secretary and the Department of Health 
     and Human Services.
       (2) GAO evaluation.--The Comptroller General of the United 
     States shall evaluate the plan and, not later than the date 
     that is 6 months after the date on which the plan is received 
     by the Comptroller General, shall submit to Congress a report 
     on such evaluation.
       (b) Transfer of Adjudication Authority.--
       (1) In general.--Not earlier than July 1, 2004, and not 
     later than October 1, 2004, the Commissioner of Social 
     Security and the Secretary shall implement the transition 
     plan under subsection (a) and transfer the administrative law 
     judge functions described in such subsection from the Social 
     Security Administration to the Secretary.
       (2) Assuring independence of judges.--The Secretary shall 
     assure the independence of administrative law judges 
     performing the administrative law judge functions transferred 
     under paragraph (1) from the Centers for Medicare & Medicaid 
     Services and its contractors.
       (3) Geographic distribution.--The Secretary shall provide 
     for an appropriate geographic distribution of administrative 
     law judges performing the administrative law judge functions 
     transferred under paragraph (1) throughout the United States 
     to ensure timely access to such judges.
       (4) Hiring authority.--Subject to the amounts provided in 
     advance in appropriations Act, the Secretary shall have 
     authority to hire administrative law judges to hear such 
     cases, giving priority to those judges with prior experience 
     in handling medicare appeals and in a manner consistent with 
     paragraph (3), and to hire support staff for such judges.
       (5) Financing.--Amounts payable under law to the 
     Commissioner for administrative law judges performing the 
     administrative law judge functions transferred under 
     paragraph (1) from the Federal Hospital Insurance Trust Fund 
     and the Federal Supplementary Medical Insurance Trust Fund 
     shall become payable to the Secretary for the functions so 
     transferred.
       (6) Shared resources.--The Secretary shall enter into such 
     arrangements with the Commissioner as may be appropriate with 
     respect to transferred functions of administrative law judges 
     to share office space, support staff, and other resources, 
     with appropriate reimbursement from the Trust Funds described 
     in paragraph (5).
       (c) Increased Financial Support.--In addition to any 
     amounts otherwise appropriated, to ensure timely action on 
     appeals before administrative law judges and the Departmental 
     Appeals Board consistent with section 1869 of the Social 
     Security Act (as amended by section 521 of BIPA, 114 Stat. 
     2763A-534), there are authorized to be appropriated (in 
     appropriate part from the Federal Hospital Insurance Trust 
     Fund and the Federal Supplementary Medical Insurance Trust

[[Page 11944]]

     Fund) to the Secretary such sums as are necessary for fiscal 
     year 2004 and each subsequent fiscal year to--
       (1) increase the number of administrative law judges (and 
     their staffs) under subsection (b)(4);
       (2) improve education and training opportunities for 
     administrative law judges (and their staffs); and
       (3) increase the staff of the Departmental Appeals Board.
       (d) Conforming Amendment.--Section 1869(f)(2)(A)(i) (42 
     U.S.C. 1395ff(f)(2)(A)(i)), as added by section 522(a) of 
     BIPA (114 Stat. 2763A-543), is amended by striking ``of the 
     Social Security Administration''.

     SEC. 832. PROCESS FOR EXPEDITED ACCESS TO REVIEW.

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

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

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

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

       ``(iii) Venue.--Such action shall be brought in the 
     district court of the United States for the judicial district 
     in which the appellant is located (or, in the case of an 
     action brought jointly by more than one applicant, the 
     judicial district in which the greatest number of applicants 
     are located) or in the district court for the District of 
     Columbia.
       ``(iv) Interest on amounts in controversy.--Where a 
     provider of services or supplier seeks judicial review 
     pursuant to this paragraph, the amount in controversy shall 
     be subject to annual interest beginning on the first day of 
     the first month beginning after the 60-day period as 
     determined pursuant to clause (ii) and equal to the rate of 
     interest on obligations issued for purchase by the Federal 
     Hospital Insurance Trust Fund and by the Federal 
     Supplementary Medical Insurance Trust Fund for the month in 
     which the civil action authorized under this paragraph is 
     commenced, to be awarded by the reviewing court in favor of 
     the prevailing party. No interest awarded pursuant to the 
     preceding sentence shall be deemed income or cost for the 
     purposes of determining reimbursement due providers of 
     services or suppliers under this Act.
       ``(D) Review panels.--For purposes of this subsection, a 
     `review panel' is a panel consisting of 3 members (who shall 
     be administrative law judges, members of the Departmental 
     Appeals Board, or qualified individuals associated with a 
     qualified independent contractor (as defined in subsection 
     (c)(2)) or with another independent entity) designated by the 
     Secretary for purposes of making determinations under this 
     paragraph.''.
       (b) Application to Provider Agreement Determinations.--
     Section 1866(h)(1) (42 U.S.C. 1395cc(h)(1)) is amended--
       (1) by inserting ``(A)'' after ``(h)(1)''; and
       (2) by adding at the end the following new subparagraph:
       ``(B) An institution or agency described in subparagraph 
     (A) that has filed for a hearing under subparagraph (A) shall 
     have expedited access to judicial review under this 
     subparagraph in the same manner as providers of services, 
     suppliers, and individuals entitled to benefits under part A 
     or enrolled under part B, or both, may obtain expedited 
     access to judicial review under the process established under 
     section 1869(b)(2). Nothing in this subparagraph shall be 
     construed to affect the application of any remedy imposed 
     under section 1819 during the pendency of an appeal under 
     this subparagraph.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to appeals filed on or after October 1, 2003.
       (d) Expedited Review of Certain Provider Agreement 
     Determinations.--
       (1) Termination and certain other immediate remedies.--The 
     Secretary shall develop and implement a process to expedite 
     proceedings under sections 1866(h) of the Social Security Act 
     (42 U.S.C. 1395cc(h)) in which the remedy of termination of 
     participation, or a remedy described in clause (i) or (iii) 
     of section 1819(h)(2)(B) of such Act (42 U.S.C. 1395i-
     3(h)(2)(B)) which is applied on an immediate basis, has been 
     imposed. Under such process priority shall be provided in 
     cases of termination.
       (2) Increased financial support.--In addition to any 
     amounts otherwise appropriated, to reduce by 50 percent the 
     average time for administrative determinations on appeals 
     under section 1866(h) of the Social Security Act (42 U.S.C. 
     1395cc(h)), there are authorized to be appropriated (in 
     appropriate part from the Federal Hospital Insurance Trust 
     Fund and the Federal Supplementary Medical Insurance Trust 
     Fund) to the Secretary such additional sums for fiscal year 
     2004 and each subsequent fiscal year as may be necessary. The 
     purposes for which such amounts are available include 
     increasing the number of administrative law judges (and their 
     staffs) and the appellate level staff at the Departmental 
     Appeals Board of the Department of Health and Human Services 
     and educating such judges and staffs on long-term care 
     issues.

     SEC. 833. REVISIONS TO MEDICARE APPEALS PROCESS.

       (a) Requiring Full and Early Presentation of Evidence.--
       (1) In general.--Section 1869(b) (42 U.S.C. 1395ff(b)), as 
     amended by BIPA and as amended by section 832(a), is further 
     amended by adding at the end the following new paragraph:
       ``(3) Requiring full and early presentation of evidence by 
     providers.--A provider of services or supplier may not 
     introduce evidence in any appeal under this section that was 
     not presented at the reconsideration conducted by the 
     qualified independent contractor under subsection (c), unless 
     there is good cause which precluded the introduction of such 
     evidence at or before that reconsideration.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on October 1, 2003.
       (b) Use of Patients' Medical Records.--Section 
     1869(c)(3)(B)(i) (42 U.S.C. 1395ff(c)(3)(B)(i)), as amended 
     by BIPA, is amended by inserting ``(including the medical 
     records of the individual involved)'' after ``clinical 
     experience''.
       (c) Notice Requirements for Medicare Appeals.--
       (1) Initial determinations and redeterminations.--Section 
     1869(a) (42 U.S.C. 1395ff(a)), as amended by BIPA, is amended 
     by adding at the end the following new 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 include--
       ``(A) the specific reasons for the determination, 
     including--
       ``(i) upon request, the provision of the policy, manual, or 
     regulation used in making the determination; and
       ``(ii) as appropriate in the case of a redetermination, a 
     summary of the clinical or scientific evidence used in making 
     the determination;
       ``(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.

     The written notice on a redetermination shall be provided in 
     printed form and written

[[Page 11945]]

     in a manner calculated to be understood by the individual 
     entitled to benefits under part A or enrolled under part B, 
     or both.''.
       (2)Reconsiderations.--Section1869(c)(3)(E) (42 U.S.C. 
     1395ff(c)(3)(E)), as amended by BIPA, is amended--
       (A) by inserting ``be written in a manner calculated to be 
     understood by the individual entitled to benefits under part 
     A or enrolled under part B, or both, and shall include (to 
     the extent appropriate)'' after ``in writing, ''; and
       (B) by inserting ``and a notification of the right to 
     appeal such determination and instructions on how to initiate 
     such appeal under this section'' after ``such decision, ''.
       (3) Appeals.--Section 1869(d) (42 U.S.C. 1395ff(d)), as 
     amended by BIPA, is amended--
       (A) in the heading, by inserting ``; Notice'' after 
     ``Secretary''; and
       (B) by adding at the end the following new paragraph:
       ``(4) Notice.--Notice of the decision of an administrative 
     law judge shall be in writing in a manner calculated to be 
     understood by the individual entitled to benefits under part 
     A or enrolled under part B, or both, and shall include--
       ``(A) the specific reasons for the determination 
     (including, to the extent appropriate, a summary of the 
     clinical or scientific evidence used in making the 
     determination);
       ``(B) the procedures for obtaining additional information 
     concerning the decision; and
       ``(C) notification of the right to appeal the decision and 
     instructions on how to initiate such an appeal under this 
     section.''.
       (4) Submission of record for appeal.--Section 
     1869(c)(3)(J)(i) (42 U.S.C. 1395ff(c)(3)(J)(i)) by striking 
     ``prepare'' and inserting ``submit'' and by striking ``with 
     respect to'' and all that follows through ``and relevant 
     policies''.
       (d) Qualified Independent Contractors.--
       (1) Eligibility requirements of qualified independent 
     contractors.--Section 1869(c)(3) (42 U.S.C. 1395ff(c)(3)), as 
     amended by BIPA, is amended--
       (A) in subparagraph (A), by striking ``sufficient training 
     and expertise in medical science and legal matters'' and 
     inserting ``sufficient medical, legal, and other expertise 
     (including knowledge of the program under this title) and 
     sufficient staffing''; and
       (B) by adding at the end the following new subparagraph:
       ``(K) Independence requirements.--
       ``(i) In general.--Subject to clause (ii), a qualified 
     independent contractor shall not conduct any activities in a 
     case unless the entity--

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

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

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

       ``(ii) prohibit an individual who has staff privileges at 
     the institution where the treatment involved takes place from 
     serving as a reviewer merely on the basis of having such 
     staff privileges if the existence of such privileges is 
     disclosed to the Secretary and such individual (or authorized 
     representative), and neither party objects; or
       ``(iii) prohibit receipt of compensation by a reviewing 
     professional from a contractor if the compensation is 
     provided consistent with paragraph (3).
     For purposes of this paragraph, the term `participation 
     agreement' means an agreement relating to the provision of 
     health care services by the individual and does not include 
     the provision of services as a reviewer under this 
     subsection.
       ``(3) Limitations on reviewer compensation.--Compensation 
     provided by a qualified independent contractor to a reviewer 
     in connection with a review under this section shall not be 
     contingent on the decision rendered by the reviewer.
       ``(4) Licensure and expertise.--Each reviewing professional 
     shall be--
       ``(A) a physician (allopathic or osteopathic) who is 
     appropriately credentialed or licensed in one or more States 
     to deliver health care services and has medical expertise in 
     the field of practice that is appropriate for the items or 
     services at issue; or
       ``(B) a health care professional who is legally authorized 
     in one or more States (in accordance with State law or the 
     State regulatory mechanism provided by State law) to furnish 
     the health care items or services at issue and has medical 
     expertise in the field of practice that is appropriate for 
     such items or services.
       ``(5) Related party defined.--For purposes of this section, 
     the term `related party' means, with respect to a case under 
     this title involving a specific individual entitled to 
     benefits under part A or enrolled under part B, or both, any 
     of the following:
       ``(A) The Secretary, the medicare administrative contractor 
     involved, or any fiduciary, officer, director, or employee of 
     the Department of Health and Human Services, or of such 
     contractor.
       ``(B) The individual (or authorized representative).
       ``(C) The health care professional that provides the items 
     or services involved in the case.
       ``(D) The institution at which the items or services (or 
     treatment) involved in the case are provided.
       ``(E) The manufacturer of any drug or other item that is 
     included in the items or services involved in the case.
       ``(F) Any other party determined under any regulations to 
     have a substantial interest in the case involved.''.
       (3) Effective date.--The amendments made by paragraphs (1) 
     and (2) shall be effective as if included in the enactment of 
     the respective provisions of subtitle C of title V of BIPA, 
     (114 Stat. 2763A-534).
       (4) Transition.--In applying section 1869(g) of the Social 
     Security Act (as added by paragraph (2)), any reference to a 
     medicare administrative contractor shall be deemed to include 
     a reference to a fiscal intermediary under section 1816 of 
     the Social Security Act (42 U.S.C. 1395h) and a carrier under 
     section 1842 of such Act (42 U.S.C. 1395u).

     SEC. 834. PREPAYMENT REVIEW.

       (a) In General.--Section 1874A, as added by section 
     811(a)(1) and as amended by sections 812(b), 821(b)(1), and 
     821(c)(1), is further amended by adding at the end the 
     following new subsection:
       ``(h) Conduct of Prepayment Review.--
       ``(1) Conduct of random prepayment review.--
       ``(A) In general.--A medicare administrative contractor may 
     conduct random prepayment review only to develop a 
     contractor-wide or program-wide claims payment error rates or 
     under such additional circumstances as may be provided under 
     regulations, developed in consultation with providers of 
     services and suppliers.
       ``(B) Use of standard protocols when conducting prepayment 
     reviews.--When a medicare administrative contractor conducts 
     a random prepayment review, the contractor may conduct such 
     review only in accordance with a standard protocol for random 
     prepayment audits developed by the Secretary.
       ``(C) Construction.--Nothing in this paragraph shall be 
     construed as preventing the

[[Page 11946]]

     denial of payments for claims actually reviewed under a 
     random prepayment review.
       ``(D) Random prepayment review.--For purposes of this 
     subsection, the term `random prepayment review' means a 
     demand for the production of records or documentation absent 
     cause with respect to a claim.
       ``(2) Limitations on non-random prepayment review.--
       ``(A) Limitations on initiation of non-random prepayment 
     review.--A medicare administrative contractor may not 
     initiate non-random prepayment review of a provider of 
     services or supplier based on the initial identification by 
     that provider of services or supplier of an improper billing 
     practice unless there is a likelihood of sustained or high 
     level of payment error (as defined in subsection (i)(3)(A)).
       ``(B) Termination of non-random prepayment review.--The 
     Secretary shall issue regulations relating to the 
     termination, including termination dates, of non-random 
     prepayment review. Such regulations may vary such a 
     termination date based upon the differences in the 
     circumstances triggering prepayment review.''.
       (b) Effective Date.--
       (1) In general.--Except as provided in this subsection, the 
     amendment made by subsection (a) shall take effect 1 year 
     after the date of the enactment of this Act.
       (2) Deadline for promulgation of certain regulations.--The 
     Secretary shall first issue regulations under section 
     1874A(h) of the Social Security Act, as added by subsection 
     (a), by not later than 1 year after the date of the enactment 
     of this Act.
       (3) Application of standard protocols for random prepayment 
     review.--Section 1874A(h)(1)(B) of the Social Security Act, 
     as added by subsection (a), shall apply to random prepayment 
     reviews conducted on or after such date (not later than 1 
     year after the date of the enactment of this Act) as the 
     Secretary shall specify.
       (c) Application to Fiscal Intermediaries and Carriers.--The 
     provisions of section 1874A(h) of the Social Security Act, as 
     added by subsection (a), shall apply to each fiscal 
     intermediary under section 1816 of the Social Security Act 
     (42 U.S.C. 1395h) and each carrier under section 1842 of such 
     Act (42 U.S.C. 1395u) in the same manner as they apply to 
     medicare administrative contractors under such provisions.

     SEC. 835. RECOVERY OF OVERPAYMENTS.

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

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

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

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

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

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

     The opportunity provided under clause (ii)(I) does not waive 
     any appeal rights with respect to the alleged overpayment 
     involved.
       ``(D) Consent settlement defined.--For purposes of this 
     paragraph, the term `consent settlement' means an agreement 
     between the Secretary and a provider of services or supplier 
     whereby both parties agree to settle a projected overpayment 
     based on less than a statistically valid sample of claims and 
     the provider of services or supplier agrees not to appeal the 
     claims involved.
       ``(6) Notice of over-utilization of codes.--The Secretary 
     shall establish, in consultation with organizations 
     representing the classes of providers of services and 
     suppliers, a process under which the Secretary provides for 
     notice to classes of providers of services and suppliers 
     served by the contractor in cases in which the contractor has

[[Page 11947]]

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

     SEC. 836. PROVIDER ENROLLMENT PROCESS; RIGHT OF APPEAL.

       (a) In General.--Section 1866 (42 U.S.C. 1395cc) is 
     amended--
       (1) by adding at the end of the heading the following: ``; 
     enrollment processes''; and
       (2) by adding at the end the following new subsection:
       ``(j) Enrollment Process for Providers of Services and 
     Suppliers.--
       ``(1) Enrollment process.--
       ``(A) In general.--The Secretary shall establish by 
     regulation a process for the enrollment of providers of 
     services and suppliers under this title.
       ``(B) Deadlines.--The Secretary shall establish by 
     regulation procedures under which there are deadlines for 
     actions on applications for enrollment (and, if applicable, 
     renewal of enrollment). The Secretary shall monitor the 
     performance of medicare administrative contractors in meeting 
     the deadlines established under this subparagraph.
       ``(C) Consultation before changing provider enrollment 
     forms.--The Secretary shall consult with providers of 
     services and suppliers before making changes in the provider 
     enrollment forms required of such providers and suppliers to 
     be eligible to submit claims for which payment may be made 
     under this title.
       ``(2) Hearing rights in cases of denial or non-renewal.--A 
     provider of services or supplier whose application to enroll 
     (or, if applicable, to renew enrollment) under this title is 
     denied may have a hearing and judicial review of such denial 
     under the procedures that apply under subsection (h)(1)(A) to 
     a provider of services that is dissatisfied with a 
     determination by the Secretary.''.
       (b) Effective Dates.--
       (1) Enrollment process.--The Secretary shall provide for 
     the establishment of the enrollment process under section 
     1866(j)(1) of the Social Security Act, as added by subsection 
     (a)(2), within 6 months after the date of the enactment of 
     this Act.
       (2) Consultation.--Section 1866(j)(1)(C) of the Social 
     Security Act, as added by subsection (a)(2), shall apply with 
     respect to changes in provider enrollment forms made on or 
     after January 1, 2003.
       (3) Hearing rights.--Section 1866(j)(2) of the Social 
     Security Act, as added by subsection (a)(2), shall apply to 
     denials occurring on or after such date (not later than 1 
     year after the date of the enactment of this Act) as the 
     Secretary specifies.

     SEC. 837. PROCESS FOR CORRECTION OF MINOR ERRORS AND 
                   OMISSIONS ON CLAIMS WITHOUT PURSUING APPEALS 
                   PROCESS.

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

     SEC. 838. PRIOR DETERMINATION PROCESS FOR CERTAIN ITEMS AND 
                   SERVICES; ADVANCE BENEFICIARY NOTICES.

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

[[Page 11948]]

       ``(ii) the item or service is not so covered; or
       ``(iii) the contractor lacks sufficient information to make 
     a coverage determination.

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

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

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

     from receiving (and submitting a claim for) such items 
     services and from obtaining administrative or judicial review 
     respecting such claim under the other applicable provisions 
     of this section. Failure to seek a prior determination under 
     this subsection with respect to items and services shall not 
     be taken into account in such administrative or judicial 
     review.
       ``(C) No prior determination after receipt of services.--
     Once an individual is provided items and services, there 
     shall be no prior determination under this subsection with 
     respect to such items or services.''.
       (b) Effective Date; Transition.--
       (1) Effective date.--The Secretary shall establish the 
     prior determination process under the amendment made by 
     subsection (a) in such a manner as to provide for the 
     acceptance of requests for determinations under such process 
     filed not later than 18 months after the date of the 
     enactment of this Act.
       (2) Transition.--During the period in which the amendment 
     made by subsection (a) has become effective but contracts are 
     not provided under section 1874A of the Social Security Act 
     with medicare administrative contractors, any reference in 
     section 1869(g) of such Act (as added by such amendment) to 
     such a contractor is deemed a reference to a fiscal 
     intermediary or carrier with an agreement under section 1816, 
     or contract under section 1842, respectively, of such Act.
       (3) Limitation on application to sgr.--For purposes of 
     applying section 1848(f)(2)(D) of the Social Security Act (42 
     U.S.C. 1395w-4(f)(2)(D)), the amendment made by subsection 
     (a) shall not be considered to be a change in law or 
     regulation.
       (c) Provisions Relating to Advance Beneficiary Notices; 
     Report on Prior Determination Process.--
       (1) Data collection.--The Secretary shall establish a 
     process for the collection of information on the instances in 
     which an advance beneficiary notice (as defined in paragraph 
     (4)) has been provided and on instances in which a 
     beneficiary indicates on such a notice that the beneficiary 
     does not intend to seek to have the item or service that is 
     the subject of the notice furnished.
       (2) Outreach and education.--The Secretary shall establish 
     a program of outreach and education for beneficiaries and 
     providers of services and other persons on the appropriate 
     use of advance beneficiary notices and coverage policies 
     under the medicare program.
       (3) GAO report report on use of advance beneficiary 
     notices.--Not later than 18 months after the date on which 
     section 1869(g) of the Social Security Act (as added by 
     subsection (a)) takes effect, the Comptroller General of the 
     United States shall submit to Congress a report on the use of 
     advance beneficiary notices under title XVIII of such Act. 
     Such report shall include information concerning the 
     providers of services and other persons that have provided 
     such notices and the response of beneficiaries to such 
     notices.
       (4) GAO report on use of prior determination process.--Not 
     later than 18 months after the date on which section 1869(g) 
     of the Social Security Act (as added by subsection (a)) takes 
     effect, the Comptroller General of the United States shall 
     submit to Congress a report on the use of the prior 
     determination process under such section. Such report shall 
     include--
       (A) information concerning the types of procedures for 
     which a prior determination has been sought, determinations 
     made under the process, and changes in receipt of services 
     resulting from the application of such process; and
       (B) an evaluation of whether the process was useful for 
     physicians (and other suppliers) and beneficiaries, whether 
     it was timely, and whether the amount of information required 
     was burdensome to physicians and beneficiaries.
       (5) Advance beneficiary notice defined.--In this 
     subsection, the term ``advance beneficiary notice'' means a 
     written notice provided under section 1879(a) of the Social 
     Security Act (42 U.S.C. 1395pp(a)) to an individual entitled 
     to benefits under part A or B of title XVIII of such Act 
     before items or services are furnished under such part in 
     cases where a provider of services or other person that would 
     furnish the item or service believes that payment will not be 
     made for some or all of such items or services under such 
     title.

                  Subtitle E--Miscellaneous Provisions

     SEC. 841. POLICY DEVELOPMENT REGARDING EVALUATION AND 
                   MANAGEMENT (E & M) DOCUMENTATION GUIDELINES.

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

     The Secretary shall make changes to the manner in which 
     existing evaluation and management documentation guidelines 
     are implemented to reduce paperwork burdens on physicians.
       (b) Pilot Projects to Test Evaluation and Management 
     Documentation Guidelines.--
       (1) In general.--The Secretary shall conduct under this 
     subsection appropriate and representative pilot projects to 
     test new evaluation and management documentation guidelines 
     referred to in subsection (a).
       (2) Length and consultation.--Each pilot project under this 
     subsection shall--
       (A) be voluntary;
       (B) be of sufficient length as determined by the Secretary 
     to allow for preparatory physician and medicare contractor 
     education, analysis, and use and assessment of potential 
     evaluation and management guidelines; and
       (C) be conducted, in development and throughout the 
     planning and operational stages of the project, in 
     consultation with practicing physicians (including both 
     generalists and specialists).
       (3) Range of pilot projects.--Of the pilot projects 
     conducted under this subsection--
       (A) at least one shall focus on a peer review method by 
     physicians (not employed by a medicare contractor) which 
     evaluates medical record information for claims submitted by 
     physicians identified as statistical outliers relative to 
     definitions published in the Current Procedures Terminology 
     (CPT) code book of the American Medical Association;
       (B) at least one shall focus on an alternative method to 
     detailed guidelines based

[[Page 11949]]

     on physician documentation of face to face encounter time 
     with a patient;
       (C) at least one shall be conducted for services furnished 
     in a rural area and at least one for services furnished 
     outside such an area; and
       (D) at least one shall be conducted in a setting where 
     physicians bill under physicians' services in teaching 
     settings and at least one shall be conducted in a setting 
     other than a teaching setting.
       (4) Banning of targeting of pilot project participants.--
     Data collected under this subsection shall not be used as the 
     basis for overpayment demands or post-payment audits. Such 
     limitation applies only to claims filed as part of the pilot 
     project and lasts only for the duration of the pilot project 
     and only as long as the provider is a participant in the 
     pilot project.
       (5) Study of impact.--Each pilot project shall examine the 
     effect of the new evaluation and management documentation 
     guidelines on--
       (A) different types of physician practices, including those 
     with fewer than 10 full-time-equivalent employees (including 
     physicians); and
       (B) the costs of physician compliance, including education, 
     implementation, auditing, and monitoring.
       (6) Periodic reports.--The Secretary shall submit to 
     Congress periodic reports on the pilot projects under this 
     subsection.
       (c) Objectives for Evaluation and Management Guidelines.--
     The objectives for modified evaluation and management 
     documentation guidelines developed by the Secretary shall be 
     to--
       (1) identify clinically relevant documentation needed to 
     code accurately and assess coding levels accurately;
       (2) decrease the level of non-clinically pertinent and 
     burdensome documentation time and content in the physician's 
     medical record;
       (3) increase accuracy by reviewers; and
       (4) educate both physicians and reviewers.
       (d) Study of Simpler, Alternative Systems of Documentation 
     for Physician Claims.--
       (1) Study.--The Secretary shall carry out a study of the 
     matters described in paragraph (2).
       (2) Matters described.--The matters referred to in 
     paragraph (1) are--
       (A) the development of a simpler, alternative system of 
     requirements for documentation accompanying claims for 
     evaluation and management physician services for which 
     payment is made under title XVIII of the Social Security Act; 
     and
       (B) consideration of systems other than current coding and 
     documentation requirements for payment for such physician 
     services.
       (3) Consultation with practicing physicians.--In designing 
     and carrying out the study under paragraph (1), the Secretary 
     shall consult with practicing physicians, including 
     physicians who are part of group practices and including both 
     generalists and specialists.
       (4) Application of hipaa uniform coding requirements.--In 
     developing an alternative system under paragraph (2), the 
     Secretary shall consider requirements of administrative 
     simplification under part C of title XI of the Social 
     Security Act.
       (5) Report to congress.--(A) Not later than October 1, 
     2004, the Secretary shall submit to Congress a report on the 
     results of the study conducted under paragraph (1).
       (B) The Medicare Payment Advisory Commission shall conduct 
     an analysis of the results of the study included in the 
     report under subparagraph (A) and shall submit a report on 
     such analysis to Congress.
       (e) Study on Appropriate Coding of Certain Extended Office 
     Visits.--The Secretary shall conduct a study of the 
     appropriateness of coding in cases of extended office visits 
     in which there is no diagnosis made. Not later than October 
     1, 2004, the Secretary shall submit a report to Congress on 
     such study and shall include recommendations on how to code 
     appropriately for such visits in a manner that takes into 
     account the amount of time the physician spent with the 
     patient.
       (f) Definitions.--In this section--
       (1) the term ``rural area'' has the meaning given that term 
     in section 1886(d)(2)(D) of the Social Security Act, 42 
     U.S.C. 1395ww(d)(2)(D); and
       (2) the term ``teaching settings'' are those settings 
     described in section 415.150 of title 42, Code of Federal 
     Regulations.

     SEC. 842. IMPROVEMENT IN OVERSIGHT OF TECHNOLOGY AND 
                   COVERAGE.

       (a) Improved Coordination Between FDA and CMS on Coverage 
     of Breakthrough Medical Devices.--
       (1) In general.--Upon request by an applicant and to the 
     extent feasible (as determined by the Secretary), the 
     Secretary shall, in the case of a class III medical device 
     that is subject to premarket approval under section 515 of 
     the Federal Food, Drug, and Cosmetic Act, ensure the sharing 
     of appropriate information from the review for application 
     for premarket approval conducted by the Food and Drug 
     Administration for coverage decisions under title XVIII of 
     the Social Security Act.
       (2) Publication of plan.--Not later than 6 months after the 
     date of the enactment of this Act, the Secretary shall submit 
     to appropriate Committees of Congress a report that contains 
     the plan for improving such coordination and for shortening 
     the time lag between the premarket approval by the Food and 
     Drug Administration and coding and coverage decisions by the 
     Centers for Medicare & Medicaid Services.
       (3) Construction.--Nothing in this subsection shall be 
     construed as changing the criteria for coverage of a medical 
     device under title XVIII of the Social Security Act nor 
     premarket approval by the Food and Drug Administration and 
     nothing in this subsection shall be construed to increase 
     premarket approval application requirements under the Federal 
     Food, Drug, and Cosmetic Act.
       (b) Council for Technology and Innovation.--Section 1868 
     (42 U.S.C. 1395ee), as amended by section 823(a), is amended 
     by adding at the end the following new subsection:
       ``(c) Council for Technology and Innovation.--
       ``(1) Establishment.--The Secretary shall establish a 
     Council for Technology and Innovation within the Centers for 
     Medicare & Medicaid Services (in this section referred to as 
     `CMS').
       ``(2) Composition.--The Council shall be composed of senior 
     CMS staff and clinicians and shall be chaired by the 
     Executive Coordinator for Technology and Innovation 
     (appointed or designated under paragraph (4)).
       ``(3) Duties.--The Council shall coordinate the activities 
     of coverage, coding, and payment processes under this title 
     with respect to new technologies and procedures, including 
     new drug therapies, and shall coordinate the exchange of 
     information on new technologies between CMS and other 
     entities that make similar decisions.
       ``(4) Executive coordinator for technology and 
     innovation.--The Secretary shall appoint (or designate) a 
     noncareer appointee (as defined in section 3132(a)(7) of 
     title 5, United States Code) who shall serve as the Executive 
     Coordinator for Technology and Innovation. Such executive 
     coordinator shall report to the Administrator of CMS, shall 
     chair the Council, shall oversee the execution of its duties, 
     and shall serve as a single point of contact for outside 
     groups and entities regarding the coverage, coding, and 
     payment processes under this title.''.
       (c) GAO Study on Improvements in External Data Collection 
     for Use in the Medicare Inpatient Payment System.--
       (1) Study.--The Comptroller General of the United States 
     shall conduct a study that analyzes which external data can 
     be collected in a shorter time frame by the Centers for 
     Medicare & Medicaid Services for use in computing payments 
     for inpatient hospital services. The study may include an 
     evaluation of the feasibility and appropriateness of using of 
     quarterly samples or special surveys or any other methods. 
     The study shall include an analysis of whether other 
     executive agencies, such as the Bureau of Labor Statistics in 
     the Department of Commerce, are best suited to collect this 
     information.
       (2) Report.--By not later than October 1, 2003, the 
     Comptroller General shall submit a report to Congress on the 
     study under paragraph (1).
       (d) IOM Study on Local Coverage Determinations.--
       (1) Study.--The Secretary shall enter into an arrangement 
     with the Institute of Medicine of the National Academy of 
     Sciences under which the Institute shall conduct a study on 
     local coverage determinations (including the application of 
     local medical review policies) under the medicare program 
     under title XVIII of the Social Security Act. Such study 
     shall examine--
       (A) the consistency of the definitions used in such 
     determinations;
       (B) the types of evidence on which such determinations are 
     based, including medical and scientific evidence;
       (C) the advantages and disadvantages of local coverage 
     decisionmaking, including the flexibility it offers for 
     ensuring timely patient access to new medical technology for 
     which data are still be collected;
       (D) the manner in which the local coverage determination 
     process is used to develop data needed for a national 
     coverage determination, including the need for collection of 
     such data within a protocol and informed consent by 
     individuals entitled to benefits under part A of title XVIII 
     of the Social Security Act, or enrolled under part B of such 
     title, or both; and
       (E) the advantages and disadvantages of maintaining local 
     medicare contractor advisory committees that can advise on 
     local coverage decisions based on an open, collaborative 
     public process.
       (2) Report.--Such arrangement shall provide that the 
     Institute shall submit to the Secretary a report on such 
     study by not later than 3 years after the date of the 
     enactment of this Act. The Secretary shall promptly transmit 
     a copy of such report to Congress.
       (e) Methods for Determining Payment Basis For New Lab 
     Tests.--Section 1833(h) (42 U.S.C. 1395l(h)) is amended by 
     adding at the end the following:
       ``(8)(A) The Secretary shall establish by regulation 
     procedures for determining the basis for, and amount of, 
     payment under this subsection for any clinical diagnostic 
     laboratory test with respect to which a new or substantially 
     revised HCPCS code is assigned on

[[Page 11950]]

     or after January 1, 2004 (in this paragraph referred to as 
     `new tests').
       ``(B) Determinations under subparagraph (A) shall be made 
     only after the Secretary--
       ``(i) makes available to the public (through an Internet 
     site and other appropriate mechanisms) a list that includes 
     any such test for which establishment of a payment amount 
     under this subsection is being considered for a year;
       ``(ii) on the same day such list is made available, causes 
     to have published in the Federal Register notice of a meeting 
     to receive comments and recommendations (and data on which 
     recommendations are based) from the public on the appropriate 
     basis under this subsection for establishing payment amounts 
     for the tests on such list;
       ``(iii) not less than 30 days after publication of such 
     notice convenes a meeting, that includes representatives of 
     officials of the Centers for Medicare & Medicaid Services 
     involved in determining payment amounts, to receive such 
     comments and recommendations (and data on which the 
     recommendations are based);
       ``(iv) taking into account the comments and recommendations 
     (and accompanying data) received at such meeting, develops 
     and makes available to the public (through an Internet site 
     and other appropriate mechanisms) a list of proposed 
     determinations with respect to the appropriate basis for 
     establishing a payment amount under this subsection for each 
     such code, together with an explanation of the reasons for 
     each such determination, the data on which the determinations 
     are based, and a request for public written comments on the 
     proposed determination; and
       ``(v) taking into account the comments received during the 
     public comment period, develops and makes available to the 
     public (through an Internet site and other appropriate 
     mechanisms) a list of final determinations of the payment 
     amounts for such tests under this subsection, together with 
     the rationale for each such determination, the data on which 
     the determinations are based, and responses to comments and 
     suggestions received from the public.
       ``(C) Under the procedures established pursuant to 
     subparagraph (A), the Secretary shall--
       ``(i) set forth the criteria for making determinations 
     under subparagraph (A); and
       ``(ii) make available to the public the data (other than 
     proprietary data) considered in making such determinations.
       ``(D) The Secretary may convene such further public 
     meetings to receive public comments on payment amounts for 
     new tests under this subsection as the Secretary deems 
     appropriate.
       ``(E) For purposes of this paragraph:
       ``(i) The term `HCPCS' refers to the Health Care Procedure 
     Coding System.
       ``(ii) A code shall be considered to be `substantially 
     revised' if there is a substantive change to the definition 
     of the test or procedure to which the code applies (such as a 
     new analyte or a new methodology for measuring an existing 
     analyte-specific test).''.

     SEC. 843. TREATMENT OF HOSPITALS FOR CERTAIN SERVICES UNDER 
                   MEDICARE SECONDARY PAYOR (MSP) PROVISIONS.

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

     SEC. 844. EMTALA IMPROVEMENTS.

       (a) Payment for EMTALA-Mandated Screening and Stabilization 
     Services.--
       (1) In general.--Section 1862 (42 U.S.C. 1395y) is amended 
     by inserting after subsection (c) the following new 
     subsection:
       ``(d) For purposes of subsection (a)(1)(A), in the case of 
     any item or service that is required to be provided pursuant 
     to section 1867 to an individual who is entitled to benefits 
     under this title, determinations as to whether the item or 
     service is reasonable and necessary shall be made on the 
     basis of the information available to the treating physician 
     or practitioner (including the patient's presenting symptoms 
     or complaint) at the time the item or service was ordered or 
     furnished by the physician or practitioner (and not on the 
     patient's principal diagnosis). When making such 
     determinations with respect to such an item or service, the 
     Secretary shall not consider the frequency with which the 
     item or service was provided to the patient before or after 
     the time of the admission or visit.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to items and services furnished on or after 
     January 1, 2003.
       (b) Notification of Providers When EMTALA Investigation 
     Closed.--Section 1867(d) (42 U.S.C. 42 U.S.C. 1395dd(d)) is 
     amended by adding at the end the following new paragraph:
       ``(4) Notice upon closing an investigation.--The Secretary 
     shall establish a procedure to notify hospitals and 
     physicians when an investigation under this section is 
     closed.''.
       (c) Prior Review by Peer Review Organizations in EMTALA 
     Cases Involving Termination of Participation.--
       (1) In general.--Section 1867(d)(3) (42 U.S.C. 
     1395dd(d)(3)) is amended--
       (A) in the first sentence, by inserting ``or in terminating 
     a hospital's participation under this title'' after ``in 
     imposing sanctions under paragraph (1)''; and
       (B) by adding at the end the following new sentences: 
     ``Except in the case in which a delay would jeopardize the 
     health or safety of individuals, the Secretary shall also 
     request such a review before making a compliance 
     determination as part of the process of terminating a 
     hospital's participation under this title for violations 
     related to the appropriateness of a medical screening 
     examination, stabilizing treatment, or an appropriate 
     transfer as required by this section, and shall provide a 
     period of 5 days for such review. The Secretary shall provide 
     a copy of the organization's report to the hospital or 
     physician consistent with confidentiality requirements 
     imposed on the organization under such part B.''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply to terminations of participation initiated on or 
     after the date of the enactment of this Act.

     SEC. 845. EMERGENCY MEDICAL TREATMENT AND LABOR ACT (EMTALA) 
                   TECHNICAL ADVISORY GROUP.

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

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

     SEC. 846. AUTHORIZING USE OF ARRANGEMENTS WITH OTHER HOSPICE 
                   PROGRAMS 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 
     new subparagraph:

[[Page 11951]]

       ``(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.''.
       (b) Conforming Payment Provision.--Section 1814(i) (42 
     U.S.C. 1395f(i)), as amended by section 421(b), is amended by 
     adding at the end the following new paragraph:
       ``(5) In the case of hospice care provided by a hospice 
     program under arrangements under section 1861(dd)(5)(D) made 
     by another hospice program, the hospice program that made the 
     arrangements shall bill and be paid for the hospice care.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to hospice care provided on or after the date of 
     the enactment of this Act.

     SEC. 847. APPLICATION OF OSHA BLOODBORNE PATHOGENS STANDARD 
                   TO CERTAIN HOSPITALS.

       (a) In General.--Section 1866 (42 U.S.C. 1395cc) is 
     amended--
       (1) in subsection (a)(1)--
       (A) in subparagraph (R), by striking ``and'' at the end;
       (B) in subparagraph (S), by striking the period at the end 
     and inserting ``, and''; and
       (C) by inserting after subparagraph (S) the following new 
     subparagraph:
       ``(T) in the case of hospitals that are not otherwise 
     subject to the Occupational Safety and Health Act of 1970, to 
     comply with the Bloodborne Pathogens standard under section 
     1910.1030 of title 29 of the Code of Federal Regulations (or 
     as subsequently redesignated).''; and
       (2) by adding at the end of subsection (b) the following 
     new paragraph:
       ``(4)(A) A hospital that fails to comply with the 
     requirement of subsection (a)(1)(T) (relating to the 
     Bloodborne Pathogens standard) is subject to a civil money 
     penalty in an amount described in subparagraph (B), but is 
     not subject to termination of an agreement under this 
     section.
       ``(B) The amount referred to in subparagraph (A) is an 
     amount that is similar to the amount of civil penalties that 
     may be imposed under section 17 of the Occupational Safety 
     and Health Act of 1970 for a violation of the Bloodborne 
     Pathogens standard referred to in subsection (a)(1)(T) by a 
     hospital that is subject to the provisions of such Act.
       ``(C) A civil money penalty under this paragraph shall be 
     imposed and collected in the same manner as civil money 
     penalties under subsection (a) of section 1128A are imposed 
     and collected under that section.''.
       (b) Effective Date.--The amendments made by this subsection 
     (a) shall apply to hospitals as of July 1, 2003.

     SEC. 848. BIPA-RELATED TECHNICAL AMENDMENTS AND CORRECTIONS.

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

     SEC. 849. CONFORMING AUTHORITY TO WAIVE A PROGRAM EXCLUSION.

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

     SEC. 850. TREATMENT OF CERTAIN DENTAL CLAIMS.

       (a) In General.--Section 1862 (42 U.S.C. 1395y) is amended 
     by adding after subsection (g) the following new subsection:
       ``(h)(1) Subject to paragraph (2), a group health plan (as 
     defined in subsection (a)(1)(A)(v)) providing supplemental or 
     secondary coverage to individuals also entitled to services 
     under this title shall not require a medicare claims 
     determination under this title for dental benefits 
     specifically excluded under subsection (a)(12) as a condition 
     of making a claims determination for such benefits under the 
     group health plan.
       ``(2) A group health plan may require a claims 
     determination under this title in cases involving or 
     appearing to involve inpatient dental hospital services or 
     dental services expressly covered under this title pursuant 
     to actions taken by the Secretary.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect on the date that is 60 days after the date 
     of the enactment of this Act.

     SEC. 851. ANNUAL PUBLICATION OF LIST OF NATIONAL COVERAGE 
                   DETERMINATIONS.

       The Secretary shall provide, in an appropriate annual 
     publication available to the public, a list of national 
     coverage determinations made under title XVIII of the Social 
     Security Act in the previous year and information on how to 
     get more information with respect to such determinations.

                     TITLE IX--MEDICAID PROVISIONS

     SEC. 901. NATIONAL BIPARTISAN COMMISSION ON THE FUTURE OF 
                   MEDICAID.

       (a) Establishment.--There is established a commission to be 
     known as the National Bipartisan Commission on the Future of 
     Medicaid (in this section referred to as the ``Commission'').
       (b) Duties of the Commission.--The Commission shall--
       (1) review and analyze the long-term financial condition of 
     the medicaid program under title XIX of the Social Security 
     Act (42 U.S.C. 1396 et seq.);
       (2) identify the factors that are causing, and the 
     consequences of, increases in costs under the medicaid 
     program, including--
       (A) the impact of these cost increases upon State budgets, 
     funding for other State programs, and levels of State taxes 
     necessary to fund growing expenditures under the medicaid 
     program;
       (B) the financial obligations of the Federal government 
     arising from the Federal matching requirement for 
     expenditures under the medicaid program; and
       (C) the size and scope of the current program and how the 
     program has evolved over time;
       (3) analyze potential policies that will ensure both the 
     financial integrity of the medicaid program and the provision 
     of appropriate benefits under such program;
       (4) make recommendations for establishing incentives and 
     structures to promote enhanced efficiencies and ways of 
     encouraging innovative State policies under the medicaid 
     program;
       (5) make recommendations for establishing the appropriate 
     balance between benefits covered, payments to providers, 
     State and Federal contributions and, where appropriate, 
     recipient cost-sharing obligations;
       (6) make recommendations on the impact of promoting 
     increased utilization of competitive, private enterprise 
     models to contain program cost growth, through enhanced 
     utilization of private plans, pharmacy benefit managers, and 
     other methods currently being used to contain private sector 
     health-care costs;
       (7) make recommendations on the financing of prescription 
     drug benefits currently covered under medicaid programs, 
     including analysis of the current Federal manufacturer rebate 
     program, its impact upon both private market prices as well 
     as those paid by other government purchasers, recent State 
     efforts to negotiate additional supplemental manufacturer 
     rebates and the ability of pharmacy benefit managers to lower 
     drug costs;
       (8) review and analyze such other matters relating to the 
     medicaid program as the Commission deems appropriate; and
       (9) analyze the impact of impending demographic changes 
     upon medicaid benefits, including long term care services, 
     and make recommendations for how best to appropriately divide 
     State and Federal responsibilities for funding these 
     benefits.
       (c) Membership.--

[[Page 11952]]

       (1) Number and appointment.--The Commission shall be 
     composed of 17 members, of whom--
       (A) four shall be appointed by the President;
       (B) six shall be appointed by the Majority Leader of the 
     Senate, in consultation with the Minority Leader of the 
     Senate, of whom not more than 4 shall be of the same 
     political party;
       (C) six shall be appointed by the Speaker of the House of 
     Representatives, in consultation with the Minority Leader of 
     the House of Representatives, of whom not more than 4 shall 
     be of the same political party; and
       (D) one, who shall serve as Chairman of the Commission, 
     appointed jointly by the President, Majority Leader of the 
     Senate, and the Speaker of the House of Representatives.
       (2) Deadline for appointment.--Members of the Commission 
     shall be appointed by not later than December 1, 2002.
       (3) Terms of appointment.--The term of any appointment 
     under paragraph (1) to the Commission shall be for the life 
     of the Commission.
       (4) Meetings.--The Commission shall meet at the call of its 
     Chairman or a majority of its members.
       (5) Quorum.--A quorum shall consist of 8 members of the 
     Commission, except that 4 members may conduct a hearing under 
     subsection (e).
       (6) Vacancies.--A vacancy on the Commission shall be filled 
     in the same manner in which the original appointment was made 
     not later than 30 days after the Commission is given notice 
     of the vacancy and shall not affect the power of the 
     remaining members to execute the duties of the Commission.
       (7) Compensation.--Members of the Commission shall receive 
     no additional pay, allowances, or benefits by reason of their 
     service on the Commission.
       (8) Expenses.--Each member of the Commission shall receive 
     travel expenses and per diem in lieu of subsistence in 
     accordance with sections 5702 and 5703 of title 5, United 
     States Code.
       (d) Staff and Support Services.--
       (1) Executive director.--
       (A) Appointment.--The Chairman shall appoint an executive 
     director of the Commission.
       (B) Compensation.--The executive director shall be paid the 
     rate of basic pay for level V of the Executive Schedule.
       (2) Staff.--With the approval of the Commission, the 
     executive director may appoint such personnel as the 
     executive director considers appropriate.
       (3) Applicability of civil service laws.--The staff of the 
     Commission shall be appointed without regard to the 
     provisions of title 5, United States Code, governing 
     appointments in the competitive service, and shall be paid 
     without regard to the provisions of chapter 51 and subchapter 
     III of chapter 53 of such title (relating to classification 
     and General Schedule pay rates).
       (4) Experts and consultants.--With the approval of the 
     Commission, the executive director may procure temporary and 
     intermittent services under section 3109(b) of title 5, 
     United States Code.
       (5) Physical facilities.--The Administrator of the General 
     Services Administration shall locate suitable office space 
     for the operation of the Commission. The facilities shall 
     serve as the headquarters of the Commission and shall include 
     all necessary equipment and incidentals required for the 
     proper functioning of the Commission.
       (e) Powers of Commission.--
       (1) Hearings and other activities.--For the purpose of 
     carrying out its duties, the Commission may hold such 
     hearings and undertake such other activities as the 
     Commission determines to be necessary to carry out its 
     duties.
       (2) Studies by gao.--Upon the request of the Commission, 
     the Comptroller General shall conduct such studies or 
     investigations as the Commission determines to be necessary 
     to carry out its duties.
       (3) Cost estimates by congressional budget office and 
     office of the chief actuary of cms.--
       (A) The Director of the Congressional Budget Office or the 
     Chief Actuary of the Centers for Medicare & Medicaid 
     Services, or both, shall provide to the Commission, upon the 
     request of the Commission, such cost estimates as the 
     Commission determines to be necessary to carry out its 
     duties.
       (B) The Commission shall reimburse the Director of the 
     Congressional Budget Office for expenses relating to the 
     employment in the office of the Director of such additional 
     staff as may be necessary for the Director to comply with 
     requests by the Commission under subparagraph (A).
       (4) Detail of federal employees.--Upon the request of the 
     Commission, the head of any Federal agency is authorized to 
     detail, without reimbursement, any of the personnel of such 
     agency to the Commission to assist the Commission in carrying 
     out its duties. Any such detail shall not interrupt or 
     otherwise affect the civil service status or privileges of 
     the Federal employee.
       (5) Technical assistance.--Upon the request of the 
     Commission, the head of a Federal agency shall provide such 
     technical assistance to the Commission as the Commission 
     determines to be necessary to carry out its duties.
       (6) Use of mails.--The Commission may use the United States 
     mails in the same manner and under the same conditions as 
     Federal agencies and shall, for purposes of the frank, be 
     considered a commission of Congress as described in section 
     3215 of title 39, United States Code.
       (7) Obtaining information.--The Commission may secure 
     directly from any Federal agency information necessary to 
     enable it to carry out its duties, if the information may be 
     disclosed under section 552 of title 5, United States Code. 
     Upon request of the Chairman of the Commission, the head of 
     such agency shall furnish such information to the Commission.
       (8) Administrative support services.--Upon the request of 
     the Commission, the Administrator of General Services shall 
     provide to the Commission on a reimbursable basis such 
     administrative support services as the Commission may 
     request.
       (9) Printing.--For purposes of costs relating to printing 
     and binding, including the cost of personnel detailed from 
     the Government Printing Office, the Commission shall be 
     deemed to be a committee of the Congress.
       (f) Report.--Not later than March 1, 2004, the Commission 
     shall submit a report to the President and Congress which 
     shall contain a detailed statement of the recommendations, 
     findings, and conclusions of the Commission.
       (g) Termination.--The Commission shall terminate 30 days 
     after the date of submission of the report required in 
     subsection (f).
       (h) Authorization of Appropriations.--There are authorized 
     to be appropriated $1,500,000 to carry out this section.

     SEC. 902. DISPROPORTIONATE SHARE HOSPITAL (DSH) PAYMENTS.

       Section 1923(f)(3) (42 U.S.C. 1396r-4(f)(3)) is amended--
       (1) in subparagraph (A), by amending subparagraph (A) to 
     read as follows:
       ``(A) In general.--The DSH allotment for any State--
       ``(i) for fiscal year 2003 is equal to the DSH allotment 
     for the State for fiscal year 2001 under the table in 
     paragraph (2), without regard to paragraph (4), 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 fiscal year 
     2001; and
       ``(ii) for each succeeding fiscal year is equal to the DSH 
     allotment for the State for the previous fiscal year under 
     this subparagraph increased, subject to subparagraph (B) and 
     paragraph (5), by 1.7 percent or, in the case of fiscal years 
     beginning with the fiscal year specified in subparagraph (C) 
     for that State, the percentage change in the consumer price 
     index for all urban consumers (all items; U.S. city average), 
     for the previous fiscal year.''; and
       (2) by adding at the end the following new subparagraph:
       ``(C) Fiscal year specified.--For purposes of subparagraph 
     (A)(ii), the fiscal year specified in this subparagraph for a 
     State is the first fiscal year for which the Secretary 
     estimates that the DSH allotment for that State will equal 
     (or no longer exceed) the DSH allotment for that State under 
     the law as in effect before the date of the enactment of this 
     subparagraph.''.

     SEC. 903. MEDICAID PHARMACY ASSISTANCE PROGRAM.

       Title XIX is amended--
       (1) by redesignating section 1935 as section 1936; and
       (2) by inserting after section 1934 the following new 
     section:


                     ``pharmacy assistance program

       ``Sec. 1936. (a) In General.--A State plan under this title 
     may provide assistance, consistent with this section, to 
     pharmacies in implementing the new prescription drug benefit 
     under part D of title XVIII.
       ``(b) Use of Funds.--Such grants may be provided to assist 
     pharmacies--
       ``(1) in complying with requirements relating to electronic 
     prescribing;
       ``(2) in prospective drug utilization review; and
       ``(3) in developing innovative medication therapy 
     management programs using information technology.
       ``(c) Condition for Receipt.--A pharmacy is not eligible 
     for a grant under this section unless the pharmacy 
     demonstrates how it will operate a program that will work 
     effectively with patients to reduce adverse drug reactions 
     and medical errors. No grant shall be awarded under this 
     section before January 1, 2004.
       (d) Priorities.--In awarding grants under this section, a 
     State shall take into account and give priority to the needs 
     of small or rural pharmacies and to pharmacies which service 
     underserved areas.
       ``(e) Funding.--
       ``(1) Treatment as medical assistance.--Subject to 
     paragraph (2), amounts provided under grants by a State under 
     this section (and the reasonable administrative expenses of a 
     State in carrying out this section, not to exceed 10 percent 
     of the total amount awarded as grants by a State) shall be 
     treated as the provision of medical assistance for purposes 
     of section 1903. In applying section 1903(a)(1) with respect 
     to such assistance, the

[[Page 11953]]

     Federal medical assistance percentage is deemed to be 100 
     percent.
       ``(2) Limitation and allotment.--
       ``(A) Limitation.--The total amount for which Federal 
     financial participation is available under section 1903(a) 
     for grants and administrative expenses under this section in 
     calendar quarters in any fiscal year is limited to 
     $150,000,000 in each of fiscal years 2004 through 2007.
       ``(B) Allocation.--The Secretary shall provide a method for 
     the allocation of the amount of funds described in 
     subparagraph (A) in each fiscal year among the States. Such 
     method shall take into account the distribution among States 
     of priority pharmacies specified in subsection (d).
       ``(3) Requirement for application.--The preceding 
     provisions of this section shall only apply to a State if the 
     State has filed with the Secretary an amendment to its State 
     plan that provides for the awarding of grants under this 
     section that is consistent with the requirements of this 
     section.''.

  The SPEAKER pro tempore. The gentlewoman from Connecticut (Mrs. 
Johnson), the gentleman from California (Mr. Stark), the gentleman from 
Louisiana (Mr. Tauzin), and the gentleman from Michigan (Mr. Dingell) 
each will control 30 minutes of debate on the bill.
  The Chair recognizes the gentlewoman from Connecticut (Mrs. Johnson).
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I yield myself 3 minutes.
  Mr. Speaker, I rise in strong support of H.R. 4954 because it 
provides prescription drugs to all seniors as an entitlement under 
Medicare.
  Mr. Speaker, I am honored to bring this bill to the floor of this 
great House. Everywhere I go, seniors look at me with worry in their 
eyes, concern that they will not be able to buy the prescription drugs 
needed to get well, worry that they will not be able to afford the many 
prescriptions needed to enable them to enjoy their lives and keep on 
with their daily activities.
  Mr. Speaker, nothing is more important than assuring that our seniors 
have access to prescription drugs as part of Medicare, within Medicare 
as part of that entitlement to health services, because indeed, 
Medicare without prescription drugs is a mere shadow of the promise of 
health care security that Medicare has always represented to the 
seniors of our great country.
  Mr. Speaker, I am very proud that this bill provides the deepest 
discounts on drug prices that any bill has ever brought to this floor. 
It is a 30 percent discount, compared to every other plan that provides 
a 10 percent discount.
  On top of that 30 percent discount are powerful subsidies, 80 percent 
subsidies, up to $1,000 in drug costs, and \50/50\ after that. This is 
powerful help. For those living under 150 percent of poverty income, it 
will provide 100 percent of their drug cost needs up to $2,000. For 
over that, States will have freed-up resources to help those that 
cannot afford their prescriptions.
  This is a powerful benefit for our seniors right up through 
catastrophic coverage, which provides the peace of mind that they so 
deserve in their senior years.
  But that is not all this bill does. It goes on to provide better 
preventive care for our seniors and to provide those plans that are 
able to provide disease management, which is the only way that seniors 
with chronic illness are going to enjoy health in their elder years. 
Also, it reduces the cost of medication errors, provides safety for our 
seniors, compensates our providers more realistically, and in general, 
would strengthen our Medicare program.
  I am going to go into the details of the bill later, Mr. Speaker. I 
will reserve my time for a discussion of this powerful new expansion of 
Medicare to improve the lives of the seniors of our country.
  Mr. Speaker, I reserve the balance of my time.
  Mr. STARK. Mr. Speaker, I yield myself 1 minute.
  Mr. Speaker, I would explain, when one sells out to the insurance 
industry, we get the Republican bill. They free up any resources that 
go to the Hartford Insurance Companies.
  The truth is that the average senior in this country spends $3,059 on 
drugs. Under the Republican plan, they will have to spend $1,959 out of 
pocket to get that $3,000 worth of drugs. Under the bill that we would 
suggest, they would spend only $691.80.
  So Members can see that the Democratic plan, had we been allowed to 
offer it, is better. It does something for the seniors that the 
Republican bill does not do: it gives them the wherewithal to afford 
drugs. It gives them an entitlement that they are entitled to.
  The Republican bill is an entitlement for the pharmaceutical industry 
and the insurance industry. They are the only ones who get any money 
under the Republican bill. Under our alternative, the seniors are 
entitled.
  Mr. Speaker, I reserve the balance of my time.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I yield 3\1/2\ minutes to 
the gentleman from California (Mr. Thomas), the chairman of the 
Committee on Ways and Means and an expert on health policy and 
prescription drugs.
  Mr. THOMAS. Mr. Speaker, I thank the gentlewoman for yielding time to 
me.
  Mr. Speaker, at some point, somebody needs to talk about reality. 
What we have heard from the other side of the aisle is that they want 
to operate under democracy, that democracy does not operate here.
  There is a difference between democracy and chaos. Democracy means 
majority rules, but it also means rights of the minority. What are some 
of those rights? The rights are the minority gets to participate if 
they play by the rules. What are the rules? That under the budget, and 
they want democracy, under the budget they have the right to offer a 
plan which costs no more than the amount the budget provides: $350 
billion. What they presented was a plan that costs $974 billion.
  Guess what? They do not play by the rules; they do not get to offer 
their substitute. What they want to do is do whatever they want to do 
without following the rules. That is not democracy.
  Secondly, what I heard from the gentleman from Florida while we were 
arguing the rules was, our bill does not do a pay-back to the 
providers. What does that mean? They are going to spend $1 trillion, 
and they do not take any of it to address the fact that our physicians 
serving seniors have a payment system that is broken. Why is it broken? 
Because it is not automatic. If it were automatic, it would adjust to 
the market. Instead, it is an arbitrary, fixed price. But they do not 
even want to fix that in their bill.
  Now, we have also heard several times, the latest argument was that 
we are in the pocket of somebody; that Republicans can only write a 
bill if they are in the pocket of somebody. Oftentimes we have heard 
that we are in the pocket of the pharmaceutical manufacturers.
  Mr. Speaker, let me explain what is in this bill. The Democrats put 
into effect a payment called ``best price.'' Whenever someone says, we 
are going to give you the best price, you had better beware. What is 
``best price''? It is an arbitrary, bureaucratic, green eye shade 
determination of a floor of what we are going to pay.
  When the Democrats ran this place and when the Democrats wrote 
legislation, they put in best price. Do Members know what we suggest? 
In this bill, we get rid of best price. What in the world would we pay 
if we got rid of best price? Guess what.
  Do Members know that in that pocket of the pharmaceutical 
manufacturers that we are in there is going to be a whole lot more room 
for us, because the pharmaceutical manufacturers get taken out of their 
bottom line $18 billion in this bill. They are denied $18 billion by 
going from best price.
  They have to help us solve this problem by the tune of $18 billion, 
because instead of best price, guess what we ask them to do? We ask 
them to compete. We have all kinds of laws to produce pure drugs. Who 
will give it to us at the cheapest price? A modest competition produces 
a savings of $18 billion applied to the benefits to seniors paid for by 
pharmaceutical manufacturers.
  They have nothing in their bill. They have rhetoric. They have hot 
air. We have $18 billion paid out of the pockets of the pharmaceutical 
manufacturers to help seniors.
  Mr. STARK. Mr. Speaker, I yield myself such time as I may consume.

[[Page 11954]]

  Mr. Speaker, I would remind the distinguished chair of the Committee 
on Ways and Means that I suggested that the Republicans were in the 
pocket of the insurance companies, and I was about to say that when 
they go to bed with the pharmaceutical industry, they get a bill like 
this.
  Mr. Speaker, I yield 2\1/2\ minutes to the gentleman from Michigan 
(Mr. Levin).
  Mr. LEVIN. Mr. Speaker, I say to the gentleman from California (Mr. 
Thomas), democracy means give the minority a substitute bill, period. 
That is what it means. Under the rules? Look, we go by the American 
rules, not the rules of the gentleman from California (Mr. Thomas).
  It is a disgrace that they do not give us the chance for a 
substitute. They did it on the trade bill, a motion to recommit. Now 
they are doing it on this.
  Mr. Speaker, we will never yield to the gentleman's demeaning 
democracy. The gentlewoman from Connecticut (Mrs. Johnson) talks about 
``this great House.'' I want to talk substance, that she is demeaning 
this great House. She is changing this from the people's House to 
something else.
  Mr. Speaker, this bill is a shell. It is worse than empty in the 
sense that it is filled with deceptions. Ten words: no set premiums, no 
assured benefits, and use private insurance.
  The gentlewoman from Connecticut (Mrs. Johnson) said, let us not get 
into the details. I can understand why. She likes to say that 44 
percent of women will be covered without cost. What she does not say is 
that those women are especially vulnerable to paying more than $2,000 
bucks; and after that, they fall into a deep hole of noncoverage.
  This bill is not part of Medicare like hospital and physician bills, 
and we say, why not? They just do not like Medicare.

                              {time}  2300

  Now, the gentleman from California (Mr. Thomas) does not like us to 
talk about Medicare+Choice. I can understand. That has not worked. 
Under Medicare+Choice if there is not enough money then you have to 
come to Congress. Under your bill if there is not enough money, I would 
call this no prescription choice, except you can run to the Secretary 
to get some more money.
  This bill, as I said, is worse than an empty shell; and what makes it 
worse is you are playing the shell game with democracy.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I yield 2 minutes and 15 
seconds to the gentleman from Illinois (Mr. Crane).
  Mr. CRANE. Mr. Speaker, I rise in strong support of H.R. 4954, the 
Medicare Modernization and Prescription Drug Act.
  When it comes to Medicare, Congress must consistently balance 
accessibility of services from qualified providers, cost and financial 
stability of the Medicare program. This legislation does just that.
  H.R. 4954 provides a long-overdue prescription drug benefit that is 
voluntary and available to all Medicare beneficiaries in a fiscally 
responsible way. Our House-passed budget provides for $350 billion for 
a Medicare prescription drug benefit and modernizations to the program.
  According to CBO estimates our proposed drug benefit is estimated to 
cost $310 billion over 10 years and also achieves a 30 percent savings 
on drug costs. It is projected that in 2004 the median out-of-pocket 
drug costs for Medicare beneficiaries will be $1,453. Under our 
proposal, $827 of that, more than 50 percent, of the beneficiary's drug 
expenditures will be covered.
  The Medicare Modernization and Prescription Drug Act also provides a 
number of reasonable and necessary adjustments to provider payments. 
Most importantly, this legislation includes $21.3 billion for 
physicians to reverse the negative and irrational payment updates they 
received this year and are expected to receive next year.
  The physician payment provision helps us to ensure that physicians 
will continue to participate in the Medicare program and provide 
quality health service to beneficiaries. If we do not ensure that 
providers are adequately reimbursed, all the new benefits that we have 
passed and will pass for Medicare beneficiaries will be for naught 
because providers will close their doors to beneficiaries.
  My colleagues on the other side of the aisle argue that this 
legislation is an empty promise to seniors. I cannot disagree more. 
This package provides a prescription drug benefit that covers more than 
95 percent of Medicare beneficiaries and helps to improve access to 
quality health care services.
  Let us give our seniors access to quality health services that they 
deserve. Let us pass a meaningful prescription drug benefit that is 
voluntary and available to all Medicare beneficiaries. Let us make sure 
that our seniors have a choice in Medicare. Let us not play politics 
with America's seniors.
  I urge my colleagues to support the Medicare Modernization and 
Prescription Drug Act.
  Mr. STARK. Mr. Speaker, I yield 2 minutes to the distinguished 
gentleman from Maryland (Mr. Cardin).
  Mr. CARDIN. Mr. Speaker, let me thank the gentleman from California 
(Mr. Stark) for yielding me time.
  Mr. Speaker, this bill is fundamentally flawed. It does not use the 
Medicare model for providing benefits; and with Medicare, when we 
provide benefits for physicians or hospitals, our seniors are 
guaranteed those benefits. In this bill for prescription drugs, they 
are guaranteed nothing.
  It reminds me of what we told our seniors with HMOs. Join HMOs and 
you will get prescription drug coverage. What happened as soon as they 
joined? The deductible, the co-pays went up, and the amount of coverage 
went down.
  There is no protection in this bill on premiums like under Medicare. 
In Medicare, our seniors know that their Part B premium is tied to 25 
percent of the cost. They know how much it will be. There is no 
protection in this bill as to what the premium will be set at or how 
much it will increase. No protections to our seniors.
  In Medicare, we know that there will be a reimbursement system in our 
communities. You can always rely on Medicare. The underlying bill 
relies on private insurance. Mr. Speaker, there is no protection in 
this bill for those private insurance companies leaving our community.
  Look what happened with the HMOs. They enrolled seniors. They brought 
them in, and then they left town.
  Ask the people in Maryland. In 1996, we had eight HMOs writing 
seniors business, private insurance. Today, we have one with a capped 
enrollment. The private insurance companies will be there as long as 
they can make money; and as soon as they cannot make money, they will 
be gone.
  There is no protection in this bill to provide prescription drugs to 
our seniors. It is fundamentally flawed, and we should correct it. We 
will have an opportunity to do it with the motion to recommit.
  I urge my colleagues, if we are serious about providing prescription 
drug coverage for seniors, let us use the model that has worked. Let us 
use the Medicare model. Let us not use private insurance, solely 
private insurance. It has not worked in the past, and it will not work 
under this bill.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I yield 2 minutes to the 
gentleman from Louisiana (Mr. McCrery), an esteemed member of the 
Subcommittee on Health of the Committee on Ways and Means.
  Mr. McCRERY. Mr. Speaker, I thank the gentlewoman for yielding me 
time.
  Mr. Speaker, to those who say the benefit in this bill is not rich 
enough, Mr. Speaker, I would ask them to remember that Medicare 
spending, despite the bipartisan Balanced Budget Act of 1997, is still 
growing at an unsustainable rate. As a share of our gross domestic 
product, Medicare has grown from 1.3 percent in 1980 to more than 2.2 
percent today and will hit 5 percent by the year 2030. By 2075, 
Medicare will be just under 10 percent of our gross domestic product.
  10 percent of GDP may not seem like much until you consider that over 
the last four decades Federal tax revenues have averaged between 18 and 
19 percent of GDP. In other words, Mr. Speaker, under current 
projections, unless the Federal tax burden is raised to

[[Page 11955]]

new and potentially economically destructive levels, Medicare, together 
with Social Security and Medicaid, will quickly crowd out spending on 
other important initiatives, including defense, homeland security, 
education, transportation and others.
  These long-term trends will only be exacerbated by the addition of a 
prescription drug benefit which is not coupled with meaningful 
structural reform of the Medicare program.
  I am pleased, therefore, that the legislation before us this evening 
includes the first steps towards the long-term structural reforms 
needed to bend the growth curve. Just as it would be irresponsible for 
the Congress, Mr. Speaker, not to try to help seniors with the cost of 
prescription drugs, it would be irresponsible to add a prescription 
drug benefit to Medicare without tackling these long-term trends in the 
growth of Medicare spending.
  I hope, Mr. Speaker, that next year we will come back here on this 
floor and continue the kind of reforms that we started in this bill 
tonight so that those who are under 65 in our society will not be 
burdened with a tax that just cannot be sustained and continue the kind 
of society, the kind of economy that we enjoy in this country.
  Mr. Speaker, I urge my colleagues to adopt this bill along with the 
minor reforms that we have this evening.
  Mr. STARK. Mr. Speaker, pending recognizing the gentleman from 
Washington (Mr. McDermott) for 2 minutes, I would just like to remind 
the Members that the gentleman from Louisiana (Mr. McCrery) recalls 
that it was the gentlewoman from Connecticut (Mrs. Johnson) who voted 
in committee not to increase money for nursing homes. She voted against 
eliminating co-pays for home health care. She voted against limiting 
the premiums to seniors, and she voted against giving seniors a choice 
of going to any pharmacy. So much for her concern for the seniors.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I assume my colleague was 
speaking on his own time.
  The SPEAKER pro tempore (Mr. Thornberry). The gentlewoman is correct. 
The gentleman was speaking on his time.
  Mr. STARK. Mr. Speaker, I yield 2 minutes to the gentleman from 
Washington (Mr. McDermott).
  Mr. McDERMOTT. Mr. Speaker, this is a bad bill because there is no 
assured benefits and there is no set premiums because the Republicans 
are privatizing Medicare. They are giving this whole benefit to the 
private insurance companies.
  Now you have to remember that the chairman of the committee chaired 
the Medicare Commission and spent an entire year trying to get a 
voucher system for senior citizens in Medicare. This is his second try. 
Buried in this bill is the creation of a new private benefit management 
company or management authority that will handle the HMOs and will 
handle the private drug plans.
  Now you think I am making this up, but if you take the bill, and I 
will bet you there is not a person on this floor that has read page 
157, line 16, which prevents the Secretary of HHS from ``interfering in 
any way with the negotiations between the private drug plans and the 
Medicare+Choice organizations and drug manufacturers.''
  Now what this is saying is that the Secretary of Health and Human 
Services, whoever that may be, has no ability to stand up for the 
people of this country, the senior citizens, the 40 million people that 
count on this program, and negotiate for them. She has to stand back 
and let the private drug programs and the pharmaceutical companies 
negotiate.
  Now, we all saw what happened with Medicare+Choice. Hundreds of 
thousands of people were lured into HMOs and then were dumped out in 
the street; 500,000 in my State; and I do not know how many across this 
country. And you say, well, we did not learn anything from that. We 
know the private industry will take care of them. So let us give them 
the drug benefit. You are going to get the same thing, and it is 
rotten.
  Everyone should vote ``no'' and vote ``yes'' on the Democratic 
alternative.
  Mr. STARK. Mr. Speaker, I yield myself 15 seconds to remind the 
Members that both the gentlewoman from Connecticut (Mrs. Johnson) and 
the gentleman from Florida (Mr. Shaw) voted against increasing payments 
to hospitals, voting against filling the Republican gap in the drug 
coverage, and voted against requiring drug companies to offer real 
discounts. So much that they care for the senior citizens of this 
country.
  Mr. Speaker, I yield 2 minutes to the gentleman from Wisconsin (Mr. 
Kleczka).
  Mr. KLECZKA. Mr. Speaker, we are told by my Republican colleagues 
that this is a powerful benefit, that this is an historic opportunity. 
Well, nothing could be further from the truth. For you see, Mr. 
Speaker, 2 years ago to the day an identical bill passed this House of 
Representatives. And why did it pass 2 years ago at this time and why 
is this bill on the floor here today? Because 4 months from now we will 
have the November congressional elections.
  And you see, the American public wants a drug benefit. And they do 
not want to give one, but they keep bringing up this fig leaf 4 months, 
every 2 years before the Congressional elections.
  But what is their bill all about? This is not a Medicare benefit like 
hospitals and physicians. This is a subsidy to insurance companies. We 
were told 2 years ago when this same bill was up that no insurance 
companies are going to sell these policies. For everyone who buys a 
policy will have a claim against the policy, and it is going to be 
identical to the failed experiment that the gentleman from California 
(Mr. Thomas) called Medicare Choice.
  Two million people have been canceled by insurance companies from 
that plan, and the same is going to happen here. But for a senior with 
drug costs of $3,800 a year, the Republican plan will give them almost 
nothing. After they are charged a premium, a deductible, they pay $150 
for the first $1,000 of costs. They pay one-half or $500 for the next 
thousand. Then they have no coverage at all for any and all drug costs 
from $2,000 to $3,800. So for $3,800 in drug costs per year the senior 
gets $3,100 of extra payments out of the pocket. The benefit is $655.
  Is that what they want to give their mothers and their aging fathers? 
They should be ashamed of themselves.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I yield 1 minute to the 
gentleman from Iowa (Mr. Nussle).
  Mr. NUSSLE. Mr. Speaker, I rise in support of H.R. 4954, the Medicare 
Modernization Prescription Drug Act. It is a good bill. It fits within 
a budget. It fits within a budget plan. We have got a budget. We have 
got a plan. It meets the needs of seniors. It meets the needs of health 
care providers. It meets the needs for the future.
  In 1965, Medicare should have included a prescription drug benefit.

                              {time}  2315

  For many years after 1965, Democrats had the opportunity to propose 
legislation for a prescription drug benefit. In fact as early as 1993, 
they controlled the House, the other body and the House down the road 
here, and did not do a thing for seniors on prescription drugs; and now 
tonight they rush in, claim that we will not let them have the 
substitute when in fact their substitute costs almost a trillion 
dollars; and that is the reason they cannot have it, because it does 
not fit within a budget, and it does not fit within a plan.
  Mr. Speaker, just 3 hours ago they were screaming that we had to 
raise the debt ceiling because we were spending too much. Tonight they 
are claiming we are not spending enough. Vote for this bill.
  I rise in support of H.R. 4954, the Medicare Modernization and 
Prescription Drug act of 2002. I'd like to congratulate the Committees 
on Ways and Means and Energy and Commerce for producing a bill that 
provides a much-needed Medicare prescription drug benefit within a 
fiscally responsible framework.
  No senior should be forced to choose between the basic necessities of 
life and purchasing prescription drugs. This bill provides prescription 
drug coverage that is affordable, accessible, and completely voluntary.

[[Page 11956]]

  Because the Medicare program has not been significantly modernized 
since its inception in 1965 to include a prescription drug benefit, it 
is not meeting the needs of Iowa seniors.
  While the drug benefit is indeed important, Iowans recognize that the 
critical inequities in today's current Medicare program must also be 
addressed. While Iowa boasts the 8th highest quality of heathcare in 
the Nation, it is 50th in Medicare reimbursement.
  Actions that affect Medicare affect Iowa's entire health care system. 
If health care providers leave rural areas, who will write 
prescriptions under the new drug benefit? Who will provide the care 
that cannot be provided by drugs alone? If local hospitals close, where 
will we take our children for emergency care?
  Many of these problems have compounded since 1965, but rural health 
care, particularly in Iowa, is on the verge of a crisis. This bill 
offers significant progress toward bridging the gap between urban 
providers and those in rural States such as Iowa.
  As a member of the House Committee on Ways and Means, I successfully 
amended this important legislation with Medicare's antiquated 
reimbursement policies in the current system in mind. My amendment is 
directed at the hospitals that need help the most, especially those in 
Iowa. It has been estimated that my amendment will provide $123 million 
over the years in much-needed relief for Iowa hospitals such as 
Covenant in Waterloo, Mercy in Dubuque, and Regional Medical Center in 
my hometown of Manchester.
  I am also pleased that this legislation includes an important 
provision recognizing the unique cost of physician work in rural areas. 
This provision would give the Secretary of Health and Human Services 
discretion to raise the minimum level of physician wages providing an 
increase of roughly $7 million to physicians in Iowa.
  After years of working to correct these inequities, I'm glad to see 
that the House of Representatives is following my lead in addressing 
these disparities in the current system. While this legislation is an 
important step forward, I will not stop working on this important 
issue.
  Today we are adding an unquestionably important prescription drug 
benefit to Medicare as well as beginning to reverse the years of unjust 
reimbursement formulas that have burdened Iowa's hospitals and 
physicians. We have listened to both seniors and health care 
professionals.
  The budgetary parameters for this bill were established in the 
Concurrent Resolution on the budget for Fiscal Year 2003 (H. Con. Res 
353), the budget resolution that the House passed in March and then 
deemed enforceable in the House last month.
  That budget made modernizing Medicare with, among other things, a 
prescription drug benefit and reforming Medicare among the highest 
priorities for the Congress--along with fighting the war on terrorism 
and encouraging economic recovery.
  The budget provides $5 billion in fiscal year 2003 and $350 billion 
over 10 years to strengthen Medicare and include a prescription drug 
benefit. That money was specifically fenced off from the rest of a 
budget in a reserve fund.
  This bill meets the requirements in the budget resolution and 
therefore I am releasing amounts in the reserve fund provided in the 
budget resolution to enable the House to consider the bill.
  Some have said that $350 billion is inadequate. The bottom line is 
that we made the maximum amount available for Medicare, given the state 
of the economy and the costs we face in the war against terrorism.
  Indeed, the bill provides almost twice the resources for Medicare 
reform as the President proposed in his budget for fiscal year 2003. 
Unfortunately, critics of the bill failed to offer an alternative when 
the budget resolution was considered on the floor. And the other body 
has yet to even consider a budget resolution, despite the fact that 
they are required by law to do so by April 15.
  As modified by the rule, this bill is ``on budget'' and within the 
reserve fund level of $350 billion over 10 years. About $310 billion of 
the total is for the drug benefit, around $40 billion of additional 
assistance is provided to struggling medicare providers, and the rest 
is for various miscellaneous but important provisions such as 
regulatory reform.
  The modernization provisions in the bill include a Medicare+Choice 
competition program, regulatory reform, and the President's 
prescription drug discount card.
  I believe that modernization efforts like the Medicare Plus Choice 
competition program are necessary to help address Medicare's long-term 
financial liabilities. I would encourage future conferees on this bill 
to make further reforms to address Medicare's financial liabilities, 
should the other body act on this legislation and allow us to have a 
conference.
  In conclusion, this bill fulfills our commitment to enact a 
prescription drug benefit within Medicare that is affordable, and that 
is part of the overall effort to reform Medicare to make the program 
sustainable over the long term.
  Mr. STARK. Mr. Speaker, I yield 2 minutes to the gentleman from 
Tennessee (Mr. Tanner), who realizes that the National Community 
Pharmacists Association states that the Republican bill penalizes 
beneficiaries desiring to continue their trusted relationship with 
their pharmacists and access to valuable pharmacist services.
  Mr. TANNER. Mr. Speaker, I thank the gentleman from California (Mr. 
Stark) for yielding me this time.
  Mr. Speaker, my problem with the bill that is under consideration 
tonight is in the theory behind it. My family has been in the insurance 
business in Tennessee for over a hundred years, and the reason we have 
Medicare in this country is because in the private world of insurance, 
there is no way that a senior citizen 80 years old with heart trouble 
and diabetes can buy health insurance. That is why Medicare came into 
being. They still could not buy it if we did not have Medicare. So what 
we are trying to do here is put a square peg in a round hole in that 
this bill tries to make an insurable product out of a benefit for which 
there is no risk pool for the concept, the theory of insurance to work.
  Insurance does not work when every policyholder is also making a 
claim against their policy. By the very inception of this kind of 
protocol, every policyholder will be making a claim. It is simply not 
an insurable product. What we are going to wind up with, I am afraid, 
and we will be back here in a year if this passes and passes the 
Senate, is we are going to have a patchwork across the country of 
differing coverages, differing plans, differing copays, differing 
premiums, differing in every respect. Nobody will know for sure what 
they have got.
  What is one to do? One will figure what one's drug payment is a year; 
and if it is less than what they would get if there is a plan offered 
and knowing they cannot go to their neighborhood pharmacy even if the 
pharmacy is willing to abide by the plan, if their drug benefit is more 
than what they are spending, they will take it. If it is less than 
that, they will not. So everybody that the insurance company signed up 
will be making a claim and will be getting more than their premium 
copayments. The whole structure of this thing is flawed, and that is 
why I cannot support it.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I yield 2 minutes to the 
gentlewoman from Washington (Ms. Dunn), a member of the Committee on 
Ways and Means.
  Ms. DUNN. Mr. Speaker, one of the most important values to all 
seniors is that they be financially independent in their retirement, 
and that means they do not want to be a burden on their children and 
that means access to affordable health care. The high cost of 
prescription drugs and the lack of prescription drug coverage has 
caused many seniors, and especially senior women, to be very worried 
about their independence.
  I was sorry to have witnessed early this evening my women colleagues 
in the opposition claiming that older women will not be helped by this 
bill because I have seen how older women are being forced to make tough 
decisions about whether to spend their limited dollars on necessary 
prescription drugs or other of life's necessities. Our mothers and 
grandmothers are outliving our fathers and our grandfathers. They are 
living on fewer dollars for more years, and they are far more likely to 
develop chronic medical conditions.
  This bill does benefit women. This bill helps seniors on fixed 
incomes and those with high drug costs. A woman living on an income of 
less than $15,000 a year will receive total assistance from this 
Federal Government Medicare program for prescription drugs. While all 
seniors will benefit because any senior can opt to buy this coverage, 
nearly 17 million or 44 percent of Medicare beneficiaries will qualify 
for additional assistance when this bill is fully implemented.

[[Page 11957]]

  Perhaps the most important part of this bill, Mr. Speaker, is the 
fact that no senior under this coverage will ever have to pay more than 
$3,700 a year for their total of drugs. Improving Medicare, though, is 
not only about providing drug benefits. It is about giving seniors 
access to doctors and hospitals and Medicare HMOs and other services 
they need. So we put some additional benefits in this bill to ensure 
that doctors will continue to serve seniors. We increase the 
reimbursements those doctors receive. We also help rural, urban, and 
teaching hospitals care for seniors and low-income individuals.
  For Medicare HMOs this bill requires Medicare to account for military 
retirees in the future, which means higher Medicare+Choice 
reimbursements in every county in this country with military 
facilities.
  I urge my colleagues to support this fine bill.
  Mr. STARK. Mr. Speaker, I yield 15 seconds to the gentlewoman from 
Florida (Mrs. Thurman).
  Mrs. THURMAN. Mr. Speaker, I thank the gentleman from California (Mr. 
Stark) for yielding me this time.
  I want to point out something here that continues to be talked about 
in the low-income seniors being given total prescription drugs. The 
problem is in the bill that we are talking about, it does not waive the 
asset test that beneficiaries would have to meet in order to get their 
benefits. So in fact the number of people who would qualify for the 
low-income benefit would actually be much less.
  Mr. STARK. Mr. Speaker, I yield 1 minute to the gentleman from 
Pennsylvania (Mr. Holden).
  Mr. HOLDEN. Mr. Speaker, I rise in opposition to the bill. Those of 
us from rural districts and those of us from central and northeastern 
Pennsylvania know that the idea that we are going to turn over the 
administration of a prescription drug program for our senior citizens 
to the insurance industry, to the HMOs, and have it be fair and 
universal is ridiculous. In fact it is a joke.
  Number one, the insurance industry wants no part of it. As the 
gentleman from Tennessee (Mr. Tanner) mentioned before, why would they 
when every policyholder is also going to file a claim? They are going 
to lose their shirt in this proposal. Medicare+Choice has failed across 
the country, but it has failed miserably in rural America. My 
constituents had to look at commercials coming out of the Philadelphia 
media market, Cadillac plan for prescription drug coverage and low 
premiums, and they were not able to participate. The reason they were 
not able to participate is because they had lower participation and 
lower reimbursement from Medicare.
  As a result of it, we did not have universal coverage as 
Medicare+Choice. We cannot make the same mistake. We need to have a 
divine benefit. We need to have a divine premium, and we need to have 
universal coverage for all our senior citizens.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I yield myself 20 seconds. 
I want to make a correction of the record.
  Over and over again my colleagues say we do not have a defined 
benefit. We have a very clearly defined benefit. Do we have a defined 
premium? Of course not. The part B premium is not defined. That is a 
percentage of costs and it varies every year. Federal health employee 
benefit plans do not define the premium in law. It varies every year.
  In our plan we do not want to set the premium in law because if we 
can provide a more efficient plan, we want to be able to pass on that 
savings through a lower premium to seniors. We are proud of our core 
benefit.
  Mr. Speaker, I yield 2 minutes to the gentleman from Ohio (Mr. 
Portman).
  Mr. PORTMAN. Mr. Speaker, I thank the chairwoman for yielding me the 
time. I am glad that she was able to correct the record on a few 
misstatements that have been made this evening.
  I would like to correct the record again. My friend from Pennsylvania 
just stood up and talked about Medicare+Choice and how this is the 
same. It is not. In fact, in this bill, we are helping to make 
Medicare+Choice work. Just because we have choked off the funding to 
Medicare+Choice so it does not work for our seniors, including a bunch 
of mine, who were not getting the right reimbursement has nothing to do 
with this plan. This is an entirely different plan, but it does help on 
Medicare+Choice, and I hope people are happy to hear that who are so 
concerned about it.
  This is a great plan. This is exactly what our seniors need. One 
would never design the Medicare program today without adding 
prescription drugs. The other side wants to add $1 trillion of 
prescription drugs. After just voting not to raise the debt limit they 
want to add another $1 trillion.
  We are doing this within $350 billion, which is responsible, which 
is, unlike what my friend from Wisconsin said earlier, a lot different 
than the bill 2 years ago. It is more money, yes, because we believe it 
is necessary to be able to provide seniors with the coverage they need.
  CBO has scored this. CBO has said that this will lower prescription 
drug prices more than any other bill that has been introduced in this 
House that has been scored by CBO. Our bill lowers drug prices more. 
There is a discount for all seniors. In fact, for the average senior 
there will be a 44 percent reduction in the drug costs. Average drug 
costs $2,150, they only pay $1,200 out of pocket. That is a savings of 
44 percent.
  There is another 44 percent number we ought to hear about tonight and 
that is for low-income seniors, which is 44 percent of seniors. They 
will pay no deductible. They will pay no percentage, 20 percent or 50 
percent. They only have a nominal copay. They get this for free. That 
is 44 percent of the seniors. The very people the other side has said 
tonight repeatedly they are worried about, that they are not going to 
get a benefit, they get a total benefit.
  This is precisely the kind of plan that the Republican Party has been 
talking about for the last couple of years, but it is even better than 
the one from 2 years ago. It meets the principles. It lowers the cost 
of prescription drugs and does that now. It guarantees all seniors drug 
coverage. It gives seniors more choices including Medicare+Choice.
  It is a good plan. It is affordable. It is voluntary. It preserves 
the right to choose. I strongly urge its adoption.
  Mr. STARK. Mr. Speaker, I yield 2 minutes to the distinguished 
gentleman from North Dakota (Mr. Pomeroy), pending which I would point 
out to my distinguished colleagues that the gentlewoman from 
Connecticut (Mrs. Johnson) and the gentleman from Florida (Mr. Shaw) 
both voted against protecting low-income seniors from higher copayments 
and the gaping gap in the Republican plan. So much they care for the 
senior citizens.
  Mr. POMEROY. Mr. Speaker, I thank the gentleman for yielding me the 
time.
  At the heart of what this debate is all about is a clear choice, 
whether we should provide a prescription drug benefit for seniors 
through the Medicare program or whether we should send money to 
insurance companies to induce them to provide a coverage that at the 
present time they have said they do not want to write, prescription 
drug coverage for seniors.
  I used to be an insurance commissioner. For 8 years it was my 
responsibility to protect the seniors from insurance companies in the 
State of North Dakota. There has not been a Member of this body that 
spent more time talking to seniors about insurance than me, and 
directions that I have received from seniors on this issue are 
absolutely consistent and absolutely clear. They want Medicare coverage 
for prescription drugs.
  Not a single senior has said to me, please, I want to go buy another 
insurance policy; please send me more agents, I want to hear what they 
have to say; please give me that fine print, it is fascinating and I 
want to read some more of it; and by the way, I want to deal with 
insurance companies because I so enjoy wondering whether they are going 
to pay that claim or whether they will not; I so enjoy wondering 
whether they are going to be there when I need them or whether they 
will be gone and out of business.

[[Page 11958]]

  No senior has said that. It is ludicrous on its face. They know 
Medicare. Medicare covers their hospital bills. Medicare covers their 
doctor bills. Medicare has been the program that has been so vital to 
preserving and promoting the health of seniors in this country for the 
last nearly 4 decades. We do not have to invent some new hocus pocus 
private sector, gosh-I-hope-it-works kind of deal. We have got Medicare 
and the seniors know it and they like it; and they would have preferred 
that plan tonight, which is why we were not allowed our substitute to 
have a Medicare delivery of a prescription drug benefit as opposed to 
the alternative the majority has advanced.
  Nobody wants prescription drug coverage for seniors more than the 
minority in this body, and they will be opposing this version because 
it simply will not work. It does not get the job done. Vote it ``no.''
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I yield myself 10 seconds.
  Under Medicare we have part A. We have part B. We have part C, and 
this will be part D under Medicare, providing prescription drugs to 
seniors to any plan sponsor, and plan sponsors may be a group of any 
sort, preferably companies skilled and experienced in managing drug 
benefits.
  Mr. Speaker, I yield 1 minute to the gentleman from Michigan (Mr. 
Camp).
  Mr. CAMP. Mr. Speaker, today we have the opportunity to help seniors 
improve their quality of life by providing a prescription drug benefit 
in Medicare. On a daily basis it is reported that the cost of cutting-
edge, life-saving medicines have skyrocketed, forcing those on fixed 
incomes to make difficult choices.
  One constituent in my district had drug costs of over $15,000 a year 
for him and his wife, and their Social Security check was $21,000 a 
year, and there are countless other heartbreaking stories just like 
that one.

                              {time}  2330

  These seniors have worked hard all their lives to provide for their 
families, but now they can barely make ends meet.
  We can all agree if Medicare were created today it would contain a 
prescription drug component. In Michigan alone, this bill would benefit 
over 1.2 million seniors. This proposal provides affordable coverage 
for every senior without gimmicks, without sunsets, without pie-in-the-
sky proposals that cost over $1 trillion.
  Regrettably, some have sought to politicize this issue and hold other 
seniors and the disabled hostage to a cruel game of brinksmanship. We 
must strengthen and modernize Medicare. Vote for this bill.
  Mr. STARK. Mr. Speaker, I yield myself 15 seconds to point out that 
every Republican, including the gentlewoman from Connecticut (Mrs. 
Johnson) and the gentleman from Florida (Mr. Shaw), voted against 
assuring seniors that they could get the drugs that their doctor 
prescribes, because there is nothing in the Republican bill that 
guaranties the drugs that a doctor might prescribe.
  Mr. Speaker, I yield 2 minutes to the gentleman from California (Mr. 
Becerra).
  Mr. BECERRA. Mr. Speaker, I thank the gentleman for yielding me this 
time.
  Mr. Speaker, my colleagues on the Republican side have never truly 
embraced Medicare. They opposed it in 1965, they have talked about 
letting it die on the vine, and they have described it as a Soviet-
style program. In fact, what we have in this bill from my Republican 
colleagues and friends is a bill that moves us much closer to 
privatizing Medicare all together.
  To privatize Medicare is to ignore the lessons of the Enron scandal 
and the pension abuse that occurred as a result. To privatize Medicare 
is to turn back the clock to those bad old days before 1965 when the 
health care for our seniors was not guaranteed and left to the private 
sector.
  Under this Republican plan, a senior who is paying $250 a month in 
prescription drugs, and that is a lot of our seniors, would lose 
coverage, total coverage under this plan after August. So that, come 
September, come October, come November, come December, that senior 
would have to, out of his or her own pocket, pay for the remaining cost 
of all those drugs.
  Under this plan, a senior who has $5,000 in annual prescription drug 
costs, and there are a lot of them who do, would have to pay $4,200 
out-of-pocket out of that $5,000 cost. Compare that to the Democratic 
plan, where the total cost to that senior for the $5,000 would be 
$1,380, a savings of $2,800 between the Republican plan and the 
Democratic plan.
  Those are the facts, and that is the difference. But we do not have a 
chance to put our Democratic plan for a vote here. Mr. Speaker, today, 
today as we speak, seniors are having to make a choice, do I buy my 
groceries, or do I buy my prescription drugs? Do I pay my rent, or do I 
buy the medication I need? We should not have them make that choice.
  Give seniors what they want. They want an affordable and guaranteed 
benefit. The Democratic plan does that; the Republican plan does not. 
Let us defeat this plan.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I yield myself such time as 
I may consume to note that it is curious the gentleman from California 
keeps citing the votes that we cast against his unfunded amendments, 
the unfunded amendments from the other side, when he is about to cast a 
vote against funding 43 percent of the seniors in California with 
everything, drug costs, copayments, deductibles, premiums, the whole 
business, 43 percent, and saving California $5 billion under Medicaid 
with which they can then expand drug benefits for many other folks in 
their State. Too bad.
  Mr. Speaker, I yield 2 minutes to the gentleman from Pennsylvania 
(Mr. English).
  Mr. ENGLISH. Mr. Speaker, as a member of the Subcommittee on Health 
of the Committee on Ways and Means, I particularly want to pay tribute 
to the gentlewoman from Connecticut (Mrs. Johnson), who has been on the 
receiving end of many barbs tonight. The fact is that no one has fought 
harder to bring a prescription drug benefit to the Medicare program; 
and if we are successful in that, she, perhaps more than any other 
Member of this body, will deserve substantial credit.
  I am here tonight because I represent a district which consists of 
working families for whom the abstractions of this debate do not mean 
much but who desperately need help on their prescriptions. This program 
that is being proposed in this landmark legislation would give them a 
flexible and affordable benefit, one that would be voluntary, a program 
that would give them real choices, allowing them to customize their 
benefits. It would provide a benefit that would be very substantial, 
more generous in fact than the one that had been previously proposed by 
the Clinton administration that folks on the other side of the aisle 
once embraced.
  This is a program that represents a $350 billion investment in the 
Medicare program and one that would provide substantial benefits to 
seniors that would be available for a premium of about $1 a day. At the 
same time, for those seniors, including many in my district who cannot 
afford that premium, this program would provide full coverage for low-
income seniors.
  What is particularly striking about this legislation is that it 
establishes a firm ceiling, a limit, catastrophic coverage for people 
who participate in this program, an ultimate limit on the amount of 
prescription drugs they would be liable for in a given year, a limit of 
$3,700. That is extraordinarily generous, and it positions people who 
participate in this program to be able to have affordable drugs when 
they need it.
  The 30 percent discount that is built into this program has been much 
mentioned. Let me say it also allows CMS to negotiate with the drug 
companies to get the best possible discount and to sharpen their 
pencils.
  This is a great program, and I hope the House will pass it tonight.
  Mr. STARK. Mr. Speaker, I recognize the gentlewoman from Florida 
(Mrs. Thurman) for 15 seconds.

[[Page 11959]]


  Mrs. THURMAN. Mr. Speaker, we keep hearing this 30 percent. Actually, 
there has been a letter dated by the CBO on July 26 that says that they 
are confused, that there has been some confusion about the meaning of 
the 30 percent cost management factor that CBO applied in analyzing 
H.R. 4954. It goes on to say, the savings are stated as a proportion of 
total spending and do not represent a per-prescription discount.
  Mr. STARK. Mr. Speaker, I am privileged to yield 2 minutes to the 
gentleman from Arkansas (Mr. Ross), who understands why the National 
Association of Chain Drug Stores and the National Retail Federation and 
other pharmacy groups have said they consider a vote for the Republican 
bill to be a vote against the professional pharmacy and pharmacists.
  Mr. ROSS. Mr. Speaker, I do rise in opposition, strong opposition, to 
this bill.
  Just a few months ago, I was in Glenwood, Arkansas, a small town in 
my district, and ran into an elderly woman who is a retired pharmacist 
and who just happened to be a relief pharmacist in my hometown when I 
was a small child growing up.
  She related the story to me about how when I was a child and she was 
a pharmacist, if she had a prescription that cost over $5, she would go 
on and fill the next one while she built up enough confidence to let 
the patient know it was going to cost $5. I think that really 
demonstrates, more than life itself, that today's Medicare, if we think 
about it, was really designed for yesterday's medical care.
  Health insurance companies, which are very greedy, in my opinion, 
make huge profits and even they cover the cost of medicine. Why? 
Because they know it helps patients to get well and live healthier 
lifestyles.
  As a small town family pharmacy owner, I am sick and tired of seeing 
seniors leave the doors of our pharmacy without their medicine. And 
living in a small town, I learn a week or 10 days later where they are 
in the hospital running up a $10,000 or $20,000 Medicare bill simply 
because they could not afford their medicine or could not afford to 
take it properly. So I came to Congress to try to do something about 
it.
  This should not be a partisan issue. I wrote a bipartisan bill 
alongside the gentlewoman from Missouri (Mrs. Emerson), a Republican; 
and the Republican national leadership would not give us a hearing on 
our bill. They would not give us a vote on our bill.
  Now, less than 5 months before, yes, another election, they are 
coming to us with this plan, this so-called Medicare plan, which has 
nothing to do with Medicare other than attempting to privatize it, 
written by the drug manufacturers for the drug manufacturers.
  I know my colleagues have heard a lot from both sides tonight and 
that very few seniors are still awake listening because it is midnight, 
and that is the reason they are bringing it up now, but let me say 
this: Do not listen to them and do not listen to us. Go to the family 
pharmacist and ask them which plan is right for America.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I yield 30 seconds to the 
gentleman from California (Mr. Thomas).
  Mr. THUNE. Mr. Speaker, will the gentleman yield?
  Mr. THOMAS. I yield to the gentleman from South Dakota.
  Mr. THUNE. Mr. Speaker, I thank the gentleman for yielding to me; and 
I want to commend the chairman, because I know he has worked hard, 
along with the gentlewoman from Connecticut, to fashion a bill that 
addresses these concerns.
  Mr. Speaker, we have seniors in South Dakota who need prescription 
drug relief. We have rural providers who need relief. I also share some 
of the concerns the gentleman just voiced about the pharmacist, and I 
would inquire of the chairman whether, as this process moves forward, 
he would be willing to work with me to provide assurances to 
pharmacists, particularly those in rural areas, that their concerns 
will be addressed?
  Mr. THOMAS. Reclaiming my time, Mr. Speaker, I appreciate the 
gentleman's concerns. We have moved in the direction. There are still 
some concerns, and I assure him that, as we move forward in Congress, 
we will address the concerns of pharmacists.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I yield myself 15 seconds.
  I would like to point out to the gentleman from South Dakota that, 
while on page 18 of the other party's bill they say they require any 
willing provider, on page 8 of the other party's bill they say that 
there has to be pharmacy networks and the networks can determine cost 
sharing for beneficiaries outside the network.
  So their bill does not provide any willing providers; and ours, at a 
later time, provides a lot of recognition to pharmacists.
  Mr. Speaker, I yield 2 minutes to the gentleman from Arizona (Mr. 
Hayworth).
  Mr. HAYWORTH. Mr. Speaker, I thank the gentlewoman from Connecticut 
for yielding me this time and who has worked so hard on this 
legislation.
  It is important for citizens of my home State, Arizona, the seniors 
there who are still awake at what is 20 until 9, prime time in the 
State of Arizona, to understand exactly what we are doing in this 
legislation.
  Despite the wailing and gnashing of teeth about process, we ought to 
focus on results. Here are the simple facts, Mr. Speaker: Under our 
plan, prescription drug coverage under Medicare is available to every 
senior who wants it. Every senior who wants this plan will be eligible 
for coverage. We will leave no senior behind.
  That is especially important when we look at the people who need the 
most help. The 44 percent of seniors nationwide below 175 percent of 
poverty, their benefit is paid for. Over $40 billion in savings to 
Medicaid. Real money for real people with a real prescription drug 
benefit.
  And this is the most compelling argument, Mr. Speaker. When we cut 
through all the smoke and mirrors and all the rhetoric, what seniors 
want, what I heard at the Mesa Senior Center a couple of weeks ago, was 
that seniors want prescription drug savings now. When we pass this, 
when the other body takes its action, our plan begins covering seniors 
and lowering costs as soon as 50 days after the President signs the 
bill into law.
  Mr. Speaker, the time is now to act. If this can be moved, if this 
bill can become law, seniors can start realizing savings before 
Christmas. The perfect present to give our mothers and fathers and 
grandmothers and grandfathers. Support this legislation.
  Mr. STARK. Mr. Speaker, I yield myself 25 seconds to remind the 
gentleman from Arizona that he should tell the seniors in Mesa that he 
has lined his own pockets with a benefit for Members of Congress which 
is 50 percent more generous than what he is willing to give the seniors 
in his home State, and that he and the gentlewoman from Connecticut 
(Mrs. Johnson) and the gentleman from Florida (Mr. Shaw) voted against 
eliminating cost sharing for preventive benefits for seniors.
  Now that again shows us how much they care for the seniors in 
Hartford or in Florida or in Arizona.

                              {time}  2345

  Mr. Speaker, I yield 1 minute to the gentlewoman from Indiana (Ms. 
Carson).
  Ms. CARSON of Indiana. Mr. Speaker, there is an old adage that says 
those that pay the piper name the tune. We are here tonight on a tune 
that was written by a $30 million dinner a few nights ago. As I 
understand it, the senior citizens were not allowed to even win door 
prizes for prescription drugs at that event. And $30 million would have 
undergirded the cost of prescription drugs for millions of seniors who 
need them across this country. Those that pay the piper name the tune.
  When the nonpartisan Congressional Research Service did a comparison 
of the drug benefit under the Blue Cross/Blue Shield standard option 
available to Federal employees to the Democrat and Republican 
prescription drug plans, they found that the Republican

[[Page 11960]]

plan would give about 40 percent of the coverage Members of Congress 
receive, but the Democratic would give comparable coverage. But those 
that pay the piper name the tune and obviously have now begun to get 
their thrill on Capitol Hill.
  Mr. Speaker, the senior citizens still suffer with a headache or 
heartache from this incredible sham that the Republicans have offered.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I yield 2 minutes to the 
gentleman from Illinois (Mr. Weller).
  Mr. WELLER. Mr. Speaker, I am proud to say tonight we have an 
opportunity to provide prescription drug coverage under Medicare for 
our senior citizens. Tonight we are seeing an example of two different 
kinds of debate. Some people want to offer partisan rhetoric for 
political purposes. Others want to offer policy, policy which gives a 
solution to the challenge we have. The bottom line is we want to 
provide prescription drug coverage for our seniors.
  It was quoted earlier this year, one of the advisers to the 
Democratic leadership said, ``One of the biggest worries that our 
policy people had was that they would actually write a good bill.''
  We have a good bill before us. This is a bill that increases funding 
for Medicare by $350 billion, provides prescription drug coverage under 
Medicare, lowers the cost of prescription drugs now, guarantees all 
senior citizens prescription drug coverage, improves Medicare with more 
choices and more savings, and strengthens Medicare for the future.
  The question is: What does that mean for the average senior citizen? 
The bottom line is under the plan that the gentlewoman from Connecticut 
(Mrs. Johnson) is managing before the House of Representatives, we have 
an opportunity to save for senior citizens real money. The overall out-
of-pocket drug costs would fall by as much as 70 percent according to 
the Department of Human Services with the plan we have before us today.
  According to a Health and Human Services study released this week, 
the House Republican plan would provide real relief for seniors and 
disabled Americans. Those who now pay full retail prices would 
typically see the cost of each prescription cut by 60 to 85 percent. 
Their overall out-of-pocket drug costs would fall as much as 70 
percent, all in exchange for an affordable premium of $34 a month.
  It is projected that the average senior would save $940 a year as a 
result of this plan. We have a plan that takes $18 billion out of the 
pockets of the pharmaceutical companies and saves the average senior 
$940. It deserves bipartisan support.
  Mr. STARK. Mr. Speaker, I yield 2 minutes to the gentleman from Texas 
(Mr. Doggett).
  Mr. DOGGETT. Mr. Speaker, this is one of those proposals that is 
perhaps best considered very late in the evening when the cover of 
darkness can attempt to hide the shame of the proposal. This bill is 
about creating the appearance of doing something when it does nothing 
to improve the lot of our seniors. When we get right down to it, 
despite the charts, the Republicans have no plan. All they offer is a 
placebo based on privatization. I suppose we can call it a Swiss cheese 
plan, but seniors get all of the holes and no cheese. There is no 
guaranteed deductible, no guaranteed premium, no guaranteed benefit, 
and there is no insurance company that has ever offered a plan of this 
type; and most have said that they will not be able to provide a plan 
of this type.
  It all centers on the Republican ideological insistence that we must 
privatize Medicare, and that is not a prescription for reform; it is a 
prescription for disaster.
  This very day, one of their top leaders called the plan that Lyndon 
Johnson signed into law and upon which millions of Americans have 
relied, had the audacity to call it a Soviet-style plan. They did not 
like Medicare then. They have never accepted it, and they are 
determined to use this device to privatize it.
  Further, we find in the fine print of the plan in the paragraph 
called ``noninterference,'' a specific command that the administrator 
of this program cannot act to reduce costs. This figure of $18 billion 
has been pulled out of the air by a Republican Health and Human 
Services administrator. It has no basis in fact.
  Rather, with this bill, the Republican leadership has once again 
pledged its allegiance to the pharmaceutical manufacturers whose price 
gouging forces our seniors to pay the highest prices of anyone in the 
world. Little wonder that those same manufacturers are continuing to 
pay for ads all over the country telling people that the Republican 
partners are great people for obstructing the help that our seniors so 
desperately need.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I yield 1 minute to the 
gentleman from Texas (Mr. Brady).
  Mr. BRADY of Texas. Mr. Speaker, this is an important night for the 
seniors in my community. I am proud the House is standing up for 
seniors who desperately need an affordable, permanent prescription drug 
plan under Medicare, and who need it right now.
  The House plan gives America's seniors the right to choose the 
Medicare prescription plan that is best for them with catastrophic 
protection for the very costly illnesses, extra help for the poor who 
need it the most, and lower drug prices for all seniors using group 
buying power so drug companies will compete for our business and not 
the other way around.
  That means for nearly half up Texas' seniors on Medicare, they will 
receive up to $2,000 of essentially free medicine each year that they 
need, and that is real help.
  Thankfully, tonight we are rejecting the alternatives, alluringly 
irresponsible schemes that are simply too good to be true, schemes that 
would bankrupt Medicare within 10 years and leave our vulnerable 
seniors to face grim choices. I support the Republican plan, and my 
seniors do as well.
  Mr. STARK. Mr. Speaker, I yield 1 minute to the gentleman from 
California (Mr. Baca), who understands that the AARP opposes the 
Republican drug bill in its present form and says that it needs vast 
improvement before their members can support it.
  Mr. BACA. Mr. Speaker, I stand in opposition to this shameful decoy 
that creates the illusion that it covers all seniors, when we know that 
it does not cover all seniors. It only covers someone as long as it 
only reaches a certain limit.
  We have to make sure that all seniors are guaranteed coverage, make 
sure that they are able to get the kind of services that they need. 
Currently right now, they cannot even buy or put food on the table, and 
they have to decide between buying prescription drugs or not.
  This is like an insurance plan in California, telling drivers they 
have the coverage, when in fact they have the coverage as long as there 
is no accident. The minute there is an accident, the premiums go up, 
and you lose the coverage. They are afraid. They are afraid to file a 
claim. This is the same situation that we are going to have here. We 
are going to have seniors that are afraid to buy drug prescriptions 
because their coverage will go up. They will continue to go to Tijuana 
and buy it cheaper because they do not have the coverage. This is 
shameful and a decoy. We should support the Democratic plan that covers 
all seniors and all individuals.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I yield 1 minute to the 
gentleman from Wisconsin (Mr. Ryan), but in the course of doing that I 
want to mention that the Congressional Budget Office in their letter to 
us made clear that exempting Medicare prescription drug plans from 
Medicaid's best price drives down drug prices $18 billion for our 
seniors.
  Mr. RYAN of Wisconsin. Mr. Speaker, I would like to put one thing 
straight. The AARP does not oppose this bill.
  But for the benefit of Members who are truly listening to this debate 
and trying to make up their minds, let me point out three distinct 
differences. The Democratic bill will have the consequence of pushing 
out private-sector-provided prescription drug coverage. The Republican 
bill supplements that. What the Democratic bill will do, will

[[Page 11961]]

have the consequence of making sure that all those employers who are 
providing prescription drug benefits for their employees do not do so 
any more so the government will pick it up so we are needlessly forcing 
taxpayers to pay for a benefit that the private sector is already 
providing.
  The Republican bill includes deeper discounts on prescription drugs 
than the Democrat bill does. The Democrat bill is a $1 trillion-plus 
bill that will do nothing more than make Medicare go broke faster. We 
have a problem. We have two problems. We need prescription drug 
coverage for our seniors. We need to give them access to deep discounts 
on their price of drugs, and we need to make Medicare solvent for the 
baby boomer generation. The Democrat bill fails in that area. The 
Republican bill delivers.
  Mr. STARK. Mr. Speaker, I yield 15 seconds to myself to apologize to 
the Republicans and quote the actual words that I misspoke. The AARP 
does not oppose their bill, they just say that it requires improvements 
before our members would support their bill. I want the record to make 
it perfectly clear, while they do not oppose it, they do not support 
it.
  Mr. Speaker, I yield 1 minute to the gentleman from Tennessee (Mr. 
Clement).
  Mr. CLEMENT. Mr. Speaker, I could not support the Republican bill 
because we have to have fairness. It does not offer fairness. As a 
matter of fact, I just completed a survey in Tennessee, and the fact is 
that prescription drugs are twice what they are in Canada and Europe 
and Asia. But that is not true just in Tennessee; it is true all over 
the country.
  There are a lot of things we could do. The Bush administration could 
reimport those drugs from Canada right now, and we would get a break. 
We have a lot of people on the border that can go across the border and 
get prescription drugs, a 90-day supply. There are a lot of things that 
we can do that are not being done.
  The United States Senate Democrats have a very good plan, and we 
ought to look at the Senate Democrat plan because we are not going to 
get any justice here.
  I suggest to Members, vote ``no.'' The fact is we are subsidizing 
other countries. We have got price gouging going on by the 
pharmaceutical companies at present. We need to give relief now, and 
prescription drugs should be part of the Medicare package.

                              {time}  0000

  Mrs. JOHNSON of Connecticut. Mr. Speaker, I yield 1 minute to the 
gentleman from Louisiana (Mr. Vitter).
  Mr. VITTER. Mr. Speaker, I rise in proud support of this Republican 
prescription drug plan. Prescription drug coverage is absolutely 
critical for seniors today, and no senior should have to choose between 
paying for prescription drugs and paying for food or rent. So we are 
acting and we are producing a plan and we are passing a plan to give 
seniors choice. They can choose the plan that works best for their 
needs. It reduces their out-of-pocket costs for prescription drugs, 
gives them a lifetime benefit, and the plan is voluntary.
  So if seniors have a plan already that they are happy with, they can 
stay with it. They are not going to get kicked out. But for those 
without coverage, this bill will help them get that coverage and cover 
those escalating costs of prescription drugs.
  Seniors deserve a prescription drug benefit, not just talk, not just 
debate, and they deserve it today, and that is why we are going to act 
today, not talk, not debate but act, act responsibly and act within a 
budget that we can sustain over time.
  Mr. STARK. Mr. Speaker, I am honored to yield the balance of my time 
to the distinguished gentlewoman from California (Ms. Pelosi), pending 
which I would just like to remind all the seniors in the country to 
review all the votes that the Republicans took against their interests 
in coming to this useless bill which they have brought to the floor.
  The SPEAKER pro tempore (Mr. Thornberry). The gentlewoman from 
California is recognized for 3 minutes.
  Ms. PELOSI. Mr. Speaker, I thank the gentleman for yielding me this 
time and thank him for his leadership and that of so many other members 
on the Committee on Commerce and the Committee on Ways and Means for 
their leadership in making the distinction between what the Democrats 
would have proposed had the Republicans not been afraid of seeing a 
real prescription drug benefit plan on the floor tonight and their 
sham, their cruel hoax, on America's seniors that they have presented.
  Why is it a cruel hoax? It is a cruel hoax because it helps 
pharmaceutical companies and HMOs and it does not help seniors pay for 
needed medication. It is a cruel hoax because there is no guaranteed 
coverage because insurance companies just will not offer plans. Our 
plan would have guaranteed coverage for all seniors through Medicare. 
Their plan does nothing to lower prices and ours would have lowered 
prices by enabling Medicare to negotiate on behalf of seniors. It goes 
on and on.
  What is very important for me to note is that we spend annually $70 
billion on doctors under Medicare, $140 billion on hospitals. It would 
be necessary to spend $90 billion on pharmaceuticals. It sounds like a 
lot of money, and it is. But it is a tremendous investment in the 
health of the American people.
  The committee on which I serve that funds the National Institutes of 
Health, we have seen the progress in science since the inception of 
Medicare. It is miraculous what these drugs can do. Would it not be 
great if seniors could have the opportunity to have funding for self-
administered drugs that is prevented so far and that the Republican 
bill does nothing to improve?
  It would save seniors money. It would save the taxpayers money. 
Because these drugs are not only an adjunct to care and to 
hospitalization, they are a substitute for it. It would improve the 
quality of life, it would save the taxpayers money, and it would go a 
long way to restoring the dignity to our seniors which we owe them.
  Every family in America, Mr. Speaker, is just one accident or one 
diagnosis away from sadness not only in terms of what it means to 
physical health but in terms of economic security. We have an agreement 
with the American people that their health is part of the strength of 
our country. Access and affordability are linked. Access to affordable 
prescription drugs is central to the health of our senior population. 
We owe them better than a debate on a sham bill that has no guarantee. 
It is a suggestion but not a guarantee. It is not a prescription drug 
entitlement under Medicare as what is promised and should be promised 
to our seniors. Again, it does nothing to address the issue of cost.
  Every senior in America deserves the respect and dignity of economic 
and health security. The Republican bill is a cruel hoax on them. I 
urge a ``no'' vote.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I yield myself 5 seconds.
  Respectfully, how could a sham bill accelerate the pace at which 
technology will come into Medicare for the first time ever? And I am 
proud of it.
  Mr. Speaker, I yield 1 minute to the gentleman from New York (Mr. 
Grucci).
  Mr. GRUCCI. Mr. Speaker, I thank the gentlewoman for yielding me this 
time. When I went back to my district and I started talking about this 
program and this plan for senior citizens, I was wondering what kind of 
reception I was going to get, what they were going to say to me, the 
things that they would tell me.
  One of the things I saw that really lit the fire of passion in my 
heart on this issue and on this particular bill was when I saw the hope 
in the eyes of the senior citizens when they recognized for the first 
time ever they were going to get help on their prescription drugs, that 
the cost of their prescription drugs was going to come down, that they 
were going to be able to put hundreds of dollars back into their 
pockets and they were going to be able to use that for the rhetoric 
that we keep talking about, to buy their food, to be able

[[Page 11962]]

to put heat in their homes, so that instead of having to stretch their 
medicine, they could take it as prescribed.
  I sat across the table from these senior citizens and they were not 
just telling me rhetoric, they were telling me how they have to live 
their lives. When they saw the benefits of this program coming in front 
of them, when they saw the opportunity to get their money back into 
their pockets, they had hope.
  For that, Mr. Speaker, I encourage my colleagues here tonight to have 
a ``yes'' vote on this particular bill.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I yield the balance of my 
time to the gentleman from Missouri (Mr. Blunt).
  The SPEAKER pro tempore. The gentleman from Missouri (Mr. Blunt) is 
recognized for 1 minute and 40 seconds.
  Mr. BLUNT. Mr. Speaker, I thank the gentleman for yielding time, the 
great job she has done on the floor tonight and the great job that she 
and the committee have done with this bill.
  This is a tremendous step forward. It provides so many things that 
seniors need. The amount of money allocated to this bill is possible. 
It is within budget. Health care providers and hospitals support this 
bill.
  The AARP in a letter to the chairman of the Committee on Ways and 
Means said, ``We are pleased that your bill makes the voluntary 
prescription drug benefit permanent and maintains the entitlement 
nature of the Medicare program.''
  This is something that can actually be done. It is within a real 
budget. It is an amount of money that can be spent for this purpose and 
can start immediately. It makes a difference in the lives of seniors.
  Certainly health care delivery has changed dramatically since 
Medicare was created. This benefit needs to be added to Medicare. It 
needs to be an entitlement, not an experiment. It needs to be something 
that we do now, not come up with an amount of money that is impossible 
to do for years to come.
  The amount of money allocated to this bill far exceeds the amount of 
money that our friends on the other side of the aisle said was 
necessary just 2 years ago. New drugs and devices would not be a result 
of a government-run health care program. They will be a result of a 
program that maintains incentives but guarantees lower cost, guarantees 
access, makes this an entitlement. It is supported by health care 
providers for a reason. The AARP says it has great merit for a reason.
  We need to do this. We need to do it now. We need to make this a 
reality this year.
  The SPEAKER pro tempore. Pursuant to House Resolution 465, the 
gentleman from Louisiana (Mr. Tauzin) and the gentleman from Michigan 
(Mr. Dingell) each will control 30 additional minutes of debate.
  The Chair recognizes the gentleman from Louisiana (Mr. Tauzin).
  Mr. TAUZIN. Mr. Speaker, I yield myself 3\1/2\ minutes.
  Mr. Speaker, I rise in strong support of H.R. 4954.
  I first want to thank the gentleman from Michigan (Mr. Dingell) and 
all the members of the Committee on Energy and Commerce who spent over 
30 hours of markup in producing this bill. I particularly want to thank 
my colleagues on the other side for the spirited but I think agreeably 
friendly debate we had that stretched over 3 days and ended up on 
Thursday when we started at 9:30 and completed at 8:30 the next 
morning.
  This is a complex piece of legislation. I have heard people describe 
it on the other side as a hollow bill that contains no benefits. Let me 
make it clear, this is a bill that spends 350 billion of American 
taxpayer dollars that will create a valuable new entitlement for 
Medicare beneficiaries, that will finally provide them with 
prescription drug coverage, and it will do so in a comprehensive way, 
ensuring that the benefit will work within a stronger Medicare system 
for decades to come.
  I do not speak just for myself. Let me quote a letter from the AARP. 
The letter from the AARP says our members and virtually all older 
Americans need this coverage now. They are tired of excuses. They are 
tired of politics. They want us to pass this benefit bill now.
  Here is what they said about our bill. ``We are pleased that your 
bill makes the voluntary prescription drug benefit permanent and 
maintains the entitlement nature of the Medicare program.''
  They went on further to say, ``The bill contains other favorable 
components as well.'' They talk about the coverage of the first $2,000 
in the bill and particularly the financial assistance for low-income 
beneficiaries with drug costs under $2,000 as being vitally important. 
They also mention, and I quote, we appreciate your efforts to contain 
drug costs because a Medicare drug benefit bill alone without effective 
cost controls will be difficult to sustain. They understand we cannot 
bankrupt Medicare. We have got to make this system work within our 
budget.
  But they went on to say, ``You can improve this. We don't like this 
home health copay.'' It is now gone. Our committee voted it out, and it 
is not in the bill.
  They asked us to do what we could to close the gap, the $4,500 gap 
that existed between the first $2,000 of coverage and the catastrophic 
coverage. We found $18 billion by forcing the pharmaceutical companies 
to negotiate discounts below the so-called best price, $18 billion from 
pharmaceutical companies, and we lowered that loss from $4,500 of out-
of-pocket expenses down to $3,700. We paid $800 more of drug cost in 
the bill now, exactly what AARP asked us to do.
  Finally, they said, it is important, because our research indicates 
that Americans are looking for stability and dependability, to ensure 
that private sector entities will be willing to offer coverage.
  We have a letter, too, from the Health Insurance Association of 
America and this is what their letter says:
  ``The improvements contained in the proposal should make the benefit 
more attractive to beneficiaries. Consequently, there is now a much 
better chance our members will offer the benefit.''
  We have a comprehensive plan, a permanent plan, a voluntary 
entitlement within Medicare that is within budget, that insurance 
companies say they will be able to work under it and provide plans and 
what CBO says as high as 97 percent of the seniors in America will find 
drug coverage and participate in.
  This is a great bill. Seniors want it now. They are tired of 
politics. Let us pass it tonight.
  Mr. Speaker, I reserve the balance of my time.
  Mr. DINGELL. Mr. Speaker, I yield 2 minutes to the distinguished 
gentleman from New Jersey (Mr. Pallone).
  Mr. PALLONE. Mr. Speaker, I listened to the chairman of our committee 
from Louisiana, and it bothers me because he is not looking at the 
bill. He is not talking about the Republican bill that is on the floor 
of this House. This is not a Medicare bill. This is not a Medicare 
program. There is nothing in this bill that is going to help the 
average American senior.
  If you look at it, first of all, we know that it does not provide 
Medicare coverage, no guarantees. What it does is to give some money 
and throw some money to private insurance companies in the hope that 
somehow they are going to provide a Medicare benefit. The insurance 
companies have said they are not going to provide the benefit. If they 
were providing the benefit, we would not need a Federal program.
  Let us imagine that somewhere, somehow, I do not believe it, but 
somewhere, somehow some private insurance company is willing to provide 
the plan the way the chairman describes. Why in the world would anybody 
buy into such a plan? Look at some of the figures that we have.
  First of all, if I could use this chart, it shows very dramatically 
that the senior citizen is only going to get about 22 percent of their 
coverage paid for by the Federal Government, compared to the Democratic 
plan which was significantly more. Look at this so-called doughnut hole 
in coverage. In the beginning you are going to get, if it is even 
available, you will get some money in the very beginning, up to

[[Page 11963]]

$1,000 and then up to $2,000 out of pocket. But then after that there 
is no coverage. For 40 percent of the beneficiaries, the average senior 
citizen, they are going to get no coverage during this interim period.
  If you are going to be in a situation, either there is no plan at 
all, you do not have the advantage of a plan because the private 
insurance companies do not provide it, or, secondly, the premium is so 
high, the deductible is so high or it costs so much over the course of 
the year that it is not even worth buying.
  Who in the world would want to buy the coverage even if it was 
available? The answer is nobody. That is the reality of this bill.
  The other thing that really bothers me here is I have heard some of 
my colleagues on the Republican side tonight talk about how there is 
going to be a 30 percent discount. I asked the gentlewoman from 
Connecticut (Mrs. Johnson), where is this in the bill? There is nothing 
in the bill that provides any discount here. She is assuming that there 
is going to be some competition to provide it, but they put a 
noninterference clause in the bill that prevents any price reduction. 
They do not want price reduction.

                              {time}  0015

  Mr. TAUZIN. Mr. Speaker, I note that New Jersey is going to receive 
$1.5 billion in Medicaid savings directly from this bill, and 40 
percent of their seniors will receive subsidized coverage of their 
insurance premium.
  Mr. Speaker, I yield 5 minutes to the gentleman from Florida (Mr. 
Bilirakis), the chairman of the Subcommittee on Health of the Committee 
on Energy and Commerce.
  Mr. BILIRAKIS. Mr. Speaker, I thank the gentleman for yielding me 
this time.
  Before I get into my remarks, I would say that the gentleman from New 
Jersey, as usual, does not listen. When the chairman read from the AARP 
letter, when they said, ``We are pleased that your bill makes the 
voluntary prescription drug benefit permanent and maintains the 
entitlement nature of the Medicare program,'' that means it is under 
Medicare.
  Mr. Speaker, obviously, I rise in support of the bill. I believe that 
today's vote is another example of our commitment to getting something 
done for seniors this year, not just talk about it this year.
  The bill creates a new entitlement under Medicare. Senior citizens 
and persons with disabilities will now have access to a voluntary, 
comprehensive prescription drug benefit. Our bill creates this benefit 
without jeopardizing the financial health of the overall program, which 
would certainly happen under the plan offered by our friends on the 
other side of the aisle.
  During the Committee on Energy and Commerce's consideration of the 
bill last week, committee Democrats offered an amendment in the nature 
of a substitute that, while not scored, would likely cost over $900 
billion over 10 years. I was disappointed that they would offer such an 
irresponsible plan during such a serious debate, especially since, just 
last year, House Democrats included $330 billion for a new prescription 
drug benefit in their proposed budget resolution.
  A benefit without explanations is, of course, no benefit at all. The 
counter-proposal offered by my colleagues does not explain how they 
would fund this enormous program since they did not even offer a budget 
resolution this year. I repeat, they did not even offer a budget 
resolution this year.
  The fact that they have now tripled the amount they say is necessary 
for a prescription drug benefit tells me that, instead of being serious 
about a solution, they care only about outbidding Republicans in an 
attempt to score a political point for the November elections. After 
all, as has been said before, they controlled this House for 40 
consecutive years and at no time did they attempt to address this 
problem.
  We are addressing it. We want to help seniors now, not just use 
political rhetoric.
  Our plan provides Medicare beneficiaries with meaningful, 
comprehensive coverage. It does not force beneficiaries into a one-
size-fits-all program where bureaucrats pick their medicines. Instead, 
seniors will have a choice of at least two prescription drug plans 
which will provide the best price discounts available. The bill also 
puts into effect an idea presented to me some time ago by Dr. William 
Hale of Dunedin, Florida, to offer at government expense an initial 
medical physical for all beneficiaries going into the Medicare program. 
It is easy to envision, I think, that many diseases will be picked up 
at that time in their early stages and, thus, result in more healthful 
retirement years and ultimate health cost savings.
  Mr. Speaker, H.R. 4954 places an appropriate focus on two populations 
that have long been, as many know, a priority of mine: the low-income 
senior without prescription drug coverage and the very ill senior who 
is in danger of impoverishing him or herself in order to pay for their 
medications.
  The bill we are considering today includes strong protections for 
these vulnerable beneficiaries. It fully subsidizes cost-sharing, 
except for nominal copayments for Medicare beneficiaries with incomes 
up to 75 percent of poverty. This feature means that 44 percent of our 
Nation's seniors, those with incomes less than $15,505 for singles and 
$20,895 for married couples, could be eligible for full cost-sharing 
assistance. Mr. Speaker, $20,895 for married couples, could be eligible 
for full cost-sharing assistance.
  Our bill makes needed changes to the program by raising reimbursement 
rates. That has been talked about.
  Mr. Speaker, I hope that the Senate follows our lead and passes a 
bill soon so that we can begin the process of reconciling our two 
packages later this year. This is a good bill, a responsible plan, not 
a perfect plan by any means, but intended to help our seniors now, and 
we need to support it.
  Mr. DINGELL. Mr. Speaker, I yield 2\1/2\ minutes to the distinguished 
gentleman from Ohio (Mr. Brown), the ranking member of the 
subcommittee.
  Mr. BROWN of Ohio. Mr. Speaker, I thank the gentleman for yielding me 
this time.
  The Republican HMO drug plan does several things.
  First of all, it begins the process of privatizing Medicare. The 
Republican HMO drug plan gives 30 percent less choice, 30 percent less 
choice for seniors' prescription drugs. The Republican HMO drug plan is 
an entitlement for insurance companies, not for America's seniors. It 
does nothing to bring drug prices down. In fact, prices in the United 
States will continue to be, under the Republican plan, the highest, 
two, three, four times what they are in other countries, the highest 
prices in the world. And the Republican HMO drug plan gives benefits 
almost twice as good to Members of Congress as it does to America's 
seniors. As we can see on this chart, Members of Congress have a plan 
worth about $2,100. The Republican plan provides for America's seniors 
a plan worth about $1,300.
  Now, why would our friends on the other side of the aisle come up 
with a plan like this that privatizes Medicare, that gives seniors 30 
percent less choices, an entitlement for insurance companies, that most 
outrageously gives a much better plan to Members of Congress than it 
does to America's seniors? Why would they do that?
  I think the answer to that, Mr. Speaker, came last Wednesday 
afternoon when our committee, the Committee on Energy and Commerce, 
adjourned early at 5 o'clock so that all of the Republican Members 
could troop off to a $30 million, that is $30 million fund-raiser 
underwritten by the American drug and the prescription drug industry 
where the money went to feed the coffers of Republican Party 
candidates. This fund-raiser was chaired by the CEO of one of the 
world's largest drug companies, the CEO of Glaxo, a drug company 
located in England, a foreign drug company. His company gave $250,000 
to this Republican event. He was joined by $250,000 contributions from 
the trade association representing the drug companies and many others.
  The question, Mr. Speaker, is of voting for a plan that is written by 
and for the drug companies or a plan for America's seniors.

[[Page 11964]]

  So, the next day, when Members of Congress from our committee 
returned to vote on legislation, to vote on this prescription drug 
bill, surprise: every vote cast by my Republican friends, whether it 
was to make the seniors' plan the same as Members of Congress, whether 
it was to bring prices down, whether it was to reduce out-of-pocket 
expenses, every time these Republican Members of Congress voted with 
the drug companies.
  It is a question of, do we vote for legislation written by and for 
America's drug companies, or do we vote for legislation written for 
America's seniors?
  Mr. TAUZIN. Mr. Speaker, Ohio, under our bill, will earn $1.8 billion 
in Medicaid savings, and 38 percent of their seniors will get free 
premiums under our bill.
  Mr. Speaker, I am pleased to yield 1 minute to the gentleman from 
Kentucky (Mr. Whitfield), a distinguished member of our committee.
  Mr. WHITFIELD. Mr. Speaker, I have been somewhat shocked, really, at 
the animosity expressed against our plan this evening. Medicare as it 
exists today uses private companies to administer the Medicare program. 
Under the Democratic plan, private companies will be used to administer 
their drug program, just as ours is.
  I was looking, and in Kentucky we have 615,000 citizens under 
Medicare. Under this plan, the plan that we will be voting on and 
passing tonight, 315,000, or 50 percent of them, will basically receive 
free prescription drugs with a very small copay of like $2 for generics 
and $5 for name-brand drugs. So how could we possibly oppose helping 
seniors with this kind of a meaningful program?
  We have heard a lot of discussion tonight about how horrible the drug 
companies are in America. I think they have the best research and 
development, and we are fortunate to live in a country where drugs are 
being discovered every day to cure serious diseases.
  Mr. Speaker, I urge the support and passage of this legislation.
  Mr. DINGELL. Mr. Speaker, I yield 1\1/2\ minutes to the distinguished 
gentlewoman from California (Ms. Eshoo).
  Ms. ESHOO. Mr. Speaker, I thank the distinguished ranking member for 
yielding me this time.
  Mr. Speaker, I rise tonight to speak about an issue that calls to a 
need of the American people. This is really a solemn moment in this 
Chamber, and I regret enormously that my friends on the other side of 
the aisle did not have enough confidence in themselves to debate here 
tonight two plans, not just their plan. So since it is just their plan, 
that is what I am going to direct my comments to.
  I know you all love your mothers and fathers. So do we. We all love 
our families. We are talking about the American family. We are talking 
about senior citizens.
  Now when the American people go shopping for coverage for something, 
what do they want? They want something that is comprehensive, they want 
something that is affordable, they want something that is guaranteed, 
and they want something that is understandable. They have come to trust 
the gold standard that Medicare represents.
  Now my friends on the other side keep using the word ``Medicare.'' Do 
we know why? It is the best marketing word in the country. But look at 
the fine print. What they do is they put the language down for 
Medicare, but they take the taxpayers' money and shift to private 
insurance companies, with no guarantee that there is any insurance 
company that is going to bring them these benefits.
  So American people: Beware. Beware of false advertising. This is no 
more a Medicare prescription drug plan than I am a redhead.
  Mr. TAUZIN. Mr. Speaker, the State of California will get $5.1 
billion in Medicaid savings under this bill, and 1.5 million California 
seniors, including redheads, will get free premium insurance coverage.
  Mr. Speaker, I yield 2 minutes to the gentleman from Iowa (Mr. 
Ganske).
  Mr. GANSKE. Mr. Speaker, this is a $350 billion bill. Since when has 
$350 billion been pencil dust, I ask my colleagues. That is a third of 
a trillion dollars.
  Mr. Speaker, 37 percent of Iowan senior citizens will have no 
copayment, deductible, or premium. They will get this benefit free. 
That is not pencil dust.
  We have another problem that we have not addressed, and that is that 
in rural States like my State, rural hospitals and other providers, the 
rural hospitals are going broke and other providers are not taking care 
of, cannot take any more Medicare patients into their practices, and 
this bill addresses that. This bill addresses that.
  Without this bill, we would have a 15 percent cut in physician 
payments. Without this bill, rural hospitals in Iowa will go bankrupt. 
This bill provides Iowa with $330 million in additional payments for 
Medicaid, and this is at a time when my State is struggling to meet its 
payments.
  This bill helps seniors. U.S. Seniors endorses it, and Sixty Plus. It 
helps the providers like physicians to keep taking Medicare patients 
into their practices.

                              {time}  0030

  It helps keep the rural hospitals open. That is why it is endorsed by 
the AMA and the American Hospital Association. Ninety-five percent of 
seniors would find this a good deal and sign up for this bill.
  This bill basically is a bird in the hand. That is worth more than 
two or three in the bush. Senior citizens in Iowa are telling me that 
$350 billion now will help a lot, and that is a lot better than an 
empty promise for two or three times more than that.
  Mr. Speaker, a few winters ago, when Iowa was experiencing 
skyrocketing home heating bills, I received numerous letters from Iowa 
seniors who were forced to choose between paying their monthly heating 
bills or paying for their prescription drugs.
  I don't believe that's a choice Iowans should have to make.
  That is why this week, I have been working with my Energy and 
Commerce committee to pass the Medicare Modernization and Prescription 
Drug Act of 2002, which would provide a prescription-drug benefit for 
needy Iowa seniors through Medicare.
  Although many members of the other party continue to treat Medicare 
as a political football, we are moving forward to provide immediate 
help to those who need it most.
  Specifically, the bill includes an affordable and permanent 
prescription drug benefit with an average premium of $35 per month. The 
bill also includes a standard benefit that would begin with a $250 
deductible and pay 80% of spending up to the first $1,000 and 50% up to 
the second $1,000. Seniors who meet the low-income criteria (50% of 
seniors currently without coverage) would pay less than $5 per 
prescription, up to coverage limits. All participants are protected 
against catastrophic costs, with out-of-pocket expenditures capped at 
$3,800 per year. An estimated 94% of eligible seniors in this country 
would participate in this plan in the first year, according to the 
nonpartisan Congressional Budget Office.
  In addition to the drug benefit, our legislation also provides a 
boost to rural Iowa hospitals that, for too long, have ranked last in 
the country in Medicare reimbursements. The bill provides increased 
equity for all hospitals in rural areas, as well as increasing payments 
to sole community hospitals, rural home health agencies, and rural 
ambulance services.
  Congressman Nussle and I also have worked to amend the legislation to 
provide an increase of up to $40 million per year to Iowa's non-
teaching hospitals.
  These provisions are significant because the vitality of Iowa's rural 
hospitals is central to the economy of our state. Our bill would help 
ensure that Iowans living and working in rural areas have access to 
reliable and affordable health care.
  Our prescription drug legislation contains significant provisions for 
lower-income Iowans. Benefit premiums for Medicare beneficiaries below 
150% of poverty level would be fully subsidized, as would cost-sharing 
expenditures for beneficiaries under 175% of poverty. Premiums for 
individuals between 150% and 175% of poverty would be subsidized on a 
sliding-scale basis.
  The Medicaid provisions would mean savings of $337 million dollars to 
Iowa's state budget--needed help to our state legislators who are 
struggling to balance the state budget.
  Has the other party proposed, a prescription drug bill of their own? 
Yes--a bill that irresponsibly busts the budget and risks bankrupting 
the entire Medicare system.

[[Page 11965]]

  Our legislation, on the other hand, provides an immediate $350 
billion drug benefit and fits into the budget.
  So, do Iowa's seniors want our prescription-drug benefit now, or the 
other party's empty promises of a drug benefit at some undetermined 
point in the future?
  The answer is that Iowa seniors want help now--because they realize 
that a bird in the hand is better than two in the bush.
  Mr. DINGELL. Mr. Speaker, I yield 1\1/2\ minutes to the distinguished 
gentleman from Florida (Mr. Deutsch).
  Mr. DEUTSCH. Mr. Speaker, I thank the gentleman for yielding time to 
me.
  Mr. Speaker, this bill and the two proposals, one is in front of us 
and one was not allowed to be in front of us, really are fundamental 
policy differences. What the American people want is to have 
prescription drugs as part of Medicare.
  When Medicare was created in 1965, there are two interesting 
statistics. One is that the average age of Americans was 65 in 1965. It 
has gone up by more than 10 years. I think we consider that a high-
class problem.
  The second interesting statistic is that the out-of-pocket payments 
by seniors in America, the percentage of their income has actually gone 
up, even with Medicare.
  One of the main reasons for both of those statistics is because of 
prescription drugs. We cannot conceive of a Medicare program, which is 
an insurance program, it is a forced insurance program, and that has 
been Medicare's success, we cannot conceive of that being set up today 
without prescription drugs.
  What my colleagues on the other side of the aisle are proposing, and 
I do not doubt the chairman of the full committee will cite a statistic 
about Florida saving Medicaid dollars after I finish speaking, but that 
is not Medicare, Mr. Speaker. That is not Medicare.
  That is not what American seniors want. It is a sham. It is 
misadvertising for American seniors, and they get it. They get it, and 
they do not want it. They do not want what Members are proposing. What 
they want is simple. They want an expansion of Medicare coverage for 
prescription drugs, because they understand on a day-to-day basis that 
prescription drugs are a necessary component of Medicare, and 
eventually the American seniors are going to get what they want, 
regardless of the action that we take today.
  Mr. TAUZIN. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, Floridians, seniors under Medicare, over 1 million will 
have free premiums under this bill, and the State of Florida will 
receive $3.1 billion in Medicaid savings.
  Mr. Speaker, I yield 1 minute to the gentleman from North Carolina 
(Mr. Burr), distinguished vice chairman of the Committee on Energy and 
Commerce.
  Mr. BURR of North Carolina. Mr. Speaker, I have listened to the 
debate tonight for over an hour. I have heard the word ``sham'' and I 
have heard other words used. Those words are in fact about a benefit 
that we are going to extend to Medicare, a benefit that had not been 
extended since 1965, when Medicare was created.
  Mr. Speaker, tonight we have a great opportunity. We have a great 
opportunity to pass a bill that is not perfect, but few things in this 
House are. We have the opportunity to extend for seniors for the first 
time coverage that the majority of Americans eligible for Medicare want 
and need. I do not think that is a sham; I think it is a tremendous 
opportunity for the Congress of the United States to pass for those 
individuals.
  Some will get up and say that ``GOP'' is ``get old people.'' Maybe 
they ought to change the words tonight to ``GOPD, Get Old People 
Drugs.'' That is what we are here to do. If we can put aside 
partisanship, we can pass a bill that for the first time brings drugs 
to the American people.
  Mr. DINGELL. Mr. Speaker, I yield 2 minutes to the distinguished 
gentleman from California (Mr. Waxman).
  Mr. WAXMAN. Mr. Speaker, I cannot tell Members how disappointed I am 
that we are not discussing a Medicare bill that will really meet the 
needs of the American people.
  We are not doing it on a bipartisan basis. Who would have thought 
this is a partisan issue? Both parties promised prescription drugs for 
seniors under the Medicare program in the last election, but the 
Republican plan that is before us today does not provide an adequate 
benefit. It does not help bring down the cost of drugs or stop 
excessive pharmaceutical company profits. It does not establish what 
the premium will be, or if it will be affordable.
  Our Republican colleagues claim that the premium is set the same way 
the Medicare premium is now established; but that is wrong, and they 
know it. Medicare's premium is not set by a private insurance company 
that is interested first and foremost in its own profits. These 
premiums will be set just that way.
  The Republican plan does not guarantee help with the cost of the 
drugs the physicians prescribe for us, and it does not ensure that we 
get our drugs at the local pharmacy. The fact is, this plan does not 
guarantee anything except subsidies for private insurance companies.
  Let us put a real benefit in Medicare. Let us defeat this bill and 
give people the help they need. If they want to compare, for those 
seniors who are watching this, if they want to compare what they will 
get from the Republican bill and what they would have received from the 
Democratic bill if we had even had a chance to debate and pass it, go 
to the Web site. Go to www.House.gov/reform/min, and Members will be 
able to compare easily on that Web site what the reality is compared to 
all the promises we have heard from the Republicans.


                Announcement by the Speaker Pro Tempore

  The SPEAKER pro tempore (Mr. Thornberry). The Chair would remind all 
Members to address their remarks to the Chair.
  Mr. TAUZIN. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, not only will 43 percent of the seniors in California 
get subsidized premiums under this bill, but the State of California 
safety net hospitals receive over $63 million new dollars of help to 
provide health care.
  Mr. Speaker, I yield 2 minutes to the distinguished gentleman from 
Georgia (Mr. Norwood).
  Mr. NORWOOD. Mr. Speaker, I thank the gentleman for yielding time to 
me.
  Mr. Speaker, I heard comments earlier tonight saying that we should 
not be debating so late, that nobody would be awake. My contention is 
it does not matter whether one is awake or asleep. We cannot get 
anything out of this kind of debate at all.
  I do not believe I have ever heard more misrepresentations or 
mistruths or demagoguery on a subject in a long, long time. I could 
spend the night discounting some of the things, but some of the 
statements are just absolutely ludicrous, like people lining up over 
here saying that $320 billion going into prescription drugs is going to 
harm people. Who in the world thinks we are going to spend $320 billion 
of the taxpayers' money to harm somebody?
  There are statements saying in 1964, Republicans hated Medicare; they 
voted against it. That is not true. That is not true at all. 
Republicans, in fact, the majority voted for Medicare, and not all the 
Democrats voted for Medicare in 1965. It was a discussion worth having 
back then.
  But do not stand up here and say all Republicans hate Medicare. Those 
who continue to say that Republicans say Medicare is going to wither on 
the vine, I saw that speech. I have a copy of that speech. Newt 
Gingrich made the speech. He said that HCFA was going to wither on the 
vine, and that outdated organization needs to have some rework, because 
it is interfering with the care of patients, for pity's sakes.
  There have been a lot of complaints about the rules, and not a lot of 
truths about the bill. This is not a perfect bill. I know that; Members 
know that. All of us could do better. Any one of us could write a 
perfect bill if we did not have to worry about a budget. We could write 
a perfect bill, all of us could, if we did not care about bankrupting 
the trust fund, but we do.
  But I will tell Members what this bill will do. They can call it, say 
it, do any way they want to, but what this bill

[[Page 11966]]

will do is it will help the poorest and help the sickest seniors. We 
need to do it now, because this is the only game in town.
  Mr. DINGELL. Mr. Speaker, I yield 1 minute to my good friend, the 
gentleman from Michigan (Mr. Stupak).
  Mr. STUPAK. Mr. Speaker, I thank the gentleman for yielding time to 
me.
  With all due respect to the last speaker, this is not a perfect bill; 
this is not even a good bill. Through all this debate, I went back to 
my office tonight and listened to all this.
  I pulled two letters from my district, one from Vanderbilt, Michigan. 
A couple there has $6,288 per year in drug costs. Under the Democratic 
plan, if we would ever get a chance to vote on it, they would pay 
$1,637 and they would save $4,650, or 74 percent of their drug savings.
  Underneath their plan, their bill here tonight, they would have to 
pay $4,096. They would only save $2,192, or 35 percent of their drug 
costs.
  The other couple I pulled was from Travers City, Michigan. They have 
$3,240 per year on drug costs. Under the Democratic plan, they would 
pay $1,028 and save $2,212 or 68 percent. Under the Republican plan, 
they would pay $2,536 and save only $704, or 22 percent.
  Do the math. The Republican plan just does not add up.
  Mr. TAUZIN. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, Michigan will get one and one-tenth billion dollars in 
this plan of Medicaid savings, and nearly 40 percent of their seniors 
will get subsidized premiums for their Medicare prescription drug 
coverage.
  Mr. Speaker, I yield 1 minute to the distinguished gentleman from 
Oregon (Mr. Walden) from our committee.
  Mr. WALDEN of Oregon. Mr. Speaker, if we think about this, nobody has 
fought harder for Patients' Bill of Rights in this country than the 
gentleman from Georgia (Mr. Norwood), the gentleman from Iowa (Mr. 
Ganske), and the gentleman from Kentucky (Mr. Fletcher). They are 
unanimously in support of this bill.
  These are careful legislators who have evaluated this bill carefully. 
They unanimously support it because they know it is within the budget. 
It will give care to those who need it the most. From the people that I 
represent, that is what is most important, that we put together a plan 
that will fit within the budget framework we have been given to operate 
under that will get them care, because they need help now. They need 
help now. They do not want partisan rhetoric. We are sick and tired of 
that in America.
  This winter and spring, I went around and met with hospitals, 
doctors, patients, and seniors all across my district. The clear 
message was: get us help now; do what you can for us now. This bill 
does that. That is why organizations representing these doctors and 
hospitals and seniors and others support it.
  It will help home health care; it will help Medicare patients. This 
is a good plan that will make a real difference for patients. It 
provides prescription drugs at no cost to those who make $15,000 or 
less a year in our senior community.
  Mr. DINGELL. Mr. Speaker, I yield 1\1/2\ minutes to my distinguished 
friend, the gentleman from Massachusetts (Mr. Markey).
  Mr. MARKEY. Mr. Speaker, watch out, Grandma. Watch out, Grandpa. The 
GOP doctors are on their way, and boy, do they have a prescription for 
you. Every senior citizen gets three bitter pills to swallow:
  Pill number one is a half-dose of dollars. The Republicans provide 
less than half the money that Democrats provide to seniors in their 
plan so that they will not be burdened by the soaring cost of 
prescription drugs, but the Republicans will not allow a vote on that 
plan.
  Pill number two is a poison pill for Medicare. The Republicans are 
diverting Medicare funds into risky private drug plans with no maximum 
premiums and no guaranteed coverage in a cynical drive to privatize the 
Medicare program. But they will not allow a vote to prevent the 
privatization of Medicare.
  Pill number three is a privacy piracy. The Republicans allow the 
pharmaceutical fat cats to exploit Grandma and Grandpa's sensitive 
medical secrets in marketing schemes without their knowledge or 
consent, and they will not allow a vote to protect that privacy, which 
is inside of the Democratic bill.
  ``GOP,'' it used to stand for ``Grand Old Party.'' ``GOP'' now stands 
for ``get old people.'' Vote ``no'' on the Republican plan tonight.
  Mr. TAUZIN. Mr. Speaker, I yield myself 30 seconds.
  Mr. Speaker, how dare any of the Members suggest they love their 
mothers and fathers more than we love our mothers and fathers. How dare 
they suggest that we dislike our grandparents and would feed them 
bitter pills, and get them. How dare they make that suggestion.
  My mother is alive because of Medicare. Medicare saved her life not 
once but three times. We are here to fight for Medicare and to improve 
it tonight, Republicans and Democrats alike. They have a different plan 
than us, but we all love our mothers and fathers. We all love our 
grandparents. How dare they suggest otherwise.
  Mr. Speaker, I yield 1 minute to my friend, the gentleman from 
Michigan (Mr. Upton).
  Mr. UPTON. Mr. Speaker, I thank the gentleman for yielding me the 
time.
  Mr. Speaker, I am pleased that we are moving forward tonight with a 
very important bill for our Nation's seniors, our moms and dads and 
health professionals who care for them.

                              {time}  0045

  No senior should be forced to forego needed medications, take less 
than the prescribed dose or go without necessities in order to afford 
life-saving medication.
  The bill before us tonight will provide much-needed comprehensive 
Medicare, prescriptive care for all seniors who elect to participate. 
For those who can least afford their prescriptions, Medicare will cover 
a hundred percent of these premium deductibles.
  In addition to modernizing Medicare by adding a prescription drug 
benefit, the bill before us tonight will also help to ensure that 
Medicare beneficiaries continue to have ready access to high-quality 
community-based health care services.
  The bill fixes flaws in the Medicare prescription fee schedules that 
are resulting in significant unintended cuts in physician payments. It 
also improves hospitals and skilled nursing homing reimbursement, 
eliminates a scheduled 15 percent cut in home health payments, puts a 
moratorium on the cap on physical therapy reimbursement, and takes a 
good first step in improving reimbursement for ambulance services.
  It is a good bill. I urge my colleagues to votes yes.
  Mr. DINGELL. Mr. Speaker, I yield 1\1/2\ minutes to the distinguished 
gentleman from Texas (Mr. Green).
  Mr. GREEN of Texas. Mr. Speaker, I thank my ranking member from 
Michigan for yielding me time.
  It is hard to say in one and a half minutes how much is wrong with 
this piece of legislation. We should have the opportunity to debate 
alternatives to correct the problems, but the tyranny of the majority 
makes that mockery of democracy.
  There is one major glaring problem that should be mentioned: the 
gaping hole in the coverage of the drug costs that exceed $2,000. If a 
senior has a $300 monthly drug bill, they can expect to lose their drug 
coverage halfway through the year. But they will have to keep paying 
month after month for the rest of the year until they reach that 
catastrophic limit.
  Another problem is, if seniors have other coverage from an employer 
or maybe some help from their church or a charitable organization, 
these contributions will not count as out-of-pocket expenses for that 
senior. So that is wrong with the bill.
  There is another major disincentive for employers to provide retiree 
health care. It will further erode what little health care coverage we 
have left in our country.

[[Page 11967]]

  Diabetes is a major illness for seniors. This bill, granted, covers 
insulin, but it does not pay for the syringes. So those seniors have to 
pay to inject the insulin we will give them. What kind of sense does 
this make?
  Mr. Speaker, there are so many problems with this legislation we 
should be allowed our alternative, providing a meaningful prescription 
drug benefit, but the Republican majority again is afraid to allow 
amendments to pass.
  My Republican colleague from Iowa said that their bill is a bird in 
the hand, but seniors, when they find out what this bill does, will be 
left with only bird droppings in their hands.
  Mr. TAUZIN. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, the seniors of Texas will receive $1.9 billion in 
Medicaid savings under this bill; and 55 percent of them will have 
subsidized premium coverage. That is not bird droppings.
  Mr. Speaker, I yield 1 minute to my friend, the gentleman from 
Pennsylvania (Mr. Gekas).
  Mr. GEKAS. Mr. Speaker, I thank the gentleman for yielding me time.
  There is an extra benefit that is being conferred by passage of this 
bill and that is to our veterans. Veterans are experiencing two 
phenomena that we can help remove here tonight. One is the higher cost 
of medications that they are experiencing, of course. All seniors will 
benefit from that. But there is another idea that we have to shake away 
from the existing scene about our veterans and that is the long waiting 
lines that they are experiencing at the VA hospitals.
  In our central Pennsylvania area, some 6,000 are waiting to see a 
doctor in waiting lines, and their medications that will be prescribed 
are not waiting for them because of the long lines and because of the 
high costs of medication. Strike a blow here for your veterans as well 
as the other seniors by passing this legislation, reducing the cost of 
prescriptions to our veterans and reducing the long lines that they are 
now facing in and even waiting to see a doctor at VA hospitals for the 
purpose of medication.
  Waiting lists at veterans hospitals across the country are growing. 
In central Pennsylvania alone there are over 6,000 veterans waiting to 
be seen. Nearly 70 percent of these veterans are rated as category 
seven by the VA, meaning that they have no service connected 
disability. In fact, the vast majority of them are seeking a meeting 
with a VA doctor solely in order to receive assistance with their 
medications. They are seeking help because of the high cost of their 
medications or because their health plan discontinued their pharmacy 
benefits.
  Our new Medicare prescription drug benefit will reduce out-of-pocket 
drug expenses for Americans by 25-30 percent. That savings may help 
veterans in central Pennsylvania opt out of the long waiting lines at 
the veterans health care facilities in Lebanon, Camp Hill, Berks, 
Pottsville, and others. Veterans will be able to switch from their 
veterans plans to the plan we vote on today without penalty.
  I have visited with VA officials in my district to discuss the 
problem of lengthening waiting lists. At the Lebanon VA hospital, I was 
told that nearly 1,800 veterans still wait to be seen by a doctor. Of 
those waiting, 65 percent are category seven and most likely waiting to 
get assistance with medication. I commended the caring individuals who 
run that acclaimed facility for providing outstanding healthcare. The 
Lebanon VA hospital has, in fact, received the highest patient 
satisfaction scores of all VA medical centers across the Nation. But I 
had to agree with them that we do not want to see these quality 
institutions simply turned into pharmacies. Furthermore, we do not want 
to see long lines of patients waiting to see a VA doctor when a drug 
plan that reduces their drug expenditures would work just as well.
  One of the great benefits to come from passage of this prescription 
drug coverage bill will be the relief provided to veterans and VA 
hospitals. Vets will be able to choose this new drug coverage plan and 
opt out of the long lines at VA hospitals. Veterans who need help 
purchasing their medication will get real relief. Those who are waiting 
inordinate lengths of time on waiting lists to see a doctor at there 
local VA hospital may look forward to shorter waits and prompter 
services. Our veterans deserve no less.
  Mr. DINGELL. Mr. Speaker, I yield 1\1/2\ minutes to the distinguished 
gentleman from Ohio (Mr. Strickland).
  Mr. STRICKLAND. Mr. Speaker, we need to tell the full truth about 
veterans and prescription drugs. This administration has raised the co-
pay for medications that veterans get at our VA facilities from $2 to 
$7 per prescription, a $250 increase. That is the fact.
  Mr. Speaker, the assets test provided under the Republican plan makes 
a mockery of one of the key objectives of the Medicare prescription 
drug benefit, to prevent senior citizens from having to pauperize 
themselves to get the drugs they need. Think what this means.
  It means that a frail elderly woman who qualifies for a handicapped 
sticker on her car because she cannot walk a short distance cannot keep 
a car that she cannot be confident will not break down on the highway 
if she wants to qualify for the assistance she needs to get the drugs 
her doctor prescribes.
  It means that a spouse who has managed to buy a burial plot, a burial 
plot so that they can lie for eternity next to a husband or wife may 
have to sell that plot to get the prescription drugs they need to 
survive. For shame.
  Those of you who want to give a death tax elimination for the multi-
millionaires in this country have no problem with requiring grandma to 
give up her burial plot in order to qualify for the assistance under 
this plan. You ought to be ashamed of yourselves.
  Mr. TAUZIN. Mr. Speaker, I yield myself 15 seconds.
  That claim is disingenuous. Section 1902 allows the States to waive 
that means test. There is an additional section, 1115 waivers are also 
allowed for the States, and they can waive that means test any time 
they want to.
  Mr. Speaker, I yield 1 minute to the gentleman from Pennsylvania (Mr. 
Greenwood), the distinguished chairman of the Subcommittee on Oversight 
and Investigations of the Committee of Energy and Commerce.
  Mr. GREENWOOD. Mr. Speaker, I do not have a single new thing to say 
about this issue because it has all been said over and over again. But 
as I have been sitting listening to the debate for these last 2 hours 
and looking at it and listening to the howling and the shrieking and 
the bellowing and the clattering of pans, I could think of nothing more 
than the ancient times when there was an eclipse; and as the sun was 
eclipsed the ancients ran out and made some noise.
  For decades, the Democrats claimed to be the party that represented 
and cared for the seniors. They did nothing for the prescription drug 
benefit. Finally, our plan is eclipsing their stature; and they cannot 
stand it; and they are bellowing and howling. When the sun comes up 
tomorrow morning, we will have passed the first prescription drug plan 
in the history of this program. The howling will silence, and the 
seniors will have something to be proud of. And I am proud of you, Mr. 
Speaker.
  The SPEAKER pro tempore. The gentleman from Louisiana (Mr. Tauzin) 
has 10 minutes remaining. The gentleman from Michigan (Mr. Dingell) has 
15 minutes remaining.
  Mr. DINGELL. Mr. Speaker, I yield 30 seconds to the distinguished 
gentleman from Ohio (Mr. Strickland).
  Mr. STRICKLAND. Mr. Speaker, I would like to speak to the chairman of 
the committee. He says that the States can waive this requirement. In 
fact, they can not. The asset test was placed under title 18. The 
States are not able to waive this requirement under this bill.
  Mr. TAUZIN. Mr. Speaker, I will yield myself 15 seconds to indicate 
again that our information is the States have the power to exercise the 
waivers under this bill.
  Mr. Speaker, how much time is remaining on each side?
  The SPEAKER pro tempore. The gentleman from Michigan (Mr. Dingell) 
has 14\3/4\ minutes remaining. The gentleman from Louisiana (Mr. 
Tauzin) has 9\3/4\ minutes remaining.
  Mr. DINGELL. Mr. Speaker, I yield 1\1/2\ minutes to the distinguished 
gentlewoman from Colorado (Ms. DeGette).
  Ms. DeGETTE. Mr. Speaker, with this bill Congress should be keeping a 
solemn promise to our seniors. But what the Republicans are doing is 
giving simply a fig leaf instead.
  This proposal covers only about 20 percent of the expenses that 
seniors

[[Page 11968]]

will incur for prescription drugs in the next 10 years. Well, the 
Republicans say we are operating under budget constraints. We cannot 
afford to pay the 80 percent of the costs that the Democratic 
alternative would have offered had we been able to offer it. Why? Why 
do we have these budget constraints? Because their priority is not to 
give relief to the 40 million Americans who need the relief but to give 
it to the 500,000 of the very wealthiest Americans who want estate tax 
relief.
  Take a look at this chart. Here is the number of seniors who need 
this prescription drug plan and need a thorough plan, 35 million. Here 
is the number of people who will benefit from the Republican estate tax 
cut that they passed a few weeks ago and that caused the budget 
constraints which are preventing us from passing a real benefit.
  The seniors of America need to know this is why we cannot give 
grandma and grandpa their drugs. It is not because God came down and 
gave us these constraints. It is because the Republican caucus gave 
them to us.
  Let me answer one more thing. Mr. Strickland says that grandma and 
grandpa will not be able to buy their burial plots because of the 
assets test. That is under Medicare. That cannot be waived under title 
18 by the State. It is nonwaivable.
  Mr. DINGELL. Mr. Speaker, I yield 1\1/2\ minutes to the distinguished 
gentleman from New York (Mr. Engel.)
  Mr. ENGEL. Mr. Speaker, I thank the ranking member for yielding me 
time.
  The fact of the matter is that the bill that we are debating today is 
inadequate because there is inadequate funding for the bill; and the 
reason there is inadequate funding for the bill is, as the previous 
speaker pointed out, all the money has been used up with tax relief for 
the very wealthy in this country, $1.6 trillion worth of tax relief for 
the very wealthy people in the country. So, of course, when it comes to 
a prescription drug benefit we do not have enough money to provide a 
real meaningful plan.
  We would like to debate the Democratic bill along with the Republican 
bill here, but we were denied the opportunity. So we do not have the 
ability to show why our plan is better.
  The fact of the matter is, our plan is better. It will cover more 
seniors. It will give an entitlement under the Medicare program which 
is really what seniors want.
  The bill we are debating today does not provide any real guaranteed 
benefit and simply, in my opinion, lays the groundwork to eventually 
privatize Medicare. The bill does not contain the entitlement to a 
defined benefits package as provided in the rest of the Medicare 
program. It only promises that seniors can shop for some kind of 
coverage undefined either through private insurance plans or Medicare 
HMOs. The bill does not contain, again, any defined premium or 
assurances that prescription drugs will be affordable; and it will 
cover less, and listen to this, it will cover less than one-fifth of 
the estimated drug costs of Medicare beneficiaries over the next 10 
years. There is a large gap in the coverage.
  Seniors who needs more than $2,000 worth of the drugs in the calendar 
year must pay for 100 percent of their drugs until they reach $3,700. 
So what we are seeing here is a woefully inadequate bill, and it is an 
indication where sometimes when you have something it is worse than 
having nothing.
  Mr. TAUZIN. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, this bill that has been described as so terrible will 
give to the State of New York $4.5 billion of Medicaid savings. It will 
cover 51 percent of New York seniors with subsidized premiums paid for 
by the government and will provide safety net hospitals in New York 
with nearly 90 million new dollars. What a terrible bill.
  Mr. Speaker, I yield 2 minutes to the gentleman from Texas (Mr. 
Barton), the distinguished chairman of the Subcommittee on Energy and 
Air Quality of the Committee on Energy and Commerce.
  Mr. BARTON of Texas. Mr. Speaker, I want to thank my distinguished 
chairman and simply tell him I am glad to be on the floor backing him 
up, and I look forward to tomorrow delivering one of his famous 
cookbooks to one of my dearest friends down in Texas who has indicated 
to me you need to be backed up tonight with great, great enthusiasm.
  I would like to tell my good Democratic friends that I agree with 
them on one point, and that is the fact that the rule should have 
allowed you to offer your substitute. I think it would have been a neat 
trick to have almost to a person voted against an increase in the debt 
ceiling of $450 billion and then turn right around and voted for a $1 
trillion expansion of a brand new entitlement program 2 hours later.

                              {time}  0100

  I think this is a good bill. The provider part of it is almost 
universally supported. I think the prescription drug benefit is a good 
start. I think it could be improved.
  I would like at some point in time to have the ability to offer the 
additional option of a prescription drug savings account. Many in my 
district, over two-thirds of the seniors that I have talked to, have 
said that they would probably opt for some sort of a drug savings 
account if they were given that option, and I hope that later this year 
we could do that.
  This bill that is before us for over half of the seniors in this 
country would pay nothing for prescription drugs except a small 
copayment for the specific drug that they had to use, and I would point 
out that prescription drugs for most of our seniors are not of a 
catastrophic nature. They are of a chronic nature. They are to treat 
heart disease or to treat high blood pressure or cholesterol. They are 
something they have to take to have a lifestyle that we want them to 
have.
  So I think my idea of a prescription drug savings account would give 
them a lot of options to do that, and again, I hope that we have the 
opportunity to offer that at some point in time.
  To start the ball rolling, I agree that this bill is a good start and 
hope we will vote for it later this evening.
  Mr. DINGELL. Mr. Speaker, I yield 2 minutes to the distinguished 
gentlewoman from California (Mrs. Capps).
  Mrs. CAPPS. Mr. Speaker, I thank the ranking member for yielding time 
to me; and, Mr. Speaker, for seniors in my district, there is no issue 
more important than prescription drug coverage, but the bill before us 
will not offer my seniors what they need.
  First, it entices insurance companies to offer the drug coverage 
plans. In fact, it gives them the money without any guarantee of a 
benefit for seniors. Medicare+Choice has shown us that just relying on 
private insurance companies does not work.
  Second, under the majority's proposal, as a senior's drug costs 
increase, their benefits decrease. In fact, once a senior's costs 
exceed $2,000, a senior has to spend another $2,900 on their 
medications before they will get any help.
  This chart here, the GOP plan, shows a calendar for seniors. Many 
seniors in my district pay $400 a month. This senior paying $400 a 
month will get no benefit during the first month while he is paying his 
deductible; but then he will get a benefit, February, March, April and 
May. Unfortunately, then he reaches that $2,000. No more benefit for 
this senior for the entire rest of the month, and we call this is a 
drug benefit for our seniors? This is the plan we are voting on tonight 
because we have no alternative.
  We are not allowed to bring a plan that our side has developed that 
would offer affordable, reliable prescription drug coverage for all 
under Medicare. For our $25 premium, $100 deductible, seniors would get 
80 percent coverage of all their medications. This person during this 
time of having no coverage is not allowed to rely on a church who wants 
to step to their aid or family members or if they have a pension plan 
because of their services, they cannot use that.
  This plan is the one that we must vote ``yes'' or ``no'' on tonight. 
We do have many alternatives. The one we wanted to put up would be a 
good and fair plan. No opportunity to do that because the majority is 
so afraid that

[[Page 11969]]

they will lose the opportunity to do the things that they know in their 
hearts they should do for this Greatest Generation. We owe our seniors 
a better plan than this one.
  Mr. TAUZIN. Mr. Speaker, would the Chair again advise us how much 
time remains on each side?
  The SPEAKER pro tempore (Mr. Thornberry). The gentleman from 
Louisiana (Mr. Tauzin) has 7\1/2\ minutes remaining. The gentleman from 
Michigan (Mr. Dingell) has 9\3/4\ minutes remaining.
  Mr. TAUZIN. Mr. Speaker, I am pleased to yield 1 minute to the 
distinguished gentleman from New Jersey (Mr. Ferguson).
  Mr. FERGUSON. Mr. Speaker, I thank the chairman for yielding me the 
time.
  We have heard a lot tonight about facts and figures and partisan 
rhetoric and attacks and misrepresentations. Some of our colleagues on 
the other side of the aisle earlier tonight suggested that we talk 
about or focus on senior women. I would like to do that for a second, 
one in particular, my mother.
  My mother, Roberta, was diagnosed almost 5 years ago with cancer, 
deadly form of cancer, should have been dead by now. She is alive 
today, thank God, because she has had access to good medical care and 
prescription drugs that have saved her life. Why is that so important? 
Because without it, she never would have met her grandkids. Our kids, 3 
and 2 years old, she never would have met them. Thank God she had 
access to these life-changing, life-saving products, because of 
scientists and researchers and companies who invest hundreds of 
millions of dollars, indeed billions of dollars, to find the miracle 
cures of tomorrow.
  We have to make these miracle products affordable and accessible to 
everyone because our seniors are too important to let this opportunity 
sneak by. Our grandmothers want to meet their grandkids. Let us make it 
happen. Pass this plan tonight.
  Mr. DINGELL. Mr. Speaker, I yield 1 minute to the distinguished 
gentleman from Maine (Mr. Allen).
  Mr. ALLEN. Mr. Speaker, I thank the gentleman for yielding me the 
time.
  Mr. Speaker, anyone who has been half awake for the last 2 years 
knows that for Republicans tax cuts for the wealthy are far more 
important than prescription drugs for seniors. In the room upstairs, 
Republicans can call Medicare a Soviet-style program; but down here on 
television, they say they are providing a Medicare benefit.
  The Republican plan relies on private, stand-alone prescription drug 
insurance plans. They do not even exist now, and they probably never 
will. No guaranteed benefits, no guaranteed premium, no guaranteed 
reduction in price. Their plan is an empty promise.
  We have been asked where is our plan. The truth is my colleagues will 
not let us vote on it. Why? Because they know that a real Medicare 
benefit would reduce prescription drug prices. That is not acceptable 
to the pharmaceutical companies, so it is not part of the Republican 
bill.
  Many Americans may be confused by this debate. All these numbers, 
estimates, projections. Just remember that Republicans get most of the 
money from HMOs and pharmaceutical companies. This bill is great for 
them, but it is a fraud on America's seniors.
  Mr. TAUZIN. Mr. Speaker, I am pleased to advise the great citizen of 
Maine that their citizens, their seniors, 40 percent of them will get 
subsidized and mostly fully subsidized premium coverage under this 
bill.
  Mr. Speaker, I am pleased to yield 1 minute to the distinguished 
gentleman from Tennessee (Mr. Bryant), a member of the Committee on 
Energy and Commerce.
  Mr. BRYANT. Mr. Speaker, I thank the chairman for yielding me the 
time, and I thank the chairman for making a priority of our committee 
to bring forth this first prescription drug benefit that is going to be 
available to people eligible for Medicare.
  I think it is a good bill. It offers low-cost drugs. I think it 
guarantees insurance coverage, and it is all done in a fiscally 
responsible way. It fits within our budget, and I thank again the 
chairman for doing this.
  I know our folks in Tennessee, we have about 700,000 senior citizens, 
and about 45 percent of those senior citizens will be eligible for 
virtually cost-free drugs under this plan; and I know those citizens in 
Tennessee that are dual eligible, that are covered, are qualified both 
in Medicare and Medicaid, that would result in, when this program picks 
up those people from the State, in a savings of about $565 million over 
the years 2005 to 2012.
  So, Mr. Speaker, again I commend the gentleman from Louisiana (Mr. 
Tauzin) for bringing forth this very good bill and making it a priority 
of this Republican Congress to give us our first-ever prescription drug 
benefit in the Medicare system outside the hospital.
  Mr. DINGELL. Mr. Speaker, I yield 1\1/2\ minutes to the distinguished 
gentleman from Illinois (Mr. Phelps).
  Mr. PHELPS. Mr. Speaker, I want to thank the gentleman for what he 
has done in the leadership in this particular subject that has brought 
us here tonight.
  I rise in opposition to this plan and sadly because the rhetoric I 
guess tonight comes to an end. After promises from both sides of the 
aisle and those who have run an election for the last several years who 
promised to do something on this particular subject, we fall short and 
it is sad because I wanted to come to this body to have a true, fair 
debate on subjects of great priority like this, not to debate at 1:00 
a.m. in the morning where we hide things from people, to say just one 
plan is the best plan, it is the only plan. That is not what we are 
about.
  I am not here to promote adversity. I do not want conflicts. I want 
us to come together in a bipartisan manner to try to solve the very 
best of all plans, not just say one plan is the only plan, and say, 
Illinois, that I know that the gentleman is about to quote how many 
millions of dollars we are going to receive and help, but what could we 
have received? That is the question. Those people out there, 
constituents that I represent, will never know until the true light of 
day is shed on my colleagues' plan, and that is what we intend to do.
  They have limited us to debate here tonight, trying to get one side 
of our plan more clear, under handicap conditions. That is not what we 
are about. That is not why we were elected, to have one party or a 
majority party have the only plan to make it deceptively look like it 
is a positive plan.
  That is why we are here tonight, to debate the best, the most 
priority issue in the Nation, not in the wee hours in the morning just 
one plan, but a fair plan for all the best of all plans.
  Mr. TAUZIN. Mr. Speaker, I am pleased to let my friend know that the 
great State of Illinois will get a great fair share of this bill, about 
$2 billion in Medicaid savings, and about half a million of his senior 
citizens will get totally free premiums for their Medicare premium drug 
insurance coverage. That is a pretty good deal, pretty fair.
  Mr. Speaker, I am pleased to yield 1 minute to the gentleman from 
Indiana (Mr. Buyer), a distinguished member of the Committee on Energy 
and Commerce.
  Mr. BUYER. Mr. Speaker, it took me 3 years to redesign the pharmacy 
benefit of military health delivery system. As the only Member of this 
body in this Congress to offer a prescription drug bill that has been 
passed and signed into law, I want to share a few observations.
  Number one, I want to thank the gentleman from Hawaii (Mr. 
Abercrombie) because we worked in a bipartisan fashion, something that 
has not occurred here.
  Secondly, we were able to modernize a program without dulling the 
cutting edge of new prescription drugs.
  Missing from this debate is the celebration of capitalization, a free 
enterprise system that avails the great minds of the world, the 
incentives to form at-risk entities to push the bounds of modern 
medicine and pharmacology to the benefit of our people and the 
improvements in their quality of life.
  Please do not demonize these scientists and those in the medical 
community. Americans are living longer

[[Page 11970]]

with many chronic illnesses. Why? Because modern medicine and the best 
health care system in the world is giving them that chance. Access to 
these drugs is what is important. That is what the Republican drug plan 
is going to do.
  Please vote for this bill.
  Mr. BROWN of Ohio. Mr. Speaker, I yield 1 minute to the gentlewoman 
from Florida (Mrs. Meek).
  Mrs. MEEK of Florida. Mr. Speaker, first of all, this bill tonight, I 
have listened very carefully. It is a relief act for the insurance 
industry. That is what it is.
  Also, the Republican plan is not a fair plan. It is not going to help 
all seniors. Think about that. That is the fact. It does not cover 
them. There is no real guarantee at all, and many of them keep getting 
up and saying this is the first plan. That is all they want to go out 
and say, this is the first plan. It does not mean anything except it is 
the first ever, and it is not worth doodley squat. So they run with 
that.
  So we have got to think of three things. It will not cover all the 
seniors. Imagine this, seniors having to run around, trying to shop 
around and find a plan. That is a big hassle for older Americans. They 
cannot contend with all these various insurance plans that come and go. 
We do not know how the model is going to work. Those of us who have 
been around, we know it did not work in 1965; and this is just another 
part of it. It is not going to work now.
  We should be sure tonight to vote against this relief act for the 
insurance agencies.
  Mr. TAUZIN. Mr. Speaker, I yield myself such time as I may consume.
  I am pleased to let my dear friend, the gentlewoman from Florida 
(Mrs. Meek), know that the poor seniors in her State, over 1 million of 
them, will get free insurance drug coverage under this bill. That is 42 
percent of her seniors and the State will get $3.1 billion of Medicaid 
assistance.
  Mrs. MEEK of Florida. Mr. Speaker, will the gentleman yield?
  Mr. TAUZIN. I yield to the gentlewoman from Florida for 15 seconds 
only.
  Mrs. MEEK of Florida. Mr. Speaker, I did not say poor seniors. I said 
all seniors.
  Mr. TAUZIN. Mr. Speaker, I am saying all seniors are going to get 
helped, but the poorest will get totally free insurance coverage.
  Mr. Speaker, I yield 2 minutes to the distinguished gentleman from 
Kentucky (Mr. Fletcher), a new member of the Committee on Energy and 
Commerce.
  Mr. FLETCHER. Mr. Speaker, again, prescription drugs for our seniors 
is probably the most pressing health care issue that we face, and I 
want to thank the chairman of the Committee on Energy and Commerce for 
his leadership in bringing this to the floor, a plan that is 
reasonable, responsible and doable, unlike a plan that was brought up 
in our committee and will be brought up in the recommit motion. That is 
a plan that scores out at $973 billion with absolutely no way to pay 
for it.

                              {time}  0115

  That means you are either going to have to increase taxes on our 
children, grandchildren or you are going to have to take it from 
education, national security, homeland security, or Social Security. 
Those are the only choices you have.
  Let me talk just briefly. Two years ago there was a $303 billion 
prescription bill plan. Who supported that? Virtually every single 
Democrat supported that. What happened this year? I think they have had 
an election year epiphany. All of a sudden, it is an election year; and 
we need three times as much money for it to be a reasonable plan. Is it 
not amazing that when we offer a plan that is reasonable, doable, it 
will be a plan that will provide benefits for every senior?
  Let me talk about Kentucky. There are 615,000 Medicare beneficiaries 
that will receive help with this. Fifty percent of those in Kentucky 
are at 175 percent of the poverty level or below, which means they will 
be subsidized. It means $459 million for Kentucky. We are a small 
State, but $459 million for Kentucky, and those dual eligible for 
Medicare and Medicaid will get help. We are having trouble meeting our 
budgetary needs, so this bill is the right kind of a bill. It is a 
responsible bill, it is a reasonable bill, it is a doable bill, and 
they thought it was 2 years ago, but now in an election year, no, it is 
not enough.
  I think we need to lay aside election-year politics, pass this thing 
on a bipartisan basis, and let us do what our seniors need, provide 
them a prescription drug bill and help for our States.
  Mr. BROWN of Ohio. Mr. Speaker, I notice that my friends on the other 
side of the aisle talk about giving free coverage to poor seniors 
except for the $2,700 out of pocket they would have to pay under the 
Republican private insurance plan.
  Mr. Speaker, I yield such time as she may consume to the gentlewoman 
from Missouri (Ms. McCarthy).
  Ms. McCARTHY of Missouri. Mr. Speaker, I am in opposition to the 
measure before us and in support of the Democrat alternative that was 
denied.
  I rise today in opposition to H.R. 4954, the Medicare Modernization 
and Prescription Drug Act of 2002. This ``Insurance Company Protection 
Act'' will not provide an affordable and dependable benefit for 
seniors. The Democratic substitute, which is being denied consideration 
by Republican leadership, provides comprehensive prescription drug 
coverage and savings to employers.
  The ``Insurance Company Protection Act'' is an effort to privatize 
Medicare. This bill shifts $68 billion in health care costs onto 
employers, by designing the benefit so that private plans are required 
to cover prescription drug costs. As a result of this increase in costs 
for employers, the Congressional Budget Office (CBO) estimates that one 
third of seniors in employer sponsored retiree plans will be dropped, 
leaving three million seniors who currently have employee based retiree 
coverage owing more for prescription drugs after this law is enacted.
  The ``Insurance Company Protection Act'' threatens our local 
pharmacies. With myriad medications, seniors rely on their local 
pharmacists for advice and help in the management of their 
prescriptions. This legislation does not allow any pharmacy to be 
applicable for the prescription drug program, breaking many long 
standing relationships between pharmacist and patient.
  Instead of shifting costs onto employers and seniors losing their 
coverage, the Democratic proposal offers a universal benefit with a $25 
a month premium, $100 a year deductible, 80 percent of costs paid by 
Medicare, and a $2,000 out of pocket limit per beneficiary per year. It 
provides low income subsidies to ensure that every senior can afford to 
participate in the Medicare Prescription Drug Plan. In addition, 
physicians would have received a true solution to the Medicare payment 
problems that threaten the program today.
  The Rules Committee had an opportunity to produce a bill that 
provides sufficient drug coverage for our seniors by allowing a vote on 
the Democratic substitute. Instead, the House will vote on a plan set 
by industry, the ``Insurance Company Protection Act,'' that provides no 
entitlement under Medicare, an inadequate and ill defined benefit, and 
no equality for seniors in different parts of the country. Seniors 
cannot even be assured that the drugs they are prescribed will be 
covered, or that they will be able to continue their trusted 
relationship with their pharmacist. With these provisions, it is not 
difficult to understand why every senior group opposes the bill before 
us. I urge my colleagues to vote against the Medicare Modernization and 
Prescription Drug Act.
  Mr. BROWN of Ohio. Mr. Speaker, I yield 1 minute to my friend, the 
gentleman from Washington State (Mr. Inslee).
  Mr. INSLEE. Mr. Speaker, why should the senior citizens of America 
have to settle with a big gamble about whether they are going to get 
prescription drugs? Why should they have to gamble that maybe, maybe an 
insurance company will show up when no insurance companies exist on the 
face of this planet today to provide this service?
  When one thinks about this, the Republican plan does not provide 
drugs. It provides a pair of dice to roll, and that is not good enough 
for senior citizens. Now, you do provide them a chance maybe some of 
them will get prescription drugs, but this generation has taken enough 
chances. It took chances on Omaha Beach, it took chances on Iwo Jima, 
and it should not have to

[[Page 11971]]

have a crapshoot to see whether or not they are going to be able to get 
prescription drugs, and one would think after the abject failure of 
Medicare+Choice that you would not place your bets on a horse that has 
gone lame all over this country time and time again.
  Mr. Speaker, we ought to reject this pathetic excuse and pass a real 
meaningful Medicare plan.
  Mr. BROWN of Ohio. Mr. Speaker, I yield 1 minute to the gentleman 
from Texas (Mr. Turner).
  Mr. TURNER. Mr. Speaker, we have had a lot said on this floor 
tonight, but what really is going to count is what is said when we get 
out there talking to those seniors that we are trying to help here 
tonight.
  I traveled all over my district and collected pill bottles from those 
seniors, and I know how they feel, and they are going to ask some tough 
questions of us. If this plan passes, they are going to want to know 
and they are going to hand me that list of medicines they have been 
prescribed by their doctor and they are going to ask, are these 
medicines going to be covered under this plan? And if you give them an 
honest answer, you are going to have to say, I do not know, because you 
do not know.
  They are going to say, how much is the premium going to be for this 
plan? If you give them an honest answer, you are going to say, I do not 
know. That is going to depend on what the insurance company that is 
going to carry this plan is going to charge you.
  Then they may look at you and say, well, can I get this plan at my 
local pharmacy? You know the answer to that one. The answer is no. You 
are going to have to get it through mail order.
  And if you look at them again and they say, this does not sound like 
too good a program, how do I know that this program is going to be 
there? The answer is you do not know because those Medicare HMOs have 
not been there for our seniors.
  So I think what we have got to do tonight is be honest with our 
seniors and tell them we are passing a sham tonight, a sham that means 
nothing to these seniors, and what we have got to do is pass a real 
plan, a real Medicare plan for our seniors.
  Mr. BROWN of Ohio. Mr. Speaker, I yield 1\1/2\ minutes to the 
gentlewoman from New York (Mrs. Lowey).
  Mrs. LOWEY. Mr. Speaker, I rise in strong opposition to this bill. 
The skyrocketing cost of prescription drugs is a bitter pill to 
swallow, and the Republican leadership's refusal to let us consider the 
Democratic proposal is simply bad medicine for America's seniors.
  My colleagues, last year, I conducted a study which showed that 
seniors in Westchester County are paying from 57 percent to 128 percent 
more than their counterparts in six foreign countries for the five 
drugs most commonly used by seniors in the United States. It also 
revealed that three medications frequently prescribed to seniors 
increased in price by at least twice the rate of inflation.
  These statistics reveal to us over and over again the depth of the 
problem, which is growing worse by the day. Clearly, America's seniors 
deserve more than a hope and a prayer when it comes to ensuring their 
health and well-being.
  The bill under consideration would, unfortunately, not guarantee 
benefits for seniors. Instead, it would pay subsidies to insurance 
companies in the hopes that they will establish drug-only insurance 
plans for Medicare beneficiaries. Under the Democratic plan, which we 
were not able to really debate this evening, Medicare would provide 
voluntary prescription drug coverage for all Medicare beneficiaries.
  It is simply unconscionable that the Republicans are denying us a 
vote on the Democratic bill because perhaps they feel their Members 
will join us in voting for a real prescription drug benefit.
  I also note that congressional action on provider payment increase 
and protections for Medicare-Plus Choice is long overdue.
  Let us vote for a real plan. Let us have a real debate. Let us vote 
down this bill.
  Mr. BROWN of Ohio. Mr. Speaker, I yield the balance of my time to the 
gentleman from Michigan (Mr. Dingell), who will explain why the 
Democratic plan is written for America's seniors and the Republican 
plan is written by and for America's drug companies.
  The SPEAKER pro tempore (Mr. Thornberry). The gentleman from Michigan 
(Mr. Dingell) is recognized for 2\1/2\ minutes.
  Mr. DINGELL. Mr. Speaker, I am Mr. John Dingell. My dad was the 
original author of Medicare. He wrote it for and under Harry Truman's 
guidance and tutelage. It was a great piece of legislation. It took us 
10 years to get it enacted into law. I sat in the Chair when we passed 
it. The Republicans, after years of fighting it, finally came along and 
supported it because they saw the handwriting on the wall.
  I know Medicare, and this fraudulent proposal that is before the 
House is not Medicare. What it is is a subsidy for the insurance 
companies. We give a pile of money to the insurance companies that they 
can spend any way they want.
  The counsel of the committee was inquired of by me for about 20 
minutes. He could not tell us of any constraints on the insurance 
companies or any rights of the insured that would be protected under 
this Republican legislation.
  That is why this is bad legislation. The insurance companies can take 
this money and spend it any doggone way they want, dividends, or they 
can give it in corporate executive salaries and bonuses. That is why it 
is a bad bill.
  The Democratic bill is a very simple bill. What it does is it says, 
you pay $25 a month, you get 80 percent of your prescription 
pharmaceuticals paid for by the government, and you pay 20 percent of 
the cost yourself. Very simple, very understandable, very plain. No 
great big donut hole, no disqualifications for having your expenditures 
counted, and you get your benefits all year round. Not like this sorry 
mess that my Republican colleagues would foist upon our senior 
citizens.
  This is a bad proposal. This is a bad process. This is a situation 
where we do not get an honest chance to either offer an amendment or 
see to it it is properly explained.
  But I would note one thing. Every honest senior citizen organization 
in the United States says this Republican bill is a bad bill, and AARP 
says it needs significant improvement before they can support it.
  We want to give the American senior citizens Social Security in good 
form, Medicare in proper form, and a Medicare benefit which will take 
care of their needs for prescription pharmaceuticals when they come. No 
longer should we have a situation where American senior citizens have 
to decide whether they are going to pay their rent or whether they are 
going to eat or whether they are going to get their prescription 
pharmaceuticals. That is wrong.
  Our bill corrects that. The Republican bill does not. Vote against 
their bill. Vote for the motion to recommit and my colleagues will 
serve their constituents well, especially their seniors.
  Mr. Speaker, I include for the Record a letter written to the 
gentleman from Louisiana (Mr. Tauzin) from AARP, which was referred to 
earlier.

                                                         AARP,

                                                    June 18, 2002.
     Hon. W.J. Tauzin,
     Chairman, Committee on Energy and Commerce, U.S. House of 
         Representatives, Washington, DC.
       Dear Chairman Tauzin: Thank you for your initiative to move 
     legislation through the House this year that will address the 
     important need for prescription drug coverage in Medicare. As 
     you know, AARP's top priority is available and affordable 
     prescription drug coverage for all Medicare beneficiaries.
       Our members, and virtually all older Americans, need this 
     coverage now. They cannot wait any longer for protection 
     against the increasing costs of prescription drugs.
       We are pleased that your bill makes the voluntary 
     prescription drug benefit permanent and maintains the 
     entitlement nature of the Medicare program.
       The bill contains other favorable components as well. For 
     the approximately 50 percent of beneficiaries who are 
     estimated to

[[Page 11972]]

     have annual prescription drug costs of $2,000 or less in 
     2005, the initial level of coinsurance in the bill should be 
     attractive. Likewise, the financial assistance for low-income 
     beneficiaries with drug costs under $2,000 is vitally 
     important.
       We also appreciate your efforts to contain drug costs 
     because a Medicare drug benefit alone, without effective cost 
     controls will be difficult to sustain as our growing 
     population of older Americans increases its drug utilization. 
     While we want to ensure that cost containment mechanisms 
     result in meaningful savings, it is critical that these 
     mechanisms do not impede access to needed medications.
       More needs to be done to ensure that a final bill provides 
     a benefit of value to our members and a program in which 
     Medicare beneficiaries will enroll. As the process moves 
     forward, the issues of funding adequacy, structure, benefit 
     viability, and other Medicare changes like the home health 
     copay, need to be addressed.
       A voluntary drug benefit must attract broad enough 
     participation to avoid the dangers of risk selection. Our 
     research show that beneficiaries assess the value of the 
     benefit by adding up the premium, coinsurance, and deductible 
     to determine if it is a good buy. The existence of a large 
     coverage gap is a strong disincentive to enrollment. More 
     funds are needed to close this gap and protect the viability 
     of the program.
       Unfortunately, a substantial amount of the already limited 
     funds allocated for a prescription drug benefit have been 
     diverted to pay for provider reimbursement increases. We 
     believe that providers should be paid fairly for treating 
     Medicare patients, but Medicare beneficiaries have waited 
     long enough for relief from high prescription drug costs. 
     Every dollar allocated to ``givebacks'' package means one 
     dollar less for a Medicare drug benefit. We firmly believe 
     that agreement on an affordable Medicare prescription drug 
     benefit should be reached before Congress considers 
     additional provider reimbursement increases.
       Our research also indicates that older Americans are 
     looking for stability and dependability in coverage. 
     Therefore, it is important to ensure that private sector 
     entities will be willing to offer coverage.
       AARP's goal is enactment this year of an affordable 
     Medicare drug benefit that is available to all beneficiaries. 
     This bill requires improvements before our members will 
     provide their support. We want to work with you to assure 
     adequate funding and resolve other issues as the process 
     moves forward and before any legislation is enacted into law.
           Sincerely,
                                               William D. Novelli,
                                       Executive Director and CEO.

  Mr. TAUZIN. Mr. Speaker, I yield myself the balance of my time.
  Mr. Speaker, this debate tonight should not be about politics. 
American seniors have heard all the politics they can stomach. And the 
AARP said it best in their letter. They said, ``Our members, virtually 
all older Americans, need this coverage now.'' What coverage were they 
talking about? They were talking about the coverage in this bill.
  Here is a quote from the AARP, and I am sorry my colleagues are in 
such disagreement with the AARP, but here is their quote. ``We are 
pleased that your bill makes the voluntary prescription drug benefit 
permanent and maintains the entitlement nature of the Medicare 
program.''
  Now this is not also about who loves their mother or father the most 
or their grandparents the most or who is willing to step up to the 
plate and do what they can to make sure that American citizens in their 
senior years have prescription drug benefits. This is about whether or 
not we have a plan that works. We think it does, and the AARP agrees 
with us.
  Now let me make another point. We have heard a lot about the drug 
companies. I want to give my colleagues a Clinton administration 
statistic. The Clinton administration estimated that seniors without 
drug coverage pay 20 percent more for their drugs than anybody else in 
America with drug coverage. This bill will give seniors drug coverage. 
It will reduce the cost of their drugs at the expense of the 
pharmaceuticals.
  We had the courage in the Committee on Energy and Commerce to do 
something our friends on the other side would not do. We got rid of the 
floor that pharmaceuticals will not negotiate below, and we forced the 
pharmaceuticals to spend $18 billion more, lowering the cost of drugs 
by eliminating that floor.
  This is a great bill for Americans. This makes for a great savings on 
the drug bills of moms and dads and grandparents. We ought to vote for 
it tonight.
  Mr. HOYER. Mr. Speaker, This GOP drug bill is nothing but a candy-
coated placebo that fails to cure the problems faced by million and 
millions of senior citizens who are struggling every single month to 
pay for life-saving prescription drugs.
  The American people are just not going to swallow it.
  If the FDA approved a drug that was this untested and unreliable, 
there would be an outcry across this great Nation for immediate 
congressional investigations.
  Three words say it all: It won't work.
  This ideological plan--which depends on private insurance drug only 
policies--even has insurers scratching their heads.
  As Bill Gradison, our former Republican colleague in this House and 
the former head of the Health Insurance Association of America, 
recently said: ``I'm very skeptical that `drug only' private plans 
would work.''
  There's no guarantee insurers will offer drug only policies.
  There's no guaranteed monthly premium. There's no defined benefit for 
seniors. There's no guaranteed access to the drugs you need.
  The only guarantee in this bill is that it would provide inadequate 
coverage.
  Everyone of us knows that the Republican party really wants to 
privatize Medicare.
  This bill is the first step. A few years ago, the majority leader 
even told the Chicago Tribune that he ``deeply resents the fact that 
when I'm 65, I must enroll in Medicare.''
  In sharp contrast, Democrats want to create a plan under Medicare 
that's affordable, guaranteed, universal, and voluntary.
  The only argument that our Republican friends can muster against the 
Democratic plan is cost.
  But these are the same folks who voted to give Enron $250 Million, 
who voted to give a handful of other corporations billions more, who 
voted to eliminate the estate tax on the wealthiest estates in the 
country.
  Vote against this shameless drug bill.
  Let's adopt a plan that gives seniors the drugs they need and 
deserve.
  Mr. UDALL of New Mexico. Mr. Speaker, I rise today in opposition to 
H.R. 4954, the Medicare Modernization and Prescription Drug Act. It's a 
sad day for seniors all across this country and especially in my 
congressional district in New Mexico. It is sad because the Republican 
leadership has decided that the House will only consider their 
pharmaceutical company-backed Medicare prescription drug benefit 
program.
  The majority does not seem to care about making affordable 
prescription drugs available to all of our seniors. Instead, they only 
care about making political capital at the expense, literally, of our 
low income-seniors. For Congress after Congress, Democrats have called 
for making affordable prescription drugs available to seniors. And now 
that the Republicans fear losing their majority, they have brought a 
bill forward that has been industry-bought and industry-paid for.
  The Democrat alternative that we have proposed, and that the majority 
refuses to allow us to debate, has been bought and paid for by the 
American people, many who are seniors that have sent us here to 
represent their interests and not the interests of America's 
pharmaceutical companies. Our bill which has been endorsed by most 
senior advocacy groups would charge a $25 monthly premium and a $100 
deductible and require co-payments of 20 percent up to $2,000. After 
that amount, the government would pay all costs. The Democratic plan 
has no gaps in coverage and low-income seniors are protected under our 
plan. The majority says it is too expensive. Why? Because all the money 
was spent last year on the $1.3 trillion Bush tax cut for the wealthy 
few.
  The Republican proposal is a ridiculous sham that has been introduced 
to fool our senior citizens into believing that they will finally have 
a prescription drug plan under Medicare that works. Republican 
strategists believe that their passage of any drug bill will inoculate 
their candidates against criticism. Even the spokesman for House 
Republicans' campaign committee has been quoted in the Washington Post 
as saying, ``The fact that the House will have passed a prescription-
drug bill will take away the Democrats' ammunition, and will make 
Senate Democrats look worse for failing to pass it.''
  Are you kidding me? This shouldn't be about politics. It should be 
about policy. Prescription drugs are nothing more than a political game 
to the majority. Frankly, this is slap in the face to every American 
senior and not to mention insulting.
  My poor constituency in New Mexico cannot afford the outrageous 
prices of prescription drugs. Many of them drive hundreds of miles 
across the U.S./Mexico border to buy affordable prescription drugs. 
Many of them have to

[[Page 11973]]

go without paying their bills in order to afford prescription drugs. 
Many of them have to forgo buying groceries, clothes, and other basic 
necessities to afford prescription drugs.
  We owe it to America's seniors to do the right thing and propose a 
plan that offers a real prescription drug benefit. We owe it to 
America's seniors to be able to debate a plan that offers real 
prescription drug benefits. We owe it to American's seniors to debate 
our bill.
  Our seniors deserve a prescription drug plan that works with a 
defined benefit plan, guaranteed premium and access, and protection for 
low-income seniors. The democratic alternative is the real prescription 
drug plan and not hoax on low-income seniors.
  I urge my colleagues to vote ``no'' on H.R. 4954. Send this back and 
give us a fair vote on a real prescription drug plan.
  Mr. OWENS. Mr. Speaker, H.R. 4954, the Republican Pharmaceutical 
Industry Protection Act, is a cruel and unusual joke perpetrated 
against the senior citizens of America. The Republicans are preoccupied 
with the goal of the prescription drug manufacturers which is to 
maintain the highest possible prices and profits in America. Without 
operating at a loss in foreign markets, these drug companies sell their 
products at much lower prices. They sell at lower prices because 
foreign government negotiators refuse to pay exorbitant prices. Insults 
are added to injuries when Americans are forced to pay the highest 
prices for drugs which our Government often play a major role in 
research and development. A workable and simple plan offering the 
necessary benefits to seniors in need can be set in motion immediately. 
First, lower the cost of prescription drugs by following the principles 
and procedures set forth in my bill, H.R. 4772, the Pharmaceutical 
Products Price Equity Act which I first introduced on September 25, 
2000. This bill ensures that pharmaceutical companies cannot charge 
more than 6 percent above the average retail price of prescription 
drugs sold in the 5 most industrialized, free-market countries. This 
will ensure that pharmaceutical companies charge consumers within the 
U.S. prescription drug prices that are comparable to other nations.
  The second simple step is to follow the program of implementation as 
stated in the Democratic Plan. No new HMO and insurance bureaucracy is 
necessary. Let the Prescription Drug Benefit Plan be an extension of 
the Medicare program. Instead of offering a cruel and unusual joke, 
this Congress should unite behind a plan which relieves the very 
desperate needs of many of our senior citizens.
  Mr. FILNER. Mr. Speaker and colleagues, I rise today to protest the 
half-baked drug scheme that the GOP has jammed down Congress' throat. I 
find it a particular affront to our system of democracy that the 
Republicans blocked consideration of a plan that would easily cover all 
seniors.
  I join hundreds of my colleagues in opposing a GOP scheme that would 
force America's seniors and future seniors to rely on private insurance 
companies or HMOs for prescription drug coverage. GOP supporters of the 
scheme received hundreds of thousands of dollars in campaign 
contributions from pharmaceutical companies and HMOs.
  America's seniors deserve affordable prescription drug coverage. They 
should not have to make the preposterous choice between prescription 
drugs and paying their rent.
  The Democratic bill--on which GOP leaders refused to allow a vote--
would have guaranteed voluntary prescription coverage for all Medicare 
beneficiaries. Medicare is available to the vast majority of people 
over 65. It would have a $25 monthly premium and a deductible of $100 
per year. After that, beneficiaries would be responsible for just 20 
percent of drug costs, with Medicare covering the remaining 80 percent. 
All costs would be covered after a beneficiary spent $2,000 out-of-
pocket.
  The Republican bill guarantees no specific benefit and subsidizes 
insurance companies in the hope they will create private insurance 
plans. Many HMOs and private insurance would not want to offer coverage 
under the plan. Those that did would be able devise the coverage and 
set the premium.
  We should not be playing a shell game with something as important as 
our seniors' health and well-being. The Republican bill leaves our 
seniors out in the cold.
  Mr. DAVIS of Illinois. Mr. Speaker, I rise today to urge my 
colleagues to support a fair and equal prescription drug plan.
  Mr. Speaker, as you know, Adam Smith's economic theory of competition 
over monopoly has worked for our country's economy for nearly 200 
years. While competition works for material items, it does not work for 
social services and human needs such as health care and prescription 
drugs. If we allow private companies to set their own premiums and 
encourage competition among the prescription drug plan providers, we 
will not cut costs, nor will we provide seniors with low premiums and 
co-pays.
  As we have seen from health insurance providers, the most affordable 
insurance plans offer the least amount of coverage, while the most 
comprehensive plans are the most expensive. This leaves a senior, on a 
tight monthly budget, with the option of enrolling in a low-cost plan, 
or no plan at all. Therefore, by voting for this legislation, and 
allowing these companies to set their own premiums and deductibles, we 
are not guaranteeing anything to our seniors, and will be leaving the 
sickest ones, on the tightest budgets behind.
  The Democratic plan is simply stated. There will be a $25 premium, 
$100 deductible, and 20 percent co-pay, and an out-of-pocket limit at 
$2,000. However, the Republican plan is extremely complicated. 
Different people will pay different co-pays depending on their total 
prescription drug costs. And let us not forget the gap in coverage for 
those who exceed $2,000 in total costs, but do not exceed their out-of-
pocket cost of $3,800, all the while continuing to pay their high 
premiums of $35 per month.
  In order to maintain all these different co-pays and to assure that 
competition is available, this bill would create a new agency called 
the Medicare Benefits Administration. This would only create more 
bureaucracy and red tape that is currently driving up the cost of 
health care in America. Almost 25 percent of the cost of health care is 
to cover the administrative overhead. We cannot add to this current 
horrible problem.
  Not only is the Republican plan more confusing, but it will cost our 
seniors more. Let us look at two examples. The first is of individuals 
with $100 per month in prescription drug costs. Under the Republican 
plan they would pay $892 a year, but under the Democratic plan they 
would pay only $620 a year. How about those that have $300 per month in 
prescription drug costs? Under the Republican plan they would pay 
$2,892 a year, but under the Democratic plan they would only have to 
pay $1,100; that is a difference of $1,796 a year.
  Mr. Speaker, let me close by saying that the issue of adding 
prescription drug coverage for Medicare recipients is long over due. 
But H.R. 4954 is not the answer.
  Mr. RAMSTAD. Mr. Speaker, I rise today in strong support of H.R. 
4954, the Medicare Modernization and Prescription Drug Act of 2002.
  This is truly a monumental day for millions of seniors in America. 
Congress is finally addressing our greatest generation's need for a 
prescription drug benefit under Medicare.
  Prescription drug coverage is one of the most critical issues facing 
our Nation. This issue has moral, medical, and economic implications 
for every single American.
  Under this bill, seniors will no longer have to become insolvent just 
to pay for the prescription drugs they need. We are rescuing seniors 
from the terrible dilemma of paying for food or life-saving medicines.
  The problem is that when the majority of people need prescription 
drugs most, in the later years of life, the largest insurer of the 
elderly does not provide prescription drug coverage. As a result, many 
seniors go without the drugs they need, dilute their prescriptions or 
forego other basic necessities to purchase vital prescription drugs. 
This is wrong, Mr. Speaker.
  H.R. 4954 not only provides affordable prescription drug coverage, 
but also strengthens the Medicare system to ensure that doctors are 
available to treat Medicare patients and hospitals can keep their doors 
open to Medicare beneficiaries.
  Mr. Speaker, our seniors need and deserve a Medicare system that 
reflects the advances in medicine that have occurred in the past 37 
years since Medicare began in 1965. They also deserve prescription drug 
coverage under Medicare.
  The Medicare Modernization and Prescription Drug Act provides a 
prescription drug benefit to all seniors and reforms irrational 
payments to doctors, hospitals, and nursing homes. The bill also 
strengthens the long-term financial condition of the Medicare program.
  All Medicare beneficiaries are eligible for this prescription drug 
coverage, and seniors will save nearly 30 percent, according to the 
Congressional Budget Office.
  Mr. Speaker, I urge my colleagues to pass this critical legislation 
because the seniors of America deserve a prescription drug benefit and 
a modernized Medicare system.
  Ms. HARMAN. Mr. Speaker, tonight we are engaged in a partisan debate 
on what should be a bipartisan issue.
  Reforming Medicare to ensure access to prescription drugs is one of 
the most important things we could do this year. Seniors have been 
promised this benefit by both parties during the past two Congresses.

[[Page 11974]]

  Rather than engage in constructive debate, the Republican leadership 
has introduced a bill that does not get the job done under a rule for 
debate designed to prevent the consideration of any alternatives.
  I intend to vote against the Republican bill because it fails to 
provide genuine, reliable drug coverage for seniors.
  The Republican bill is confusing and unworkable. It requires seniors 
pay different amount in co-payments depending on how much they spend on 
prescription drugs overall. In fact, its benefits are likely so meager 
that only the sickest seniors would want to enroll--a recipe for 
bankruptcy of the system.
  The Republican bill does not ensure discounts on all the drugs 
seniors need. Not only does it offer no guarantee that private plans 
will cover all the prescriptions seniors need, but because of high 
cost-sharing and premiums, it will cover only 20 percent of the average 
senior's drug costs in a year.
  The Republican bill has a large gap in coverage. It offers seniors no 
assistance on drug costs between $2,000 and $3,700. That means that 
nearly half of all seniors will receive no coverage of their 
prescriptions for part of the year, even though they continue to pay 
premiums.
  A Medicare prescription drug benefit must be affordable for both 
senior citizens and the federal government. A plan with high premiums 
and deductibles--or large gaps in coverage--won't help the seniors who 
need it most.
  I believe that a Medicare drug benefit should achieve the following 
goals, and I am eager to work with my colleagues to achieve them:
  (1) Help those who need it most first. We need to provide genuine and 
immediate assistance to low-income seniors and seniors who do not 
currently have drug coverage.
  (2) Provide relief from the high and escalating cost of prescription 
drugs. Prescription drugs cost more in the United States than in any 
other nation in the world. Medicare should have the ability to 
negotiate lower prices for senior citizens as part of a drug benefit.
  (3) Encourage new disease management techniques and innovation in the 
delivery of care. Medicare needs to catch up with the private sector in 
focusing on preventive care and the treatment of chronic conditions. 
Improving Medicare's coverage on these fronts will improve seniors' 
lives--and reduce their health care costs as well.
  I hope we will be able to work in a bipartisan manner in the coming 
months to keep our promises to seniors and enact a fiscally 
responsible, meaningful law to include prescription drugs under 
Medicare.
  Mr. WATTS of Oklahoma. Mr. Speaker, this House stepped up to the 
plate in March and set aside three hundred and fifty billion dollars in 
our budget for prescription drug coverage. What was in the Democrat 
budget proposal for senior citizens? Well, nothing. They didn't bother 
to offer a budget.
  But the absence of action did not prevent the other party from 
criticism and condemnation. It's always easy to yell and scream when 
you have nothing to offer.
  The plan before the House today is one that will lower the cost of 
prescription drugs and help seniors get the life-saving medicine they 
need. It is practical, realistic, and supported by the President.
  The Medicare Modernization and Prescription Drug Act of 2002 is the 
right remedy for a national problem. In fact, the Department of Health 
and Human Services recently released a report that stated: ``The House 
Republican plan would provide real relief for seniors and disabled 
Americans: those who now pay full retail prices would typically see the 
costs of each prescription cut by 60 to 85 percent, and their overall 
out-of-pocket drug costs would fall by as much as 70 percent--in 
exchange for a stable and affordable premium starting at thirty-four 
dollars per month.''
  The Democrat plan is a prescription for higher drug costs, enriching 
drug companies and fiscal disaster. It is an election year gimmick that 
will cost over eight hundred billion dollars over ten years and lead to 
higher drug prices and government price controls.
  The Republican plan lowers drug costs, guarantees coverage and gives 
seniors choices. Seniors would be able to pick the plan of their 
choice--because one size does not fit all. Competition will drive down 
costs.
  Mr. Speaker, no senior should have to decide between buying food and 
buying medicine. I urge my colleagues to support this legislation to 
give seniors the life-saving drugs they need and the peace of mind they 
deserve.
  Mr. BLUMENAUER. Mr. Speaker, the pattern denying opportunity for full 
debate and reasonable alternatives continues as we deal with 
prescription drug benefits for our Nation's seniors. The House will not 
be permitted to vote on the Democratic prescription alternative. 
Instead, we will only be allowed to consider the Republican bill, which 
does not provide a guaranteed drug benefit, instead offering only an 
HMO-style managed-drugs plan for some. Medicare was created in 1965 
because most elderly people could not afford to buy expensive health 
insurance on the private market. Most still cannot, and we as a 
Congress should not in fairness impose this flawed plan on seniors.
  Especially important to Oregon seniors are the regional inequities 
that already exist in Medicare, and that the Republican bill would 
allow to grow. Medicare already punishes Oregon for its size and 
efficiency with a Medicare reimbursement rate that is 66 percent of the 
national average rate per enrollee. As a result, Oregon seniors lose 
more than \3/4\ of a billion dollars every year. That represents 
approximately $1,660 per enrollee that ought to be going to medical 
care and services. We cannot tell how much we will lose under the bill 
before us today.
  Their bill allows many different insurance companies to deal with 
seniors differently from city to city, and state to state. A senior in 
Oregon might pay significantly more than someone in Louisiana for the 
same, or even a reduced benefit. All seniors paid their taxes, and they 
all deserve an equal benefit. Rural areas and western states have had 
enough of this regional healthcare discrimination!
  Choice is illusory in the Republican bill because the plans they 
propose do not exist and there is no assurance that insurance companies 
will ever offer these plans.
  The Democratic bill, by comparison, is simple and fair. All 
beneficiaries will receive the same benefits, the same low $25 a month 
premiums, a lower $2,000 out-of-pocket limit, with any pharmacy they 
choose--wherever they live.
  Furthermore, the Democratic alternative allows the Secretary to use 
collective purchasing powers on behalf of 40 million beneficiaries to 
negotiate lower prices, as he did getting Cipro, the antibiotic used 
for Anthrax, in the Fall of 2001. The Republican bill has no such 
provision. I support the plan that helps seniors, Medicare contractors, 
and is fair to the taxpayers.
  Mr. STRICKLAND. Mr. Speaker, the Republican prescription drug bill is 
a sham, and the unfair rule that brings it to the floor exposed this 
partisan and shameful process for what it is--a political masquerade 
designed to convince Americans that we have answered the plea to add a 
prescription drug benefit to Medicare. Make no mistake, we fall far 
short of that goal today. I am appalled that the Republican leadership 
is not willing to allow the American people the decency of comparing 
the bill before us to a substitute that would provide a real drug 
benefit for Medicare beneficiaries. This limited debate available to us 
speaks volumes about the quality of the proposal before us today and 
its lack of a meaningful prescription drug benefit for the seniors.
  The Republican sham prescription drug plan would not provide a 
guaranteed adequate prescription drug benefit for seniors. The coverage 
outlined in the bill isn't the kind of coverage most Americans think of 
when the need for prescription drug coverage for seniors. Coverage if 
80/20 only through the first $1,000, when coverage drops to 50/50. And 
then there is a huge gap in coverage between $2,000, when the initial 
benefits run out, and $3,700, when catastrophic coverage finally 
begins. A beneficiary will receive zero benefits between $2,000 and 
$3,800 in spending, even though she will continue to pay the $35 
monthly premium.
  Perhaps even worse, the bill take the first step toward privitizing 
Medicare by contracting this new drug benefit out to private insurance 
plans. In so doing, premiums, deductibles, and copayments will vary 
across the country--so a senior who lives in Florida will likely pay a 
different premium than one of my constituents in Ohio. In addition, 
coverage under the bill we are considering today will be unstable 
because plans will be able to pull out from an area when they decide it 
doesn't fit their business plan. Where, then do our seniors turn for 
prescription drug coverage? The experience of Medicare+Choice 
illustrates this concern: there were Medicare+Choice HMOs in my 
district, but every single one left. Thankfully, those seniors who did 
switch to an M+C plan had traditional Medicare to fall back on. This 
won't be the case for prescription drugs if we pass the Republican drug 
plan. Instead, seniors will be left without any drug plan at all if and 
when the private insurers leave the area.
  The Democrats' prescription drug plan would provide quality, 
guaranteed help for seniors. Unlike the Republican plan, the Democrats' 
proposal would create a prescription drug benefit that is part of 
Medicare, thus avoiding instability or variation in premiums

[[Page 11975]]

that occur depending on where the beneficiary happens to live. In 
addition, the Democrats' plan provides much more help for seniors: 
there is no gap in coverage, catastrophic coverage would begin at 
$2,000 rather than 3,800, and the monthly premium would be $25. The 
unfair rule under which we debate this incredibly important issue means 
that Americans won't get to hear this comparison in detail or see how 
it fares in a vote. This is exactly what the Republicans want because 
they know their proposal can't compete with the Democrats' concrete 
plan, which has been endorsed by a litany of groups, including the 
Alliance of Retired Persons, the AARP, the AFL-CIO, AFSCME, The 
American Federation of Teachers, the Center for Medicare Advocacy, 
Families USA, the National Committee to Preserve Social Security, and 
Medicare, the National Council on the Aging, the National Partnership 
for Women and Families, and the National Senior Citizens Law Center.
  Some of my colleagues will contend that the difference between our 
plan and theirs is the cost. They will say that the Democrats' are 
fiscally irresponsible and that our plan breaks the bank. On this 
point, I stand firm. It is a fact that this Congress has chosen to give 
huge tax breaks to the wealthy. The President told us we could do both: 
he said we could enact nearly $2 trillion in tax cuts as well as a 
prescription drug benefit for America's seniors. But Congress chose to 
pass tax cuts for the wealthy, and we have chosen not to enact a real 
prescription drug benefit for seniors. If the choice is between 
enacting a real prescription drug benefit and giving tax breaks to the 
wealthy and corporations, then I am proud to choose to stand on the 
side of America's seniors.
  The rule also means that I won't be able to vote for a bill including 
many commendable provisions that have clear bipartisan support. This 
year, doctors were hit with a 5.4 percent cut in their Medicare 
reimbursement, hospitals are struggling with decreases in Medicaid 
disproportionate share hospital (DSH) funding and shortages in other 
payments, home health agencies are facing a 15 percent cut in 
reimbursement, and most Medicare providers are struggling with an 
increasingly difficult regulatory burden.
  Doctors and hospitals in my district provide invaluable care to 
Medicare and Medicaid recipients, and I hope they know that I support 
fixing all of these problems. I hope they do not interpret my no vote 
on this bill as a vote against the compromises that have been reached 
to address these problems. I recognize that our failure to fix these 
could seriously threaten the quality of care seniors and the disabled 
receive, and I cannot overstate my determination to continue working 
with my colleagues on both sides of the aisle to enact these important 
solutions. We have, in some cases, already done this. For example, last 
year, the House passed a Medicare regulatory reform package that is now 
also included in this bill. And even though I support a permanent fix 
to the formula used to calculate the physician update in Medicare, I 
have worked with my colleagues to reach a temporary compromise that is 
included in this bill. I support these and other provisions that will 
go a long way to ensuring providers have the resources they need to 
continue to offer quality care for seniors. Therefore, it is with 
regret that I cannot support the bill that includes many of these 
solutions, and I will continue to work for their enactment this year.
  I would like for all Americans to understand that the rule bringing 
this bill to the floor today undermines their ability to hear a full 
and open debate about developing a prescription drug plan for our 
seniors. It is shameful that politics is getting in the way of a 
healthy debate on the addition of a prescription drug benefit to 
Medicare. And it is also shameful that politics is interfering in the 
needed changes in Medicare reimbursements that will ensure 
beneficiaries continue to receive quality care. This is no way to 
develop thoughtful, reasonable, balanced legislation that will best 
serve the nation. Our seniors deserve much better.
  Mr. WICKER. Mr. Speaker, I rise in support of this comprehensive 
package which will provide needed improvements to the Medicare system. 
Much of the debate on this legislation has centered on the need to add 
a prescription drug component to Medicare. I agree with this goal, and 
I support the responsible proposal put forth by the Ways and Means and 
Commerce Committees. The practice of medicine has significantly changed 
since the Medicare program was created in the 1960s, and the role of 
prescription drugs has dramatically increased. It is time we reform the 
Medicare program to reflect changing times.
  However, I want to focus on other, very important parts of this 
legislation related to reimbursements for providers, especially those 
in rural America. This legislation provides a lifeline for rural 
America.
  In my conversations with doctors, hospital administrators, and 
community leaders throughout Mississippi, a common concern is the 
decreasing ability to provide access to quality care in rural areas. 
The jobs of rural health care professionals are made harder by 
inequities in Medicare reimbursement rates between rural and urban 
areas. This bill goes a long way in correcting this problem by 
increasing the standardized amount for hospital reimbursement in small 
cities and rural areas to the level of urban areas in a two step 
process over the next 2 fiscal years. This is in addition to an 
increase in the market basket adjustment that all hospitals--urban, 
suburban, and rural--will receive.
  The level of the standardized amount is especially important because 
this is the base with which Medicare starts when establishing 
reimbursement rates for specific services. Equalizing the standardized 
amount reduces the difference in payments caused by other parts of the 
Medicare reimbursement formula. But by putting urban and rural 
hospitals on the same footing at the beginning of the reimbursement 
formula, rural hospitals will benefit for years to come as changes are 
made to any part of the reimbursement system. This major improvement 
for rural hospitals will be fully implemented in just 2 years.
  Other aspects of this bill provide additional benefits for home 
health agencies and critical access hospitals in rural America. The 
threat of a 15 percent reduction for home health services has been 
eased in recent years as Congress has continually delayed the planned 
reduction. This bill will eliminate the threat by permanently repealing 
the 15 percent cut, allowing home health agencies to adequately prepare 
their financial future. Critical access hospitals are increasingly an 
attractive option for rural communities that would otherwise be without 
health care service. By improving the rules and regulations for 
critical access hospitals, this legislation provides more flexibility 
in operations and in attracting physicians to medically underserved 
areas.
  I am also pleased this legislation includes a three site hospice 
pilot project which is based upon H.R. 3270, a bill which I introduced 
in an effort to improve options for hospice care in rural areas. I 
believe the current 80 percent out-patient requirement makes it 
economically difficult to provide inpatient hospice care in rural areas 
because of smaller patient populations. It is my hope that this pilot 
project will validate the worth of our proposal and lead to an 
expansion of this specialized care to rural areas across the Nation.
   Mr. Speaker, this is a good bill which will improve access to 
quality health care, be it for prescription drugs, or care in a 
hospital, home health agency, or hospice. I urge support for this 
legislation.
  Mr. SIMMONS. Mr. Speaker, in my 18 months in Congress, through the 
many town hall meetings, letters, e-mails and phone calls, I 
consistently hear the same concern from people of eastern Connecticut--
the rising cost of prescription drugs.
  We all heard about seniors who have cut their medication in half 
because they can't afford to take their entire prescription or a senior 
who has to choose between buying food and buying their medication. We 
see seniors who are confronted with this choice at supermarkets 
everyday. We need to lower the cost of prescription drugs for our 
seniors now.
  This concern is not perceived, but very real. The non-partisan 
Congressional Budget Office estimated that in 1999, nearly 90 percent 
of Medicare beneficiaries filled at least one prescription. In 2001, 
the average Medicare beneficiary pay $1,756 on prescription drugs 
annually, filling approximately 22 prescriptions in that year.
  Next month, Medicare will turn 37 years old. The delivery of health 
care today is very different from the system of our parents and 
grandparents and very different from the way we cared for our seniors 
back in 1965.
  I believe Medicare needs to be improved to better reflect these 
changes and strengthened for the future. If Medicare were being 
designed today, it would include a prescription drug benefit. Because 
of the remarkable advances made in prescription drugs, seniors are 
living longer, with a better quality of life. Unfortunately, the 
promise of prescription drugs is very hollow for those who cannot 
afford them.
  Twenty-six states--including Connecticut--have already enacted some 
form of prescription drug assistance program and they are to be 
prescription drug assistance program and they are to be commended. I 
have long felt that the Federal Government should partner with states 
to help provide prescription drug relief to seniors, particularly to 
low-income seniors who have the greatest need.
  Earlier this year, in an effort to provide immediate relief for 
Connecticut's seniors who

[[Page 11976]]

 were feeling the financial pinch over paying for their medicine, I 
introduced ``Immediate Helping Hand'' legislation, which provides more 
than $48 billion to states to give those who can't afford prescription 
drugs a ``helping hand.''
  My bill would provide Connecticut's ConnPACE program with more than 
$91 million per year and expand prescription drug coverage to thousands 
of seniors. My plan was a solid first step--a bridge to provide seniors 
with immediate assistance until Congress passed a more comprehensive 
prescription drug benefit through Medicare.
  But as of tonight, only 51 or so legislative days remain until 
Congress adjourns. I've come to realize with the short window of time 
left, its time to roll up our sleeves and work together on this issue. 
If Congress really wants to give seniors a prescription drug benefit, 
then we would need to do it now.
  The Ways and Means and the Energy and Commerce Committees have 
introduced a plan to provide a prescription drug benefit under Medicare 
that is voluntary and affordable and guarantees prescription drug 
coverage for all seniors. Our plan gives seniors immediate relief from 
the rising costs of prescription medications by providing a 30 percent 
discount off the top of their overall drug bill. While seniors would 
pay a $35 monthly premium and A $250 annual deductible, our bill 
provides 80 percent coverage for drug bills between $251 and $1,000 of 
out of pocket drug expenses and 50 percent coverage for the next 
$1,000. Finally, our plan provides 100 percent catastrophic coverage 
for out of pocket drug expenses over $4,500 a year, ensuring that no 
senior will be forced into bankruptcy because of their prescription 
medication bill during a long-term, serious illness.
  Our plan will lower the cost of prescription drugs now by providing a 
discount so that seniors can better afford their medications. Our plan 
will guarantee all senior citizens prescription drug coverage and 
provide additional assistance to low-income seniors. Our plan will 
improve Medicare with more choices and more savings and will strengthen 
Medicare for the future. Our plan is a reasonable solution that 
provides seniors with upfront savings on the high costs of drugs now as 
well as guarantee them a drug benefit under Medicare that doesn't 
sunset and can't be taken away.
  Our seniors have worked hard to save for their ``Golden Years.'' Yet 
the cost of prescription drugs is depleting their savings and 
jeopardizing their retirement security. Under our plan, seniors will be 
protected from run-away drug costs.
  Our plan is also of particular importance to women. Women have a 
higher life expectancy than men; yet often have lower incomes in their 
retirement and face additional costs after their husbands pass on.
  Speaker Hastert asked me to participate in a special Prescription 
Drug Action Team and I thank him for this opportunity. In this role, I 
have tried to advance the cause of providing a prescription drug 
benefit under Medicare by meeting with the President and members of his 
cabinet; hold outreach meetings with groups such as senior citizen 
advocates and representatives of pharmacies and drug companies; attend 
listening sessions at local senior centers, such as Rose City Senior 
Center in Norwich and the Colchester Seniors Center, and pharmacies; 
and participate in bipartisan discussions with other Members of 
Congress to find lawmakers with the same goals who will work with me to 
produce a plan that will help provide real relief to seniors in 
Connecticut as well as the rest of the country.
  Our seniors should not be forced to scrimp on food and shelter just 
to be able to afford their medicine. Older Americans deserve more 
savings and more choice when they fill their prescriptions, and I hope 
Democrats and Republicans will join together now to see that they 
receive meaningful prescription drug coverage.
  To delay is to deny. Lets get a prescription drug benefit signed into 
law now.
  Ms. JACKSON-LEE of Texas. Mr. Speaker, I rise today to speak out 
against H.R. 4954, what should have been called the Republican 
Insurance Protection Act.
  When medical students become doctors, they take an oath written by 
Hippocrates, a great Greek philosopher and naturalist, in the year 400 
BC. The underlying spirit of the Hippocratic Oath, is that when someone 
needs your help, when they trust you to do the right thing to improve 
their health, the number one priority is to do not harm.
  As we design a system to get the much-needed medications to our 
Nation's seniors and disabled citizens on Medicare, we must keep the 
spirit of the Hippocratic oath in mind. These folks need our help, we 
have promised them that we would help them get the health care they 
need, and they trust us to keep that promise.
  The Republican plan to privatize and compromise Medicare would be a 
step in the wrong direction. It is a gift to insurance companies and 
the pharmaceuticals industry, but does nothing for most of our seniors. 
If it passes, Hippocrates will probably be turning over in his grave.
  Let's look at some numbers:
  Let's consider one senior, she could be your mother or grandmother. 
She could be on a fixed income, and her doctor has decided she needs 
$500 per month in prescription medications to live comfortably. Not 
only is she carrying a huge financial burden, but she is sick, and from 
talking to our constituents at home, we all know the frustration and 
even depression that can accompany long-term illness.
  She is a member of the greatest generation, as they have been called, 
that generation that worked hard to give us the unprecedented 
prosperity and security we all have enjoyed over the past decades, and 
now she needs our help.
  And what does the Insurance Protection Act offer her?
  As the year starts, so do her bills. Her out of pocket costs rise 
rapidly throughout the year--$1,000, $2,000, $3,000, about $4,000, 
because even if she hits the catastrophic limit, she is still paying 
premiums that add to her burden.
  And what about her benefits? They are almost non-existent for most of 
the year. She gets a little help at first, but it falls off rapidly. 
Then, for a big chunk of the year--she gets nothing, as she falls into 
the Republican gap.
  Finally, when she hits catastrophe, her bills get covered. But, most 
seniors don't ever get there--they just end up stuck in the Republican 
gap.
  These numbers are the best we could calculate last week with the 
vague plan that we had been presented with. These numbers look bad, but 
they may be even worse. H.R. 4954 does not guarantee even this low 
level of benefit. It only offers subsidies to private insurance 
companies in hopes that they might take care of our seniors even though 
we don't. Associations of insurance companies have already gone on 
record stating they probably will not offer the drug-only plans 
necessary for the Republican plan to function.
  The Republican plan puts this sick senior on a roller coaster. Her 
premiums are not guaranteed. Her deductible is high. She is not assured 
that she will be able to buy the drugs her doctor prescribes at the 
pharmacy she trusts. She gets nothing for a big part of the year, even 
though she keeps paying her premiums.
  She gets all of the paperwork and premiums of a big government 
program--with none of the benefits. This is a gimmick. It is a step in 
the wrong direction, and it violates the principle of do no harm.
  We do not have to take this step backward because, there is a choice. 
The Democratic alternative provides a continuous stream of aid to all 
of those who need it. It offers low premiums and guaranteed benefits. 
Yes it costs more, but it could actually be a bargain. Unlike the 
Republican plan which does nothing for the vast majority of seniors, 
the Democratic plan helps all seniors. By harnessing the bargaining 
power of those 40 million seniors, the Democratic plan will drive down 
the cost of prescription drugs. Also, new medications, especially 
preventive medications can save us money in the long run. By keeping 
people out of hospitals and emergency rooms and off of the surgeon's 
table, a good prescription drug bill could actually start saving us 
money.
  But most importantly, it is what our seniors deserve. I urge my 
colleagues to wait for a better alternative, and vote ``no'' today on 
H.R. 4539, the Insurance Protection Plan.
  Mr. SERRANO. Mr. Speaker, I rise in opposition to the bill before us 
and in strong support of the Democratic alternative, of which I am an 
original cosponsor.
  The Republicans know that the American people demand prescription 
drug coverage for seniors. But instead of passing a bill to help our 
seniors, they've chosen to give $350 billion to insurance companies, 
trusting them to do what's right for seniors.
  This bill is a cruel joke. Republicans broke their word--they 
promised to help seniors and the disabled with a real Medicare 
prescription drug benefit, and instead passed a pathetic gimmick that 
will leave seniors holding the bag. This bill isn't a Medicare benefit 
plan for seniors, it's a Republican benefit plan for corporations.
  I am an original cosponsor of a alternative bill that would provide 
real coverage for our seniors through Medicare. The Democratic plan 
fulfills our responsibility to provide for those who made this country 
what it is today. No senior should be forced into poverty to pay for 
life-saving drugs--and no senior living in poverty should be denied 
necessary medications.

[[Page 11977]]

  Our plan would not only provide a meaningful prescription drug 
benefit, it would allow seniors and individuals with disabilities to go 
on making the choices that matter. The Republican bill would take 
choices away, offering coverage through private plans that may not 
allow seniors to choose their pharmacy, or their doctor. The only 
choice left for many seniors would be between purchasing food and 
purchasing drugs.
  The Democratic plan is so good, in fact, that Republicans would not 
even let it come to a vote. They did not want to admit that their 
trillion dollar tax cuts for the super-rich don't leave enough money 
for a real benefit for seniors. But the American people are not so 
easily fooled. They know that Republicans put the interests of the rich 
ahead of the interests of seniors.
  Our plan would help all Americans. It would bring down the 
skyrocketing price of prescription drugs, so that giant pharmaceutical 
companies can't inflate their profits at public expense. Medicare 
contractors would obtain guaranteed reductions in price, and the 
Secretary of Health and Human Services would be able to fight back 
against price gouging, using the collective bargaining power of 
Medicare's 40-million beneficiaries. It would stop patent abuses, 
bringing down drug prices for all Americans. The Secretary would also 
be able to encourage the use of generic drugs, set lower coinsurance 
for preferred drugs, enhance disease management, and strengthen 
beneficiary and provider education. The Republican plan would do 
nothing to reduce the price of prescription drugs. Tax dollars would be 
used to pay the same inflated prices that seniors pay today.
  I urge my colleagues to make good on their promises, to defeat H.R. 
4954, and to pass meaningful prescription drug coverage in Medicare for 
seniors and the disabled.
  Mr. HINOJOSA. Mr. Speaker, I rise today in opposition to the 
Republican prescription drug bill. For years, our seniors have been 
begging for help to obtain affordable prescription drugs. The bill 
before us today gives relief to the large drug companies, not our 
vulnerable seniors.
  It forces Medicare patients into multiple private drug plans, 
undercuts seniors' collective purchasing power, and enables the drug 
industry to maintain its unjustifiably high prices.
  By contrast, the Democratic plan would provide voluntary prescription 
drug coverage for all Medicare beneficiaries. The plan curbs drug costs 
by allowing the Secretary to use the collective bargaining power of 
Medicare's 40 million beneficiaries to negotiate lower drug prices.
  But we will not have the opportunity to vote on this sensible plan 
that is supported by the majority of Americans because the Republican 
leadership is afraid it would pass.
  I urge my colleagues to oppose the sham Republican proposal and say 
no to the big drug companies. I yield back the balance of my time.
  Mr. WEXLER. Mr. Speaker, prescription drug coverage has long been a 
top priority for a majority of Americans, and as a result, both George 
Bush and Al Gore pledged during the 2000 Presidential campaign to 
provide seniors with a comprehensive prescription drug plan and finally 
put an end to the prescription drug crisis in America. The House 
Republican leadership avoided this issue for as long as they could, but 
the day of reckoning arrived, and when it was time for both sides to 
ante up, the Republicans offered nothing but a sham. Now here we are, 
preparing to vote on what the Republicans say is a plan that will help 
seniors pay for prescription drugs. But before we do, I want all my 
colleagues to know what is really on the table.
  Quite simply, the Republican prescription drug plan is a disgrace; it 
is nothing more than a half-hearted attempt to deliver on an empty 
promise and provide themselves with election year cover. This will not 
bring the rising costs of prescription drugs down, it has significant 
gaps in coverage, and where it does provide coverage, it relies 
completely on unreliable HMOs and insurance companies to provide it. 
The Republican plan will get us nowhere and will leave too many seniors 
with nothing at all. As we look at the Republican proposal, it is clear 
that while the needs of so many are being neglected, the wants of an 
influential few are being met.
  The Democratic prescription drug bill we have offered will provide 
real, meaningful, affordable, prescription drug coverage under 
Medicare. It will allocate $800 billion to ensure that all seniors can 
afford coverage. There will be no gaps in coverage, and nobody will be 
force to join an HMO. But regrettably, we can't even debate this bill 
today. While that is a shame in and of itself, the real tragedy is that 
we must choose between a horrible bill or no bill at all. But maybe 
that is what Republicans--who have been raking in campaign 
contributions from the insurance industry and the pharmaceutical 
companies who are the only true beneficiaries of the Republican bill--
wanted all along.
  The bill that I am sponsoring will be affordable for all seniors, 
will cover any prescription regardless of the brand, and not just cover 
those on the insurance companies' formularies. Our prescription drug 
plan will provide seniors substantial savings by using the government's 
bargaining power to obtain the best prices for Medicare, as currently 
done for Medicaid and the Veterans Administration. The Republican plan, 
in contrast, relies on the insurance industry and HMOs to provide the 
already scant coverage that it offers. The Republicans have disguised 
their shallow attempt to pay back the pharmaceutical companies and 
insurance industry for millions in campaign contributions under the 
title of Medicare Modernization. The real name for this bill should be 
the Insurance and Pharmaceutical Industry Payback Act.
  The criticism that has been offered by Republicans regarding the 
Democratic bill is that it is unrealistic. That is their argument, 
simply because they know that the Democratic bill interferes with their 
$1.3 trillion tax cut. And to add insult to injury, Republicans 
continue to push for additional billions in tax cuts for the wealthiest 
Americans, which is more than enough to pay for the more generous 
Democratic plan. It is shameful that while Republicans pander to the 
narrow interests they serve, seniors continue to wait for a real 
solution to the prescription drug crisis.
  Mr. KNOLLENBERG. Mr. Speaker, it is simply unacceptable that 13 
million seniors do not have prescription drug coverage. Seniors need 
prescription drug coverage and they need it now.
  The legislation before us today provides a real, timely drug benefit 
while helping ensure the future solvency of the Medicare program. 
Although much more reform is necessary, the Medicare modernization 
provisions contained in the bill are a significant step forward in 
providing long overdue Medicare improvements. If the Medicare system is 
to remain viable in the future, it is essential that we bring the 
Medicare program in line with 21st century healthcare advances and 
expectations.
  I support the Medicare Modernization and Prescription Drug Act of 
2002 because it creates a prescription drug benefit in Medicare that is 
affordable, available, and voluntary. It gives people the power to 
choose the plan that best fits their needs, including protection 
against high out-of-pocket drug costs that threaten their health and 
financial security.
  This bill guarantees a choice of at least two drug plans in every 
area of the country, without endangering existing drug coverage that 
seniors might already have through a former employer. We avoid giving 
the Federal Government too heavy a hand in controlling drug benefits, 
ensuring that seniors will not be denied the right to select the 
coverage that best fits their needs.
  Furthermore, the bill will bring the increased competition among 
health plans that is necessary to reduce drug prices. According to the 
Department of Health and Human Services, this plan is the only proposal 
before Congress that would lower drug prices and provide an immediate 
drug discount of up to 15 percent.
  Mr. Speaker, seniors must not have to choose between their medicine 
and other basics like food and housing. We have a chance to strengthen 
the Medicare program to guarantee that our children and their children 
have access to quality health services and prescription drugs when they 
become eligible for Medicare. Let us take this monumental step and 
improve Medicare for the future.
  Mr. COSTELLO. Mr. Speaker, I rise today in opposition to H.R. 4954 
and in support of the Democratic substitute. It is imperative that we 
provide senior citizens with quality, affordable, and reliable health 
care. H.R. 4954 does not accomplish these important goals.
  I am committed to strengthening and improving Medicare. As the 
nationwide health insurance program for the elderly, Medicare has 
provided important protections for millions of Americans over its 37-
year history. However, the program continues to face increasing 
problems. Like so many Americans, I am concerned that the program's 
structure has failed to keep pace with the changes in the health care 
system as a whole. When Medicare was created, prescription drug use was 
limited, with most beneficiaries being treated in hospitals. Today, 
advances in pharmaceutical research allow doctors to treat seniors on 
an outpatient basis. Unfortunately, Medicare has not keep up with this 
change.
  As a result, Congress has been actively working to craft a 
prescription drug benefit for Medicare that is affordable and reliable. 
Yet, under the Republican bill, the government would pay subsidies to 
insurance companies to induce them to offer drug coverage. These

[[Page 11978]]

``drug only'' insurance plans do not currently exist, and may never 
exist, and therefore do not offer a guaranteed benefit to our seniors. 
Beneficiaries would be forced to choose between HMOs and risky private 
drug-only insurance plans. Further, this legislation merely provides 
suggestions for standard coverage; private insurers have the freedom to 
alter premiums which can be much higher, varying from county to county, 
and year to year. Seniors would not know what to expect from their drug 
benefit from year to year or how much it would cost.
  In addition, H.R. 4954 provides inadequate coverage to Medicare 
beneficiaries. It would cover less than a quarter of beneficiaries' 
estimated drug costs over the next 10 years. Nearly half of all seniors 
spend over $2,000 annually. This bill would not pay for drug costs 
between $2,000 and $3,700. Further, this legislation would do nothing 
to assist low-income beneficiaries. Low-income beneficiaries may have 
to pay $2 to $5 co-pays and 100 percent of the costs in the coverage 
gap.
  In contrast, the Democratic substitute, had we been able to offer it, 
offers seniors a real Medicare prescription drug benefit for with 
relief from the high cost of prescription drug prices. This legislation 
would lower the costs of drugs for all seniors, would offer an 
affordable, guaranteed Medicare drug benefit, would ensure seniors 
coverage of the drugs their doctors prescribe, and would not force 
seniors into HMOs or private insurance. Beneficiaries would pay a $25 
premium per month, a $100 deductible per year, and would receive full 
coverage after paying $2,000 in out of pocket expenses. In addition, 
this substitute would help low-income beneficiaries with premium and 
co-insurance payments. Finally, it would guarantee Medicare 
beneficiaries the choices that matter: choice of prescription drug, 
choice of pharmacy, and choice of doctor and hospital.
  I support the provider payment adjustments made to hospitals, 
physicians, and rural communities represented in both H.R. 4954 and the 
Democratic substitute; however, I cannot in good faith support H.R. 
4954 with its unacceptable prescription drug plan.
  Mr. Speaker, I am committed to providing a comprehensive benefit that 
is affordable and dependable for all beneficiaries with no gaps or 
gimmicks in its coverage. What Congress offers to senior citizens and 
individuals with disabilities should be no less generous than what 
Members of Congress and other Federal employees receive. For these 
reasons, I oppose H.R. 4954. I urge my colleagues to do the same.
  Mr. BONILLA. Mr. Speaker, while I support this bill because it 
provides meaningful prescription drug coverage for America's seniors 
and implements measures needed to modernize the Medicare system, I rise 
out of concern for the effects of this bill on pharmacy services. 
Pharmacists are on the front lines of health care for millions of 
Americans. Seniors count on their pharmacist for quality medications 
and medication therapy services. Coverage of prescription drugs should 
go hand-in-hand with access to quality pharmacy services.
  This bill would inhibit the ability of America's seniors to select 
the pharmacy that best meets their needs. In many of the smaller towns 
in my district, seniors have established long-standing relationships of 
trust with their community pharmacists. This bill would force many of 
these seniors to turn elsewhere for prescription drug services.
  Furthermore, this bill allows Pharmacy Benefit Managers to establish 
restrictive pharmacy networks, preferred formularies, mail order 
services and inadequate reimbursement rates, severely undermining the 
future viability of community pharmacies. Prescription drug plan 
sponsors, not pharmacists or doctors, would determine the selection of 
medications to be included on formularies. Cost would supercede the 
medication that is in the best interest of the patient, and community 
pharmacies would be left struggling to stay in business.
  This bill also compromises seniors' access to medication-therapy 
services. Pharmacists play an important role in reducing medication-
related problems. They routinely resolve complex drug interaction 
problems for seniors who take multiple medications. These problems cost 
billions of dollars annually and kill hundreds-of-thousands of persons. 
Medication-therapy services decrease long-term health care costs while 
increasing safety.
  As a conservative, I recognize the need to be fiscally responsible, 
however we should not allow our efforts to rein in the high cost of 
prescription drugs to jeopardize the health of our seniors. Taken 
together, the provisions of this legislation would impose economic 
hardships that would severely damage pharmacy infrastructure and 
compromise the health of America's precious seniors.
  Thousands of pharmacists have diligently served America's seniors 
with dedication and excellence. We should not inhibit their ability to 
continue providing the drugs and services our seniors desperately need.
  Mr. PAUL. Mr. Speaker, while there is little debate about the need to 
update and modernize the Medicare system to allow seniors to use 
Medicare funds for prescription drugs, there is much debate about the 
proper means to achieve this end. However, much of that debate is 
phony, since neither H.R. 4954 or the alternative allow seniors the 
ability to control their own health care. Instead both plans give a 
large bureaucracy the power to determine what prescription drugs senior 
citizens can receive. The only difference is that alternative puts 
seniors under the control of the federal bureaucy, while H.R. 4954 
gives this power to ``private'' health maintenance organizations and 
insurance companies.
  I am pleased that the drafters of H.R. 4954 incorporate regulatory 
relief legislation, which I have supported in the past, into the bill. 
This will help relieve some of the tremendous regulatory burden imposed 
on health care providers by the Federal Government. I am also pleased 
that H.R. 4954 contains several good provisions addressing the 
Congressionally-created crisis in rural health and attempting to ensure 
that physicians are fairly reimbursed by the Medicare system.
  However, Mr. Speaker, at the heart of this legislation is a fatally 
flawed plan that will fail to provide seniors access to the 
pharmaceuticals of their choice. H.R. 4954 requires seniors to enroll 
in a prescription benefit management company (PBM), which is the 
equivalent of an HMO. Under this plan, the PBM will have the authority 
to determine which pharmaceuticals are available to seniors. Thus, in 
order to get any help with their prescription drug costs, seniors have 
to relinquish their ability to choose the type of prescriptions that 
meet their own individual needs! The inevitable result of this process 
will be rationing, as PBM bureaucrats attempt to control costs by 
reducing the reimbursements paid to pharmacists to below-market levels 
(thus causing pharmacists to refuse to participate in PBM plans), and 
restricting the type of pharmacies seniors may use in the name of 
``cost effectiveness.'' PBM bureaucrats may even go so far as to forbid 
seniors from using their own money to purchase Medicare-covered 
pharmaceuticals. I remind my colleagues that today the federal 
government prohibits seniors from using their own money to obtain 
health care services which differ from those ``approved'' of by the 
Medicare bureaucracy!
  Since H.R. 4954 extends federal subsidies (and federal regulations) 
to private insurers, the effects of this program will be felt even by 
those seniors with private insurance. Thus, H.R. 4954 will in actuality 
reduce the access of many seniors to the prescription drugs of their 
choice!
  I must express my disappointment that this legislation does nothing 
to reform the government policies responsible for the skyrocketing 
costs of prescription drugs. Congress should help all Americans by 
reforming federal patent laws and FDA policies which provide certain 
large pharmaceutical companies a government-granted monopoly over 
pharmaceutical products. Perhaps the most important thing Congress 
could do to reduce pharmaceutical policies is liberalize the 
regulations surrounding the reimportation of FDA-approved 
pharmaceuticals.
  As a representative of an area near the Texas-Mexican border, I often 
hear from angry constituents who cannot purchase inexpensive quality 
imported pharmaceuticals in their local drug store. Some of these 
constituents regularly travel to Mexico on their own to purchase 
pharmaceuticals. It is an outrage that my constituents are being denied 
the opportunity to benefit from a true free market in pharmaceuticals 
by their own government.
  The alternative suffers from the same flaws, and will have the same 
(if not worse) negative consequences for seniors as will H.R. 4954. The 
only difference between the two is that under the alternative, seniors 
will be denied the choice for pharmaceuticals by bureaucrats at the 
Center for Medicare and Medicaid Services (CMS) rather than by a 
federally subsidized PMB bureaucrat.
  Mr. Speaker, our seniors deserve better than a ``choice'' between 
whether a private-or-public sector bureaucrat will control their health 
care. Meaningful prescription drug legislation should be based on the 
principles of maximum choice and flexibility for senior citizens. For 
example, my H.R. 2268 provides seniors the ability to use Medicare 
dollars to cover the costs of prescription drugs in a manner that 
increases seniors' control over their own health care.
  H.R. 2268 removes the numerical limitations and sunset provisions in 
the Medicare Medical

[[Page 11979]]

Savings Accounts (MSA) program. Medicare MSAs consist of a special 
saving account containing Medicare funds for seniors to use for their 
routine medical expenses, including prescription drug costs. Unlike the 
plans contained in H.R. 4504, and the Democratic alternative, Medicare 
MSAs allow seniors to use Medicare funds to obtain the prescription 
drugs that fit their unique needs. Medicare MSAs also allow seniors to 
use Medicare funds for other services not available under traditional 
Medicare, such as mammograms.
  Medicare MSAs will also ensure senior access to a wide variety of 
health care services by minimizing the role of the federal bureaucracy. 
As many of my colleagues know, an increasing number of health care 
providers have withdrawn from the Medicare program because of the 
paperwork burden and constant interference with their practice by 
bureaucrats from the Center for Medicare and Medicaid Services. The MSA 
program frees seniors and providers from this burden, thus making it 
more likely that quality providers will remain in the Medicare program!
  Mr. Speaker, seniors should not be treated like children by the 
federal government and told what health care services they can and 
cannot have. We in Congress have a duty to preserve and protect the 
Medicare trust fund. We must keep the promise to America's seniors and 
working Americans, whose taxes finance Medicare, that they will have 
quality health care in their golden years. However, we also have a duty 
to make sure that seniors can get the health care that suits their 
needs, instead of being forced into a cookie cutter program designed by 
Washington, DC-based bureaucrats! Medicare MSAs are a good first step 
toward allowing seniors the freedom to control their own health care.
  In conclusion, Mr. Speaker, both H.R. 4954 and the alternative force 
seniors to cede control over what prescription medicines they may 
receive. The only difference between them is that H.R. 4954 gives 
federally funded HMO bureaucrats control over seniors prescription 
drugs, while the alternative gives government functionaries the power 
to tell seniors what prescription drug they can (and can't) have. 
Congress can, and must, do better for our Nation's seniors, by 
rejecting this command-and-control approach. Instead, Congress should 
give seniors the ability to use Medicare funds to pay for the 
prescription drugs of their choice by passing my legislation giving all 
seniors access to Medicare-Medicaid Savings Accounts.
  Ms. ROYBAL-ALLARD. Mr. Speaker, I rise in opposition to the 
Republican Party's sham prescription drug benefit proposal. 
Prescription drugs, especially for our elderly population, are not a 
luxury but a matter of life or death. Prescription drug costs in our 
country are rising nearly 20 percent each year, forcing more and more 
of our country's parents and grandparents to choose between their 
medication and other necessities of life such as food. Our Nation's 
seniors worked hard to make this country strong, many fighting in far-
off places to keep us free. They deserve to have health care security.
  Unfortunately, the Republican prescription drug plan falls short in 
providing this security to our seniors. First, the Republican plan 
covers less than a quarter of the costs seniors will pay for their 
medication over the next 10 years. Second, under the Republican plan, 
the premiums and the deductible are so high that most seniors won't be 
able to afford the plan and as a result will receive no benefits at 
all. Finally, the Republicans have no universal prescription drug plan. 
Instead, they leave it to individual insurance companies to develop 
their own plans. This means seniors will be left on their own to do the 
research on each plan that will vary in price, benefits, and 
availability across the country.
  This complicated, time-consuming, and expensive process is unfair and 
unnecessary, and it represents just another step in the Republican 
Party's effort to privatize Medicare. That is why Democrats have 
offered a simple, affordable prescription drug plan with a standard 
benefit and a low deductible. Through the use of collective buying 
power, the Democratic prescription drug plan actually lowers drug 
prices for all of Medicare's 40 million beneficiaries. Unfortunately, 
Republicans did not allow this alternative plan to be presented to the 
House for a vote. The Republican bill before us is a sham that does 
little to help our Nation's seniors.
  The House must defeat the Republican bill and take the necessary 
steps to pass the Democratic prescription drug bill that will give all 
America's seniors the benefits they need and the health care security 
they deserve.
  Ms. BROWN of Florida. Mr. Speaker, it matters who is in charge. This 
Republican leadership must think the American people are stupid. Last 
week they raised $30 million dollars in a fund raiser with the drug 
companies, and this week we have a prescription drug bill on the floor. 
Now who do you think they wrote this bill for: The seniors they've been 
promising relief to for 2 years, or the big drug companies that will be 
funding their elections this fall?
  While on a trip back home to Jacksonville in March, I went to the 
drug store for my grandmother to pick up just one of her prescriptions. 
I was expecting maybe a $15 co-payment because I knew her insurance 
plan had drug coverage. The bill was $91 dollars. She had a limit on 
her coverage, and it had run out. We were 3 months into the year, and 
she no longer has a drug plan.
  My grandmother, and all grandmothers deserve better than this. If the 
Republicans can take a break from their million dollar drug company 
fund raisers and constant tax cut bills for their country club friends, 
maybe we can work on a compromise that will provide our seniors with 
the relief we have been promising them. My Republican colleagues talk 
the talk, but they don't walk the walk. The Republican leadership has 
come up with a privatized drug plan that has been rejected by both the 
insurance industry and the drug stores as unworkable, and fails to 
truly help seniors.
  This is one more perfect example of why it matters who is in charge.
  Mrs. BONO. Mr. Speaker, I rise today to support comprehensive health 
care improvements for our country. The Medicare Modernization and 
Prescription Drug Act of 2002 offers a real and immediate benefit to 
our seniors, while also offering substantive improvements to a Medicare 
system that will collapse in on itself without reforms.
  Currently the seniors in my district, which represent over one in 
five of all individuals in California's 44th District, are without 
prescription drug coverage that is essential to their quality of 
health. With this legislation, these individuals will receive an 
affordable option that will become a permanent facet of Medicare for 
generations to come.
  I have had the honor of serving on the Speaker's Prescription Drug 
Action team, and we have worked hard to address both prescription drug 
coverage and improvements to the Medicare system. These include helping 
our doctors continue to better serve Medicare beneficiaries and helping 
our hospitals to keep their doors open to those who can't afford to 
meet even basic health care needs. In particular, the Medicaid 
Disproportionate Share Hospital monies included in this bill are a 
serious start to helping our public hospitals, including two in my 
district.
  There is still work to be done in properly funding these hospitals 
that offer such essential services, but this comprehensive legislation 
is taking a step in the right direction.
  One of my constituents recently wrote to me and spoke of the urgency 
with which we need to provide our seniors with affordable prescription 
drug coverage. Her message is echoed by thousands of others, and she is 
correct that we can no longer ignore the urgent need to improve our 
health care system.
  It is urgent because our seniors cannot continue to keep up with 
rising prescription drug costs. It is urgent because our doctors and 
hospitals must have the tools to continue to offer quality care. And it 
is urgent because we can no longer afford to make patchwork fixes to a 
program that has not received needed improvements since its inception 
in 1965. It is for these reasons that I rise today in support of The 
Medicare Modernization and Prescription Drug Act of 2002.
  Mr. KIND. Mr. Speaker, providing affordable Medicare prescription 
drug coverage for our Nation's seniors is one of the most pressing 
issues facing our country today. Even though the elderly use the most 
prescriptions, more than 75 percent of seniors on Medicare lack 
reliable drug coverage. It is time to modernize Medicare to reflect our 
current health care delivery system. The use of prescription 
medications is as important today as the use of hospital beds was in 
1965 when Medicare was created.
  I have heard from a number of seniors in western Wisconsin regarding 
the problems they have paying for prescription drugs. One woman from 
Deer Park, Wisconsin, a small town in my district, wrote to me and 
said:

       My medication is $135.00 per month. Fortunately my husband 
     is not on any medication. If we both were not working part-
     time, I guess that we would have to make a choice between 
     food and medication--does one eat to survive or take the 
     medication for a ``long and happy life''?

  What is to happen to this couple if the husband falls ill and has 
high drug costs too?
  Seniors without prescription drug coverage often pay the highest 
prices for their medication. Pharmaceutical companies negotiate prices 
with their most favored customers, such as HMOs, but seniors without 
drug coverage do not benefit from these negotiations. Not

[[Page 11980]]

only do my seniors face price discrimination in their hometowns, but 
also they can go to Canada and get the same medicine for a 
substantially cheaper price. On average my constituents would pay about 
80 percent less for their drugs in Canada than they do at home in 
western Wisconsin. That is wrong.
  The cost of prescription medicines should not place financial on 
seniors that would force them to choose between buying drugs and buying 
food. We need to make prescription medicines affordable and accessible 
to all of our seniors.
  Unfortunately, today's debate is a sham. We will not have the 
opportunity to discuss this issue in a fair and open process. The 
majority decided to railroad the debate and silence the minority by not 
allowing an alternative to be debated and voted upon. Our nation's 
seniors deserve better. They deserve an open process, but the 
Republican leadership has failed to deliver this.
  The leadership has also failed seniors with their prescription drug 
proposal. The Republican plan is doomed to fail because the plan relies 
on health insurance companies to offer drug only policies which they 
have said they won't offer. If insurance companies won't offer these 
policies, how will seniors actually obtain prescription drug coverage 
under the leadership plan?
  Every insurance company with whom I have spoken has said that they 
will not offer a drug-only insurance policy. In fact, during our last 
debate on this issue, the Health Insurance Association of America, 
which consists of nearly 300 insurance companies, released a statement 
claiming, ``These `drug only' policies represent an empty promise to 
America's seniors. They are not workable or realistic.''
  Why should the insurance companies provide these drug only policies? 
They are in the business of insuring risk and there is no risk 
associated with a drug only policy. This single benefit policy will 
result in adverse risk selection--only people with predictably high 
prescription medicine costs will purchase the plan. This will increase 
the cost to the insurance companies who in turn will pass the costs on 
to the beneficiaries through higher premiums.
  In addition, providing a drug benefit through private plans could be 
problematic, specifically for folks living in rural and small 
communities. There are no requirements as to what has to be covered and 
the coverage may vary from area to area depending on the plan. 
Wisconsin may end up on the short end of the stick like we have in the 
past under Medicare. Another problem is the huge hole in coverage. Once 
a senior hits $2,000 in drug costs there is no coverage until they 
spend $3,700 in out-of-pocket expenses. Nearly half of all seniors have 
drug expenditures over $2,000 and will receive no drug coverage for 
part of the year. Further, there is no help for low-income seniors to 
cover their drug costs over $2,000 and before they hit the stop-loss.
  We must provide a real solution to the problem of prescription drug 
coverage for our seniors. The Republican plan falls woefully short. The 
Democratic proposal, however, heads in the right direction and builds 
on the current Medicare program. The benefit would include: a $25/month 
premium; a $100 annual deductible; 20 percent cost-sharing for drug 
costs; and $2,000 out-of-pocket annual stop-loss. Low-income 
individuals up to 150 percent of poverty will pay no premium or cost-
sharing. The Democratic plan would guarantee a minimum benefit and 
ensure that those who live in Wisconsin would receive the same benefit 
as those who live in California or Florida.
  This plan is expensive but it would work because of its simplicity. 
The question about its affordability depends on whether the American 
people want a meaningful prescription drug program or if they would 
rather see large tax cuts in the future for the wealthiest Americans.
  It is unfortunate that the Republican leadership has squandered an 
excellent opportunity to try and solve the problem of prescription drug 
coverage in a bipartisan fashion. Instead they have steam-rolled ahead 
and presented our Nation's seniors with an unworkable solution to a 
grave problem. I urge my colleagues to reject this flawed proposal.
  Mr. BEREUTER. Mr. Speaker, this Member will vote for H.R. 4954, the 
Medicare Modernization and Prescription Drug Act of 2002. There are 
elements in this Medicare reform legislation which improve the access 
of health care services in rural areas.
  For example, not only does this legislation continue an effort to 
address some of this Member's concerns regarding the significant 
difference in reimbursement levels for urban and rural health care 
providers, it would also provide a 3-year fix for the Medicare 
physician payment formula, resulting in a 6 percent increase in 
Medicare payments over the next 3 years rather than the 14.2 percent 
projected cut under current law.
  For some time now, this Member has been aggressively pursuing an 
issue related to the formula used in the Medicare program to reimburse 
physicians and other health care providers for beneficiaries' medical 
care. The problem is that it does not accurately measure the cost of 
providing such services. The program reimburses physicians and other 
health care providers in a manner that favors urban providers over 
rural providers. Instead, Medicare payment formulas should more 
accurately compensate physicians and providers who deliver high-
quality, cost-effective services to Medicare beneficiaries in all areas 
of the country.
  Accordingly, this Member is pleased that the Medicare Modernization 
and Prescription Drug Act of 2002 contains a compromise agreement that 
would establish a floor of 9.985 for the physician work adjuster in 
2004 (only), thereby raising all localities with a work adjuster below 
9.985 to that level. This change would be dependent upon the outcome of 
a General Accounting Office (GAO) study and secretarial discretion. The 
Secretary of the Department of Health and Human Services would 
determine, after taking into account the GAO report, if there is ``a 
sound economic rationale for the implementation'' of such a change. If 
so, the new floor would go into effect. The change would thereby allow 
34 Medicare localities across the country, including this Member's home 
state of Nebraska, to receive a higher reimbursement rate without 
harming other localities. This language is a modified version of this 
Member's legislation, the Rural Equity Payment Index Reform Act (H.R. 
3569), which is currently co-sponsored on a bipartisan basis by 60 
Members of the House. The language included in the House Medicare 
Modernization and Prescription Drug Act is also a result of efforts by 
the distinguished gentlelady from New Mexico [Mrs. Wilson], and pushed 
hard to ensure such language was and the distinguished gentleman from 
Wisconsin [Mr. Barrett], who pursued this issue in the House Energy and 
Commerce Committee. This Member joined his colleagues, especially the 
gentlelady from New Mexico [Mrs. Wilson], and pushed hard to ensure 
such language was included in the final Medicare bill brought to the 
House Floor for consideration today.
  Establishing a floor of 9.985 to the Medicare physician work adjuster 
would translate into approximately a $4 million annual increase in 
Medicare payments to Nebraska physicians and skilled health care 
professionals in 2004. This is an important first step toward achieving 
much needed Medicare reform.
  This Member is also pleased that the bill would avert a series of 
projected cuts of nearly 15 percent in Medicare payments. On November 
1, 2001, the Centers for Medicare and Medicaid Services (CMS) announces 
that it would lower payment rates for 2002 under the Medicare Physician 
Fee Schedule. Estimates indicate that this change would result in a 
$2.0 billion reduction in payments for 2002.
  Reductions of this magnitude were completely unexpected and stemmed 
from two major factors: the downturn of the economy and the related 
reduction in the Gross Domestic Product that is used to establish the 
sustainable growth rate for physician spending, and an error on the 
part of the CMS in collecting physician payment information. This 
legislation addresses this serious health care issue.
  The Medicare Modernization and Prescription Drug Act of 2002 also 
takes an important step forward in addressing the unintended 
consequences of the Balanced Budget Act, as well as improving payments 
for hospitals, particularly rural hospitals. For example, the bill 
provides increased payment rates for hospitals in rural areas or in 
metropolitan areas with a population of less than one million.
  Under current law, Medicare pays for inpatient services in acute care 
hospitals in large urban areas using a standardized payment amount that 
is 1.6 percent larger than the standardized amount used to reimburse 
hospitals in rural areas and smaller urban areas. This legislation, 
over a 2-year period, would increase the standardized amount for 
hospitals in rural and small urban areas to the standardized amount 
paid to hospitals in large urban areas. According to the Nebraska 
Hospital Association, for example, this could mean an additional $6 
million annually for hospitals in Nebraska.
  Additionally, the bill increases payments to non-teaching rural and 
urban hospitals in states whose aggregate inpatient operating medical 
margins are negative for rural hospitals or less than three percent for 
urban hospitals. The Nebraska Hospital Association estimates that this 
could result in an additional $8 million annually for Nebraska's 
hospitals.
  This Member will record two concerns about the initiation of any 
Medicare prescription drug plan and that is, first, the rather 
extraordinary

[[Page 11981]]

cost of this new entitlement program which would have to be paid for 
employers, employees, and the self-employed, recognizing the high 
probability that these costs will be under-estimated in this or any 
alternative proposals put before the Congress. That is the track record 
for all past Medicare and Medicaid initiatives.
  However, the major concern this Member has is the near certainty that 
the cost of prescription drugs for Americans not eligible for the 
proposed Medicare prescription drug benefits will increase because of 
the Medicare prescription drug coverage offered to eligible senior 
citizens under this or other proposals. When, for example, Medicaid 
costs for nursing home care soared, cost restraints were imposed and 
the operators cost-shifted to the private-pay and insurance-pay 
residents. The same cost-shifting occurred when cost-restraints had to 
be established on Medicare costs for hospitalization and health 
professional fees. It is certain that some cost-shifting will occur in 
short order when restraints inevitably will be placed on Medicare 
prescription drug costs. The result will surely be that pharmaceutical 
costs will be cost-shifted by the drug industry to everyone else in 
America.
  This legislation, in this crucial deficiency, does nothing to 
restrain pharmaceutical costs and domestic cost-shifting. However, 
after extensive consultation, House leadership has promised a vote to 
those of us demanding some method to directly keep Medicare 
prescription drug benefits of eligible senior citizens from causing 
prescription drug costs to resultantly increase for other Americans.
  One such vote could be on an implementable drug re-importation 
program of FDA approved drugs for individual, wholesale, or retail 
uses. Turn loose the American entrepreneurial proclivities on this 
approach, and it will moderate the outrageously unacceptable level of 
international cost-shifting that now falls onto the backs of American 
consumers. Most other developed countries have imposed cost constraints 
on the prescription drug costs borne by their consumers; therefore, 
American and foreign-owned pharmaceutical firms are charging what the 
market and tolerance of the American people will bear. This legislation 
thus far does not address this huge problem--ultimately providing 
Medicare drug benefits to eligible senior citizens will make the cost 
of prescription drugs more expensive for most Americans directly and 
indirectly through Medicare deductions from their paychecks and through 
its effects on their employer's bottom line.
  Mr. Speaker, in conclusion, on balance, this Member supports H.R. 
4954 because of the progress made in providing better access to quality 
health care in non-metropolitan areas through the Medicare finance 
reforms and because of the promised opportunity for a clear opportunity 
for the House to soon cast votes on legislation which can restrain or 
lower prescription drug costs for those Americans not eligible for 
prospective Medicare prescription drug benefits. This Member will 
support the advancement of H.R. 4954 to a stage where conferees can 
craft what this Member would hope to be better legislation if the other 
body passes its version of a Medicare reform and prescription drug 
bill.
  Mr. CHAMBLISS. Mr. Speaker, we need to strengthen, simplify, and 
improve Medicare and provide prescription drug coverage for all seniors 
and disabled Americans. It has been entirely too long that seniors have 
done without substantial help in affording their prescription drugs. I 
am committed to working hard to pass prescription drug relief for 
America's seniors.
  Tonight we will pass a fiscally responsible bill that allows seniors 
and disabled Americans to purchase quality and affordable prescription 
drugs, offers seniors third party buying power, and provides the 
security of knowing they are protected from catastrophic pharmaceutical 
bills.
  We desperately need this prescription drug plan. Seniors need this 
plan to finally receive prescription drug coverage they deserve along 
with greater choice and flexibility. Further, this plan will 
substantially help nursing facilities, home health agencies, rural 
hospitals and local doctors provide better health services and ensure 
quality health care for folks throughout Georgia.
  This bill will not force folks into a Federal Government-run, one-
size-fits-all prescription drug plan that has too many rules, 
regulations, and restrictions and that allows Washington bureaucrats to 
decide what medicines can and can't be prescribed. This plan is 
voluntary, and protects those seniors who are already satisfied with 
their current prescription drug benefit by allowing them to stay in the 
existing program.
  With all these benefits, we need to make sure this legislation is 
friendly to small businesses and our local pharmacies. I have heard 
from a number of constituents and share their serious concerns that 
pharmacists may lose access to networks and our seniors will not gain 
access to benefits at their local pharmacy. Our hometown pharmacies 
play a critical role in providing health care in our local communities. 
We need to ensure that they are not put out of business by this 
legislation and that pharmacists will have the same opportunity to 
negotiate price reductions and provide discounted drugs to their 
customers. It is important that pharmacists be involved in the 
decision-making process for these plans and have the same opportunities 
to deliver lower costs to the consumer. I want our pharmacists to be 
able to continue giving customers top-notch care, and I hope that as 
the process moves forward on this important bill, these critical issues 
will be adequately addressed.
  It is no secret that prescription drug costs are an overwhelming 
burden on the health and financial security of seniors and disabled 
Americans. Too many senior citizens and disabled Americans face 
decisions between putting food on their table and being able to afford 
the prescription drugs they need. In the wealthiest country in the 
world, our seniors should not be forced to make these decisions or do 
without medication that would allow them to live longer healthier more 
enjoyable lives, and I look forward to passing a responsible 
prescription drug plan that helps America's seniors.
  Mr. EVANS. Mr. Speaker, today's seniors increasingly depend on 
prescription drugs to live healthy lives. But with prescription drug 
prices skyrocketing, medication is out-of-reach for too many of our 
Nation's seniors. All too often, we hear of seniors on tight budgets 
who are forced to choose between medication and their next meal. 
Congress must ensure that all seniors have access to affordable 
prescription drug coverage, but the plan that the Republicans have 
offered falls short. A voluntary benefit added to Medicare would 
guarantee all seniors access to affordable coverage.
  I support a plan that provides a voluntary, guaranteed, defined 
benefit under the Medicare program. A Medicare prescription drug plan 
would leave nothing to surprise. Seniors would know how much to expect 
to pay in premiums and co-payments. All seniors would be eligible to 
participate. Moreover, this plan would allow Medicare to negotiate the 
same price breaks for Medicare beneficiaries that are currently enjoyed 
by other large scale buyers like HMOs and insurance companies.
  The Republican plan is riddled with flaws. First, it is not a 
Medicare benefit, rather it relies on private insurers who have already 
made clear that they have no intention of providing drug only plans to 
Medicare beneficiaries. Second, the Republican proposal fails to rein 
in the high costs of prescription drugs for seniors. Private insurers 
will not be limited to what they may charge Medicare beneficiaries and 
will do little to reduce the high out-of-pocket costs that seniors 
already pay. Third, the GOP plan will only create more hardships for 
seniors who will be forced to jump through the hoops of their private 
insurer and be subjected to limited power provider and drug choices.
  Mr. SMITH of Texas. Mr. Speaker, I support this legislation because 
it provides a prescription drug benefit to all seniors using Medicare.
  In these times of escalating prescription drug prices, it is 
essential that seniors have access to affordable drugs to meet their 
medical needs.
  The best way to accomplish this goal is to lower the costs of 
prescription drugs, ensure that all seniors have prescription drug 
coverage and increase choices of coverage plans.
  Patients who live in rural areas and communities deserve the same 
access to physicians as their urban counterparts. As a member of the 
Rural Health Care Caucus, I am pleased that this bill addresses 
inequities between payments made to rural and urban hospitals, wage 
adjustments for physicians in rural areas and funding for health care 
organizations.
  Not only does this legislation help consumers of prescription drugs, 
but it also recognizes the importance of pharmacists in providing 
prescription drugs, helps states cover their Medicare costs and 
enhances employer-sponsored health care benefits for retirees.
  My Democratic colleagues have proposed a bill that costs over $800 
billion and sunsets after ten years. But what happens after ten years?
  This bill is a common sense, realistic approach that provides 
permanent coverage for seniors at a sensible cost. It gives special 
attention to the needs of low-income seniors and those facing 
exorbitant costs due to catastrophic illness.
  The SPEAKER pro tempore. All time for debate has expired.
  Pursuant to House Resolution 467, the previous question is ordered on 
the bill, as amended.

[[Page 11982]]

  The question is on 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. Gephardt

  Mr. GEPHARDT. Mr. Speaker, I offer a motion to recommit.
  The SPEAKER pro tempore. Is the gentleman opposed to the bill?
  Mr. GEPHARDT. I am in its current form, Mr. Speaker.
  The SPEAKER pro tempore. The Clerk will report the motion to 
recommit.
  The Clerk read as follows:

       Mr. Gephardt moves to recommit the bill H.R. 4954 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 amendment:

       Strike all after the enacting clause and insert the 
     following:

     SECTION 1. SHORT TITLE; REFERENCES IN ACT; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Medicare 
     Rx Drug Benefit and Discount Act of 2002''.
       (b) Amendments to Social Security Act.--Except as otherwise 
     specifically provided, whenever in title I of 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:

                 TITLE I--PRESCRIPTION DRUG PROVISIONS

Sec. 101. Voluntary medicare outpatient prescription medicine program.

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

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

     TITLE II--MEDICARE+CHOICE REVITALIZATION AND MEDICARE+CHOICE 
                          COMPETITION PROGRAM

Sec. 201. Medicare+Choice improvements.
Sec. 202. Making permanent change in Medicare+Choice reporting 
              deadlines and annual, coordinated election period.
Sec. 203. Specialized Medicare+Choice plans for special needs 
              beneficiaries.
Sec. 204. Extension of reasonable cost and SHMO contracts.
Sec. 205. Continuous open enrollment and disenrollment.
Sec. 206. Limitation on Medicare+Choice cost-sharing.
Sec. 207. Extension of municipal health service demonstration projects.

               TITLE III--RURAL HEALTH CARE IMPROVEMENTS

Sec. 301. Reference to full market basket increase for sole community 
              hospitals.
Sec. 302. Enhanced disproportionate share hospital (DSH) treatment for 
              rural hospitals and urban hospitals with fewer than 100 
              beds.
Sec. 303. 2-year phased-in increase in the standardized amount in rural 
              and small urban areas to achieve a single, uniform 
              standardized amount.
Sec. 304. More frequent update in weights used in hospital market 
              basket.
Sec. 305. Improvements to critical access hospital program.
Sec. 306. Extension of temporary increase for home health services 
              furnished in a rural area.
Sec. 307. Reference to 10 percent increase in payment for hospice care 
              furnished in a frontier area and rural hospice 
              demonstration project.
Sec. 308. Reference to priority for hospitals located in rural or small 
              urban areas in redistribution of unused graduate medical 
              education residencies.
Sec. 309. GAO study of geographic differences in payments for 
              physicians' services.
Sec. 310. Providing safe harbor for certain collaborative efforts that 
              benefit medically underserved populations.
Sec. 311. Relief for certain non-teaching hospitals.

                TITLE IV--PROVISIONS RELATING TO PART A

                Subtitle A--Inpatient Hospital Services

Sec. 401. Revision of acute care hospital payment updates.
Sec. 402. Freeze in level of adjustment for indirect costs of medical 
              education (IME) through fiscal year 2007.
Sec. 403. Recognition of new medical technologies under inpatient 
              hospital PPS.
Sec. 404. Phase-in of Federal rate for hospitals in Puerto Rico.
Sec. 405. Reference to provision relating to enhanced disproportionate 
              share hospital (DSH) payments for rural hospitals and 
              urban hospitals with fewer than 100 beds.
Sec. 406. Reference to provision relating to 2-year phased-in increase 
              in the standardized amount in rural and small urban areas 
              to achieve a single, uniform standardized amount.
Sec. 407. Reference to provision for more frequent updates in the 
              weights used in hospital market basket.
Sec. 408. Reference to provision making improvements to critical access 
              hospital program.

             Subtitle B--Skilled Nursing Facility Services

Sec. 411. Payment for covered skilled nursing facility services.

                          Subtitle C--Hospice

Sec. 421. Coverage of hospice consultation services.
Sec. 422. 10 percent increase in payment for hospice care furnished in 
              a frontier area.
Sec. 423. Rural hospice demonstration project.

                      Subtitle D--Other Provisions

Sec. 431. Demonstration project for use of recovery audit contractors 
              for part A services.

                 TITLE V--PROVISIONS RELATING TO PART B

                    Subtitle A--Physicians' Services

Sec. 501. Revision of updates for physicians' services.
Sec. 502. Studies on access to physicians' services.
Sec. 503. MedPAC report on payment for physicians' services.
Sec. 504. 1-year extension of treatment of certain physician pathology 
              services under medicare.
Sec. 505. Physician fee schedule wage index revision.

                       Subtitle B--Other Services

Sec. 511. Competitive acquisition of certain items and services.
Sec. 512. Payment for ambulance services.
Sec. 513. 5-year extension of moratorium on therapy caps; provisions 
              relating to reports.
Sec. 514. Accelerated implementation of 20 percent coinsurance for 
              hospital outpatient department (OPD) services; other OPD 
              provisions.
Sec. 515. Coverage of an initial preventive physical examination.
Sec. 516. Renal dialysis services.
Sec. 517. Improved payment for certain mammography services.
Sec. 518. Waiver of part B late enrollment penalty for certain military 
              retirees; special enrollment period.
Sec. 519. Coverage of cholesterol and blood lipid screening.

             TITLE VI--PROVISIONS RELATING TO PARTS A AND B

                    Subtitle A--Home Health Services

Sec. 601. Elimination of 15 percent reduction in payment rates under 
              the prospective payment system.
Sec. 602. Update in home health services.
Sec. 603. OASIS Task Force; suspension of certain OASIS data collection 
              requirements pending Task Force submittal of report.
Sec. 604. MedPAC study on medicare margins of home health agencies.

             Subtitle B--Direct Graduate Medical Education

Sec. 611. Redistribution of unused resident positions.
Sec. 612. Increasing for 5 years to 100 percent of the locality 
              adjusted national average per resident amount the payment 
              floor for direct graduate medical education payments 
              under the medicare program.

[[Page 11983]]

                      Subtitle C--Other Provisions

Sec. 621. Modifications to Medicare Payment Advisory Commission 
              (MedPAC).
Sec. 622. Demonstration project for disease management for certain 
              medicare beneficiaries with diabetes.
Sec. 623. Demonstration project for medical adult day care services.
Sec. 624. Publication on final written guidance concerning prohibitions 
              against discrimination by national origin with respect to 
              health care services.

                     TITLE VII--MEDICAID PROVISIONS

Sec. 701. DSH provisions.
Sec. 702. 1-year extension of Q-I1 program.

               TITLE I--PRESCRIPTION MEDICINE PROVISIONS

           Subtitle A--MEDICARE PRESCRIPTION MEDICINE BENEFIT

     SEC. 101. VOLUNTARY MEDICARE OUTPATIENT PRESCRIPTION MEDICINE 
                   PROGRAM.

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

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


          ``medicare outpatient prescription medicine benefit

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


      ``negotiating fair prices with pharmaceutical manufacturers

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


                          ``contract authority

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

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

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

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

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

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

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

     The procedures under clause (vi) shall include the use of a 
     pharmaceutical and therapeutics committee the members of 
     which include practicing pharmacists.
       ``(8) Awarding of contracts.--
       ``(A) Number of contracts.--The Secretary shall, consistent 
     with the requirements of this part and the goals of providing 
     quality care and of containing costs under this part, award 
     in a competitive manner at least 2 contracts to administer 
     benefits under this part in each area specified under 
     paragraph (6), unless only 1 pharmacy contractor submitting a 
     bid meets the minimum standards specified under this part and 
     by the Secretary.
       ``(B) Determination.--In determining which of the pharmacy 
     contractors that submitted bids that meet the minimum 
     standards specified under this part and by the Secretary to 
     award a contract, the Secretary shall consider the 
     comparative merits of each bid, as determined on the basis of 
     relevant factors, with respect to--
       ``(i) how well the contractor meets such minimum standards;
       ``(ii) the amount that the contractor will charge the 
     Secretary for administering the benefits under the contract;

[[Page 11984]]

       ``(iii) the performance standards established under 
     subsection (c)(2) and performance requirements for which the 
     administrative fee of the entity will be subject to risk 
     pursuant to subsection (c)(4)(A)(ii);
       ``(iv) the proposed negotiated prices of covered outpatient 
     medicines and annual increases in such prices;
       ``(v) factors relating to benefits, quality and 
     performance, beneficiary cost-sharing, and consumer 
     satisfaction;
       ``(vi) past performance and prior experience of the 
     contractor in administering a prescription medicine benefit 
     program;
       ``(vii) effectiveness of the contractor in containing costs 
     through pricing incentives and utilization management; and
       ``(viii) such other factors as the Secretary deems 
     necessary to evaluate the merits of each bid.
       ``(C) Exception to conflict of interest rules.--In awarding 
     contracts with pharmacy contractors under this part, the 
     Secretary may waive conflict of interest laws generally 
     applicable to Federal acquisitions (subject to such 
     safeguards as the Secretary may find necessary to impose) in 
     circumstances where the Secretary finds that such waiver--
       ``(i) is not inconsistent with the--

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

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

     Discounts referred to in subparagraphs (A) and (B) shall 
     include all volume discounts, manufacturer rebates, prompt 
     payment discounts, free goods, in-kind services, or any other 
     thing of financial value provided explicitly or implicitly in 
     exchange for the purchase of a covered outpatient 
     prescription medicine.
       ``(6) Reporting.--The pharmacy contractor shall provide the 
     Secretary with periodic reports on--
       ``(A) the contractor's costs of administering this part;
       ``(B) utilization of benefits under this part;
       ``(C) marketing and advertising expenditures related to 
     enrolling and retaining individuals under this part; and
       ``(D) grievances and appeals.
       ``(7) Records and audits.--The pharmacy contractor shall 
     maintain adequate records related to the administration of 
     benefits under this part and afford the Secretary access to 
     such records for auditing purposes.
       ``(8) Approval of marketing material and application 
     forms.--The pharmacy contractor shall comply with 
     requirements of section 1851(h) (relating to marketing 
     material and application forms) with respect to this part in 
     the same manner as such requirements apply under part C, 
     except that the provisions of paragraph (4)(A) of such 
     section shall not apply with respect to discounts or rebates 
     provided in accordance with this part.
       ``(c) Incentives for Cost and Utilization Management and 
     Quality Improvement.--
       ``(1) In general.--The Secretary shall include in a 
     contract awarded under subsection (b) with a pharmacy 
     contractor such incentives for cost and utilization 
     management and quality improvement as the Secretary may deem 
     appropriate. The contract may provide financial or other 
     incentives to encourage greater savings to the program under 
     this part.

[[Page 11985]]

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

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

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


             ``eligibility; voluntary enrollment; coverage

       ``Sec. 1859C. (a) Eligibility.--Each individual who is 
     entitled to hospital insurance benefits under part A or is 
     eligible to be enrolled in the medical insurance program 
     under part B is eligible to enroll in accordance with this 
     section for outpatient prescription medicine benefits under 
     this part.
       ``(b) Voluntary Enrollment.--
       ``(1) In general.--An individual may enroll under this part 
     only in such manner and form as may be prescribed by 
     regulations, and only during an enrollment period prescribed 
     in or under this subsection.
       ``(2) Initial enrollment period.--
       ``(A) Individuals currently covered.--In the case of an 
     individual who satisfies subsection (a) as of November 1, 
     2004, the initial general enrollment period shall begin on 
     August 1, 2004, and shall end on March 1, 2005.
       ``(B) Individual covered in future.--In the case of an 
     individual who first satisfies subsection (a) on or after 
     November 1, 2004, the individual's initial enrollment period 
     shall begin on the first day of the third month before the 
     month in which such individual first satisfies such paragraph 
     and shall end seven months later. The Secretary shall apply 
     rules similar to the rule described in the second sentence of 
     section 1837(d).
       ``(3) Special enrollment periods (without premium 
     penalty).--
       ``(A) Employer coverage at time of initial general 
     enrollment period.--In the case of an individual who--
       ``(i) at the time the individual first satisfies subsection 
     (a) is enrolled in a group health plan (including 
     continuation coverage) that provides outpatient prescription 
     medicine coverage by reason of the individual's (or the 
     individual's spouse's) current (or, in the case of 
     continuation coverage, former) employment status, and
       ``(ii) has elected not to enroll (or to be deemed enrolled) 
     under this subsection during the individual's initial 
     enrollment period,

     there shall be a special enrollment period of 6 months 
     beginning with the first month that includes the date of the 
     individual's (or individual's spouse's) retirement from or 
     termination of current employment status with the employer 
     that sponsors the plan, or, in the case of continuation 
     coverage, that includes the date of termination of such 
     coverage, or that includes the date the plan substantially 
     terminates outpatient prescription medicine coverage.
       ``(B) Dropping of retiree prescription medicine coverage.--
     In the case of an individual who--
       ``(i) at the time the individual first satisfies subsection 
     (a) is enrolled in a group health plan that provides 
     outpatient prescription medicine coverage other than by 
     reason of the individual's (or the individual's spouse's) 
     current employment; and
       ``(ii) has elected not to enroll (or to be deemed enrolled) 
     under this subsection during the individual's initial 
     enrollment period,

     there shall be a special enrollment period of 6 months 
     beginning with the first month that includes the date that 
     the plan substantially terminates outpatient prescription 
     medicine coverage and ending 6 months later.

[[Page 11986]]

       ``(C) Loss of medicare+choice prescription medicine 
     coverage.--In the case of an individual who is enrolled under 
     part C in a Medicare+Choice plan that provides prescription 
     medicine benefits, if such enrollment is terminated because 
     of the termination or reduction in service area of the plan, 
     there shall be a special enrollment period of 6 months 
     beginning with the first month that includes the date that 
     such plan is terminated or such reduction occurs and ending 6 
     months later.
       ``(D) Loss of medicaid prescription medicine coverage.--In 
     the case of an individual who--
       ``(i) satisfies subsection (a);
       ``(ii) loses eligibility for benefits (that include 
     benefits for prescription medicine) under a State plan after 
     having been enrolled (or determined to be eligible) for such 
     benefits under such plan; and
       ``(iii) is not otherwise enrolled under this subsection at 
     the time of such loss of eligibility,

     there shall be a special enrollment period specified by the 
     Secretary of not less than 6 months beginning with the first 
     month that includes the date that the individual loses such 
     eligibility.
       ``(4) Late enrollment with premium penalty.--The Secretary 
     shall permit an individual who satisfies subsection (a) to 
     enroll other than during the initial enrollment period under 
     paragraph (2) or a special enrollment period under paragraph 
     (3). But, in the case of such an enrollment, the amount of 
     the monthly premium of the individual is subject to an 
     increase under section 1859C(e)(1).
       ``(5) Information.--
       ``(A) In general.--The Secretary shall broadly distribute 
     information to individuals who satisfy subsection (a) on the 
     benefits provided under this part. The Secretary shall 
     periodically make available information on the cost 
     differentials to enrollees for the use of generic medicines 
     and other medicines.
       ``(B) Toll-free hotline.--The Secretary shall maintain a 
     toll-free telephone hotline (which may be a hotline already 
     used by the Secretary under this title) for purposes of 
     providing assistance to beneficiaries in the program under 
     this part, including responding to questions concerning 
     coverage, enrollment, benefits, grievances and appeals 
     procedures, and other aspects of such program.
       ``(6) Enrollee defined.--For purposes of this part, the 
     term `enrollee' means an individual enrolled for benefits 
     under this part.
       ``(c) Coverage Period.--
       ``(1) In general.--The period during which an individual is 
     entitled to benefits under this part (in this subsection 
     referred to as the individual's `coverage period') shall 
     begin on such a date as the Secretary shall establish 
     consistent with the type of coverage rules described in 
     subsections (a) and (e) of section 1838, except that in no 
     case shall a coverage period begin before January 1, 2005. No 
     payments may be made under this part with respect to the 
     expenses of an individual unless such expenses were incurred 
     by such individual during a period which, with respect to the 
     individual, is a coverage period.
       ``(2) Termination.--The Secretary shall provide for the 
     application of provisions under this subsection similar to 
     the provisions in section 1838(b).
       ``(d) Provision of Benefits to Medicare+Choice Enrollees.--
     In the case of an individual who is enrolled under this part 
     and is enrolled in a Medicare+Choice plan under part C, the 
     individual shall be provided the benefits under this part 
     through such plan and not through payment under this part.
       ``(e) Late Enrollment Penalties; Payment of Premiums.--
       ``(1) Late enrollment penalty.--
       ``(A) In general.--In the case of a late enrollment 
     described in subsection (b)(4), subject to the succeeding 
     provisions of this paragraph, the Secretary shall establish 
     procedures for increasing the amount of the monthly premium 
     under this part applicable to such enrollee by an amount that 
     the Secretary determines is actuarially sound for each such 
     period.
       ``(B) Periods taken into account.--For purposes of 
     calculating any 12-month period under subparagraph (A), there 
     shall be taken into account months of lapsed coverage in a 
     manner comparable to that applicable under the second 
     sentence of section 1839(b).
       ``(C) Periods not taken into account.--
       ``(i) In general.--For purposes of calculating any 12-month 
     period under subparagraph (A), subject to clause (ii), there 
     shall not be taken into account months for which the enrollee 
     can demonstrate that the enrollee was covered under a group 
     health plan that provides coverage of the cost of 
     prescription medicines whose actuarial value (as defined by 
     the Secretary) to the enrollee equals or exceeds the 
     actuarial value of the benefits provided to an individual 
     enrolled in the outpatient prescription medicine benefit 
     program under this part.
       ``(ii) Application.--This subparagraph shall only apply 
     with respect to a coverage period the enrollment for which 
     occurs before the end of the 60-day period that begins on the 
     first day of the month which includes the date on which the 
     plan terminates or reduces its service area (in a manner that 
     results in termination of enrollment), ceases to provide, or 
     reduces the value of the prescription medicine coverage under 
     such plan to below the value of the coverage provided under 
     the program under this part.
       ``(2) Incorporation of premium payment and government 
     contributions provisions.--The provisions of sections 1840 
     and 1844(a)(1) shall apply to enrollees under this part in 
     the same manner as they apply to individuals 65 years of age 
     or older enrolled under part B. For purposes of this 
     subsection, any reference in a section referred to in a 
     previous subsection to the Federal Supplementary Medical 
     Insurance Trust Fund is deemed a reference to the Federal 
     Medicare Prescription Medicine Trust Fund.
       ``(f) Election of Pharmacy Contractor To Administer 
     Benefits.--The Secretary shall establish a process whereby 
     each individual enrolled under this part and residing in a 
     region may elect the pharmacy contractor that will administer 
     the benefits under this part with respect to the individual. 
     Such process shall permit the individual to make an initial 
     election and to change such an election on at least an annual 
     basis and under such other circumstances as the Secretary 
     shall specify.


              ``provision of, and entitlement to, benefits

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

[[Page 11987]]

       ``(2) Exclusion.--The term `covered outpatient prescription 
     medicine' does not include--
       ``(A) medicines or classes of medicines, or their medical 
     uses, which may be excluded from coverage or otherwise 
     restricted under section 1927(d)(2), other than subparagraph 
     (E) thereof (relating to smoking cessation agents), as the 
     Secretary may specify and does not include such other 
     medicines, classes, and uses as the Secretary may specify 
     consistent with the goals of providing quality care and 
     containing costs under this part;
       ``(B) except as provided in paragraphs (1)(D) and (1)(E), 
     any product which may be distributed to individuals without a 
     prescription;
       ``(C) any product when furnished as part of, or as incident 
     to, a diagnostic service or any other item or service for 
     which payment may be made under this title; or
       ``(D) any product that is covered under part B of this 
     title.
       ``(c) Payment of Benefits.--
       ``(1) Covered outpatient prescription medicines.--There 
     shall be paid from the Federal Medicare Prescription Medicine 
     Trust Fund, in the case of each enrollee who incurs expenses 
     for medicines with respect to which benefits are payable 
     under this part under subsection (a)(1), amounts equal to the 
     sum of--
       ``(A) the price for which the medicine is made available 
     under this part (consistent with sections 1859A and 1859B), 
     reduced by any applicable cost-sharing under paragraphs (2) 
     and (3); and

       ``(B) a reasonable dispensing fee.

     The price under subparagraph (A) shall in no case exceed the 
     retail price for the medicine involved.
       ``(2) Deductible.--The amount of payment under paragraph 
     (1) for expenses incurred in a year, beginning with 2005, 
     shall be reduced by an annual deductible equal to the amount 
     specified in section 1859(2) (subject to adjustment under 
     paragraph (8)). Only expenses for countable cost-sharing (as 
     defined in subsection (a)(2)(B)) shall be taken into account 
     in applying this paragraph.
       ``(3) Coinsurance.--
       ``(A) In general.--The amount of payment under paragraph 
     (1) for expenses incurred in a year shall be further reduced 
     (subject to the stop-loss limit under paragraph (4)) by 
     coinsurance as provided under this paragraph.
       ``(B) Preferred medicines.--The coinsurance under this 
     paragraph in the case of a preferred medicine (including a 
     medicine treated as a preferred medicine under paragraph 
     (5)), is equal to 20 percent of the price applicable under 
     paragraph (1)(A) (or such lower percentage as may be provided 
     for under section 1859E(a)(1)(A)(ii)). In this part, the term 
     `preferred medicine' means, with respect to medicines 
     classified within a therapeutic class, those medicines which 
     have been designated as a preferred medicine by the Secretary 
     or the pharmacy contractor involved with respect to that 
     class and (in the case of a nongeneric medicine) with respect 
     to which a contract has been negotiated under this part.
       ``(C) Nonpreferred medicines.--The coinsurance under this 
     paragraph in the case of a nonpreferred medicine that is not 
     treated as a preferred medicine under paragraph (5) is equal 
     to the sum of--
       ``(i) 20 percent of the price for lowest price preferred 
     medicine that is within the same therapeutic class; and
       ``(ii) the amount by which--

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

       ``(4) No coinsurance once out-of-pocket expenditures equal 
     stop-loss limit.--Once an enrollee has incurred aggregate 
     countable cost-sharing under paragraph (3) (including cost-
     sharing under part B attributable to outpatient prescription 
     drugs or biologicals) equal to the amount specified in 
     section 1859(4) (subject to adjustment under paragraph (8)) 
     for expenses in a year--
       ``(A) there shall be no coinsurance under paragraph (3) for 
     additional expenses incurred in the year involved; and
       ``(B) there shall be no coinsurance under part B for 
     additional expenses incurred in the year involved for 
     outpatient prescription drugs and biologicals.
       ``(5) Appeals rights relating to coverage of nonpreferred 
     medicines.--
       ``(A) Procedures regarding the determination of medicines 
     that are medically necessary.--Each pharmacy contractor shall 
     have in place procedures on a case-by-case basis to treat a 
     nonpreferred medicine as a preferred medicine under this part 
     if the preferred medicine is determined to be not as 
     effective for the enrollee or to have significant adverse 
     effect on the enrollee. Such procedures shall require that 
     such determinations are based on professional medical 
     judgment, the medical condition of the enrollee, and other 
     medical evidence.
       ``(B) Procedures regarding denials of care.--Such 
     contractor shall have in place procedures to ensure--
       ``(i) a timely internal review for resolution of denials of 
     coverage (in whole or in part and including those regarding 
     the coverage of nonpreferred medicines) in accordance with 
     the medical exigencies of the case and a timely resolution of 
     complaints, by enrollees in the plan, or by providers, 
     pharmacists, and other individuals acting on behalf of each 
     such enrollee (with the enrollee's consent) in accordance 
     with requirements (as established by the Secretary) that are 
     comparable to such requirements for Medicare+Choice 
     organizations under part C;
       ``(ii) that the entity complies in a timely manner with 
     requirements established by the Secretary that (I) provide 
     for an external review by an independent entity selected by 
     the Secretary of denials of coverage described in clause (i) 
     not resolved in the favor of the beneficiary (or other 
     complainant) under the process described in such clause and 
     (II) are comparable to the external review requirements 
     established for Medicare+Choice organizations under part C; 
     and
       ``(iii) that enrollees are provided with information 
     regarding the appeals procedures under this part at the time 
     of enrollment with a pharmacy contractor under this part and 
     upon request thereafter.
       ``(6) Transfer of funds to cover costs of part b 
     prescription medicine catastrophic benefit.--With respect to 
     benefits described in subsection (a)(2), there shall be 
     transferred from the Federal Medicare Prescription Medicine 
     Trust Fund to the Federal Supplementary Medical Insurance 
     Trust Fund amounts equivalent to the elimination of cost-
     sharing described in such subsection.
       ``(7) Permitting application under part b of negotiated 
     prices.--For purposes of making payment under part B for 
     medicines that would be covered outpatient prescription 
     medicines but for the exclusion under subparagraph (B) or (C) 
     of subsection (b)(2), the Secretary may elect to apply the 
     payment basis used for payment of covered outpatient 
     prescription medicines under this part instead of the payment 
     basis otherwise used under such part, if it results in a 
     lower cost to the program.
       ``(8) Inflation adjustment.--
       ``(A) In general.--With respect to expenses incurred in a 
     year after 2005--
       ``(i) the deductible under paragraph (2) is equal to the 
     deductible determined under such paragraph (or this 
     subparagraph) for the previous year increased by the 
     percentage increase in per capita program expenditures (as 
     estimated in advance for the year involved under subparagraph 
     (B)); and
       ``(ii) the stop-loss limit under paragraph (3) is equal to 
     the stop-loss limit determined under such paragraph (or this 
     subparagraph) for the previous year increased by such 
     percentage increase.

     The Secretary shall adjust such percentage increase in 
     subsequent years to take into account misestimations made of 
     the per capita program expenditures under clauses (i) and 
     (ii) in previous years. Any increase under this subparagraph 
     that is not a multiple of $10 shall be rounded to the nearest 
     multiple of $10.
       ``(B) Estimation of increase in per capita program 
     expenditures.--The Secretary shall before the beginning of 
     each year (beginning with 2006) estimate the percentage 
     increase in average per capita aggregate expenditures from 
     the Federal Medicare Prescription Medicine Trust Fund for the 
     year involved compared to the previous year.
       ``(C) Reconciliation.--The Secretary shall also compute 
     (beginning with 2007) the actual percentage increase in such 
     aggregate expenditures in order to provide for reconciliation 
     of deductibles, stop-loss limits, and premiums under the 
     second sentence of subparagraph (A) and under section 
     1859D(d)(2).
       ``(d) Amount of Premiums.--
       ``(1) Monthly premium rate in 2005.--The monthly premium 
     rate in 2005 for prescription medicine benefits under this 
     part is the amount specified in section 1859(1).
       ``(2) Inflation adjustment for subsequent years.--The 
     monthly premium rate for a year after 2005 for prescription 
     medicine benefits under this part is equal to the monthly 
     premium rate for the previous year under this subsection 
     increased by the percentage increase in per capita program 
     expenditures (as estimated in advance for the year involved 
     under subsection (c)(8)(B)). The Secretary shall adjust such 
     percentage in subsequent years to take into account 
     misestimations made of the per capita program expenditures 
     under the previous sentence in previous years. Any increase 
     under this paragraph that is not a multiple of $1 shall be 
     rounded to the nearest multiple of $1.


                  ``administration; quality assurance

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

       ``(I) price negotiations (consistent with subsection (b));
       ``(II) reduced coinsurance (below 20 percent) to encourage 
     the utilization of appropriate preferred medicines; and

[[Page 11988]]

       ``(III) methods to reduce medication errors and encourage 
     appropriate use of medications; and

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


          ``federal medicare prescription medicine trust fund

       ``Sec. 1859F. (a) Establishment.--There is hereby created 
     on the books of the Treasury of the United States a trust 
     fund to be known as the `Federal Medicare Prescription 
     Medicine Trust Fund' (in this section referred to as the 
     `Trust Fund'). The Trust Fund shall consist of such gifts and 
     bequests as may be made as provided in section 201(i)(1), and 
     such amounts as may be deposited in, or appropriated to, such 
     fund as provided in this part.
       ``(b) Application of SMI Trust Fund Provisions.--The 
     provisions of subsections (b) through (i) of section 1841 
     shall apply to this part and the Trust Fund in the same 
     manner as they apply to part B and the Federal Supplementary 
     Medical Insurance Trust Fund, respectively.


      ``compensation for employers covering retiree medicine costs

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

[[Page 11989]]

       ``(i) \1/12\ of the average per capita aggregate 
     expenditures, as estimated under section 1859D(c)(8) for the 
     year involved; exceeds
       ``(ii) the monthly premium rate under section 1859D(d) for 
     the month involved.


          ``medicare prescription medicine advisory committee

       ``Sec. 1859H. (a) Establishment of Committee.--There is 
     established a Medicare Prescription Medicine Advisory 
     Committee (in this section referred to as the `Committee').
       ``(b) Functions of Committee.--The Committee shall advise 
     the Secretary on policies related to--
       ``(1) the development of guidelines for the implementation 
     and administration of the outpatient prescription medicine 
     benefit program under this part; and
       ``(2) the development of--
       ``(A) standards required of pharmacy contractors under 
     section 1859D(c)(5) for determining if a medicine is as 
     effective for an enrollee or has a significant adverse effect 
     on an enrollee under this part;
       ``(B) standards for--
       ``(i) defining therapeutic classes;
       ``(ii) adding new therapeutic classes;
       ``(iii) assigning to such classes covered outpatient 
     prescription medicines; and
       ``(iv) identifying breakthrough medicines;
       ``(C) procedures to evaluate the bids submitted by pharmacy 
     contractors under this part;
       ``(D) procedures for negotiations, and standards for 
     entering into contracts, with manufacturers, including 
     identifying medicines or classes of medicines where 
     Secretarial negotiation is most likely to yield savings under 
     this part significantly above those that which could be 
     achieved by a pharmacy contractor; and
       ``(E) procedures to ensure that pharmacy contractors with a 
     contract under this part are in compliance with the 
     requirements under this part.

     For purposes of this part, a medicine is a `breakthrough 
     medicine' if the Secretary, in consultation with the 
     Committee, determines it is a new product that will make a 
     significant and major improvement by reducing physical or 
     mental illness, reducing mortality, or reducing disability, 
     and that no other product is available to beneficiaries that 
     achieves similar results for the same condition. The 
     Committee may consider cost-effectiveness in establishing 
     standards for defining therapeutic classes and assigning 
     drugs to such classes under subparagraph (B).
       ``(c) Structure and Membership of the Committee.--
       ``(1) Structure.--The Committee shall be composed of 19 
     members who shall be appointed by the Secretary.
       ``(2) Membership.--
       ``(A) In general.--The members of the Committee shall be 
     chosen on the basis of their integrity, impartiality, and 
     good judgment, and shall be individuals who are, by reason of 
     their education, experience, and attainments, exceptionally 
     qualified to perform the duties of members of the Committee.
       ``(B) Specific members.--Of the members appointed under 
     paragraph (1)--
       ``(i) 5 shall be chosen to represent practicing physicians, 
     2 of whom shall be gerontologists;
       ``(ii) 2 shall be chosen to represent practicing nurse 
     practitioners;
       ``(iii) 4 shall be chosen to represent practicing 
     pharmacists;
       ``(iv) 1 shall be chosen to represent the Centers for 
     Medicare & Medicaid Services;
       ``(v) 4 shall be chosen to represent actuaries, 
     pharmacoeconomists, researchers, and other appropriate 
     experts;
       ``(vi) 1 shall be chosen to represent emerging medicine 
     technologies;
       ``(vii) 1 shall be chosen to represent the Food and Drug 
     Administration; and
       ``(viii) 1 shall be chosen to represent individuals 
     enrolled under this part.
       ``(d) Terms of Appointment.--Each member of the Committee 
     shall serve for a term determined appropriate by the 
     Secretary. The terms of service of the members initially 
     appointed shall begin on January 1, 2004.
       ``(e) Chairperson.--The Secretary shall designate a member 
     of the Committee as Chairperson. The term as Chairperson 
     shall be for a 1-year period.
       ``(f) Committee Personnel Matters.--
       ``(1) Members.--
       ``(A) Compensation.--Each member of the Committee who is 
     not an officer or employee of the Federal Government shall be 
     compensated at a rate equal to the daily equivalent of the 
     annual rate of basic pay prescribed for level IV of the 
     Executive Schedule under section 5315 of title 5, United 
     States Code, for each day (including travel time) during 
     which such member is engaged in the performance of the duties 
     of the Committee. All members of the Committee who are 
     officers or employees of the United States shall serve 
     without compensation in addition to that received for their 
     services as officers or employees of the United States.
       ``(B) Travel expenses.--The members of the Committee shall 
     be allowed travel expenses, including per diem in lieu of 
     subsistence, at rates authorized for employees of agencies 
     under subchapter I of chapter 57 of title 5, United States 
     Code, while away from their homes or regular places of 
     business in the performance of services for the Committee.
       ``(2) Staff.--The Committee may appoint such personnel as 
     the Committee considers appropriate.
       ``(g) Operation of the Committee.--
       ``(1) Meetings.--The Committee shall meet at the call of 
     the Chairperson (after consultation with the other members of 
     the Committee) not less often than quarterly to consider a 
     specific agenda of issues, as determined by the Chairperson 
     after such consultation.
       ``(2) Quorum.--Ten members of the Committee shall 
     constitute a quorum for purposes of conducting business.
       ``(h) Federal Advisory Committee Act.--Section 14 of the 
     Federal Advisory Committee Act (5 U.S.C. App.) shall not 
     apply to the Committee.
       ``(i) Transfer of Personnel, Resources, and Assets.--For 
     purposes of carrying out its duties, the Secretary and the 
     Committee may provide for the transfer to the Committee of 
     such civil service personnel in the employ of the Department 
     of Health and Human Services (including the Centers for 
     Medicare & Medicaid Services), and such resources and assets 
     of the Department used in carrying out this title, as the 
     Committee requires.
       ``(j) Authorization of Appropriations.--There are 
     authorized to be appropriated such sums as may be necessary 
     to carry out the purposes of this section.''.
       (b) Application of General Exclusions from Coverage.--
       (1) Application to part d.--Section 1862(a) (42 U.S.C. 
     1395y(a)) is amended in the matter preceding paragraph (1) by 
     striking ``part A or part B'' and inserting ``part A, B, or 
     D''.
       (2) Prescription medicines not excluded from coverage if 
     appropriately prescribed.--Section 1862(a)(1) (42 U.S.C. 
     1395y(a)(1)) is amended--
       (A) in subparagraph (H), by striking ``and'' at the end;
       (B) in subparagraph (I), by striking the semicolon at the 
     end and inserting ``, and''; and
       (C) by adding at the end the following new subparagraph:
       ``(J) in the case of prescription medicines covered under 
     part D, which are not prescribed in accordance with such 
     part;''.
       (c) Conforming Amendments.--(1) Part C of title XVIII is 
     amended--
       (A) in section 1851(a)(2)(B) (42 U.S.C. 1395w-21(a)(2)(B)), 
     by striking ``1859(b)(3)'' and inserting ``1858(b)(3)'';
       (B) in section 1851(a)(2)(C) (42 U.S.C. 1395w-21(a)(2)(C)), 
     by striking ``1859(b)(2)'' and inserting ``1858(b)(2)'';
       (C) in section 1852(a)(1) (42 U.S.C. 1395w-22(a)(1)), by 
     striking ``1859(b)(3)'' and inserting ``1858(b)(3)'';
       (D) in section 1852(a)(3)(B)(ii) (42 U.S.C. 1395w-
     22(a)(3)(B)(ii)), by striking ``1859(b)(2)(B)'' and inserting 
     ``1858(b)(2)(B)'';
       (E) in section 1853(a)(1)(A) (42 U.S.C. 1395w-23(a)(1)(A)), 
     by striking ``1859(e)(4)'' and inserting ``1858(e)(4)''; and
       (F) in section 1853(a)(3)(D) (42 U.S.C. 1395w-23(a)(3)(D)), 
     by striking ``1859(e)(4)'' and inserting ``1858(e)(4)''.
       (2) Section 1171(a)(5)(D) (42 U.S.C. 1320d(a)(5)(D)) is 
     amended by striking ``or (C)'' and inserting ``(C), or (D)''.

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

       (a) Requiring Availability of an Actuarially Equivalent 
     Prescription Medicine Benefit.--Section 1851 (42 U.S.C. 
     1395w-21) is amended by adding at the end the following new 
     subsection:
       ``(j) Availability of Prescription Medicine Benefits.--
       ``(1) In general.--Notwithstanding any other provision of 
     this part, each Medicare+Choice organization that makes 
     available a Medicare+Choice plan described in section 
     1851(a)(2)(A) shall make available such a plan that offers 
     coverage of covered outpatient prescription medicines that is 
     at least actuarially equivalent to the benefits provided 
     under part D. Information respecting such benefits shall be 
     made available in the same manner as information on other 
     benefits provided under this part is made available. Nothing 
     in this paragraph shall be construed as requiring the 
     offering of such coverage separate from coverage that 
     includes benefits under parts A and B.
       ``(2) Treatment of prescription medicine enrollees.--In the 
     case of a Medicare+Choice eligible individual who is enrolled 
     under part D, the benefits described in paragraph (1) shall 
     be treated in the same manner as benefits described in part B 
     for purposes of coverage and payment and any reference in 
     this part to the Federal Supplementary Medical Insurance 
     Trust Fund shall be deemed, with respect to such benefits, to 
     be a reference to the Federal Medicare Prescription Medicine 
     Trust Fund.''.
       (b) Application of Quality Standards.--Section 
     1852(e)(2)(A) (42 U.S.C. 1395w-22(e)(2)(A)) is amended--
       (1) by striking ``and'' at the end of clause (xi);
       (2) by striking the period at the end of clause (xii) and 
     inserting ``, and''; and

[[Page 11990]]

       (3) by adding at the end the following new clause:
       ``(xiii) comply with the standards, and apply the programs, 
     under section 1859B(b) for covered outpatient prescription 
     medicines under the plan.''.
       (c) Payment Separate From Payment for Part A and B 
     Benefits.--Section 1853 (42 U.S.C. 1395w-23) is amended--
       (1) in subsection (a)(1)(A), by striking ``and (i)'' and 
     inserting ``(i), and (j)''; and
       (2) by adding at the end the following new subsection:
       ``(j) Payment for Prescription Medicine Coverage Option.--
       ``(1) In general.--In the case of a Medicare+Choice plan 
     that provides prescription medicine benefits described in 
     section 1851(j)(1), the amount of payment otherwise made to 
     the Medicare+Choice organization offering the plan shall be 
     increased by the amount described in paragraph (2). Such 
     payments shall be made in the same manner and time as the 
     amount otherwise paid, but such amount shall be payable from 
     the Federal Medicare Prescription Medicine Trust Fund.
       ``(2) Amount.--The amount described in this paragraph is 
     the monthly Government contribution amount computed under 
     section 1859G(c)(2)(B), but subject to adjustment under 
     paragraph (3). Such amount shall be uniform geographically 
     and shall not vary based on the Medicare+Choice payment area 
     involved.
       ``(3) Risk adjustment.--The Secretary shall establish a 
     methodology for the adjustment of the payment amount under 
     this subsection in a manner that takes into account the 
     relative risks for use of outpatient prescription medicines 
     by Medicare+Choice enrollees. Such methodology shall be 
     designed in a manner so that the total payments under this 
     title (including part D) are not changed as a result of the 
     application of such methodology.''.
       (d) Separate Application of Adjusted Community Rate 
     (ACR).--Section 1854 (42 U.S.C. 1395w-24) is amended by 
     adding at the end the following:
       ``(i) Application to Prescription Medicine Coverage.--The 
     Secretary shall apply the previous provisions of this section 
     (including the computation of the adjusted community rate) 
     separately with respect to prescription medicine benefits 
     described in section 1851(j)(1).''.
       (f) Conforming Amendments.--
       (1) Section 1851 (42 U.S.C. 1395w-21) is amended--
       (A) in subsection (a)(1)(A), by striking ``parts A and B'' 
     and inserting ``parts A, B, and D''; and
       (B) in subsection (i) by inserting ``(and, if applicable, 
     part D)'' after ``parts A and B''.
       (2) Section 1852(a)(1)(A) (42 U.S.C. 1395w-22(a)(1)(A)) is 
     amended by inserting ``(and under part D to individuals also 
     enrolled under such part)'' after ``parts A and B''.
       (3) Section 1852(d)(1) (42 U.S.C. 1395w-22(d)(1)) is 
     amended--
       (A) by striking ``and'' at the end of subparagraph (D);
       (B) by striking the period at the end of subparagraph (E) 
     and inserting ``; and''; and
       (C) by adding at the end the following:
       ``(F) the plan for part D benefits guarantees coverage of 
     any specifically named prescription medicine for an enrollee 
     to the extent that it would be required to be covered under 
     part D.

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

     SEC. 103. MEDIGAP REVISIONS.

       (a) Required Coverage of Covered Outpatient Prescription 
     Medicines.--Section 1882(p)(2)(B) (42 U.S.C. 1395ss(p)(2)(B)) 
     is amended by inserting before ``and'' at the end the 
     following: ``including a requirement that an appropriate 
     number of policies provide coverage of medicines which 
     complements but does not duplicate the medicine benefits that 
     beneficiaries are otherwise eligible for benefits under part 
     D of this title (with the Secretary and the National 
     Association of Insurance Commissioners determining the 
     appropriate level of medicine benefits that each benefit 
     package must provide and ensuring that policies providing 
     such coverage are affordable for beneficiaries;''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect on January 1, 2005.
       (c) Transition Provisions.--
       (1) In general.--If the Secretary of Health and Human 
     Services identifies a State as requiring a change to its 
     statutes or regulations to conform its regulatory program to 
     the amendments made by this section, the State regulatory 
     program shall not be considered to be out of compliance with 
     the requirements of section 1882 of the Social Security Act 
     due solely to failure to make such change until the date 
     specified in paragraph (4).
       (2) NAIC standards.--If, within 9 months after the date of 
     enactment of this Act, the National Association of Insurance 
     Commissioners (in this subsection referred to as the 
     ``NAIC'') modifies its NAIC Model Regulation relating to 
     section 1882 of the Social Security Act (referred to in such 
     section as the 1991 NAIC Model Regulation, as subsequently 
     modified) to conform to the amendments made by this section, 
     such revised regulation incorporating the modifications shall 
     be considered to be the applicable NAIC model regulation 
     (including the revised NAIC model regulation and the 1991 
     NAIC Model Regulation) for the purposes of such section.
       (3) Secretary standards.--If the NAIC does not make the 
     modifications described in paragraph (2) within the period 
     specified in such paragraph, the Secretary of Health and 
     Human Services shall make the modifications described in such 
     paragraph and such revised regulation incorporating the 
     modifications shall be considered to be the appropriate 
     regulation for the purposes of such section.
       (4) Date specified.--
       (A) In general.--Subject to subparagraph (B), the date 
     specified in this paragraph for a State is the earlier of--
       (i) the date the State changes its statutes or regulations 
     to conform its regulatory program to the changes made by this 
     section; or
       (ii) 1 year after the date the NAIC or the Secretary first 
     makes the modifications under paragraph (2) or (3), 
     respectively.
       (B) Additional legislative action required.--In the case of 
     a State which the Secretary identifies as--
       (i) requiring State legislation (other than legislation 
     appropriating funds) to conform its regulatory program to the 
     changes made in this section; but
       (ii) having a legislature which is not scheduled to meet in 
     2003 in a legislative session in which such legislation may 
     be considered;

     the date specified in this paragraph is the first day of the 
     first calendar quarter beginning after the close of the first 
     legislative session of the State legislature that begins on 
     or after January 1, 2003. For purposes of the previous 
     sentence, in the case of a State that has a 2-year 
     legislative session, each year of such session shall be 
     deemed to be a separate regular session of the State 
     legislature.

     SEC. 104. TRANSITIONAL ASSISTANCE FOR LOW INCOME 
                   BENEFICIARIES.

       (a) QMB Coverage of Premiums and Cost-Sharing.--Section 
     1905(p)(3) (42 U.S.C. 1396d(p)(3)) is amended--
       (1) in subparagraph (A)--
       (A) by striking ``and'' at the end of clause (i),
       (B) by adding ``and'' at the end of clause (ii), and
       (C) by adding at the end the following new clause:
       ``(iii) premiums under section 1859D(d).'';
       (2) in subparagraph (B), by inserting ``and section 
     1859D(c)(3)(B) and 1859D(c)(3)(C)(i)'' after ``1813''; and
       (3) in subparagraph (C), by striking ``and section 
     1833(b)'' and inserting ``, section 1833(b), and section 
     1859D(c)(2)''.
       (b) Expanded SLMB Eligibility.--Section 1902(a)(10)(E) (42 
     U.S.C. 1396a(a)(10)(E)) is amended--
       (1) by striking ``and'' at the end of clause (iii);
       (2) by adding ``and'' at the end of clause (iv); and
       (3) by adding at the end the following new clause:
       ``(v)(I) for making medical assistance available for 
     medicare cost-sharing described in section 1905(p)(3)(A)(iii) 
     and medicare cost-sharing described in section 1905(p)(3)(B) 
     and section 1905(p)(3)(C) but only insofar as it relates to 
     benefits provided under part D of title XVIII, subject to 
     section 1905(p)(4), for individuals (other than qualified 
     medicare beneficiaries) who are enrolled under part D of 
     title XVIII and are described in section 1905(p)(1)(B) or 
     would be so described but for the fact that their income 
     exceeds 100 percent, but is less than 150 percent, of the 
     official poverty line (referred to in such section) for a 
     family of the size involved;
       ``(II) subject to section 1905(p)(4), for individuals 
     (other than qualified medicare beneficiaries and individuals 
     described in subclause (I)) who are enrolled under part D of 
     title XVIII and would be described in section 1905(p)(1)(B) 
     but for the fact that their income exceeds 150 percent, but 
     is less than 175 percent, of the official poverty line 
     (referred to in such section) for a family of the size 
     involved, for making medical assistance available for 
     medicare cost-sharing described in section 1905(p)(3)(A)(iii) 
     and medicare cost-sharing described in section 1905(p)(3)(B) 
     and section 1905(p)(3)(C) but only insofar as it relates to 
     benefits provided under part D of title XVIII, and the 
     assistance for medicare cost-sharing described in section 
     1905(p)(3)(A)(iii) is reduced (on a sliding scale based on 
     income) from 100 percent to 0 percent as the income increases 
     from 150 percent to 175 percent of such poverty line;''.
       (c) Federal Financing.--The third sentence of section 
     1905(b) (42 U.S.C. 1396d(b)) is amended by inserting before 
     the period at

[[Page 11991]]

     the end the following: ``and with respect to amounts expended 
     that are attributable to section 1902(a)(10)(E)(v) (other 
     than for individuals described in section 1905(p)(1)(B))''.
       (d) Treatment of Territories.--
       (1) In general.--Section 1905(p) (42 U.S.C. 1396d(p)) is 
     amended--
       (A) by redesignating paragraphs (5) and (6) as paragraphs 
     (6) and (7), respectively; and
       (B) by inserting after paragraph (4) the following new 
     paragraph:
       ``(5)(A) In the case of a State, other than the 50 States 
     and the District of Columbia--
       ``(i) the provisions of paragraph (3) insofar as they 
     relate to section 1859D and the provisions of section 
     1902(a)(10)(E)(v) shall not apply to residents of such State; 
     and
       ``(ii) if the State establishes a plan described in 
     subparagraph (B) (for providing medical assistance with 
     respect to the provision of prescription medicines to 
     medicare beneficiaries), the amount otherwise determined 
     under section 1108(f) (as increased under section 1108(g)) 
     for the State shall be increased by the amount specified in 
     subparagraph (C).
       ``(B) The plan described in this subparagraph is a plan 
     that--
       ``(i) provides medical assistance with respect to the 
     provision of covered outpatient medicines (as defined in 
     section 1859D(b)) to low-income medicare beneficiaries; and
       ``(ii) assures that additional amounts received by the 
     State that are attributable to the operation of this 
     paragraph are used only for such assistance.
       ``(C)(i) The amount specified in this subparagraph for a 
     State for a year is equal to the product of--
       ``(I) the aggregate amount specified in clause (ii); and
       ``(II) the amount specified in section 1108(g)(1) for that 
     State, divided by the sum of the amounts specified in such 
     section for all such States.
       ``(ii) The aggregate amount specified in this clause for--
       ``(I) 2005, is equal to $25,000,000; or
       ``(II) a subsequent year, is equal to the aggregate amount 
     specified in this clause for the previous year increased by 
     annual percentage increase specified in section 
     1859D(c)(8)(B) for the year involved.
       ``(D) The Secretary shall submit to Congress a report on 
     the application of this paragraph and may include in the 
     report such recommendations as the Secretary deems 
     appropriate.''.
       (2) Conforming amendment.--Section 1108(f) (42 U.S.C. 
     1308(f)) is amended by inserting ``and section 
     1905(p)(5)(A)(ii)'' after ``Subject to subsection (g)''.
       (e) Application of Cost-Sharing.--Section 1902(n)(2) (42 
     U.S.C. 1396a(n)(2)) is amended by adding at the end the 
     following: ``The previous sentence shall not apply to 
     medicare cost-sharing relating to benefits under part D of 
     title XVIII.''.
       (f) Effective Date.--The amendments made by this section 
     apply to medical assistance for premiums and cost-sharing 
     incurred on or after January 1, 2005, with regard to whether 
     regulations to implement such amendments are promulgated by 
     such date.

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

       (a) Expansion of Membership.--
       (1) In general.--Section 1805(c) (42 U.S.C. 1395b-6(c)) is 
     amended--
       (A) in paragraph (1), by striking ``17'' and inserting 
     ``19''; and
       (B) in paragraph (2)(B), by inserting ``experts in the area 
     of pharmacology and prescription medicine benefit programs,'' 
     after ``other health professionals,''.
       (2) Initial terms of additional members.--
       (A) In general.--For purposes of staggering the initial 
     terms of members of the Medicare Payment Advisory Commission 
     under section 1805(c)(3) of the Social Security Act (42 
     U.S.C. 1395b-6(c)(3)), the initial terms of the 2 additional 
     members of the Commission provided for by the amendment under 
     paragraph (1)(A) are as follows:
       (i) One member shall be appointed for 1 year.
       (ii) One member shall be appointed for 2 years.
       (B) Commencement of terms.--Such terms shall begin on 
     January 1, 2003.
       (b) Expansion of Duties.--Section 1805(b)(2) (42 U.S.C. 
     1395b-6(b)(2)) is amended by adding at the end the following 
     new subparagraph:
       ``(D) Prescription medicine benefit program.--Specifically, 
     the Commission shall review, with respect to the prescription 
     medicine benefit program under part D, the following:
       ``(i) The methodologies used for the management of costs 
     and utilization of prescription medicines.
       ``(ii) The prices negotiated and paid, including trends in 
     such prices and applicable discounts and comparisons with 
     prices under section 1859E(a)(2)(E).
       ``(iii) The relationship of pharmacy acquisition costs to 
     the prices so negotiated and paid.
       ``(iv) The methodologies used to ensure access to covered 
     outpatient prescription medicines and to ensure quality in 
     the appropriate dispensing and utilization of such medicines.
       ``(v) The impact of the program on promoting the 
     development of breakthrough medicines.''.

     TITLE II--MEDICARE+CHOICE REVITALIZATION AND MEDICARE+CHOICE 
                          COMPETITION PROGRAM

     SEC. 201. MEDICARE+CHOICE IMPROVEMENTS.

       (a) Equalizing Payments Between Fee-For-Service and 
     Medicare+Choice.--
       (1) In general.--Section 1853(c)(1) (42 U.S.C. 1395w-
     23(c)(1)) is amended by adding at the end the following:
       ``(D) Based on 100 percent of fee-for-service costs.--
       ``(i) In general.--For 2003 and 2004, the adjusted average 
     per capita cost for the year involved, determined under 
     section 1876(a)(4) for the Medicare+Choice payment area for 
     services covered under parts A and B for individuals entitled 
     to benefits under part A and enrolled under part B who are 
     not enrolled in a Medicare+Choice plan under this part for 
     the year, but adjusted to exclude costs attributable to 
     payments under section 1886(h).
       ``(ii) Inclusion of costs of va and dod military facility 
     services to medicare-eligible beneficiaries.--In determining 
     the adjusted average per capita cost under clause (i) for a 
     year, such cost shall be adjusted to include the Secretary's 
     estimate, on a per capita basis, of the amount of additional 
     payments that would have been made in the area involved under 
     this title if individuals entitled to benefits under this 
     title had not received services from facilities of the 
     Department of Veterans Affairs or the Department of 
     Defense.''.
       (2) Conforming amendment.--Such section is further amended, 
     in the matter before subparagraph (A), by striking ``or (C)'' 
     and inserting ``(C), or (D)''.
       (b) Revision of Blend.--
       (1) Revision of national average used in calculation of 
     blend.--Section 1853(c)(4)(B)(i)(II) (42 U.S.C. 1395w-
     23(c)(4)(B)(i)(II)) is amended by inserting ``who (with 
     respect to determinations for 2003 and for 2004) are enrolled 
     in a Medicare+Choice plan'' after ``the average number of 
     medicare beneficiaries''.
       (2) Change in budget neutrality.--Section 1853(c) (42 
     U.S.C. 1395w-23(c)) is amended--
       (A) in paragraph (1)(A), by inserting ``(for a year before 
     2003)'' after ``multiplied''; and
       (B) in paragraph (5), by inserting ``(before 2003)'' after 
     ``for each year''.
       (c) Revision in Minimum Percentage Increase for 2003 and 
     2004.--Section 1853(c)(1)(C) (42 U.S.C. 1395w-23(c)(1)(C)) is 
     amended by striking clause (iv) and inserting the following:
       ``(iv) For 2002, 102 percent of the annual Medicare+Choice 
     capitation rate under this paragraph for the area for 2001.
       ``(v) For 2003 and 2004, 103 percent of the annual 
     Medicare+Choice capitation rate under this paragraph for the 
     area for the previous year.
       ``(vi) For 2005 and each succeeding year, 102 percent of 
     the annual Medicare+Choice capitation rate under this 
     paragraph for the area for the previous year.''.
       (d) Inclusion of Costs of DOD and VA Military Facility 
     Services to Medicare-eligible Beneficiaries in Calculation of 
     Medicare+Choice Payment Rates.--Section 1853(c)(3) (42 U.S.C. 
     1395w-23(c)(3)) is amended--
       (1) in subparagraph (A), by striking ``subparagraph (B)'' 
     and inserting ``subparagraphs (B) and (E)'', and
       (2) by adding at the end the following new subparagraph:
       ``(E) Inclusion of costs of dod and va military facility 
     services to medicare-eligible beneficiaries.--In determining 
     the area-specific Medicare+Choice capitation rate under 
     subparagraph (A) for a year (beginning with 2003), the annual 
     per capita rate of payment for 1997 determined under section 
     1876(a)(1)(C) shall be adjusted to include in the rate the 
     Secretary's estimate, on a per capita basis, of the amount of 
     additional payments that would have been made in the area 
     involved under this title if individuals entitled to benefits 
     under this title had not received services from facilities of 
     the Department of Defense or the Department of Veterans 
     Affairs.''.
       (e) Announcement of Revised Medicare+Choice Payment 
     Rates.--Within 2 weeks after the date of the enactment of 
     this Act, the Secretary shall determine, and shall announce 
     (in a manner intended to provide notice to interested 
     parties) Medicare+Choice capitation rates under section 1853 
     of the Social Security Act (42 U.S.C. 1395w-23) for 2003, 
     revised in accordance with the provisions of this section.
       (f) MedPAC Study of AAPCC.--
       (1) Study.--The Medicare Payment Advisory Commission shall 
     conduct a study that assesses the method used for determining 
     the adjusted average per capita cost (AAPCC) under section 
     1876(a)(4) of the Social Security Act (42 U.S.C. 
     1395mm(a)(4)). Such study shall examine--
       (A) the bases for variation in such costs between different 
     areas, including differences in input prices, utilization, 
     and practice patterns;
       (B) the appropriate geographic area for payment under the 
     Medicare+Choice program under part C of title XVIII of such 
     Act; and

[[Page 11992]]

       (C) the accuracy of risk adjustment methods in reflecting 
     differences in costs of providing care to different groups of 
     beneficiaries served under such program.
       (2) Report.--Not later than 9 months after the date of the 
     enactment of this Act, the Commission shall submit to 
     Congress a report on the study conducted under paragraph (1). 
     Such report shall include recommendations regarding changes 
     in the methods for computing the adjusted average per capita 
     cost among different areas.
       (g) Applying Limitations on Balance Billing to Medicare 
     MSAs.--Section 1852(k)(1) (42 U.S.C. 1395w-22(k)(1)) is 
     amended by inserting ``or with an organization offering a MSA 
     plan'' after ``section 1851(a)(2)(A)''.
       (h) Report on Impact of Increased Financial Assistance to 
     Medicare+Choice Plans.--Not later than July 1, 2003, the 
     Secretary shall submit to Congress a report that describes 
     the impact of additional financing provided under this Act 
     and other Acts (including the Medicare, Medicaid, and SCHIP 
     Balanced Budget Refinement Act of 1999 and BIPA) on the 
     availability of Medicare+Choice plans in different areas and 
     its impact on lowering premiums and increasing benefits under 
     such plans.

     SEC. 202. MAKING PERMANENT CHANGE IN MEDICARE+CHOICE 
                   REPORTING DEADLINES AND ANNUAL, COORDINATED 
                   ELECTION PERIOD.

       (a) Change in Reporting Deadline.--Section 1854(a)(1) (42 
     U.S.C. 1395w-24(a)(1)), as amended by section 532(b)(1) of 
     the Public Health Security and Bioterrorism Preparedness and 
     Response Act of 2002, is amended by striking ``2002, 2003, 
     and 2004 (or July 1 of each other year)'' and inserting 
     ``2002 and each subsequent year (or July 1 of each year 
     before 2002)''.
       (b) Delay in Annual, Coordinated Election Period.--Section 
     1851(e)(3)(B) (42 U.S.C. 1395w-21(e)(3)(B)), as amended by 
     section 532(c)(1)(A) of the Public Health Security and 
     Bioterrorism Preparedness and Response Act of 2002, is 
     amended by striking ``and after 2005, the month of November 
     before such year and with respect to 2003, 2004, and 2005'' 
     and inserting ``, the month of November before such year and 
     with respect to 2003 and any subsequent year''.
       (c) Annual Announcement of Payment Rates.--Section 
     1853(b)(1) (42 U.S.C. 1395w-23(b)(1)), as amended by section 
     532(d)(1) of the Public Health Security and Bioterrorism 
     Preparedness and Response Act of 2002, is amended by striking 
     ``and after 2005 not later than March 1 before the calendar 
     year concerned and for 2004 and 2005'' and inserting ``not 
     later than March 1 before the calendar year concerned and for 
     2004 and each subsequent year''.
       (d) Requiring Provision of Available Information Comparing 
     Plan Options.--The first sentence of section 
     1851(d)(2)(A)(ii) (42 U.S.C. 1395w-21(d)(2)(A)(ii)) is 
     amended by inserting before the period the following: ``To 
     the extent such information is available at the time of 
     preparation of materials for the mailing''.

     SEC. 203. SPECIALIZED MEDICARE+CHOICE PLANS FOR SPECIAL NEEDS 
                   BENEFICIARIES.

       (a) Treatment as Coordinated Care Plan.--Section 
     1851(a)(2)(A) (42 U.S.C. 1395w-21(a)(2)(A)) is amended by 
     adding at the end the following new sentence: ``Specialized 
     Medicare+Choice plans for special needs beneficiaries (as 
     defined in section 1859(b)(4)) may be any type of coordinated 
     care plan.''.
       (b) Specialized Medicare+Choice Plan for Special Needs 
     Beneficiaries Defined.--Section 1859(b) (42 U.S.C. 1395w-
     29(b)) is amended by adding at the end the following new 
     paragraph:
       ``(4) Specialized medicare+choice plans for special needs 
     beneficiaries.--
       ``(A) In general.--The term `specialized Medicare+Choice 
     plan for special needs beneficiaries' means a Medicare+Choice 
     plan that exclusively serves special needs beneficiaries (as 
     defined in subparagraph (B)).
       ``(B) Special needs beneficiary.--The term `special needs 
     beneficiary' means a Medicare+Choice eligible individual 
     who--
       ``(i) is institutionalized (as defined by the Secretary);
       ``(ii) is entitled to medical assistance under a State plan 
     under title XIX; or
       ``(iii) meets such requirements as the Secretary may 
     determine would benefit from enrollment in such a specialized 
     Medicare+Choice plan described in subparagraph (A) for 
     individuals with severe or disabling chronic conditions.''.
       (c) Restriction on Enrollment Permitted.--Section 1859 (42 
     U.S.C. 1395w-29) is amended by adding at the end the 
     following new subsection:
       ``(f) Restriction on Enrollment for Specialized 
     Medicare+Choice Plans for Special Needs Beneficiaries.--In 
     the case of a specialized Medicare+Choice plan (as defined in 
     subsection (b)(4)), notwithstanding any other provision of 
     this part and in accordance with regulations of the Secretary 
     and for periods before January 1, 2007, the plan may restrict 
     the enrollment of individuals under the plan to individuals 
     who are within one or more classes of special needs 
     beneficiaries.''.
       (d) Report to Congress.--Not later than December 31, 2005, 
     the 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 upon the date of the enactment 
     of this Act.
       (2) Deadline for issuance of requirements for special needs 
     beneficiaries; transition.--No later than 6 months after the 
     date of the enactment of this Act, the Secretary of Health 
     and Human Services shall issue final regulations to establish 
     requirements for special needs beneficiaries under section 
     1859(b)(4)(B)(iii) of the Social Security Act, as added by 
     subsection (b).

     SEC. 204. EXTENSION OF REASONABLE COST AND SHMO CONTRACTS.

       (a) Reasonable Cost Contracts.--
       (1) In general.--Section 1876(h)(5)(C) (42 U.S.C. 
     1395mm(h)(5)(C)) is amended--
       (A) by inserting ``(i)'' after ``(C)'';
       (B) by inserting before the period the following: ``, 
     except (subject to clause (ii)) in the case of a contract for 
     an area which is not covered in the service area of 1 or more 
     coordinated care Medicare+Choice plans under part C''; and
       (C) by adding at the end the following new clause:
       ``(ii) In the case in which--
       ``(I) a reasonable cost reimbursement contract includes an 
     area in its service area as of a date that is after December 
     31, 2003;
       ``(II) such area is no longer included in such service area 
     after such date by reason of the operation of clause (i) 
     because of the inclusion of such area within the service area 
     of a Medicare+Choice plan; and
       ``(III) all Medicare+Choice plans subsequently terminate 
     coverage in such area;

     such reasonable cost reimbursement contract may be extended 
     and renewed to cover such area (so long as it is not included 
     in the service area of any Medicare+Choice plan).''.
       (2) Study.--The Secretary shall conduct a study of an 
     appropriate transition for plans offered under reasonable 
     cost contracts under section 1876 of the Social Security Act 
     on and after January 1, 2005. Such a transition may take into 
     account whether there are one or more coordinated care 
     Medicare+Choice plans being offered in the areas involved. 
     Not later than February 1, 2004, the Secretary shall submit 
     to Congress a report on such study and shall include 
     recommendations regarding any changes in the amendment made 
     by paragraph (1) as the Secretary determines to be 
     appropriate.
       (b) Extension of Social Health Maintenance Organization 
     (SHMO) Demonstration Project.--
       (1) In general.--Section 4018(b)(1) of the Omnibus Budget 
     Reconciliation Act of 1987 is amended by striking ``the date 
     that is 30 months after the date that the Secretary submits 
     to Congress the report described in section 4014(c) of the 
     Balanced Budget Act of 1997'' and inserting ``December 31, 
     2004''.
       (2) SHMOs offering medicare+choice plans.--Nothing in such 
     section 4018 shall be construed as preventing a social health 
     maintenance organization from offering a Medicare+Choice plan 
     under part C of title XVIII of the Social Security Act.

     SEC. 205. CONTINUOUS OPEN ENROLLMENT AND DISENROLLMENT.

       (a) In General.--Section 1851(e)(2) (42 U.S.C. 1395w-
     21(e)(2)) is amended to read as follows:
       ``(2) Continuous open enrollment and disenrollment.--
     Subject to paragraph (5), a Medicare+Choice eligible 
     individual may change the election under subsection (a)(1) at 
     any time.''.
       (b) Conforming Amendments.--
       (1) Medicare+choice.--Section 1851(e) (42 U.S.C. 1395w-
     21(e)) is amended--
       (A) in paragraph (4)--
       (i) by striking ``Effective as of January 1, 2002, an'' and 
     inserting ``An'';
       (ii) by striking ``other than during an annual, coordinated 
     election period'';
       (iii) by inserting ``in a special election period for such 
     purpose'' after ``make a new election under this section''; 
     and
       (iv) by striking the second sentence; and
       (B) in paragraphs (5)(B) and (6)(A), by striking ``the 
     first sentence of''.
       (2) Permitting enrollment in medigap when m+c plans reduce 
     benefits or when provider leaves a m+c plan.--
       (A) In general.--Clause (ii) of section 1882(s)(3)(B) (42 
     U.S.C. 1395ss(s)(3)(B)) is amended--
       (i) by inserting ``(I)'' after ``(ii)'';
       (ii) by striking ``under the first sentence of'' each place 
     it appears and inserting ``during a special election period 
     provided for under'';
       (iii) by inserting ``the circumstances described in 
     subclause (II) are present or'' before ``there are 
     circumstances''; and
       (iv) by adding at the end the following new subclause:
       ``(II) The circumstances described in this subclause are, 
     with respect to an individual enrolled in a Medicare+Choice 
     plan, a reduction in benefits (including an increase in cost-
     sharing) offered under the Medicare+Choice plan from the 
     previous year or a provider of services or physician who 
     serves the individual no longer participating in the plan 
     (other than because of

[[Page 11993]]

     good cause relating to quality of care under the plan).''.
       (B) Conforming amendment.--Clause (iii) of such section is 
     amended--
       (i) by inserting ``the circumstances described in clause 
     (ii)(II) are met or'' after ``policy described in subsection 
     (t), and''; and
       (ii) by striking ``under the first sentence of'' and 
     inserting ``during a special election period provided for 
     under''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect on January 1, 2003, and shall apply to 
     reductions in benefits and changes in provider participation 
     occurring on or after such date.

     SEC. 206. LIMITATION ON MEDICARE+CHOICE COST-SHARING.

       (a) In General.--Section 1852(a) (42 U.S.C. 1395w-22(a)) is 
     amended by adding at the end the following new paragraph:
       ``(6) Limitation on cost-sharing.--
       ``(A) In general.--Subject to subparagraph (B), in no case 
     shall the cost-sharing with respect to an item or service 
     under a Medicare+Choice plan exceed the cost-sharing 
     otherwise applicable under parts A and B to an individual who 
     is not enrolled in a Medicare+Choice plan under this part.
       ``(B) Permitting flat copayments.--Subparagraph (A) shall 
     not be construed as preventing the application of flat dollar 
     copayment amounts (in place of a percentage coinsurance), 
     such as a fixed copayment for a doctor's visit, so long as 
     such amounts are reasonable and appropriate and do not 
     adversely affect access to items and services (as determined 
     by the Secretary).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply as of January 1, 2003.

     SEC. 207. EXTENSION OF MUNICIPAL HEALTH SERVICE DEMONSTRATION 
                   PROJECTS.

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

               TITLE III--RURAL HEALTH CARE IMPROVEMENTS

     SEC. 301. REFERENCE TO FULL MARKET BASKET INCREASE FOR SOLE 
                   COMMUNITY HOSPITALS.

       For provision eliminating any reduction from full market 
     basket in the update for inpatient hospital services for sole 
     community hospitals, see section 401.

     SEC. 302. ENHANCED DISPROPORTIONATE SHARE HOSPITAL (DSH) 
                   TREATMENT FOR RURAL HOSPITALS AND URBAN 
                   HOSPITALS WITH FEWER THAN 100 BEDS.

       (a) Blending of Payment Amounts.--
       (1) In general.--Section 1886(d)(5)(F) (42 U.S.C. 
     1395ww(d)(5)(F)) is amended by adding at the end the 
     following new clause:
       ``(xiv)(I) In the case of discharges in a fiscal year 
     beginning on or after October 1, 2002, subject to subclause 
     (II), there shall be substituted for the disproportionate 
     share adjustment percentage otherwise determined under clause 
     (iv) (other than subclause (I)) or under clause (viii), (x), 
     (xi), (xii), or (xiii), the old blend proportion (specified 
     under subclause (III)) of the disproportionate share 
     adjustment percentage otherwise determined under the 
     respective clause and 100 percent minus such old blend 
     proportion of the disproportionate share adjustment 
     percentage determined under clause (vii) (relating to large, 
     urban hospitals).
       ``(II) Under subclause (I), the disproportionate share 
     adjustment percentage shall not exceed 10 percent for a 
     hospital that is not classified as a rural referral center 
     under subparagraph (C).
       ``(III) For purposes of subclause (I), the old blend 
     proportion for fiscal year 2003 is 66\2/3\ percent, for 
     fiscal year 2004 is 33\1/3\ percent subsequent year, and for 
     each fiscal year beginning with 2005 is 0 percent.''.
       (2) Conforming amendments.--Section 1886(d)(5)(F) (42 
     U.S.C. 1395ww(d)(5)(F)) is amended--
       (A) in each of subclauses (II), (III), (IV), (V), and (VI) 
     of clause (iv), by inserting ``subject to clause (xiv) and'' 
     before ``for discharges occurring'';
       (B) in clause (viii), by striking ``The formula'' and 
     inserting ``Subject to clause (xiv), the formula''; and
       (C) in each of clauses (x), (xi), (xii), and (xiii), by 
     striking ``For purposes'' and inserting ``Subject to clause 
     (xiv), for purposes''.
       (b) Effective Date.--The amendments made by this section 
     shall apply with respect to discharges occurring on or after 
     October 1, 2002.

     SEC. 303. 2-YEAR PHASED-IN INCREASE IN THE STANDARDIZED 
                   AMOUNT IN RURAL AND SMALL URBAN AREAS TO 
                   ACHIEVE A SINGLE, UNIFORM STANDARDIZED AMOUNT.

       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 2003, 
     the average standardized amount for hospitals located other 
     than in a large urban area shall be increased by \1/2\ of the 
     difference between the average 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 2004, the Secretary shall compute an average 
     standardized amount for hospitals located in any area within 
     the United States and within each region equal to the average 
     standardized amount computed for the previous fiscal year 
     under this subparagraph for hospitals located in a large 
     urban area (or, beginning with fiscal year 2005, for 
     hospitals located in any area) increased by the applicable 
     percentage increase under subsection (b)(3)(B)(i).''.

     SEC. 304. MORE FREQUENT UPDATE IN WEIGHTS USED IN HOSPITAL 
                   MARKET BASKET.

       (a) More Frequent Updates in Weights.--After revising the 
     weights used in the hospital market basket under section 
     1886(b)(3)(B)(iii) of the Social Security Act (42 U.S.C. 
     1395ww(b)(3)(B)(iii)) to reflect the most current data 
     available, the Secretary shall establish a frequency for 
     revising such weights in such market basket to reflect the 
     most current data available more frequently than once every 5 
     years.
       (b) Report.--Not later than October 1, 2003, the Secretary 
     shall submit a report to Congress on the frequency 
     established under subsection (a), including an explanation of 
     the reasons for, and options considered, in determining such 
     frequency.

     SEC. 305. IMPROVEMENTS TO CRITICAL ACCESS HOSPITAL PROGRAM.

       (a) Reinstatement of Periodic Interim Payment (PIP).--
     Section 1815(e)(2) (42 U.S.C. 1395g(e)(2)) is amended--
       (1) by striking ``and'' at the end of subparagraph (C);
       (2) by adding ``and'' at the end of subparagraph (D); and
       (3) by inserting after subparagraph (D) the following new 
     subparagraph:
       ``(E) inpatient critical access hospital services;''.
       (b) Condition for Application of Special Physician Payment 
     Adjustment.--Section 1834(g)(2) (42 U.S.C. 1395m(g)(2)) is 
     amended by adding after and below subparagraph (B) the 
     following:

     ``The Secretary may not require, as a condition for applying 
     subparagraph (B) with respect to a critical access hospital, 
     that each physician providing professional services in the 
     hospital must assign billing rights with respect to such 
     services, except that such subparagraph shall not apply to 
     those physicians who have not assigned such billing 
     rights.''.
       (c) Flexibility in Bed Limitation for Hospitals With Strong 
     Seasonal Census Fluctuations.--Section 1820 (42 U.S.C. 1395i-
     4) is amended--
       (1) in subsection (c)(2)(B)(iii), by inserting ``subject to 
     paragraph (3)'' after ``(iii) provides'';
       (2) by adding at the end of subsection (c) the following 
     new paragraph:
       ``(3) Increase in maximum number of beds for hospitals with 
     strong seasonal census fluctuations.--
       ``(A) In general.--In the case of a hospital that 
     demonstrates that it meets the standards established under 
     subparagraph (B), the bed limitations otherwise applicable 
     under paragraph (2)(B)(iii) and subsection (f) shall be 
     increased by 5 beds.
       ``(B) Standards.--The Secretary shall specify standards for 
     determining whether a critical access hospital has 
     sufficiently strong seasonal variations in patient admissions 
     to justify the increase in bed limitation provided under 
     subparagraph (A).''; and
       (3) in subsection (f), by adding at the end the following 
     new sentence: ``The limitations in numbers of beds under the 
     first sentence are subject to adjustment under subsection 
     (c)(3).''.
       (d) 5-Year Extension of the Authorization for 
     Appropriations for Grant Program.--Section 1820(j) (42 U.S.C. 
     1395i-4(j)) is amended by striking ``through 2002'' and 
     inserting ``through 2007''.
       (e) Prohibition of Retroactive Recoupment.--The Secretary 
     shall not recoup (or otherwise seek to recover) overpayments 
     made for outpatient critical access hospital services under 
     part B of title XVIII of the Social Security Act, for 
     services furnished in cost reporting periods that began 
     before October 1, 2002, insofar as such overpayments are 
     attributable to payment being based on 80 percent of 
     reasonable costs (instead of 100 percent of reasonable costs 
     minus 20 percent of charges).
       (f) Effective Dates.--
       (1) Reinstatement of pip.--The amendments made by 
     subsection (a) shall apply to payments made on or after 
     January 1, 2003.
       (2) Physician payment adjustment condition.--The amendment 
     made by subsection (b) shall be effective as if included in 
     the enactment of section 403(d) of the Medicare, Medicaid, 
     and SCHIP Balanced Budget Refinement Act of 1999 (113 Stat. 
     1501A-371).
       (3) Flexibility in bed limitation.--The amendments made by 
     subsection (c) shall

[[Page 11994]]

     apply to designations made on or after January 1, 2003, but 
     shall not apply to critical access hospitals that were 
     designated as of such date.

     SEC. 306. EXTENSION OF TEMPORARY INCREASE FOR HOME HEALTH 
                   SERVICES FURNISHED IN A RURAL AREA.

       (a) In General.--Section 508(a) of BIPA (114 Stat. 2763A-
     533) is amended--
       (1) by striking ``24-Month Increase Beginning April 1, 
     2001'' and inserting ``In General''; and
       (2) by striking ``April 1, 2003'' and inserting ``January 
     1, 2005''.
       (b) Conforming Amendment.--Section 547(c)(2) of BIPA (114 
     Stat. 2763A-553) is amended by striking ``the period 
     beginning on April 1, 2001, and ending on September 30, 
     2002,'' and inserting ``a period under such section''.

     SEC. 307. REFERENCE TO 10 PERCENT INCREASE IN PAYMENT FOR 
                   HOSPICE CARE FURNISHED IN A FRONTIER AREA AND 
                   RURAL HOSPICE DEMONSTRATION PROJECT.

       For--
       (1) provision of 10 percent increase in payment for hospice 
     care furnished in a frontier area, see section 422; and
       (2) provision of a rural hospice demonstration project, see 
     section 423.

     SEC. 308. REFERENCE TO PRIORITY FOR HOSPITALS LOCATED IN 
                   RURAL OR SMALL URBAN AREAS IN REDISTRIBUTION OF 
                   UNUSED GRADUATE MEDICAL EDUCATION RESIDENCIES.

       For provision providing priority for hospitals located in 
     rural or small urban areas in redistribution of unused 
     graduate medical education residencies, see section 611.

     SEC. 309. GAO STUDY OF GEOGRAPHIC DIFFERENCES IN PAYMENTS FOR 
                   PHYSICIANS' SERVICES.

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

     SEC. 310. PROVIDING SAFE HARBOR FOR CERTAIN COLLABORATIVE 
                   EFFORTS THAT BENEFIT MEDICALLY UNDERSERVED 
                   POPULATIONS.

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

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

     SEC. 311. RELIEF FOR CERTAIN NON-TEACHING HOSPITALS.

       (a) In General.--In the case of a non-teaching hospital 
     that meets the condition of subsection (b), for its cost 
     reporting period beginning in each of fiscal years 2003, 
     2004, and 2005 the amount of payment made to the hospital 
     under section 1886(d) of the Social Security Act for 
     discharges occurring during such fiscal year only shall be 
     increased as though the applicable percentage increase 
     (otherwise applicable to discharges occurring during such 
     fiscal year under section 1886(b)(3)(B)(i) of the Social 
     Security Act (42 U.S.C. 1395ww(b)(3)(B)(i)) had been 
     increased by 5 percentage points. The previous sentence shall 
     be applied for each such fiscal year separately without 
     regard to its application in a previous fiscal year and shall 
     not affect payment for discharges for any hospital occurring 
     during a fiscal year after fiscal year 2005.
       (b) Condition.--A non-teaching hospital meets the condition 
     of this paragraph if--
       (1) it is located in a rural area and the amount of the 
     aggregate payments under subsection (d) of such section for 
     non-teaching hospitals located in rural areas in the State 
     for their cost reporting periods beginning during fiscal year 
     1999 is less than the aggregate allowable operating costs of 
     inpatient hospital services (as defined in section 1886(a)(4) 
     of such Act) for all such hospitals in such areas in such 
     State with respect to such cost reporting periods; or
       (2) it is located in an urban area and the amount of the 
     aggregate payments under subsection (d) of such section for 
     non-teaching hospitals located in urban areas in the State 
     for their cost reporting periods beginning during fiscal year 
     1999 is less than 103 percent of the aggregate allowable 
     operating costs of inpatient hospital services (as defined in 
     section 1886(a)(4) of such Act) for all such hospitals in 
     such areas in such State with respect to such cost reporting 
     periods.
     The amounts under paragraphs (1) and (2) shall be determined 
     by the Secretary of Health and Human Services based on data 
     of the Medicare Payment Advisory Commission.
       (c) Definitions.--For purposes of this section:
       (1) Non-teaching hospital.--The term ``non-teaching 
     hospital'' means, for a cost reporting period, a subsection 
     (d) hospital (as defined in section 1886(d)(1)(B) of the 
     Social Security Act, 42 U.S.C. 1395ww(d)(1)(B)) that is not 
     receiving any additional payment under section 1886(d)(5)(B) 
     of such Act (42 U.S.C. 1395ww(d)(5)(B)) or a payment under 
     section 1886(h) of such Act (42 U.S.C. 1395ww(h)) for 
     discharges occurring during the period.
       (2) Rural; urban.--The terms ``rural'' and ``urban'' have 
     the meanings given such terms for purposes of section 1886(d) 
     of the Social Security Act (42 U.S.C. 1395ww(d)).

                TITLE IV--PROVISIONS RELATING TO PART A

                Subtitle A--Inpatient Hospital Services

     SEC. 401. REVISION OF ACUTE CARE HOSPITAL PAYMENT UPDATES.

       Subclause (XVIII) of section 1886(b)(3)(B)(i) (42 U.S.C. 
     1395ww(b)(3)(B)(i)) is amended to read as follows:
       ``(XVIII) for fiscal year 2003, the market basket 
     percentage increase for sole community hospitals and such 
     increase minus 0.25 percentage points for other hospitals, 
     and''.

     SEC. 402. FREEZE IN LEVEL OF ADJUSTMENT FOR INDIRECT COSTS OF 
                   MEDICAL EDUCATION (IME) THROUGH FISCAL YEAR 
                   2007.

       Section 1886(d)(5)(B)(ii) (42 U.S.C. 1395ww(d)(5)(B)(ii)) 
     is amended--
       (1) in subclause (VI), by inserting ``and each succeeding 
     fiscal year through fiscal year 2007'' after ``2002''; and
       (2) in subclause (VII), by striking ``2002'' and inserting 
     ``2007''.

     SEC. 403. RECOGNITION OF NEW MEDICAL TECHNOLOGIES UNDER 
                   INPATIENT HOSPITAL PPS.

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

[[Page 11995]]

       (b) Eligibility Standard.--
       (1) Minimum period for recognition of new technologies.--
     Section 1886(d)(5)(K)(vi) (42 U.S.C. 1395ww(d)(5)(K)(vi)) is 
     amended--
       (A) by inserting ``(I)'' after ``(vi)''; and
       (B) by adding at the end the following new subclause:
       ``(II) Under such criteria, a service or technology shall 
     not be denied treatment as a new service or technology on the 
     basis of the period of time in which the service or 
     technology has been in use if such period ends before the end 
     of the 2-to-3-year period that begins on the effective date 
     of implementation of a code under ICD-9-CM (or a successor 
     coding methodology) that enables the identification of a 
     significant sample of specific discharges in which the 
     service or technology has been used.''.
       (2) Adjustment of threshold.--Section 1886(d)(5)(K)(ii)(I) 
     (42 U.S.C. 1395ww(d)(5)(K)(ii)(I)) is amended by inserting 
     ``(applying a threshold specified by the Secretary that is 
     the lesser of 50 percent of the national average standardized 
     amount for operating costs of inpatient hospital services for 
     all hospitals and all diagnosis-related groups or one 
     standard deviation for the diagnosis-related group 
     involved)'' after ``is inadequate''.
       (3) Criterion for substantial improvement.--Section 
     1886(d)(5)(K)(vi) (42 U.S.C. 1395ww(d)(5)(K)(vi)), as amended 
     by paragraph (1), is further amended by adding at the end the 
     following subclause:
       ``(III) The Secretary shall by regulation provide for 
     further clarification of the criteria applied to determine 
     whether a new service or technology represents an advance in 
     medical technology that substantially improves the diagnosis 
     or treatment of beneficiaries. Under such criteria, in 
     determining whether a new service or technology represents an 
     advance in medical technology that substantially improves the 
     diagnosis or treatment of beneficiaries, the Secretary shall 
     deem a service or technology as meeting such requirement if 
     the service or technology is a drug or biological that is 
     designated under section 506 or 526 of the Federal Food, 
     Drug, and Cosmetic Act, approved under section 314.510 or 
     601.41 of title 21, Code of Federal Regulations, or 
     designated for priority review when the marketing application 
     for such drug or biological was filed or is a medical device 
     for which an exemption has been granted under section 520(m) 
     of such Act, or for which priority review has been provided 
     under section 515(d)(5) of such Act.''.
       (4) Process for public input.--Section 1886(d)(5)(K) (42 
     U.S.C. 1395ww(d)(5)(K)), as amended by paragraph (1), is 
     amended--
       (A) in clause (i), by adding at the end the following: 
     ``Such mechanism shall be modified to meet the requirements 
     of clause (viii).''; and
       (B) by adding at the end the following new clause:
       ``(viii) The mechanism established pursuant to clause (i) 
     shall be adjusted to provide, before publication of a 
     proposed rule, for public input regarding whether a new 
     service or technology not described in the second sentence of 
     clause (vi)(III) represents an advance in medical technology 
     that substantially improves the diagnosis or treatment of 
     beneficiaries as follows:
       ``(I) The Secretary shall make public and periodically 
     update a list of all the services and technologies for which 
     an application for additional payment under this subparagraph 
     is pending.
       ``(II) The Secretary shall accept comments, 
     recommendations, and data from the public regarding whether 
     the service or technology represents a substantial 
     improvement.
       ``(III) The Secretary shall provide for a meeting at which 
     organizations representing hospitals, physicians, medicare 
     beneficiaries, manufacturers, and any other interested party 
     may present comments, recommendations, and data to the 
     clinical staff of the Centers for Medicare & Medicaid 
     Services before publication of a notice of proposed 
     rulemaking regarding whether service or technology represents 
     a substantial improvement.''.
       (c) Preference for Use of DRG Adjustment.--Section 
     1886(d)(5)(K) (42 U.S.C. 1395ww(d)(5)(K)) is further amended 
     by adding at the end the following new clause:
       ``(ix) Before establishing any add-on payment under this 
     subparagraph with respect to a new technology, the Secretary 
     shall seek to identify one or more diagnosis-related groups 
     associated with such technology, based on similar clinical or 
     anatomical characteristics and the cost of the technology. 
     Within such groups the Secretary shall assign an eligible new 
     technology into a diagnosis-related group where the average 
     costs of care most closely approximate the costs of care of 
     using the new technology. In such case, no add-on payment 
     under this subparagraph shall be made with respect to such 
     new technology and this clause shall not affect the 
     application of paragraph (4)(C)(iii).''.
       (d) Improvement in Payment for New Technology.--Section 
     1886(d)(5)(K)(ii)(III) (42 U.S.C. 1395ww(d)(5)(K)(ii)(III)) 
     is amended by inserting after ``the estimated average cost of 
     such service or technology'' the following: ``(based on the 
     marginal rate applied to costs under subparagraph (A))''.
       (e) Effective Date.--
       (1) In general.--The Secretary shall implement the 
     amendments made by this section so that they apply to 
     classification for fiscal years beginning with fiscal year 
     2004.
       (2) Reconsiderations of applications for fiscal year 2003 
     that are denied.--In the case of an application for a 
     classification of a medical service or technology as a new 
     medical service or technology under section 1886(d)(5)(K) of 
     the Social Security Act (42 U.S.C. 1395ww(d)(5)(K)) that was 
     filed for fiscal year 2003 and that is denied--
       (A) the Secretary shall automatically reconsider the 
     application as an application for fiscal year 2004 under the 
     amendments made by this section; and
       (B) the maximum time period otherwise permitted for such 
     classification of the service or technology shall be extended 
     by 12 months.

     SEC. 404. PHASE-IN 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, 
     2003, the applicable Puerto Rico percentage is 50 percent and 
     the applicable Federal percentage is 50 percent;
       ``(iii) during fiscal year 2004, the applicable Puerto Rico 
     percentage is 45 percent and the applicable Federal 
     percentage is 55 percent;
       ``(iv) during fiscal year 2005, the applicable Puerto Rico 
     percentage is 40 percent and the applicable Federal 
     percentage is 60 percent;
       ``(v) during fiscal year 2006, the applicable Puerto Rico 
     percentage is 35 percent and the applicable Federal 
     percentage is 65 percent;
       ``(vi) during fiscal year 2007, the applicable Puerto Rico 
     percentage is 30 percent and the applicable Federal 
     percentage is 70 percent; and
       ``(vii) on or after October 1, 2007, the applicable Puerto 
     Rico percentage is 25 percent and the applicable Federal 
     percentage is 75 percent.''.

     SEC. 405. REFERENCE TO PROVISION RELATING TO ENHANCED 
                   DISPROPORTIONATE SHARE HOSPITAL (DSH) PAYMENTS 
                   FOR RURAL HOSPITALS AND URBAN HOSPITALS WITH 
                   FEWER THAN 100 BEDS.

       For provision enhancing disproportionate share hospital 
     (DSH) treatment for rural hospitals and urban hospitals with 
     fewer than 100 beds, see section 302.

     SEC. 406. REFERENCE TO PROVISION RELATING TO 2-YEAR PHASED-IN 
                   INCREASE IN THE STANDARDIZED AMOUNT IN RURAL 
                   AND SMALL URBAN AREAS TO ACHIEVE A SINGLE, 
                   UNIFORM STANDARDIZED AMOUNT.

       For provision phasing in over a 2-year period an increase 
     in the standardized amount for rural and small urban areas to 
     achieve a single, uniform, standardized amount, see section 
     303.

     SEC. 407. REFERENCE TO PROVISION FOR MORE FREQUENT UPDATES IN 
                   THE WEIGHTS USED IN HOSPITAL MARKET BASKET.

       For provision providing for more frequent updates in the 
     weights used in hospital market basket, see section 304.

     SEC. 408. REFERENCE TO PROVISION MAKING IMPROVEMENTS TO 
                   CRITICAL ACCESS HOSPITAL PROGRAM.

       For provision providing making improvements to critical 
     access hospital program, see section 305.

             Subtitle B--Skilled Nursing Facility Services

     SEC. 411. PAYMENT FOR COVERED SKILLED NURSING FACILITY 
                   SERVICES.

       (a) 5-Year Extension of Temporary Increase in Nursing 
     Component of PPS Federal Rate.--Section 312(a) of BIPA is 
     amended by striking ``, and before October 1, 2002'' and 
     inserting ``and before October 1, 2007''.
       (b) Adjustment to RUGs for AIDS Residents.--
       (1) In general.--Paragraph (12) of section 1888(e) (42 
     U.S.C. 1395yy(e)) is amended to read as follows:
       ``(12) Adjustment for residents with aids.--
       ``(A) In general.--Subject to subparagraph (B), in the case 
     of a resident of a skilled nursing facility who is afflicted 
     with acquired immune deficiency syndrome (AIDS), the per diem 
     amount of payment otherwise applicable shall be increased by 
     128 percent to reflect increased costs associated with such 
     residents.
       ``(B) Sunset.--Subparagraph (A) shall not apply on and 
     after such date as the Secretary certifies that there is an 
     appropriate

[[Page 11996]]

     adjustment in the case mix under paragraph (4)(G)(i) to 
     compensate for the increased costs associated with residents 
     described in such subparagraph.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to services furnished on or after October 1, 
     2003.

                          Subtitle C--Hospice

     SEC. 421. COVERAGE OF HOSPICE CONSULTATION SERVICES.

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

     SEC. 422. 10 PERCENT INCREASE IN PAYMENT FOR HOSPICE CARE 
                   FURNISHED IN A FRONTIER AREA.

       (a) In General.--Section 1814(i)(1) (42 U.S.C. 1395f(i)(1)) 
     is amended by adding at the end the following new 
     subparagraph:
       ``(D) With respect to hospice care furnished in a frontier 
     area on or after January 1, 2003, and before January 1, 2008, 
     the payment rates otherwise established for such care shall 
     be increased by 10 percent. For purposes of this 
     subparagraph, the term `frontier area' means a county in 
     which the population density is less than 7 persons per 
     square mile.''.
       (b) Report on Costs.--Not later than January 1, 2007, the 
     Comptroller General of the United States shall submit to 
     Congress a report on the costs of furnishing hospice care in 
     frontier areas. Such report shall include recommendations 
     regarding the appropriateness of extending, and modifying, 
     the payment increase provided under the amendment made by 
     subsection (a).

     SEC. 423. RURAL HOSPICE DEMONSTRATION PROJECT.

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

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

                      Subtitle D--Other Provisions

     SEC. 431. DEMONSTRATION PROJECT FOR USE OF RECOVERY AUDIT 
                   CONTRACTORS.

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

                 TITLE V--PROVISIONS RELATING TO PART B

                    Subtitle A--Physicians' Services

     SEC. 501. REVISION OF UPDATES FOR PHYSICIANS' SERVICES.

       (a) Update for 2003 through 2006.--
       (1) In general.--Section 1848(d) (42 U.S.C. 1395w-4(d)) is 
     amended by adding at the end the following new paragraphs:
       ``(5) Update for 2003.--The update to the single conversion 
     factor established in paragraph (1)(C) for 2003 is 2 percent.
       ``(6) Special rules for update for 2004, 2005, and 2006.--
     The following rules apply in determining the update 
     adjustment factors under paragraph (4)(B) for 2004, 2005, and 
     2006:
       ``(A) Use of 2002 data in determining allowable costs.--
       ``(i) The reference in clause (ii)(I) of such paragraph to 
     April 1, 1996, is deemed to be a reference to January 1, 
     2002.
       ``(ii) The allowed expenditures for 2002 is deemed to be 
     equal to the actual expenditures for physicians' services 
     furnished during 2002, as estimated by the Secretary.
       ``(B) 1 percentage point increase in gdp under sgr.--The 
     annual average percentage growth in real gross domestic 
     product per capita under subsection (f)(2)(C) for each of 
     2003, 2004, 2005, and 2006 is deemed to be increased by 1 
     percentage point.''.
       (2) Conforming amendment.--Paragraph (4)(B) of such section 
     is amended, in the matter before clause (i), by inserting 
     ``and paragraph (6)'' after ``subparagraph (D)''.
       (3) Not treated as change in law and regulation in 
     sustainable growth rate determination.--The amendments made 
     by this subsection shall not be treated as a change in law 
     for purposes of applying section 1848(f)(2)(D) of the Social 
     Security Act (42 U.S.C. 1395w-4(f)(2)(D)).
       (b) Use of 10-Year Rolling Average in Computing Gross 
     Domestic Product.--
       (1) In general.--Section 1848(f)(2)(C) (42 U.S.C. 1395w-
     4(f)(2)(C)) is amended--
       (A) by striking ``projected'' and inserting ``annual 
     average''; and
       (B) by striking ``from the previous applicable period to 
     the applicable period involved'' and inserting ``during the 
     10-year period ending with the applicable period involved''.

[[Page 11997]]

       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to computations of the sustainable growth rate 
     for years beginning with 2002.
       (c) Elimination of Transitional Adjustment.--Section 
     1848(d)(4)(F) (42 U.S.C. 1395w-4(d)(4)(F)) is amended by 
     striking ``subparagraph (A)'' and all that follows and 
     inserting ``subparagraph (A), for each of 2001 and 2002, of 
     -0.2 percent.''

     SEC. 502. STUDIES ON ACCESS TO PHYSICIANS' SERVICES.

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

     SEC. 503. MEDPAC REPORT ON PAYMENT FOR PHYSICIANS' SERVICES.

       Not later than 1 year after the date of the enactment of 
     this Act, the Medicare Payment Advisory Commission shall 
     submit to Congress a report on the effect of refinements to 
     the practice expense component of payments for physicians' 
     services in the case of services for which there are no 
     physician work relative value units, after the transition to 
     a full resource-based payment system in 2002, under section 
     1848 of the Social Security Act (42 U.S.C. 1395w-4). Such 
     report shall examine the following matters by physician 
     specialty:
       (1) The effect of such refinements on payment for 
     physicians' services.
       (2) The interaction of the practice expense component with 
     other components of and adjustments to payment for 
     physicians' services under such section.
       (3) The appropriateness of the amount of compensation by 
     reason of such refinements.
       (4) The effect of such refinements on access to care by 
     medicare beneficiaries to physicians' services.
       (5) The effect of such refinements on physician 
     participation under the medicare program.

     SEC. 504. 1-YEAR EXTENSION OF TREATMENT OF CERTAIN PHYSICIAN 
                   PATHOLOGY SERVICES UNDER MEDICARE.

       Section 542(c) of BIPA is amended by striking ``2-year 
     period'' and inserting ``3-year period''.

     SEC. 505. PHYSICIAN FEE SCHEDULE WAGE INDEX REVISION.

       (a) In General.--Notwithstanding any other provision of 
     law, for purposes of payment under the physician fee schedule 
     under section 1848 of the Social Security Act (42 U.S.C. 
     1395w-4) for physicians' services furnished during 2004, in 
     no case may the work geographic index otherwise calculated 
     under section 1848(e)(1)(A)(iii) of such Act (42 U.S.C. 
     1395w-4(e)(1)(A)(iii)) be less than 0.985.
       (b) Exemption From Limitation on Annual Adjustments.--The 
     increase in expenditures attributable to subsection (a) 
     during 2004 shall not be taken into account in applying 
     section 1848(c)(2)(B)(ii)(II) of such Act (42 U.S.C. 1395w-
     4(c)(2)(B)(ii)(II)) for that year.
       (c) GAO Report.--
       (1) Study.--The Comptroller General of the United States 
     shall conduct a study to evaluate the following:
       (A) The economic basis of the current methodology for 
     geographic adjustment of the work component of the physician 
     payment rate under the physician fee schedule under section 
     1848 of the Social Security Act (42 U.S.C. 1395w-4).
       (B) Whether the adjustment under subsection (a) should be 
     continued, and whether there is an economic basis for the 
     continuation of such adjustment, in those areas in which the 
     adjustment applies.
       (C) The effect of the methodology on physician location and 
     retention in areas affected by such adjustment.
       (D) The differences in recruitment costs and retention 
     rates for physicians, including specialists, between large 
     urban areas and other areas.
       (E) The mobility of physicians, including specialists, over 
     the last decade.
       (F) The effect of raising the floor of the geographic index 
     to a value of 1.0 for adjustment of the work component.
       (2) Report.--The Comptroller General shall submit to 
     Congress a report on the study conducted under paragraph (1) 
     by not later than 1 year after the date of the enactment of 
     this Act.

                       Subtitle B--Other Services

     SEC. 511. COMPETITIVE ACQUISITION OF CERTAIN ITEMS AND 
                   SERVICES.

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


        ``competitive acquisition of certain items and services

       ``Sec. 1847. (a) Establishment of Competitive Acquisition 
     Programs.--
       ``(1) Implementation of programs.--
       ``(A) In general.--The Secretary shall establish and 
     implement programs under which, beginning in 2008, 
     competitive acquisition areas are established throughout the 
     United States for contract award purposes for the furnishing 
     under this part of competitively priced items and services 
     (described in paragraph (2)) for which payment is made under 
     this part. Such areas may differ for different items and 
     services.
       ``(B) Phased-in implementation.--The programs shall be 
     phased-in among competitive acquisition areas over a period 
     of not longer than 3 years in a manner so that the 
     competition under the programs occurs in--
       ``(i) at least \1/3\ of such areas in 2008; and
       ``(ii) at least \2/3\ of such areas in 2009.
       ``(C) Waiver of certain provisions.--In carrying out the 
     programs, the Secretary may waive such provisions of the 
     Federal Acquisition Regulation as are necessary for the 
     efficient implementation of this section, other than 
     provisions relating to confidentiality of information and 
     such other provisions as the Secretary determines 
     appropriate.
       ``(2) Items and services described.--The items and services 
     referred to in paragraph (1) are the following:
       ``(A) Durable medical equipment and inhalation drugs used 
     in connection with durable medical equipment.--Covered items 
     (as defined in section 1834(a)(13)) for which payment is 
     otherwise made under section 1834(a), other than items used 
     in infusion, and inhalation drugs used in conjunction with 
     durable medical equipment.
       ``(B) Off-the-shelf orthotics.--Orthotics (described in 
     section 1861(s)(9)) for which payment is otherwise made under 
     section 1834(h) which require minimal self-adjustment for 
     appropriate use and does not require expertise in trimming, 
     bending, molding, assembling, or customizing to fit to the 
     patient.
       ``(3) Exemption authority.--In carrying out the programs 
     under this section, the Secretary may exempt--
       ``(A) areas that are not competitive due to low population 
     density; and
       ``(B) items and services for which the application of 
     competitive acquisition is not likely to result in 
     significant savings.
       ``(b) Program Requirements.--
       ``(1) In general.--The Secretary shall conduct a 
     competition among entities supplying items and services 
     described in subsection (a)(2) for each competitive 
     acquisition area in which the program is implemented under 
     subsection (a) with respect to such items and services.
       ``(2) Conditions for awarding contract.--
       ``(A) In general.--The Secretary may not award a contract 
     to any entity under the competition conducted in an 
     competitive acquisition area pursuant to paragraph (1) to 
     furnish such items or services unless the Secretary finds all 
     of the following:
       ``(i) The entity meets quality and financial standards 
     specified by the Secretary or developed by accreditation 
     entities or organizations recognized by the Secretary.
       ``(ii) The total amounts to be paid under the contract 
     (including costs associated with the administration of the 
     contract) are expected to be less than the total amounts that 
     would otherwise be paid.
       ``(iii) Beneficiary access to a choice of multiple 
     suppliers in the area is maintained.
       ``(iv) Beneficiary liability is limited to the applicable 
     percentage of contract award price.
       ``(B) Quality standards.--The quality standards specified 
     under subparagraph (A)(i) shall not be less than the quality 
     standards that would otherwise apply if this section did not 
     apply and shall include consumer services standards. The 
     Secretary shall consult with an expert outside advisory panel 
     composed of an appropriate selection of representatives of 
     physicians, practitioners, and suppliers to review (and 
     advise the Secretary concerning) such quality standards.
       ``(3) Contents of contract.--
       ``(A) In general.--A contract entered into with an entity 
     under the competition conducted pursuant to paragraph (1) is 
     subject to terms and conditions that the Secretary may 
     specify.

[[Page 11998]]

       ``(B) Term of contracts.--The Secretary shall rebid 
     contracts under this section not less often than once every 3 
     years.
       ``(4) Limit on number of contractors.--
       ``(A) In general.--The Secretary may limit the number of 
     contractors in a competitive acquisition area to the number 
     needed to meet projected demand for items and services 
     covered under the contracts. In awarding contracts, the 
     Secretary shall take into account the ability of bidding 
     entities to furnish items or services in sufficient 
     quantities to meet the anticipated needs of beneficiaries for 
     such items or services in the geographic area covered under 
     the contract on a timely basis.
       ``(B) Multiple winners.--The Secretary shall award 
     contracts to more than one entity submitting a bid in each 
     area for an item or service.
       ``(5) Participating contractors.--Payment shall not be made 
     for items and services described in subsection (a)(2) 
     furnished by a contractor and for which competition is 
     conducted under this section unless--
       ``(A) the contractor has submitted a bid for such items and 
     services under this section; and
       ``(B) the Secretary has awarded a contract to the 
     contractor for such items and services under this section.
       ``(6) Authority to contract for education, outreach and 
     complaint services.--The Secretary may enter into a contract 
     with an appropriate entity to address complaints from 
     beneficiaries who receive items and services from an entity 
     with a contract under this section and to conduct appropriate 
     education of and outreach to such beneficiaries with respect 
     to the program.
       ``(c) Annual Reports.--The Secretary shall submit to 
     Congress an annual management report on the programs under 
     this section. Each such report shall include information on 
     savings, reductions in cost-sharing, access to items and 
     services, and beneficiary satisfaction.
       ``(d) Demonstration Project for Clinical Laboratory 
     Services.--
       ``(1) In general.--The Secretary shall, beginning in 2008, 
     conduct a demonstration project on the application of 
     competitive acquisition under this section to clinical 
     diagnostic laboratory tests--
       ``(A) for which payment is otherwise made under section 
     1833(h) or 1834(d)(1) (relating to colorectal cancer 
     screening tests); and
       ``(B) which are furnished without a face-to-face encounter 
     between the individual and the hospital or physician ordering 
     the tests.
       ``(2) Terms and conditions.--Such project shall be under 
     the same conditions as are applicable to items and services 
     described in subsection (a)(2).
       ``(3) Report.--The Secretary shall submit to Congress--
       ``(A) an initial report on the project not later than 
     December 31, 2009; and
       ``(B) such progress and final reports on the project after 
     such date as the Secretary determines appropriate.''.
       (b) Continuation of Certain Demonstration Projects.--
     Notwithstanding the amendment made by subsection (a), with 
     respect to demonstration projects implemented by the 
     Secretary under section 1847 of the Social Security Act (42 
     U.S.C. 1395w-3) (relating to the establishment of competitive 
     acquisition areas) that was in effect on the day before the 
     date of the enactment of this Act, each such demonstration 
     project may continue under the same terms and conditions 
     applicable under that section as in effect on that date.
       (c) Report on Differences in Payment for Laboratory 
     Services.--Not later than 18 months after the date of the 
     enactment of this Act, the Comptroller General of the United 
     States shall submit to Congress a report that analyzes 
     differences in reimbursement between public and private 
     payors for clinical diagnostic laboratory services.
       (d) MedPAC Report on Impact of Demonstration Projects on 
     Beneficiary Access to Services.--Not later than 1 year after 
     the date of the enactment of this Act, the Medicare Payment 
     Advisory Commission shall submit to Congress a report that 
     analyzes the impact of demonstration projects carried out 
     under section 1847 of the Social Security Act, as in effect 
     on June 1, 2002, on access by medicare beneficiaries to 
     durable medical equipment for which payment was made under 
     the demonstration project.

     SEC. 512. PAYMENT FOR AMBULANCE SERVICES.

       (a) Phase-In Providing Floor Using Blend of Fee Schedule 
     and Regional Fee Schedules.--Section 1834(l) (42 U.S.C. 
     1395m(l)) is amended--
       (1) in paragraph (2)(E), by inserting ``consistent with 
     paragraph (10)'' after ``in an efficient and fair manner'';
       (2) by redesignating the paragraph (8) added by section 
     221(a) of BIPA as paragraph (9); and
       (3) by adding at the end the following new paragraph:
       ``(10) Phase-in providing floor using blend of fee schedule 
     and regional fee schedules.--In carrying out the phase-in 
     under paragraph (2)(E) for each level of service furnished in 
     a year before January 1, 2007, the portion of the payment 
     amount that is based on the fee schedule shall not be less 
     than the following blended rate of the fee schedule under 
     paragraph (1) and of a regional fee schedule for the region 
     involved:
       ``(A) For 2003, the blended rate shall be based 20 percent 
     on the fee schedule under paragraph (1) and 80 percent on the 
     regional fee schedule.
       ``(B) For 2004, the blended rate shall be based 40 percent 
     on the fee schedule under paragraph (1) and 60 percent on the 
     regional fee schedule.
       ``(C) For 2005, the blended rate shall be based 60 percent 
     on the fee schedule under paragraph (1) and 40 percent on the 
     regional fee schedule.
       ``(D) For 2006, the blended rate shall be based 80 percent 
     on the fee schedule under paragraph (1) and 20 percent on the 
     regional fee schedule.

     For purposes of this paragraph, the Secretary shall establish 
     a regional fee schedule for each of the 9 Census divisions 
     using the methodology (used in establishing the fee schedule 
     under paragraph (1)) to calculate a regional conversion 
     factor and a regional mileage payment rate and using the same 
     payment adjustments and the same relative value units as used 
     in the fee schedule under such paragraph.''.
       (b) Adjustment in Payment for Certain Long Trips.--Section 
     1834(l), as amended by subsection (a), is further amended by 
     adding at the end the following new paragraph:
       ``(11) Adjustment in payment for certain long trips.--In 
     the case of ground ambulance services furnished on or after 
     January 1, 2003, and before January 1, 2008, regardless of 
     where the transportation originates, the fee schedule 
     established under this subsection shall provide that, with 
     respect to the payment rate for mileage for a trip above 50 
     miles the per mile rate otherwise established shall be 
     increased by \1/4\ of the payment per mile otherwise 
     applicable to such miles.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to ambulance services furnished on or after 
     January 1, 2003.

     SEC. 513. 5-YEAR EXTENSION OF MORATORIUM ON THERAPY CAPS; 
                   PROVISIONS RELATING TO REPORTS.

       (a) 5-Year Extension of Moratorium on Therapy Caps.--
     Section 1833(g)(4) (42 U.S.C. 1395l(g)(4)) is amended by 
     striking ``and 2002'' and inserting ``2002, 2003, 2004, 2005, 
     2006, and 2007''.
       (b) Prompt Submission of Overdue Reports on Payment and 
     Utilization of Outpatient Therapy Services.--Not later than 
     December 31, 2002, the Secretary shall submit to Congress the 
     reports required under section 4541(d)(2) of the Balanced 
     Budget Act of 1997 (relating to alternatives to a single 
     annual dollar cap on outpatient therapy) and under section 
     221(d) of the Medicare, Medicaid, and SCHIP Balanced Budget 
     Refinement Act of 1999 (relating to utilization patterns for 
     outpatient therapy).
       (c) Identification of Conditions and Diseases Justifying 
     Waiver of Therapy Cap.--
       (1) Study.--The Secretary shall request the Institute of 
     Medicine of the National Academy of Sciences to identify 
     conditions or diseases that should justify conducting an 
     assessment of the need to waive the therapy caps under 
     section 1833(g)(4) of the Social Security Act (42 U.S.C. 
     1395l(g)(4)).
       (2) Reports to congress.--Not later than July 1, 2003, the 
     Secretary shall submit to Congress a preliminary report on 
     the conditions and diseases identified under paragraph (1) 
     and not later than September 1, 2003, a final report on the 
     conditions and diseases so identified.
       (d) GAO Study of Patient Access to Physical Therapist 
     Services.--
       (1) Study.--The Comptroller General of the United States 
     shall conduct a study on access to physical therapist 
     services in States authorizing such services without a 
     physician referral and in States that require such a 
     physician referral. The study shall--
       (A) examine the use of and referral patterns for physical 
     therapist services for patients age 50 and older in States 
     that authorize such services without a physician referral and 
     in States that require such a physician referral;
       (B) examine the use of and referral patterns for physical 
     therapist services for patients who are medicare 
     beneficiaries;
       (C) examine the potential effect of prohibiting a physician 
     from referring patients to physical therapy services owned by 
     the physician and provided in the physician's office;
       (D) examine the delivery of physical therapists' services 
     within the facilities of Department of Defense; and
       (E) analyze the potential impact on medicare beneficiaries 
     and on expenditures under the medicare program of eliminating 
     the need for a physician referral and physician certification 
     for physical therapist services under the medicare program.
       (2) Report.--The Comptroller General shall submit to 
     Congress a report on the study conducted under paragraph (1) 
     by not later than 1 year after the date of the enactment of 
     this Act.

     SEC. 514. ACCELERATED IMPLEMENTATION OF 20 PERCENT 
                   COINSURANCE FOR HOSPITAL OUTPATIENT DEPARTMENT 
                   (OPD) SERVICES; OTHER OPD PROVISIONS.

       (a) Accelerated Implementation of Coinsurance Reductions.--
     Section 1833(t)(8)(C)(ii) (42 U.S.C. 1395l(t)(8)(C)(ii)) is 
     amended by striking subclauses (III) through (V) and 
     inserting the following:

[[Page 11999]]

       ``(III) For procedures performed in 2004, 45 percent.
       ``(IV) For procedures performed in 2005, 40 percent.
       ``(V) For procedures performed in 2006, 2007, 2008 and 
     2009, 35 percent.
       ``(VI) For procedures performed in 2010, 30 percent.
       ``(VII) For procedures performed in 2011, 25 percent.
       ``(VIII) For procedures performed in 2012 and thereafter, 
     20 percent.''.

       (b) Treatment of Temperature Monitored Cryoablation.--
       (1) In general.--Section 1833(t)(6)(A)(ii) (42 U.S.C. 
     1395l(t)(6)(A)(ii)) is amended by striking ``or temperature 
     monitored cryoablation''.
       (2) Effective date.--The amendment made by paragraph (1) 
     applies to payment for services furnished on or after January 
     1, 2003.

     SEC. 515. COVERAGE OF AN INITIAL PREVENTIVE PHYSICAL 
                   EXAMINATION.

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

               ``Initial Preventive Physical Examination

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

     SEC. 516. RENAL DIALYSIS SERVICES.

       (a) Report on Differences in Costs in Different Settings.--
     Not later than 1 year after the date of the enactment of this 
     Act, the Comptroller General of the United States shall 
     submit to Congress a report containing--
       (1) an analysis of the differences in costs of providing 
     renal dialysis services under the medicare program in home 
     settings and in facility settings;
       (2) an assessment of the percentage of overhead costs in 
     home settings and in facility settings; and
       (3) an evaluation of whether the charges for home dialysis 
     supplies and equipment are reasonable and necessary.
       (b) Restoring Composite Rate Exceptions for Pediatric 
     Facilities.--
       (1) In general.--Section 422(a)(2) of BIPA is amended--
       (A) in subparagraph (A), by striking ``and (C)'' and 
     inserting ``, (C), and (D)'';
       (B) in subparagraph (B), by striking ``In the case'' and 
     inserting ``Subject to subparagraph (D), in the case''; and
       (C) by adding at the end the following new subparagraph:
       ``(D) Inapplicability to pediatric facilities.--
     Subparagraphs (A) and (B) shall not apply, as of October 1, 
     2002, to pediatric facilities that do not have an exception 
     rate described in subparagraph (C) in effect on such date. 
     For purposes of this subparagraph, the term `pediatric 
     facility' means a renal facility at least 50 percent of whose 
     patients are individuals under 18 years of age.''.
       (2) Conforming amendment.--The fourth sentence of section 
     1881(b)(7) (42 U.S.C. 1395rr(b)(7)) is amended by striking 
     ``The Secretary'' and inserting ``Subject to section 
     422(a)(2) of the Medicare, Medicaid, and SCHIP Benefits 
     Improvement and Protection Act of 2000, the Secretary''.
       (c) Increase in Renal Dialysis Composite Rate for Services 
     Furnished in 2004.--Notwithstanding any other provision of 
     law, with respect to payment under part B of title XVIII of 
     the Social Security Act for renal dialysis services furnished 
     in 2004, the composite payment rate otherwise established 
     under section 1881(b)(7) of such Act (42 U.S.C. 1395rr(b)(7)) 
     shall be increased by 1.2 percent.

     SEC. 517. IMPROVED PAYMENT FOR CERTAIN MAMMOGRAPHY SERVICES.

       (a) Exclusion from OPD Fee Schedule.--Section 
     1833(t)(1)(B)(iv) (42 U.S.C. 1395l(t)(1)(B)(iv)) is amended 
     by inserting before the period at the end the following: 
     ``and does not include screening mammography (as defined in 
     section 1861(jj)) and unilateral and bilateral diagnostic 
     mammography''.
       (b) Adjustment to Technical Component.--For diagnostic 
     mammography performed on or after January 1, 2004, for which 
     payment is made under the physician fee schedule under 
     section 1848 of the Social Security Act (42 U.S.C. 1395w-4), 
     the Secretary, based on the most recent cost data available, 
     shall provide for an appropriate adjustment in the payment 
     amount for the technical component of the diagnostic 
     mammography.
       (c) Effective Date.--The amendment made by subsection (a) 
     shall apply to mammography performed on or after January 1, 
     2004.

     SEC. 518. WAIVER OF PART B LATE ENROLLMENT PENALTY FOR 
                   CERTAIN MILITARY RETIREES; SPECIAL ENROLLMENT 
                   PERIOD.

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

       (a) Coverage.--Section 1861(s)(2) (42 U.S.C. 1395x(s)(2)), 
     as amended by section 515(a), is amended--
       (1) in subparagraph (V), by striking ``and'' at the end;
       (2) in subparagraph (W), by inserting ``and'' at the end; 
     and
       (3) by adding at the end the following new subparagraph:
       ``(X) cholesterol and other blood lipid screening tests (as 
     defined in subsection (xx));''.
       (b) Services Described.--Section 1861 (42 U.S.C. 1395x), as 
     amended by section 515(b), is amended by adding at the end 
     the following new subsection:

           ``Cholesterol and Other Blood Lipid Screening Test

       ``(xx)(1) The term `cholesterol and other blood lipid 
     screening test' means diagnostic testing of cholesterol and 
     other lipid levels of the blood for the purpose of early 
     detection of abnormal cholesterol and other lipid levels.
       ``(2) The Secretary shall establish standards, in 
     consultation with appropriate organizations, regarding the 
     frequency and type of cholesterol and other blood lipid 
     screening tests, except that such frequency may not be more 
     often than once every 2 years.''.
       (c) Frequency.--Section 1862(a)(1) (42 U.S.C. 1395y(a)(1)), 
     as amended by section 515(e), is amended
       (1) by striking ``and'' at the end of subparagraph (I);

[[Page 12000]]

       (2) by striking the semicolon at the end of subparagraph 
     (J) and inserting ``; and''; and
       (3) by adding at the end the following new subparagraph:
       ``(K) in the case of a cholesterol and other blood lipid 
     screening test (as defined in section 1861(xx)(1)), which is 
     performed more frequently than is covered under section 
     1861(xx)(2).''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to tests furnished on or after January 1, 2004.

             TITLE VI--PROVISIONS RELATING TO PARTS A AND B

                    Subtitle A--Home Health Services

     SEC. 601. ELIMINATION OF 15 PERCENT REDUCTION IN PAYMENT 
                   RATES UNDER THE PROSPECTIVE PAYMENT SYSTEM.

       (a) In General.--Section 1895(b)(3)(A) (42 U.S.C. 
     1395fff(b)(3)(A)) is amended to read as follows:
       ``(A) Initial basis.--Under such system the Secretary shall 
     provide for computation of a standard prospective payment 
     amount (or amounts) as follows:
       ``(i) Such amount (or amounts) shall initially be based on 
     the most current audited cost report data available to the 
     Secretary and shall be computed in a manner so that the total 
     amounts payable under the system for fiscal year 2001 shall 
     be equal to the total amount that would have been made if the 
     system had not been in effect and if section 
     1861(v)(1)(L)(ix) had not been enacted.
       ``(ii) For fiscal year 2002 and for the first quarter of 
     fiscal year 2003, such amount (or amounts) shall be equal to 
     the amount (or amounts) determined under this paragraph for 
     the previous fiscal year, updated under subparagraph (B).
       ``(iii) For 2003, such amount (or amounts) shall be equal 
     to the amount (or amounts) determined under this paragraph 
     for fiscal year 2002, updated under subparagraph (B) for 
     2003.
       ``(iv) For 2004 and each subsequent year, such amount (or 
     amounts) shall be equal to the amount (or amounts) determined 
     under this paragraph for the previous year, updated under 
     subparagraph (B).

     Each such amount shall be standardized in a manner that 
     eliminates the effect of variations in relative case mix and 
     area wage adjustments among different home health agencies in 
     a budget neutral manner consistent with the case mix and wage 
     level adjustments provided under paragraph (4)(A). Under the 
     system, the Secretary may recognize regional differences or 
     differences based upon whether or not the services or agency 
     are in an urbanized area.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect as if included in the amendments made by 
     section 501 of the Medicare, Medicaid, and SCHIP Benefits 
     Improvement and Protection Act of 2000 (as enacted into law 
     by section 1(a)(6) of Public Law 106-554).

     SEC. 602. UPDATE IN HOME HEALTH SERVICES.

       (a) Change to Calendar Year Update.--
       (1) In general.--Section 1895(b) (42 U.S.C. 1395fff(b)(3)) 
     is amended--
       (A) in paragraph (3)(B)(i)--
       (i) by striking ``each fiscal year (beginning with fiscal 
     year 2002)'' and inserting ``fiscal year 2002 and for each 
     subsequent year (beginning with 2003)''; and
       (ii) by inserting ``or year'' after ``the fiscal year'';
       (B) in paragraph (3)(B)(ii)--
       (i) in subclause (II), by striking ``fiscal year'' and 
     inserting ``year'' and by redesignating such subclause as 
     subclause (III); and
       (ii) in subclause (I), by striking ``each of fiscal years 
     2002 and 2003'' and inserting the following: ``fiscal year 
     2002, the home health market basket percentage increase (as 
     defined in clause (iii)) minus 1.1 percentage points;

       ``(II) 2003'';

       (C) in paragraph (3)(B)(iii), by inserting ``or year'' 
     after ``fiscal year'' each place it appears;
       (D) in paragraph (3)(B)(iv)--
       (i) by inserting ``or year'' after ``fiscal year'' each 
     place it appears; and
       (ii) by inserting ``or years'' after ``fiscal years''; and
       (E) in paragraph (5), by inserting ``or year'' after 
     ``fiscal year''.
       (2) Transition rule.--The standard prospective payment 
     amount (or amounts) under section 1895(b)(3) of the Social 
     Security Act for the calendar quarter beginning on October 1, 
     2002, shall be such amount (or amounts) for the previous 
     calendar quarter.
       (b) Changes in Updates for 2003, 2004, and 2005.--Section 
     1895(b)(3)(B)(ii) (42 U.S.C. 1395fff(b)(3)(B)(ii)), as 
     amended by subsection (a)(1)(B), is amended--
       (1) in subclause (II), by striking ``the home health market 
     basket percentage increase (as defined in clause (iii)) minus 
     1.1 percentage points'' and inserting ``2.0 percentage 
     points'';
       (2) by striking ``or'' at the end of subclause (II);
       (3) by redesignating subclause (III) as subclause (V); and
       (4) by inserting after subclause (II) the following new 
     subclause:

       ``(III) 2004, 1.1 percentage points;
       ``(IV) 2005, 2.7 percentage points; or''.

       (c) Payment Adjustment.--
       (1) In general.--Section 1895(b)(5) (42 U.S.C. 
     1395fff(b)(5)) is amended by striking ``5 percent'' and 
     inserting ``3 percent''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to years beginning with 2003.

     SEC. 603. OASIS TASK FORCE; SUSPENSION OF CERTAIN OASIS DATA 
                   COLLECTION REQUIREMENTS PENDING TASK FORCE 
                   SUBMITTAL OF REPORT.

       (a) Establishment.--The Secretary of Health and Human 
     Services shall establish and appoint a task force (to be 
     known as the ``OASIS Task Force'') to examine the data 
     collection and reporting requirements under OASIS. For 
     purposes of this section, the term ``OASIS'' means the 
     Outcome and Assessment Information Set required by reason of 
     section 4602(e) of Balanced Budget Act of 1997 (42 U.S.C. 
     1395fff note).
       (b) Composition.--The OASIS Task Force shall be composed of 
     the following:
       (1) Staff of the Centers for Medicare & Medicaid Services 
     with expertise in post-acute care.
       (2) Representatives of home health agencies.
       (3) Health care professionals and research and health care 
     quality experts outside the Federal Government with expertise 
     in post-acute care.
       (4) Advocates for individuals requiring home health 
     services.
       (c) Duties.--
       (1) Review and recommendations.--The OASIS Task Force shall 
     review and make recommendations to the Secretary regarding 
     changes in OASIS to improve and simplify data collection for 
     purposes of--
       (A) assessing the quality of home health services; and
       (B) providing consistency in classification of patients 
     into home health resource groups (HHRGs) for payment under 
     section 1895 of the Social Security Act (42 U.S.C. 1395fff).
       (2) Specific items.--In conducting the review under 
     paragraph (1), the OASIS Task Force shall specifically 
     examine--
       (A) the 41 outcome measures currently in use;
       (B) the timing and frequency of data collection; and
       (C) the collection of information on comorbidities and 
     clinical indicators.
       (3) Report.--The OASIS Task Force shall submit a report to 
     the Secretary containing its findings and recommendations for 
     changes in OASIS by not later than 18 months after the date 
     of the enactment of this Act.
       (d) Sunset.--The OASIS Task Force shall terminate 60 days 
     after the date on which the report is submitted under 
     subsection (c)(2).
       (e) Nonapplication of FACA.--The provisions of the Federal 
     Advisory Committee Act shall not apply to the OASIS Task 
     Force.
       (f) Suspension of OASIS Requirement for Collection of Data 
     on Non-Medicare and Non-Medicaid Patients Pending Task Force 
     Report.--
       (1) In general.--During the period described in paragraph 
     (2), the Secretary of Health and Human Services may not 
     require, under section 4602(e) of the Balanced Budget Act of 
     1997 or otherwise under OASIS, a home health agency to gather 
     or submit information that relates to an individual who is 
     not eligible for benefits under either title XVIII or title 
     XIX of the Social Security Act.
       (2) Period of suspension.--The period described in this 
     paragraph--
       (A) begins on January 1, 2003, and
       (B) ends on the last day of the 2nd month beginning after 
     the date the report is submitted under subsection (c)(2).

     SEC. 604. MEDPAC STUDY ON MEDICARE MARGINS OF HOME HEALTH 
                   AGENCIES.

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

             Subtitle B--Direct Graduate Medical Education

     SEC. 611. REDISTRIBUTION OF UNUSED RESIDENT POSITIONS.

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

       ``(I) In general.--If a hospital's resident level (as 
     defined in clause (iii)(I)) is less than the otherwise 
     applicable resident limit (as

[[Page 12001]]

     defined in clause (iii)(II)) for each of the reference 
     periods (as defined in subclause (II)), effective for cost 
     reporting periods beginning on or after January 1, 2003, the 
     otherwise applicable resident limit shall be reduced by 75 
     percent of the difference between such limit and the 
     reference resident level specified in subclause (III) (or 
     subclause (IV) if applicable).
       ``(II) Reference periods defined.--In this clause, the term 
     `reference periods' means, for a hospital, the 3 most recent 
     consecutive cost reporting periods of the hospital for which 
     cost reports have been settled (or, if not, submitted) on or 
     before September 30, 2001.
       ``(III) Reference resident level.--Subject to subclause 
     (IV), the reference resident level specified in this 
     subclause for a hospital is the highest resident level for 
     the hospital during any of the reference periods.
       ``(IV) Adjustment process.--Upon the timely request of a 
     hospital, the Secretary may adjust the reference resident 
     level for a hospital to be the resident level for the 
     hospital for the cost reporting period that includes July 1, 
     2002.

       ``(ii) Redistribution.--

       ``(I) In general.--The Secretary is authorized to increase 
     the otherwise applicable resident limits for hospitals by an 
     aggregate number estimated by the Secretary that does not 
     exceed the aggregate reduction in such limits attributable to 
     clause (i) (without taking into account any adjustment under 
     subclause (IV) of such clause).
       ``(II) Effective date.--No increase under subclause (I) 
     shall be permitted or taken into account for a hospital for 
     any portion of a cost reporting period that occurs before 
     July 1, 2003, or before the date of the hospital's 
     application for an increase under this clause. No such 
     increase shall be permitted for a hospital unless the 
     hospital has applied to the Secretary for such increase by 
     December 31, 2004.
       ``(III) Considerations in redistribution.--In determining 
     for which hospitals the increase in the otherwise applicable 
     resident limit is provided under subclause (I), the Secretary 
     shall take into account the need for such an increase by 
     specialty and location involved, consistent with subclause 
     (IV).
       ``(IV) Priority for rural and small urban areas.--In 
     determining for which hospitals and residency training 
     programs an increase in the otherwise applicable resident 
     limit is provided under subclause (I), the Secretary shall 
     first distribute the increase to programs of hospitals 
     located in rural areas or in urban areas that are not large 
     urban areas (as defined for purposes of subsection (d)) on a 
     first-come-first-served basis (as determined by the 
     Secretary) based on a demonstration that the hospital will 
     fill the positions made available under this clause and not 
     to exceed an increase of 25 full-time equivalent positions 
     with respect to any hospital.
       ``(V) Application of locality adjusted national average per 
     resident amount.--With respect to additional residency 
     positions in a hospital attributable to the increase provided 
     under this clause, notwithstanding any other provision of 
     this subsection, the approved FTE resident amount is deemed 
     to be equal to the locality adjusted national average per 
     resident amount computed under subparagraph (E) for that 
     hospital.
       ``(VI) Construction.--Nothing in this clause shall be 
     construed as permitting the redistribution of reductions in 
     residency positions attributable to voluntary reduction 
     programs under paragraph (6) or as affecting the ability of a 
     hospital to establish new medical residency training programs 
     under subparagraph (H).

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

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

       (b) No Application of Increase to IME.--Section 
     1886(d)(5)(B)(v) (42 U.S.C. 1395ww(d)(5)(B)(v)) is amended by 
     adding at the end the following: ``The provisions of clause 
     (i) of subparagraph (I) of subsection (h)(4) shall apply with 
     respect to the first sentence of this clause in the same 
     manner as it applies with respect to subparagraph (F) of such 
     subsection, but the provisions of clause (ii) of such 
     subparagraph shall not apply.''.
       (c) Report on Extension of Applications Under 
     Redistribution Program.--Not later than July 1, 2004, the 
     Secretary shall submit to Congress a report containing 
     recommendations regarding whether to extend the deadline for 
     applications for an increase in resident limits under section 
     1886(h)(4)(I)(ii)(II) of the Social Security Act (as added by 
     subsection (a)).

     SEC. 612. INCREASING FOR 5 YEARS TO 100 PERCENT OF THE 
                   LOCALITY ADJUSTED NATIONAL AVERAGE PER RESIDENT 
                   AMOUNT THE PAYMENT FLOOR FOR DIRECT GRADUATE 
                   MEDICAL EDUCATION PAYMENTS UNDER THE MEDICARE 
                   PROGRAM.

       Section 1886(h)(2)(D)(iii) (42 U.S.C. 
     1395ww(h)(2)(D)(iii)), as amended by section 511 of BIPA, is 
     amended--
       (1) by striking ``and'' after ``70 percent,''; and
       (2) by inserting after ``85 percent,'' the following: ``and 
     for cost reporting periods beginning during the period 
     beginning on October 1, 2002, and ending on September 31, 
     2007, shall not be less than 100 percent,''.

                      Subtitle C--Other Provisions

     SEC. 621. MODIFICATIONS TO MEDICARE PAYMENT ADVISORY 
                   COMMISSION (MEDPAC).

       (a) Examination of Budget Consequences.--Section 1805(b) 
     (42 U.S.C. 1395b-6(b)) is amended by adding at the end the 
     following new paragraph:
       ``(8) Examination of budget consequences.--Before making 
     any recommendations, the Commission shall examine the budget 
     consequences of such recommendations, directly or through 
     consultation with appropriate expert entities.''.
       (b) Consideration of Efficient Provision of Services.--
     Section 1805(b)(2)(B)(i) (42 U.S.C. 1395b-6(b)(2)(B)(i)) is 
     amended by inserting ``the efficient provision of'' after 
     ``expenditures for''.
       (c) Additional Reports.--
       (1) Data needs and sources.--The Medicare Payment Advisory 
     Commission shall conduct a study, and submit a report to 
     Congress by not later than June 1, 2003, on the need for 
     current data, and sources of current data available, to 
     determine the solvency and financial circumstances of 
     hospitals and other medicare providers of services. The 
     Commission shall examine data on uncompensated care, as well 
     as the sahre of uncompensated care accounted for by the 
     expenses for treating illegal aliens.
       (2) Use of tax-related returns.--Using return information 
     provided under Form 990 of the Internal Revenue Service, the 
     Commission shall submit to Congress, by not later than June 
     1, 2003, a report on the following:
       (A) Investments and capital financing of hospitals 
     participating under the medicare program and related 
     foundations.
       (B) Access to capital financing for private and for not-
     for-profit hospitals.

     SEC. 622. DEMONSTRATION PROJECT FOR DISEASE MANAGEMENT FOR 
                   CERTAIN MEDICARE BENEFICIARIES WITH DIABETES.

       (a) In General.--The Secretary of Health and Human Services 
     shall conduct a demonstration project under this section (in 
     this section referred to as the ``project'') to demonstrate 
     the impact on costs and health outcomes of applying disease 
     management to certain medicare beneficiaries with diagnosed 
     diabetes. In no case may the number of participants in the 
     project exceed 30,000 at any time.
       (b) Voluntary Participation.--
       (1) Eligibility.--Medicare beneficiaries are eligible to 
     participate in the project only if--
       (a) they are Hispanic, as determined by the Secretary;
       (A) they meet specific medical criteria demonstrating the 
     appropriate diagnosis and the advanced nature of their 
     disease;
       (B) their physicians approve of participation in the 
     project; and
       (C) they are not enrolled in a Medicare+Choice plan.
       (2) Benefits.--A medicare beneficiary who is enrolled in 
     the project shall be eligible--
       (A) for disease management services related to their 
     diabetes; and
       (B) for payment for all costs for prescription drugs 
     without regard to whether or not they relate to the diabetes, 
     except that the project may provide for modest cost-sharing 
     with respect to prescription drug coverage.
       (c) Contracts With Disease Management Organizations.--
       (1) In general.--The Secretary of Health and Human Services 
     shall carry out the project through contracts with up to 
     three disease management organizations. The Secretary shall 
     not enter into such a contract with an organization unless 
     the organization demonstrates that it can produce improved 
     health outcomes and reduce aggregate medicare expenditures 
     consistent with paragraph (2).
       (2) Contract provisions.--Under such contracts--
       (A) such an organization shall be required to provide for 
     prescription drug coverage described in subsection (b)(2)(B);
       (B) such an organization shall be paid a fee negotiated and 
     established by the Secretary in a manner so that (taking into 
     account savings in expenditures under parts A and B of the 
     medicare program under title XVIII of the Social Security 
     Act) there will be no net increase, and to the extent 
     practicable, there will be a net reduction in expenditures 
     under the medicare program as a result of the project; and
       (C) such an organization shall guarantee, through an 
     appropriate arrangement with a reinsurance company or 
     otherwise, the prohibition on net increases in expenditures 
     described in subparagraph (B).

[[Page 12002]]

       (3) Payments.--Payments to such organizations shall be made 
     in appropriate proportion from the Trust Funds established 
     under title XVIII of the Social Security Act.
       (4) Working group.--The Secretary shall establish within 
     the Department of Health and Human Services a working group 
     consisting of employees of the Department to carry out the 
     following:
       (A) To oversee the project.
       (B) To establish policy and criteria for medicare disease 
     management programs within the Department, including the 
     establishment of policy and criteria for such programs.
       (C) To identify targeted medical conditions and targeted 
     individuals.
       (D) To select areas in which such programs are carried out.
       (E) To monitor health outcomes under such programs.
       (F) To measure the effectiveness of such programs in 
     meeting any budget neutrality requirements.
       (G) Otherwise to serve as a central focal point within the 
     Department for dissemination of information on medicare 
     disease management programs.
       (d) Application of Medigap Protections to Demonstration 
     Project Enrollees.--(1) Subject to paragraph (2), the 
     provisions of section 1882(s)(3) (other than clauses (i) 
     through (iv) of subparagraph (B)) and 1882(s)(4) of the 
     Social Security Act shall apply to enrollment (and 
     termination of enrollment) in the demonstration project under 
     this section, in the same manner as they apply to enrollment 
     (and termination of enrollment) with a Medicare+Choice 
     organization in a Medicare+Choice plan.
       (2) In applying paragraph (1)--
       (A) any reference in clause (v) or (vi) of section 
     1882(s)(3)(B) of such Act to 12 months is deemed a reference 
     to the period of the demonstration project; and
       (B) the notification required under section 1882(s)(3)(D) 
     of such Act shall be provided in a manner specified by the 
     Secretary of Health and Human Services.
       (e) Duration.--The project shall last for not longer than 3 
     years.
       (f) Waiver.--The Secretary of Health and Human Services 
     shall waive such provisions of title XVIII of the Social 
     Security Act as may be necessary to provide for payment for 
     services under the project in accordance with subsection 
     (c)(3).
       (g) Report.--The Secretary of Health and Human Services 
     shall submit to Congress an interim report on the project not 
     later than 2 years after the date it is first implemented and 
     a final report on the project not later than 6 months after 
     the date of its completion. Such reports shall include 
     information on the impact of the project on costs and health 
     outcomes and recommendations on the cost-effectiveness of 
     extending or expanding the project.
       (h) GAO Study on Disease Management Programs.--The 
     Comptroller General of the United States shall conduct a 
     study that compares disease management programs under title 
     XVIII of the Social Security Act with such programs conducted 
     in the private sector, including the prevalence of such 
     programs and programs for case management. The study shall 
     identify the cost-effectiveness of such programs and any 
     savings achieved by such programs. The Comptroller General 
     shall submit a report on such study to Congress by not later 
     than 18 months after the date of the enactment of this Act.

     SEC. 623. DEMONSTRATION PROJECT FOR MEDICAL ADULT DAY CARE 
                   SERVICES.

       (a) Establishment.--Subject to the succeeding provisions of 
     this section, the Secretary of Health and Human Services 
     shall establish a demonstration project (in this section 
     referred to as the ``demonstration project'') under which the 
     Secretary shall, as part of a plan of an episode of care for 
     home health services established for a medicare beneficiary, 
     permit a medical adult day care facility or a home health 
     agency, directly or under arrangements with a medical adult 
     day care facility, to provide medical adult day care services 
     as a substitute for a portion of home health services that 
     would otherwise be provided in the beneficiary's home.
       (b) Payment.--
       (1) In general.--The amount of payment for an episode of 
     care for home health services, a portion of which consists of 
     substitute medical adult day care services, under the 
     demonstration project shall be made at a rate equal to 95 
     percent of the amount that would otherwise apply for such 
     home health services under section 1895 of the Social 
     Security Act (42 U.S.C. 1395fff). In no case may a medical 
     adult day care facility or home health agency, or a medical 
     adult day care facility under arrangements with a home health 
     agency, separately charge a beneficiary for medical adult day 
     care services furnished under the plan of care.
       (2) Budget neutrality for demonstration project.--
     Notwithstanding any other provision of law, the Secretary 
     shall provide for an appropriate reduction in the aggregate 
     amount of additional payments made under section 1895 of the 
     Social Security Act (42 U.S.C. 1395fff) to reflect any 
     increase in amounts expended from the Trust Funds as a result 
     of the demonstration project conducted under this section.
       (c) Demonstration Project Sites.--The project established 
     under this section shall be conducted in not more than 5 
     sites in States selected by the Secretary that license or 
     certify providers of services that furnish medical adult day 
     care services.
       (d) Duration.--The Secretary shall conduct the 
     demonstration project for a period of 3 years.
       (e) Voluntary Participation.--Participation of medicare 
     beneficiaries in the demonstration project shall be 
     voluntary. The total number of such beneficiaries that may 
     participate in the project at any given time may not exceed 
     15,000.
       (f) Preference in Selecting Agencies.--In selecting medical 
     adult day care facilities and home health agencies to 
     participate under the demonstration project, the Secretary 
     shall give preference to those facilities and agencies that--
       (1) are currently licensed or certified to furnish medical 
     adult day care services; and
       (2) have furnished medical adult day care services to 
     medicare beneficiaries for a continuous 2-year period before 
     the beginning of the demonstration project.
       (g) Waiver Authority.--The Secretary may waive such 
     requirements of title XVIII of the Social Security Act as may 
     be necessary for the purposes of carrying out the 
     demonstration project, other than waiving the requirement 
     that an individual be homebound in order to be eligible for 
     benefits for home health services.
       (h) Evaluation and Report.--The Secretary shall conduct an 
     evaluation of the clinical and cost effectiveness of the 
     demonstration project. Not later 30 months after the 
     commencement of the project, the Secretary shall submit to 
     Congress a report on the evaluation, and shall include in the 
     report the following:
       (1) An analysis of the patient outcomes and costs of 
     furnishing care to the medicare beneficiaries participating 
     in the project as compared to such outcomes and costs to 
     beneficiaries receiving only home health services for the 
     same health conditions.
       (2) Such recommendations regarding the extension, 
     expansion, or termination of the project as the Secretary 
     determines appropriate.
       (i) Definitions.--In this section:
       (1) Home health agency.--The term ``home health agency'' 
     has the meaning given such term in section 1861(o) of the 
     Social Security Act (42 U.S.C. 1395x(o)).
       (2) Medical adult day care facility.--The term ``medical 
     adult day care facility'' means a facility that--
       (A) has been licensed or certified by a State to furnish 
     medical adult day care services in the State for a continuous 
     2-year period;
       (B) is engaged in providing skilled nursing services and 
     other therapeutic services directly or under arrangement with 
     a home health agency;
       (C) meets such standards established by the Secretary to 
     assure quality of care and such other requirements as the 
     Secretary finds necessary in the interest of the health and 
     safety of individuals who are furnished services in the 
     facility; and
       (D) provides medical adult day care services.
       (3) Medical adult day care services.--The term ``medical 
     adult day care services'' means--
       (A) home health service items and services described in 
     paragraphs (1) through (7) of section 1861(m) furnished in a 
     medical adult day care facility;
       (B) a program of supervised activities furnished in a group 
     setting in the facility that--
       (i) meet such criteria as the Secretary determines 
     appropriate; and
       (ii) is designed to promote physical and mental health of 
     the individuals; and
       (C) such other services as the Secretary may specify.
       (4) Medicare beneficiary.--The term ``medicare 
     beneficiary'' means an individual entitled to benefits under 
     part A of this title, enrolled under part B of this title, or 
     both.

     SEC. 624. PUBLICATION ON FINAL WRITTEN GUIDANCE CONCERNING 
                   PROHIBITIONS AGAINST DISCRIMINATION BY NATIONAL 
                   ORIGIN WITH RESPECT TO HEALTH CARE SERVICES.

       Not later than January 1, 2003, the Secretary shall issue 
     final written guidance concerning the application of the 
     prohibition in title VI of the Civil Rights Act of 1964 
     against national origin discrimination as it affects persons 
     with limited English proficiency with respect to access to 
     health care services under the medicare program.

            TITLE VII--MEDICAID AND OTHER HEALTH PROVISIONS

     SEC. 701. DSH PROVISIONS.

       (a) Continuation of Medicaid DSH Allotment Adjustments 
     Under BIPA 2000.--
       (1) In general.--Section 1923(f) (42 U.S.C. 1396r-4(f))--
       (A) in paragraph (2)--
       (i) in the heading, by striking ``through 2002'' and 
     inserting ``through 2000'';
       (ii) by striking ``ending with fiscal year 2002'' and 
     inserting ``ending with fiscal year 2000''; and
       (iii) in the table in such paragraph, by striking the 
     columns labeled ``FY01'' and ``FY02'';
       (B) in paragraph (3)(A), by striking ``paragraph (2)'' and 
     inserting ``paragraph (4)''; and
       (C) in paragraph (4), as added by section 701(a)(1) of 
     BIPA--

[[Page 12003]]

       (i) by striking ``for fiscal years 2001 and 2002'' in the 
     heading;
       (ii) in subparagraph (A), by striking ``Notwithstanding 
     paragraph (2), the'' and inserting ``The'';
       (iii) in subparagraph (C)--

       (I) by striking ``No application'' and inserting 
     ``Application''; and
       (II) by striking ``without regard to'' and inserting 
     ``taking into account''.

       (2) Increase in medicaid dsh allotment for the district of 
     columbia.--
       (A) In general.--Effective for DSH allotments beginning 
     with fiscal year 2002, the item in the table contained in 
     section 1923(f)(2) of the Social Security Act (42 U.S.C. 
     1396r-4(f)(2)) for the District of Columbia for the DSH 
     allotment for FY 00 (fiscal year 2000) is amended by striking 
     ``32'' and inserting ``49''.
       (B) Construction.--Nothing in subparagraph (A) shall be 
     construed as preventing the application of section 1923(f)(4) 
     of the Social Security Act (as amended by subsection (a)) to 
     the District of Columbia for fiscal year 2002 and subsequent 
     fiscal years.
       (b) Increase in Floor for Treatment As an Extremely Low DSH 
     State to 3 Percent in Fiscal Year 2002.--
       (1) Increase in dsh floor.--Section 1923(f)(5) (42 U.S.C. 
     1396r-4(f)(5)) is amended--
       (A) by striking ``fiscal year 1999'' and inserting ``fiscal 
     year 2001'';
       (B) by striking ``August 31, 2000'' and inserting ``August 
     31, 2002'';
       (C) by striking ``1 percent'' each place it appears and 
     inserting ``3 percent''; and
       (D) by striking ``fiscal year 2001'' and inserting ``fiscal 
     year 2003''.
       (2) Effective date.--The amendments made by paragraph (1) 
     take effect on October 1, 2002, and apply to DSH allotments 
     under title XIX of the Social Security Act for fiscal year 
     2003 and each fiscal year thereafter.

     SEC. 702. 1-YEAR EXTENSION OF Q-I1 PROGRAM.

       Section 1902(a)(10)(E)(E)(iv) (42 U.S.C. 
     1396a(a)(10)(E)(E)(iv)) is amended by striking ``2002'' and 
     inserting ``2003''.

  Mr. GEPHARDT (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 Missouri?
  Mr. NUSSLE. Mr. Speaker, I reserve all points of order against this 
motion, and I object to the unanimous consent request to dispense with 
the reading.
  The SPEAKER pro tempore. The Clerk will continue to read.
  The Clerk continued the reading of the motion to recommit.

                              {time}  0130

  Mr. GEPHARDT (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 (Mr. Thornberry). Is there objection to the 
request of the gentleman from Missouri?
  There was no objection.
  Mr. TAUZIN. Mr. Speaker, I claim the time in opposition to the motion 
to recommit.
  The SPEAKER pro tempore. The gentleman from Missouri (Mr. Gephardt) 
is recognized for 5 minutes in support of his motion.
  Mr. GEPHARDT. Mr. Speaker, I ask Members to vote ``yes'' on this 
motion to recommit and to vote ``no'' on the Republican plan.
  I guess I would like to start tonight's debate with a question: Why 
did you not allow us to have an alternative to this drug plan? A 
Democratic House gave Republicans an alternative in 1965 when we 
debated Medicare. We represent 49 percent of the American people. This 
is one of the most important issues that we will vote on in this 
Congress, yet we are not afforded the opportunity to have a clean vote 
on a clear alternative. Are you afraid? Do you think that too many of 
Republican Members would vote for our plan?
  This process tonight is not worthy of this House of Representatives. 
This is the people's House. Here the people must be heard. I am deeply 
disappointed that we were not afforded the opportunity for a clear 
alternative on this very, very important issue. This is an important 
issue to all the senior citizens of our country. The Greatest 
Generation that fought our wars, paid their taxes, raised their 
children, and made this country great, that Greatest Generation now is 
too often getting on buses and going to Canada or going to Mexico to 
get their prescription drugs at prices they can afford. They are making 
choices between food and taking their drugs. There are senior citizens 
tonight that are cutting their pills in half because they cannot afford 
to pay for a whole month's worth.
  And tonight, those people are only afforded a vote on a flawed, 
deficient, wrong plan. If we stack that plan up against what these 
people are asking for, it fails. It fails. In fact, I would say it is a 
fraud. I give you what Webster called a fraud: a deception, 
deliberately practiced to secure unfair or unlawful gain. A piece of 
trickery. A trick.
  The Republican plan has no set premium. They say it might be $35. We 
are told in States where they have done what the Republicans are doing 
it is $85. There is no defined benefit. Republicans are turning seniors 
over to the private insurance market.
  This is the same debate that we had in 1965. This is a replay of that 
debate. If this were 1965, we would not have dreamed of having a 
Medicare program without a prescription drug benefit. Prescription 
drugs are now the treatment for most maladies that people face. Why 
would we not just add this benefit to the Medicare program? Our plan 
that is in the motion to recommit is simple. It is Medicare: $100 
deductible, $25 premium. The government pays 80 percent of the drug 
cost. The recipient pays 20 percent, and when they hit $2,000 out of 
pocket, the government picks it all up.
  This is what seniors are asking for. They are not asking to go into 
private insurance. They want a Medicare drug benefit, and they want all 
the seniors to be amassed to get leverage to get the price of 
prescription drugs down, down, down.

                              {time}  0145

  In the end, I suspect many of you do not support Medicare. I suspect 
you still want to privatize it. Your plans for Social Security call for 
privatizing it. In 1965, Republicans predicted Medicare would lead to 
socialized medicine. One said, ``If we pass Medicare, one day we will 
be telling our children what it was like in America when people were 
free.'' Your majority leader has said Medicare is a program that I 
would have no part of in a free world. He said he deeply resented the 
fact that when he was 65 he would have to enroll in Medicare.
  So you have reverted to form. In the end, this Republican bill 
listens not to the people of this country. It listens to the 
pharmaceutical companies and to the insurance companies and is not good 
for the people's House of Representatives. It should not be passed.
  In closing, I would ask all of you to simply tonight think of the 
people you represent, people like my mother. She is 94 years old. She 
lives in St. Louis. Every time I go home, she asks me about what is 
going to happen with the cost of her drugs. She had a stroke about 5 
years ago, and the doctor said she will probably never talk again; she 
will probably never be able to cook or to do household duties. She was 
able to get the drugs and she is back and she is talking. She is asking 
me every time I see her about what she is going to do about the cost of 
her drugs. She has glaucoma and she gets a little bitty bottle of drops 
that cost $100 a bottle and lasts for 2 weeks. She is lucky. She has 
got my brother and me, and we send her the money every month so that 
she can get her drugs.
  Think about the thousands of people in your district who are not as 
lucky as my mother. Think about them. Think about whether they can 
afford a premium more than $25. Think about whether they can put up 
with benefits ending in the middle of the year when they cannot get 
their needed drugs. Think about them when you are not getting the price 
of drugs down so that they can afford to buy the drugs.
  In 1965, this Congress took a historic step, and it passed the 
greatest program that this country has ever put together. It is the 
reason that people are living to 80 and 90 and 100 in this country with 
quality in their lives. We should honor that program tonight and expand 
it as it should have been many years ago. I am sure there were Members 
on that day or night in 1965 that voted against the Medicare program 
and regretted it through the rest of their career and their life. Do 
not regret your vote tonight. Stand for Medicare and stand for the 
American people that you represent.

[[Page 12004]]

  The SPEAKER pro tempore (Mr. Thornberry). Any point of order to be 
reserved on the motion has now been withdrawn.
  The Chair recognizes the gentleman from Louisiana (Mr. Tauzin) for 5 
minutes.
  Mr. TAUZIN. Mr. Speaker, there is trickery about this place. There is 
fraud about this House. We could have a motion to recommit forthwith, 
but that is not what happened tonight. What happened tonight was a 
motion to recommit promptly. My friend, the chairman of Ways and Means, 
will explain in just a minute the trickery in that motion.
  You see, that motion has a very special effect regarding this debate 
tonight and the possibility of us passing a prescription drug benefit 
for the seniors of America tonight. The gentleman from California will 
explain it to you in just a minute. But if we were to even consider the 
proposal offered in this motion to recommit seriously, it is almost 
identical, I believe, to the proposal that was made before the 
Committee on Energy and Commerce.
  It has been scored by CBO now at $971 billion, although our budget, 
as you know, allocated $350 billion to this effort. It is more 
expensive than the plan prepared on the Senate side by Senator Bob 
Graham. The Bob Graham plan is estimated to drive Medicare into 
insolvency by the year 2016. Just imagine how much sooner Medicare goes 
bankrupt under the plan our friends on the other side are offering in 
the motion to recommit.
  That is saving the Medicare program, driving it into bankruptcy? We 
are not alone in that assessment. The AARP looked at our plans, too; 
and this is what they said about ours: ``We appreciate your efforts to 
contain drug costs, because a Medicare drug benefit alone without 
effective cost controls will be difficult to sustain as our growing 
population of older Americans increases its drug utilization.''
  Our assessment in the committee of this plan, believe it or not, 
actually raises drug prices to seniors. We asked CBO a simple question. 
We asked CBO if the Medicare Modernization and Prescription Drug Act 
before us that we presented to this House tonight would lower drug 
expenditures more than any other House bill introduced in the Congress 
and scored by CBO, and this is what they responded: ``The answer to 
your question is yes.'' Yes, lower drug costs. Yes, prescription drug 
benefits for our seniors. Tonight, not promptly. Yes, it is time to 
pass this bill tonight for all our moms and dads.
  Mr. Speaker, I yield to the gentleman from California (Mr. Thomas).
  Mr. THOMAS. I thank the gentleman for yielding.
  The gentleman from Missouri mentioned several times 1965; 1965 was 10 
years before a Member of this Congress was born, Adam Putnam. For more 
than 30 of those 37 years, you were in the majority. You never put 
prescription drugs in Medicare. You had your chance. You never did. And 
your argument is that you have now in front of us a plan.
  The gentleman from Missouri read a definition from Webster's. What my 
mother would have said, you should have washed your mouth out, because 
for you to cite the definition of fraud and call it trickery is for 
everyone to understand what this motion to recommit really is. It is a 
little word called ``forthwith.'' If this motion had said Mr. Gephardt 
moves to recommit the bill forthwith, it would not have been fraud, and 
it would not have been trickery. But because that little word is 
missing and it requires it to be reported promptly, the effect of this 
motion to recommit is to kill this bill. All of the statements that the 
gentleman from Missouri made in the well were simply trickery, it was a 
fraud, because this bill cannot come back and be made law. You are 
wasting the House's time. Obviously, some of you do not understand the 
rules under which this House operates.
  Mr. Speaker, had they had the guts to put ``forthwith'' in this 
motion to recommit, this bill would have come back to the floor, and we 
could have debated it. You did not put ``forthwith'' in it. Your motion 
to recommit is a motion to kill the bill.
  Mr. WALDEN of Oregon. Mr. Speaker, the House is not in order. The 
gentleman deserves to be heard as was the minority leader.
  The SPEAKER pro tempore. The House will be in order.
  Mr. THOMAS. Actually, nobody deserves to be heard on this motion to 
recommit. It is 119 pages of nothing. The way you constructed it, 
knowingly and on purpose, was to pull a charade on seniors. Nothing in 
this bill will be available to seniors because you did not put a little 
word in there, a word that would have proved honesty, a word that would 
have proved courage, a word that would have let seniors know----
  Mr. TAUZIN. Mr. Speaker, the House is not in order.
  Mr. Speaker, we listened very patiently to the minority leader. I 
believe the gentleman deserves to be heard.
  The SPEAKER pro tempore. The time in opposition to the motion to 
recommit has expired.
  Mr. THOMAS. Mr. Speaker, I urge my colleagues to vote ``no'' on the 
motion to recommit.
  The SPEAKER pro tempore. 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. DINGELL. Mr. Speaker, I demand a recorded vote.
  A recorded vote was ordered.
  The vote was taken by electronic device, and there were--ayes 204, 
noes 223, not voting 8, as follows:

                             [Roll No. 281]

                               AYES--204

     Abercrombie
     Ackerman
     Allen
     Andrews
     Baca
     Baird
     Baldacci
     Baldwin
     Barcia
     Barrett
     Becerra
     Bentsen
     Berkley
     Berman
     Berry
     Bishop
     Blagojevich
     Blumenauer
     Bonior
     Borski
     Boswell
     Boucher
     Boyd
     Brady (PA)
     Brown (FL)
     Brown (OH)
     Capps
     Capuano
     Cardin
     Carson (IN)
     Carson (OK)
     Clayton
     Clement
     Clyburn
     Condit
     Conyers
     Costello
     Coyne
     Cramer
     Crowley
     Cummings
     Davis (CA)
     Davis (FL)
     Davis (IL)
     DeFazio
     DeGette
     Delahunt
     DeLauro
     Deutsch
     Dicks
     Dingell
     Doggett
     Dooley
     Doyle
     Edwards
     Engel
     Eshoo
     Etheridge
     Evans
     Farr
     Fattah
     Filner
     Ford
     Frank
     Frost
     Gephardt
     Gonzalez
     Gordon
     Green (TX)
     Hall (OH)
     Hall (TX)
     Harman
     Hastings (FL)
     Hill
     Hilliard
     Hinchey
     Hinojosa
     Hoeffel
     Holden
     Holt
     Honda
     Hooley
     Hoyer
     Inslee
     Israel
     Jackson (IL)
     Jackson-Lee (TX)
     John
     Johnson, E.B.
     Jones (OH)
     Kanjorski
     Kaptur
     Kennedy (RI)
     Kildee
     Kilpatrick
     Kind (WI)
     Kleczka
     Kucinich
     LaFalce
     Lampson
     Langevin
     Lantos
     Larsen (WA)
     Larson (CT)
     Lee
     Levin
     Lewis (GA)
     Lipinski
     Lofgren
     Lowey
     Lucas (KY)
     Luther
     Lynch
     Maloney (CT)
     Maloney (NY)
     Markey
     Mascara
     Matheson
     Matsui
     McCarthy (MO)
     McCarthy (NY)
     McCollum
     McDermott
     McGovern
     McIntyre
     McKinney
     McNulty
     Meehan
     Meek (FL)
     Meeks (NY)
     Menendez
     Millender-McDonald
     Miller, George
     Mink
     Mollohan
     Moore
     Moran (VA)
     Murtha
     Nadler
     Napolitano
     Neal
     Oberstar
     Obey
     Olver
     Ortiz
     Owens
     Pallone
     Pascrell
     Pastor
     Payne
     Pelosi
     Peterson (MN)
     Phelps
     Pomeroy
     Price (NC)
     Rahall
     Rangel
     Reyes
     Rivers
     Rodriguez
     Ross
     Rothman
     Roybal-Allard
     Rush
     Sabo
     Sanchez
     Sanders
     Sandlin
     Sawyer
     Schakowsky
     Schiff
     Scott
     Serrano
     Sherman
     Shows
     Skelton
     Slaughter
     Smith (WA)
     Snyder
     Solis
     Spratt
     Stark
     Stenholm
     Strickland
     Stupak
     Tanner
     Tauscher
     Thompson (CA)
     Thurman
     Tierney
     Turner
     Udall (CO)
     Udall (NM)
     Velazquez
     Visclosky
     Waters
     Watson (CA)
     Watt (NC)
     Waxman
     Weiner
     Wexler
     Woolsey
     Wu
     Wynn

                               NOES--223

     Aderholt
     Akin
     Armey
     Bachus
     Baker
     Ballenger
     Barr
     Bartlett
     Barton
     Bass
     Bereuter
     Biggert
     Bilirakis
     Blunt
     Boehlert
     Boehner
     Bonilla
     Bono
     Boozman
     Brady (TX)
     Brown (SC)
     Bryant
     Burr
     Burton
     Buyer
     Callahan
     Calvert
     Camp
     Cannon
     Cantor
     Capito
     Castle
     Chabot
     Chambliss
     Coble
     Collins

[[Page 12005]]


     Combest
     Cooksey
     Cox
     Crane
     Crenshaw
     Cubin
     Culberson
     Cunningham
     Davis, Jo Ann
     Davis, Tom
     Deal
     DeLay
     DeMint
     Diaz-Balart
     Doolittle
     Dreier
     Duncan
     Dunn
     Ehlers
     Ehrlich
     Emerson
     English
     Everett
     Ferguson
     Flake
     Fletcher
     Foley
     Forbes
     Fossella
     Frelinghuysen
     Gallegly
     Ganske
     Gekas
     Gibbons
     Gilchrest
     Gillmor
     Gilman
     Goode
     Goodlatte
     Goss
     Graham
     Granger
     Graves
     Green (WI)
     Greenwood
     Grucci
     Gutknecht
     Hansen
     Hart
     Hastert
     Hastings (WA)
     Hayes
     Hayworth
     Hefley
     Herger
     Hilleary
     Hobson
     Hoekstra
     Horn
     Hostettler
     Houghton
     Hulshof
     Hunter
     Hyde
     Isakson
     Issa
     Istook
     Jenkins
     Johnson (CT)
     Johnson (IL)
     Johnson, Sam
     Jones (NC)
     Keller
     Kelly
     Kennedy (MN)
     Kerns
     King (NY)
     Kingston
     Kirk
     Knollenberg
     Kolbe
     LaHood
     Latham
     LaTourette
     Leach
     Lewis (CA)
     Lewis (KY)
     Linder
     LoBiondo
     Lucas (OK)
     Manzullo
     McCrery
     McHugh
     McInnis
     McKeon
     Mica
     Miller, Dan
     Miller, Gary
     Miller, Jeff
     Moran (KS)
     Morella
     Myrick
     Nethercutt
     Ney
     Northup
     Norwood
     Nussle
     Osborne
     Ose
     Otter
     Oxley
     Pence
     Peterson (PA)
     Petri
     Pickering
     Pitts
     Platts
     Pombo
     Portman
     Pryce (OH)
     Putnam
     Quinn
     Radanovich
     Ramstad
     Regula
     Rehberg
     Reynolds
     Riley
     Roemer
     Rogers (KY)
     Rogers (MI)
     Rohrabacher
     Ros-Lehtinen
     Royce
     Ryan (WI)
     Ryun (KS)
     Saxton
     Schaffer
     Schrock
     Sensenbrenner
     Sessions
     Shadegg
     Shaw
     Shays
     Sherwood
     Shimkus
     Shuster
     Simmons
     Simpson
     Skeen
     Smith (MI)
     Smith (NJ)
     Smith (TX)
     Souder
     Stearns
     Stump
     Sullivan
     Sununu
     Sweeney
     Tancredo
     Tauzin
     Taylor (MS)
     Taylor (NC)
     Terry
     Thomas
     Thornberry
     Thune
     Tiahrt
     Tiberi
     Toomey
     Upton
     Vitter
     Walden
     Walsh
     Wamp
     Watkins (OK)
     Watts (OK)
     Weldon (FL)
     Weldon (PA)
     Weller
     Whitfield
     Wicker
     Wilson (NM)
     Wilson (SC)
     Wolf
     Young (AK)
     Young (FL)

                             NOT VOTING--8

     Clay
     Gutierrez
     Jefferson
     Paul
     Roukema
     Thompson (MS)
     Towns
     Traficant

                              {time}  0215

  So the motion to recommit was rejected.
  The result of the vote was announced as above recorded.
  The SPEAKER pro tempore (Mr. Thornberry.) 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. PALLONE. Mr. Speaker, I demand a recorded vote.
  A recorded vote was ordered.
  The vote was taken by electronic device, and there were--ayes 221, 
noes 208, not voting 6, as follows:

                             [Roll No. 282]

                               AYES--221

     Aderholt
     Akin
     Armey
     Bachus
     Baker
     Ballenger
     Barr
     Bartlett
     Barton
     Bass
     Bereuter
     Biggert
     Bilirakis
     Blunt
     Boehlert
     Boehner
     Bonilla
     Bono
     Boozman
     Boswell
     Brady (TX)
     Brown (SC)
     Bryant
     Burr
     Burton
     Buyer
     Callahan
     Calvert
     Camp
     Cannon
     Cantor
     Capito
     Castle
     Chabot
     Chambliss
     Coble
     Combest
     Condit
     Cooksey
     Cox
     Crane
     Crenshaw
     Cubin
     Culberson
     Cunningham
     Davis, Jo Ann
     Davis, Tom
     Deal
     DeLay
     DeMint
     Diaz-Balart
     Doolittle
     Dreier
     Duncan
     Dunn
     Ehlers
     Ehrlich
     English
     Everett
     Ferguson
     Fletcher
     Foley
     Forbes
     Fossella
     Frelinghuysen
     Gallegly
     Ganske
     Gekas
     Gibbons
     Gilchrest
     Gillmor
     Gilman
     Goode
     Goodlatte
     Goss
     Graham
     Granger
     Graves
     Green (WI)
     Greenwood
     Grucci
     Hall (TX)
     Hansen
     Hart
     Hastert
     Hastings (WA)
     Hayes
     Hayworth
     Hefley
     Herger
     Hilleary
     Hobson
     Hoekstra
     Horn
     Houghton
     Hulshof
     Hunter
     Hyde
     Isakson
     Israel
     Issa
     Jenkins
     Johnson (CT)
     Johnson (IL)
     Johnson, Sam
     Jones (NC)
     Keller
     Kelly
     Kennedy (MN)
     Kerns
     King (NY)
     Kingston
     Kirk
     Knollenberg
     Kolbe
     LaHood
     Latham
     LaTourette
     Leach
     Lewis (CA)
     Lewis (KY)
     Linder
     LoBiondo
     Lucas (KY)
     Lucas (OK)
     Maloney (CT)
     Matheson
     McCrery
     McHugh
     McInnis
     McKeon
     Mica
     Miller, Dan
     Miller, Gary
     Miller, Jeff
     Moran (KS)
     Morella
     Myrick
     Nethercutt
     Ney
     Northup
     Norwood
     Nussle
     Osborne
     Ose
     Otter
     Oxley
     Pence
     Peterson (MN)
     Peterson (PA)
     Petri
     Pickering
     Pitts
     Platts
     Pombo
     Portman
     Pryce (OH)
     Putnam
     Quinn
     Radanovich
     Ramstad
     Regula
     Rehberg
     Reynolds
     Riley
     Rogers (KY)
     Rogers (MI)
     Rohrabacher
     Ros-Lehtinen
     Royce
     Ryan (WI)
     Ryun (KS)
     Saxton
     Schaffer
     Schrock
     Sensenbrenner
     Sessions
     Shadegg
     Shaw
     Shays
     Sherwood
     Shimkus
     Shuster
     Simmons
     Simpson
     Skeen
     Smith (NJ)
     Smith (TX)
     Souder
     Stearns
     Stump
     Sullivan
     Sununu
     Sweeney
     Tancredo
     Tauzin
     Taylor (NC)
     Terry
     Thomas
     Thornberry
     Thune
     Tiahrt
     Tiberi
     Toomey
     Upton
     Vitter
     Walden
     Walsh
     Wamp
     Watkins (OK)
     Watts (OK)
     Weldon (FL)
     Weldon (PA)
     Weller
     Whitfield
     Wicker
     Wilson (NM)
     Wilson (SC)
     Wolf
     Young (AK)
     Young (FL)

                               NOES--208

     Abercrombie
     Ackerman
     Allen
     Andrews
     Baca
     Baird
     Baldacci
     Baldwin
     Barcia
     Barrett
     Becerra
     Bentsen
     Berkley
     Berman
     Berry
     Bishop
     Blagojevich
     Blumenauer
     Bonior
     Borski
     Boucher
     Boyd
     Brady (PA)
     Brown (FL)
     Brown (OH)
     Capps
     Capuano
     Cardin
     Carson (IN)
     Carson (OK)
     Clayton
     Clement
     Clyburn
     Collins
     Conyers
     Costello
     Coyne
     Cramer
     Crowley
     Cummings
     Davis (CA)
     Davis (FL)
     Davis (IL)
     DeFazio
     DeGette
     Delahunt
     DeLauro
     Deutsch
     Dicks
     Dingell
     Doggett
     Dooley
     Doyle
     Edwards
     Emerson
     Engel
     Eshoo
     Etheridge
     Evans
     Farr
     Fattah
     Filner
     Flake
     Ford
     Frank
     Frost
     Gephardt
     Gonzalez
     Gordon
     Green (TX)
     Gutierrez
     Gutknecht
     Hall (OH)
     Harman
     Hastings (FL)
     Hill
     Hilliard
     Hinchey
     Hinojosa
     Hoeffel
     Holden
     Holt
     Honda
     Hooley
     Hostettler
     Hoyer
     Inslee
     Istook
     Jackson (IL)
     Jackson-Lee (TX)
     John
     Johnson, E.B.
     Jones (OH)
     Kanjorski
     Kaptur
     Kennedy (RI)
     Kildee
     Kilpatrick
     Kind (WI)
     Kleczka
     Kucinich
     LaFalce
     Lampson
     Langevin
     Lantos
     Larsen (WA)
     Larson (CT)
     Lee
     Levin
     Lewis (GA)
     Lipinski
     Lofgren
     Lowey
     Luther
     Lynch
     Maloney (NY)
     Manzullo
     Markey
     Mascara
     Matsui
     McCarthy (MO)
     McCarthy (NY)
     McCollum
     McDermott
     McGovern
     McIntyre
     McKinney
     McNulty
     Meehan
     Meek (FL)
     Meeks (NY)
     Menendez
     Millender-McDonald
     Miller, George
     Mink
     Mollohan
     Moore
     Moran (VA)
     Murtha
     Nadler
     Napolitano
     Neal
     Oberstar
     Obey
     Olver
     Ortiz
     Owens
     Pallone
     Pascrell
     Pastor
     Payne
     Pelosi
     Phelps
     Pomeroy
     Price (NC)
     Rahall
     Rangel
     Reyes
     Rivers
     Rodriguez
     Roemer
     Ross
     Rothman
     Roybal-Allard
     Rush
     Sabo
     Sanchez
     Sanders
     Sandlin
     Sawyer
     Schakowsky
     Schiff
     Scott
     Serrano
     Sherman
     Shows
     Skelton
     Slaughter
     Smith (MI)
     Smith (WA)
     Snyder
     Solis
     Spratt
     Stark
     Stenholm
     Strickland
     Stupak
     Tanner
     Tauscher
     Taylor (MS)
     Thompson (CA)
     Thompson (MS)
     Thurman
     Tierney
     Turner
     Udall (CO)
     Udall (NM)
     Velazquez
     Visclosky
     Waters
     Watson (CA)
     Watt (NC)
     Waxman
     Weiner
     Wexler
     Woolsey
     Wu
     Wynn

                             NOT VOTING--6

     Clay
     Jefferson
     Paul
     Roukema
     Towns
     Traficant

                              {time}  0232

  So the bill was passed.
  The result of the vote was announced as above recorded.
  A motion to reconsider was laid on the table.

                          ____________________