[Congressional Record (Bound Edition), Volume 149 (2003), Part 12]
[House]
[Pages 16338-16512]
[From the U.S. Government Publishing Office, www.gpo.gov]




        MEDICARE PRESCRIPTION DRUG AND MODERNIZATION ACT OF 2003

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

                                 H.R. 1

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

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

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

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

              TITLE I--MEDICARE PRESCRIPTION DRUG BENEFIT

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

         ``Part D--Voluntary Prescription Drug Benefit Program

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

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

Sec. 200. Medicare modernization and revitalization.

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

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

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

``Sec. 1860E-1. Offering of enhanced fee-for-service plans throughout 
              the United States.
``Sec. 1860E-2. Offering of enhanced fee-for-service (EFFS) plans.
``Sec. 1860E-3. Submission of bids; beneficiary savings; payment of 
              plans.
``Sec. 1860E-4. Premiums; organizational and financial requirements; 
              establishment of standards; contracts with EFFS 
              organizations.

                 Subtitle B--Medicare Advantage Program

                  Chapter 1--Implementation Of Program

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

            Chapter 2--Implementation Of Competition Program

Sec. 221. Competition program beginning in 2006.

                     Chapter 3--Additional Reforms

Sec. 231. Making permanent change in medicare advantage reporting 
              deadlines and annual, coordinated election period.
Sec. 232. Avoiding duplicative State regulation.

[[Page 16339]]

Sec. 233. Specialized medicare advantage plans for special needs 
              beneficiaries.
Sec. 234. Medicare MSAs.
Sec. 235. Extension of reasonable cost contracts.
Sec. 236. Extension of municipal health service demonstration projects.
Sec. 237. Study of performance-based payment systems.

       Subtitle C--Application of FEHBP-Style Competitive Reforms

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

             TITLE III--COMBATTING WASTE, FRAUD, AND ABUSE

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

                TITLE IV--RURAL HEALTH CARE IMPROVEMENTS

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

                 TITLE V--PROVISIONS RELATING TO PART A

                Subtitle A--Inpatient Hospital Services

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

                      Subtitle B--Other Provisions

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

                TITLE VI--PROVISIONS RELATING TO PART B

                    Subtitle A--Physicians' Services

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

                    Subtitle B--Preventive Services

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

                       Subtitle C--Other Services

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

            TITLE VII--PROVISIONS RELATING TO PARTS A AND B

                    Subtitle A--Home Health Services

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

             Subtitle B--Direct Graduate Medical Education

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

                  Subtitle C--Chronic Care Improvement

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

                      Subtitle D--Other Provisions

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

              TITLE VIII--MEDICARE BENEFITS ADMINISTRATION

Sec. 801. Establishment of Medicare Benefits Administration.

         TITLE IX--REGULATORY REDUCTION AND CONTRACTING REFORM

                     Subtitle A--Regulatory Reform

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

                     Subtitle B--Contracting Reform

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

                   Subtitle C--Education and Outreach

Sec. 921. Provider education and technical assistance.
Sec. 922. Small provider technical assistance demonstration program.
Sec. 923. Medicare Provider Ombudsman; Medicare Beneficiary Ombudsman.
Sec. 924. Beneficiary outreach demonstration program.
Sec. 925. Inclusion of additional information in notices to 
              beneficiaries about skilled nursing facility benefits.
Sec. 926. Information on medicare-certified skilled nursing facilities 
              in hospital discharge plans.

                    Subtitle D--Appeals and Recovery

Sec. 931. Transfer of responsibility for medicare appeals.
Sec. 932. Process for expedited access to review.
Sec. 933. Revisions to medicare appeals process.

[[Page 16340]]

Sec. 934. Prepayment review.
Sec. 935. Recovery of overpayments.
Sec. 936. Provider enrollment process; right of appeal.
Sec. 937. Process for correction of minor errors and omissions without 
              pursuing appeals process.
Sec. 938. Prior determination process for certain items and services; 
              advance beneficiary notices.

                  Subtitle V--Miscellaneous Provisions

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

                           TITLE X--MEDICAID

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

             TITLE XI--ACCESS TO AFFORDABLE PHARMACEUTICALS

            Subtitle A--Access to Affordable Pharmaceuticals

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

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

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

             Subtitle C--Importation of Prescription Drugs

Sec. 1121. Importation of prescription drugs.

              TITLE I--MEDICARE PRESCRIPTION DRUG BENEFIT

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

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

         ``Part D--Voluntary Prescription Drug Benefit Program

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

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

     Such individuals shall have a choice of such plans under 
     section 1860D-5(d).
       ``(b) General Election Procedures.--
       ``(1) In general.--An individual eligible to make an 
     election under subsection (a) may elect to enroll in a 
     prescription drug plan under this part, or elect the option 
     of qualified prescription drug coverage under a MA-EFFS Rx 
     plan under part C or part E, and to change such election only 
     in such manner and form as may be prescribed by regulations 
     of the Administrator of the Medicare Benefits Administration 
     (appointed under section 1809(b)) (in this part referred to 
     as the `Medicare Benefits Administrator') and only during an 
     election period prescribed in or under this subsection.
       ``(2) Election periods.--
       ``(A) In general.--Except as provided in this paragraph, 
     the election periods under this subsection shall be the same 
     as the coverage election periods under the Medicare Advantage 
     and EFFS programs under section 1851(e), including--
       ``(i) annual coordinated election periods; and
       ``(ii) special election periods.

     In applying the last sentence of section 1851(e)(4) (relating 
     to discontinuance of an election during the first year of 
     eligibility) under this subparagraph, in the case of an 
     election described in such section in which the individual 
     had elected or is provided qualified prescription drug 
     coverage at the time of such first enrollment, the individual 
     shall be permitted to enroll in a prescription drug plan 
     under this part at the time of the election of coverage under 
     the original fee-for-service plan.
       ``(B) Initial election periods.--
       ``(i) Individuals currently covered.--In the case of an 
     individual who is entitled to benefits under part A or 
     enrolled under part B as of October 1, 2005, there shall be 
     an initial election period of 6 months beginning on that 
     date.
       ``(ii) Individual covered in future.--In the case of an 
     individual who is first entitled to benefits under part A or 
     enrolled under part B after such date, there shall be an 
     initial election period which is the same as the initial 
     enrollment period under section 1837(d).
       ``(C) Additional special election periods.--The 
     Administrator shall establish special election periods--
       ``(i) in cases of individuals who have and involuntarily 
     lose prescription drug coverage described in subsection 
     (c)(2)(C);
       ``(ii) in cases described in section 1837(h) (relating to 
     errors in enrollment), in the same manner as such section 
     applies to part B;
       ``(iii) in the case of an individual who meets such 
     exceptional conditions (including conditions provided under 
     section 1851(e)(4)(D)) as the Administrator may provide; and
       ``(iv) in cases of individuals (as determined by the 
     Administrator) who become eligible for prescription drug 
     assistance under title XIX under section 1935(d).
       ``(3) Information on plans.--Information described in 
     section 1860D-3(b)(1) on prescription drug plans and MA-EFFS 
     Rx plans shall be made available during election periods.
       ``(4) Additional information.--In order to promote the 
     efficient marketing of prescription drug plans and MA-EFFS 
     plans, the Administrator may provide information to the 
     sponsors and organizations offering such plans about 
     individuals eligible to enroll in such plans.
       ``(c) Guaranteed Issue; Community Rating; and 
     Nondiscrimination.--
       ``(1) Guaranteed issue.--
       ``(A) In general.--An eligible individual who is eligible 
     to elect qualified prescription drug coverage under a 
     prescription drug plan or MA-EFFS Rx plan at a time during 
     which elections are accepted under this part with respect to 
     the plan shall not be denied enrollment based on any health 
     status-related factor (described in section 2702(a)(1) of the 
     Public Health Service Act) or any other factor.
       ``(B) Medicare advantage limitations permitted.--The 
     provisions of paragraphs (2) and (3) (other than subparagraph 
     (C)(i), relating to default enrollment) of section 1851(g) 
     (relating to priority and limitation on termination of 
     election) shall apply to PDP sponsors under this subsection.
       ``(2) Community-rated premium.--
       ``(A) In general.--In the case of an individual who enrolls 
     under a prescription drug plan or in a MA-EFFS Rx plan during 
     the individual's initial enrollment period under this part or 
     maintains (as determined under subparagraph (C)) continuous 
     prescription drug coverage since the date the individual 
     first qualifies to elect prescription drug coverage under 
     this part, a PDP sponsor or entity offering a prescription 
     drug plan or MA-EFFS Rx plan and in which the individual is 
     enrolled may not deny, limit, or condition the coverage or 
     provision of covered prescription drug benefits or vary or 
     increase the premium under the plan based on any 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

[[Page 16341]]

     sponsor or an entity offering a MA-EFFS Rx plan may 
     (notwithstanding any provision in this title) adjust the 
     premium otherwise applicable with respect to qualified 
     prescription drug coverage in a manner that reflects 
     additional actuarial risk involved. Such a risk shall be 
     established through an appropriate actuarial opinion of the 
     type described in subparagraphs (A) through (C) of section 
     2103(c)(4). The Administrator shall provide a mechanism for 
     assisting such sponsors and entities in identifying eligible 
     individuals who have (or have not) maintained such continuous 
     prescription drug coverage.
       ``(C) Continuous prescription drug coverage.--An individual 
     is considered for purposes of this part to be maintaining 
     continuous prescription drug coverage on and after the date 
     the individual first qualifies to elect prescription drug 
     coverage under this part if the individual establishes that 
     as of such date the individual is covered under any of the 
     following prescription drug coverage and before the date that 
     is the last day of the 63-day period that begins on the date 
     of termination of the particular prescription drug coverage 
     involved (regardless of whether the individual subsequently 
     obtains any of the following prescription drug coverage):
       ``(i) Coverage under prescription drug plan or ma-effs rx 
     plan.--Qualified prescription drug coverage under a 
     prescription drug plan or under a MA-EFFS Rx plan.
       ``(ii) Medicaid prescription drug coverage.--Prescription 
     drug coverage under a medicaid plan under title XIX, 
     including through the Program of All-inclusive Care for the 
     Elderly (PACE) under section 1934, or through a demonstration 
     project under part C that demonstrates the application of 
     capitation payment rates for frail elderly medicare 
     beneficiaries through the use of an interdisciplinary team 
     and through the provision of primary care services to such 
     beneficiaries by means of such a team at the nursing facility 
     involved.
       ``(iii) Prescription drug coverage under group health 
     plan.--Any outpatient prescription drug coverage under a 
     group health plan, including a health benefits plan under the 
     Federal Employees Health Benefit Plan under chapter 89 of 
     title 5, United States Code, and a qualified retiree 
     prescription drug plan as defined in section 1860D-8(f)(1), 
     but only if (subject to subparagraph (E)(ii)) the coverage 
     provides benefits at least equivalent to the benefits under a 
     qualified prescription drug plan.
       ``(iv) Prescription drug coverage under certain medigap 
     policies.--Coverage under a medicare supplemental policy 
     under section 1882 that provides benefits for prescription 
     drugs (whether or not such coverage conforms to the standards 
     for packages of benefits under section 1882(p)(1)), but only 
     if the policy was in effect on January 1, 2006, and if 
     (subject to subparagraph (E)(ii)) the coverage provides 
     benefits at least equivalent to the benefits under a 
     qualified prescription drug plan.
       ``(v) State pharmaceutical assistance program.--Coverage of 
     prescription drugs under a State pharmaceutical assistance 
     program, but only if (subject to subparagraph (E)(ii)) the 
     coverage provides benefits at least equivalent to the 
     benefits under a qualified prescription drug plan.
       ``(vi) Veterans' coverage of prescription drugs.--Coverage 
     of prescription drugs for veterans under chapter 17 of title 
     38, United States Code, but only if (subject to subparagraph 
     (E)(ii)) the coverage provides benefits at least equivalent 
     to the benefits under a qualified prescription drug plan.
       ``(D) Certification.--For purposes of carrying out this 
     paragraph, the certifications of the type described in 
     sections 2701(e) of the Public Health Service Act and in 
     section 9801(e) of the Internal Revenue Code shall also 
     include a statement for the period of coverage of whether the 
     individual involved had prescription drug coverage described 
     in subparagraph (C).
       ``(E) Disclosure.--
       ``(i) In general.--Each entity that offers coverage of the 
     type described in clause (iii), (iv), (v), or (vi) of 
     subparagraph (C) shall provide for disclosure, consistent 
     with standards established by the Administrator, of whether 
     such coverage provides benefits at least equivalent to the 
     benefits under a qualified prescription drug plan.
       ``(ii) Waiver of limitations.--An individual may apply to 
     the Administrator to waive the requirement that coverage of 
     such type provide benefits at least equivalent to the 
     benefits under a qualified prescription drug plan, if the 
     individual establishes that the individual was not adequately 
     informed that such coverage did not provide such level of 
     benefits.
       ``(F) Construction.--Nothing in this section shall be 
     construed as preventing the disenrollment of an individual 
     from a prescription drug plan or a MA-EFFS Rx plan based on 
     the termination of an election described in section 
     1851(g)(3), including for non-payment of premiums or for 
     other reasons specified in subsection (d)(3), which takes 
     into account a grace period described in section 
     1851(g)(3)(B)(i).
       ``(3) Nondiscrimination.--A PDP sponsor that offers a 
     prescription drug plan in an area designated under section 
     1860D-4(b)(5) shall make such plan available to all eligible 
     individuals residing in the area without regard to their 
     health or economic status or their place of residence within 
     the area.
       ``(d) Effective Date of Elections.--
       ``(1) In general.--Except as provided in this section, the 
     Administrator shall provide that elections under subsection 
     (b) take effect at the same time as the Administrator 
     provides that similar elections under section 1851(e) take 
     effect under section 1851(f).
       ``(2) No election effective before 2006.--In no case shall 
     any election take effect before January 1, 2006.
       ``(3) Termination.--The Administrator shall provide for the 
     termination of an election in the case of--
       ``(A) termination of coverage under both part A and part B; 
     and
       ``(B) termination of elections described in section 
     1851(g)(3) (including failure to pay required premiums).

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

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

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

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

[[Page 16342]]

     (subject to adjustment under clause (ii) and subparagraph 
     (D)).
       ``(ii) Inflation increase.--For a year after 2006, the 
     dollar amount specified in clause (i) shall be increased by 
     the annual percentage increase described in paragraph (5) for 
     the year involved. Any amount determined under the previous 
     sentence that is not a multiple of $100 shall be rounded to 
     the nearest multiple of $100.
       ``(C) Application.--In applying subparagraph (A)--
       ``(i) incurred costs shall only include costs incurred for 
     the annual deductible (described in paragraph (1)), cost-
     sharing (described in paragraph (2)), and amounts for which 
     benefits are not provided because of the application of the 
     initial coverage limit described in paragraph (3); and
       ``(ii) such costs shall be treated as incurred only if they 
     are paid by the individual (or by another individual, such as 
     a family member, on behalf of the individual), under section 
     1860D-7, under title XIX, or under a State pharmaceutical 
     assistance program and the individual (or other individual) 
     is not reimbursed through insurance or otherwise, a group 
     health plan, or other third-party payment arrangement (other 
     than under such title or such program) for such costs.
       ``(D) Adjustment of annual out-of-pocket thresholds.--
       ``(i) In general.--Subject to clause (vii), for each 
     enrollee in a prescription drug plan or in a MA-EFFS Rx plan 
     whose adjusted gross income exceeds the income threshold as 
     defined in clause (ii) for a year, the annual out-of-pocket 
     threshold otherwise determined under subparagraph (B) for 
     such year shall be increased by an amount equal to the 
     percentage specified in clause (iii), multiplied by the 
     lesser of--

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

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

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

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

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

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

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

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

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

       ``(iii) Application of additional civil monetary penalty 
     for unauthorized disclosures.--In addition to any penalty 
     otherwise provided under law, any person who makes an 
     unauthorized disclosure of such information shall be subject 
     to a civil monetary penalty of not to exceed $10,000 for each 
     such unauthorized disclosure. The provisions of section 1128A 
     (other than subsections (a) and (b)) shall apply to civil 
     money penalties under this subparagraph in the same manner as 
     they apply to a penalty or proceeding under section 1128A(a).
       ``(G) Information regarding third-party reimbursement.--In 
     order to ensure compliance with the requirements of 
     subparagraph (C)(ii), the Administrator is authorized to 
     establish procedures, in coordination with the Secretary of 
     Treasury and the Secretary of Labor, for determining whether 
     costs for individuals are being reimbursed through insurance 
     or otherwise, a group health plan, or other third-party 
     payment arrangement, and for alerting the sponsors and 
     organization that offer the plans in which such individuals 
     are enrolled about such reimbursement arrangements. A PDP 
     sponsor or Medicare Advantage or EFFS organization may also 
     periodically ask individuals enrolled in a prescription drug 
     plan or MA-EFFS Rx plan offered by the sponsor or 
     organization whether the individuals have or expect to 
     receive such third-party reimbursement. A material 
     misrepresentation of the information described in the 
     preceding sentence by an individual (as defined in standards 
     set by the Administrator and determined through a process 
     established by the Administrator)

[[Page 16343]]

     shall constitute grounds for termination of enrollment under 
     section 1860D-1(d)(3).
       ``(5) Annual percentage increase.--For purposes of this 
     part, the annual percentage increase specified in this 
     paragraph for a year is equal to the annual percentage 
     increase in average per capita aggregate expenditures for 
     covered outpatient drugs in the United States for medicare 
     beneficiaries, as determined by the Administrator for the 12-
     month period ending in July of the previous year.
       ``(c) Alternative Coverage Requirements.--A prescription 
     drug plan or MA- EFFS Rx plan may provide a different 
     prescription drug benefit design from the standard coverage 
     described in subsection (b) so long as the Administrator 
     determines (based on an actuarial analysis approved by the 
     Administrator) that the following requirements are met and 
     the plan applies for, and receives, the approval of the 
     Administrator for such benefit design:
       ``(1) Assuring at least actuarially equivalent coverage.--
       ``(A) Assuring equivalent value of total coverage.--The 
     actuarial value of the total coverage (as determined under 
     subsection (e)) is at least equal to the actuarial value (as 
     so determined) of standard coverage.
       ``(B) Assuring equivalent unsubsidized value of coverage.--
     The unsubsidized value of the coverage is at least equal to 
     the unsubsidized value of standard coverage. For purposes of 
     this subparagraph, the unsubsidized value of coverage is the 
     amount by which the actuarial value of the coverage (as 
     determined under subsection (e)) exceeds the actuarial value 
     of the subsidy payments under section 1860D-8 with respect to 
     such coverage.
       ``(C) Assuring standard payment for costs at initial 
     coverage limit.--The coverage is designed, based upon an 
     actuarially representative pattern of utilization (as 
     determined under subsection (e)), to provide for the payment, 
     with respect to costs incurred that are equal to the initial 
     coverage limit under subsection (b)(3), of an amount equal to 
     at least the product of--
       ``(i) the amount by which the initial coverage limit 
     described in subsection (b)(3) exceeds the deductible 
     described in subsection (b)(1); and
       ``(ii) 100 percent minus the cost-sharing percentage 
     specified in subsection (b)(2)(A)(i).
       ``(2) Catastrophic protection.--The coverage provides for 
     beneficiaries the catastrophic protection described in 
     subsection (b)(4).
       ``(d) Access to Negotiated Prices.--
       ``(1) In general.--Under qualified prescription drug 
     coverage offered by a PDP sponsor or an entity offering a MA-
     EFFS Rx plan, the sponsor or entity shall provide 
     beneficiaries with access to negotiated prices (including 
     applicable discounts) used for payment for covered outpatient 
     drugs, regardless of the fact that no benefits may be payable 
     under the coverage with respect to such drugs because of the 
     application of cost-sharing or an initial coverage limit 
     (described in subsection (b)(3)). Insofar as a State elects 
     to provide medical assistance under title XIX to a 
     beneficiary enrolled under such title and under a 
     prescription drug plan or MA-EFFS Rx plan for a drug based on 
     the prices negotiated by a prescription drug plan or MA-EFFS 
     Rx plan under this part, the requirements of section 1927 
     shall not apply to such drugs. The prices negotiated by a 
     prescription drug plan under this part, by a MA-EFFS Rx plan 
     with respect to covered outpatient drugs, or by a qualified 
     retiree prescription drug plan (as defined in section 1860D-
     8(f)(1)) with respect to such drugs on behalf of individuals 
     entitled to benefits under part A or enrolled under part B, 
     shall (notwithstanding any other provision of law) not be 
     taken into account for the purposes of establishing the best 
     price under section 1927(c)(1)(C).
       ``(2) Disclosure.--The PDP sponsor or entity offering a MA-
     EFFS Rx plan shall disclose to the Administrator (in a manner 
     specified by the Administrator) the extent to which discounts 
     or rebates or other remuneration or price concessions made 
     available to the sponsor or organization by a manufacturer 
     are passed through to enrollees through pharmacies and other 
     dispensers or otherwise. The provisions of section 
     1927(b)(3)(D) shall apply to information disclosed to the 
     Administrator under this paragraph in the same manner as such 
     provisions apply to information disclosed under such section.
       ``(3) Audits and reports.--To protect against fraud and 
     abuse and to ensure proper disclosures and accounting under 
     this part, in addition to any protections against fraud and 
     abuse provided under section 1860D-4(b)(3)(C), the 
     Administrator may periodically audit the financial statements 
     and records of PDP sponsor or entities offering a MA-EFFS Rx 
     plan.
       ``(e) Actuarial Valuation; Determination of Annual 
     Percentage Increases.--
       ``(1) Processes.--For purposes of this section, the 
     Administrator shall establish processes and methods--
       ``(A) for determining the actuarial valuation of 
     prescription drug coverage, including--
       ``(i) an actuarial valuation of standard coverage and of 
     the reinsurance subsidy payments under section 1860D-8;
       ``(ii) the use of generally accepted actuarial principles 
     and methodologies; and
       ``(iii) applying the same methodology for determinations of 
     alternative coverage under subsection (c) as is used with 
     respect to determinations of standard coverage under 
     subsection (b); and
       ``(B) for determining annual percentage increases described 
     in subsection (b)(5).

     Such methods for determining actuarial valuation shall take 
     into account effects of alternative coverage on drug 
     utilization.
       ``(2) Use of outside actuaries.--Under the processes under 
     paragraph (1)(A), PDP sponsors and entities offering MA-EFFS 
     Rx plans may use actuarial opinions certified by independent, 
     qualified actuaries to establish actuarial values, but the 
     Administrator shall determine whether such actuarial values 
     meet the requirements under subsection (c)(1).
       ``(f) Covered Outpatient Drugs Defined.--
       ``(1) In general.--Except as provided in this subsection, 
     for purposes of this part, the term `covered outpatient drug' 
     means--
       ``(A) a drug that may be dispensed only upon a prescription 
     and that is described in subparagraph (A)(i) or (A)(ii) of 
     section 1927(k)(2); or
       ``(B) a biological product described in clauses (i) through 
     (iii) of subparagraph (B) of such section or insulin 
     described in subparagraph (C) of such section and medical 
     supplies associated with the injection of insulin (as defined 
     in regulations of the Secretary)

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

     Such exclusions are determinations subject to reconsideration 
     and appeal pursuant to section 1860D-3(f).

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

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

     Such information shall also be made available upon request to 
     prospective enrollees.
       ``(2) Disclosure upon request of general coverage, 
     utilization, and grievance information.--Upon request of an 
     individual eligible to enroll under a prescription drug plan, 
     the PDP sponsor shall provide the information described in 
     section 1852(c)(2) (other than subparagraph (D)) to such 
     individual.
       ``(3) Response to beneficiary questions.--Each PDP sponsor 
     offering a prescription drug plan shall have a mechanism for 
     providing specific information to enrollees upon

[[Page 16344]]

     request. The sponsor shall make available on a timely basis, 
     through an Internet website and in writing upon request, 
     information on specific changes in its formulary.
       ``(4) Claims information.--Each PDP sponsor offering a 
     prescription drug plan must furnish to each enrollee in a 
     form easily understandable to such enrollees an explanation 
     of benefits (in accordance with section 1806(a) or in a 
     comparable manner) and a notice of the benefits in relation 
     to initial coverage limit and the annual out-of-pocket 
     threshold applicable to such enrollee for the current year, 
     whenever prescription drug benefits are provided under this 
     part (except that such notice need not be provided more often 
     than monthly).
       ``(c) Access to Covered Benefits.--
       ``(1) Assuring pharmacy access.--
       ``(A) Participation of any willing pharmacy.--A PDP sponsor 
     and an entity offering a MA-EFFS Rx plan shall permit the 
     participation of any pharmacy that meets terms and conditions 
     that the plan has established.
       ``(B) Discounts allowed for network pharmacies.--A 
     prescription drug plan and a MA-EFFS Rx plan may, 
     notwithstanding subparagraph (A), reduce coinsurance or 
     copayments for its enrolled beneficiaries below the level 
     otherwise provided for covered outpatient drugs dispensed 
     through in-network pharmacies, but in no case shall such a 
     reduction result in an increase in payments made by the 
     Administrator under section 1860D-8 to a plan.
       ``(C) Convenient access for network pharmacies.--The PDP 
     sponsor of the prescription drug plan and the entity offering 
     a MA-EFFS Rx plan shall secure the participation in its 
     network of a sufficient number of pharmacies that dispense 
     (other than by mail order) drugs directly to patients to 
     ensure convenient access (consistent with rules of the 
     Administrator). The Administrator shall establish convenient 
     access rules under this subparagraph that are no less 
     favorable to enrollees than the rules for convenient access 
     to pharmacies of the Secretary of Defense established as of 
     June 1, 2003, for purposes of the TRICARE Retail Pharmacy 
     (TRRx) program. Such rules shall include adequate emergency 
     access for enrolled beneficiaries.
       ``(D) Level playing field.--Such a sponsor shall permit 
     enrollees to receive benefits (which may include a 90-day 
     supply of drugs or biologicals) through a community pharmacy, 
     rather than through mail order, with any differential in 
     charge paid by such enrollees.
       ``(E)  Not required to accept insurance risk.--The terms 
     and conditions under subparagraph (A) may not require 
     participating pharmacies to accept insurance risk as a 
     condition of participation.
       ``(2) Use of standardized technology.--
       ``(A) In general.--The PDP sponsor of a prescription drug 
     plan and an entity offering a MA-EFFS Rx plan shall issue 
     (and reissue, as appropriate) such a card (or other 
     technology) that may be used by an enrollee to assure access 
     to negotiated prices under section 1860D-2(d) for the 
     purchase of prescription drugs for which coverage is not 
     otherwise provided under the plan.
       ``(B) Standards.--
       ``(i) Development.--The Administrator shall provide for the 
     development or utilization of uniform standards relating to a 
     standardized format for the card or other technology referred 
     to in subparagraph (A). Such standards shall be compatible 
     with standards established under part C of title XI.
       ``(ii) Application of advisory task force.--The advisory 
     task force established under subsection (d)(3)(B)(ii) shall 
     provide recommendations to the Administrator under such 
     subsection regarding the standards developed under clause 
     (i).
       ``(3) Requirements on development and application of 
     formularies.--If a PDP sponsor of a prescription drug plan or 
     an entity offering a MA-EFFS Rx plan uses a formulary, the 
     following requirements must be met:
       ``(A) Pharmacy and therapeutic (p&t) committee.--The 
     sponsor or entity must establish a pharmacy and therapeutic 
     committee that develops and reviews the formulary. Such 
     committee shall include at least one practicing physician and 
     at least one practicing pharmacist independent and free of 
     conflict with respect to the committee both with expertise in 
     the care of elderly or disabled persons and a majority of its 
     members shall consist of individuals who are practicing 
     physicians or practicing pharmacists (or both).
       ``(B) Formulary development.--In developing and reviewing 
     the formulary, the committee shall--
       ``(i) base clinical decisions on the strength of scientific 
     evidence and standards of practice, including assessing peer-
     reviewed medical literature, such as randomized clinical 
     trials, pharmacoeconomic studies, outcomes research data, and 
     on such other information as the committee determines to be 
     appropriate; and
       ``(ii) shall take into account whether including in the 
     formulary particular covered outpatient drugs has therapeutic 
     advantages in terms of safety and efficacy.
       ``(C) Inclusion of drugs in all therapeutic categories.--
     The formulary must include drugs within each therapeutic 
     category and class of covered outpatient drugs (although not 
     necessarily for all drugs within such categories and 
     classes). In establishing such classes, the committee shall 
     take into account the standards published in the United 
     States Pharmacopeia-Drug Information. The committee shall 
     make available to the enrollees under the plan through the 
     Internet or otherwise the bases for the exclusion of coverage 
     of any drug from the formulary.
       ``(D) Provider and patient education.--The committee shall 
     establish policies and procedures to educate and inform 
     health care providers and enrollees concerning the formulary.
       ``(E) Notice before removing drug from formulary for 
     changing preferred or tier status of drug.--Any removal of a 
     covered outpatient drug from a formulary and any change in 
     the preferred or tier cost-sharing status of such a drug 
     shall take effect only after appropriate notice is made 
     available to beneficiaries and physicians.
       ``(F) Periodic evaluation of protocols.--In connection with 
     the formulary, a prescription drug plan shall provide for the 
     periodic evaluation and analysis of treatment protocols and 
     procedures.
       ``(G) Grievances and appeals relating to application of 
     formularies.--For provisions relating to grievances and 
     appeals of coverage, see subsections (e) and (f).
       ``(d) Cost and Utilization Management; Quality Assurance; 
     Medication Therapy Management Program.--
       ``(1) In general.--The PDP sponsor or entity offering a MA-
     EFFS Rx plan shall have in place, directly or through 
     appropriate arrangements, with respect to covered outpatient 
     drugs--
       ``(A) an effective cost and drug utilization management 
     program, including medically appropriate incentives to use 
     generic drugs and therapeutic interchange, when appropriate;
       ``(B) quality assurance measures and systems to reduce 
     medical errors and adverse drug interactions, including side-
     effects, and improve medication use, including a medication 
     therapy management program described in paragraph (2) and for 
     years beginning with 2007, an electronic prescription program 
     described in paragraph (3); and
       ``(C) a program to control fraud, abuse, and waste.

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

[[Page 16345]]

     following components, consistent with uniform standards 
     established under subparagraph (B):
       ``(i) Electronic transmittal of prescriptions.--
     Prescriptions must be written and transmitted electronically 
     (other than by facsimile), except in emergency cases and 
     other exceptional circumstances recognized by the 
     Administrator.
       ``(ii) Provision of information to prescribing health care 
     professional.--The program provides for the electronic 
     transmittal to the prescribing health care professional of 
     information that includes--

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

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

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

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

       ``(iii) Deadlines.--

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

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

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

       ``(a) General Requirements.--Each PDP sponsor of a 
     prescription drug plan shall meet the following requirements:
       ``(1) Licensure.--Subject to subsection (c), the sponsor is 
     organized and licensed under State law as a risk-bearing 
     entity eligible to offer health insurance or health benefits 
     coverage in each State in which it offers a prescription drug 
     plan.
       ``(2) Assumption of financial risk for unsubsidized 
     coverage.--
       ``(A) In general.--Subject to subparagraph (B) and section 
     1860D-5(d)(2), the entity assumes full financial risk on a 
     prospective basis for qualified prescription drug coverage 
     that it offers under a prescription drug plan and that is not 
     covered under section 1860D-8.
       ``(B) Reinsurance permitted.--The entity may obtain 
     insurance or make other arrangements for the cost of coverage 
     provided to any enrollee.
       ``(3) Solvency for unlicensed sponsors.--In the case of a 
     sponsor that is not described in paragraph (1), the sponsor 
     shall meet solvency standards established by the 
     Administrator under subsection (d).
       ``(b) Contract Requirements.--
       ``(1) In general.--The Administrator shall not permit the 
     election under section 1860D-1 of a prescription drug plan 
     offered by a PDP sponsor under this part, and the sponsor 
     shall not be eligible for payments under section 1860D-7 or 
     1860D-8, unless the Administrator has entered into a contract 
     under this subsection with the sponsor with respect to the 
     offering of such plan. Such a contract with a sponsor may 
     cover more than one prescription drug plan. Such contract 
     shall provide that the sponsor agrees to comply with the 
     applicable requirements and standards of this part and the 
     terms and conditions of payment as provided for in this part.
       ``(2) Negotiation regarding terms and conditions.--The 
     Administrator shall have the same authority to negotiate the 
     terms and conditions of prescription drug plans under this 
     part as the Director of the Office of Personnel Management 
     has with respect to health benefits plans under chapter 89 of 
     title 5, United States Code. In negotiating the terms and 
     conditions regarding premiums for which information is 
     submitted under section 1860D-6(a)(2), the Administrator 
     shall take into account the subsidy payments under section 
     1860D-8.
       ``(3) Incorporation of certain medicare advantage contract 
     requirements.--The

[[Page 16346]]

     following provisions of section 1857 shall apply, subject to 
     subsection (c)(5), to contracts under this section in the 
     same manner as they apply to contracts under section 1857(a):
       ``(A) Minimum enrollment.--Paragraphs (1) and (3) of 
     section 1857(b), except that the requirement of such 
     paragraph (1) shall be waived during the first contract year 
     with respect to an organization in a region.
       ``(B) Contract period and effectiveness.--Paragraphs (1) 
     through (3) and (5) of section 1857(c).
       ``(C) Protections against fraud and beneficiary 
     protections.--Section 1857(d).
       ``(D) Additional contract terms.--Section 1857(e); except 
     that in applying section 1857(e)(2) under this part--
       ``(i) such section shall be applied separately to costs 
     relating to this part (from costs under part C and part E);
       ``(ii) in no case shall the amount of the fee established 
     under this subparagraph for a plan exceed 20 percent of the 
     maximum amount of the fee that may be established under 
     subparagraph (B) of such section; and
       ``(iii) no fees shall be applied under this subparagraph 
     with respect to MA-EFFS Rx plans.
       ``(E) Intermediate sanctions.--Section 1857(g).
       ``(F) Procedures for termination.--Section 1857(h).
       ``(4) Rules of application for intermediate sanctions.--In 
     applying paragraph (3)(E)--
       ``(A) the reference in section 1857(g)(1)(B) to section 
     1854 is deemed a reference to this part; and
       ``(B) the reference in section 1857(g)(1)(F) to section 
     1852(k)(2)(A)(ii) shall not be applied.
       ``(5) Service area requirement.--For purposes of this part, 
     the Administrator shall designate at least 10 areas covering 
     the entire United States and to the extent practicable shall 
     be consistent with EFFS regions established under section 
     1860E-1(a)(2).
       ``(c) Waiver of Certain Requirements to Expand Choice.--
       ``(1) In general.--In the case of an entity that seeks to 
     offer a prescription drug plan in a State, the Administrator 
     shall waive the requirement of subsection (a)(1) that the 
     entity be licensed in that State if the Administrator 
     determines, based on the application and other evidence 
     presented to the Administrator, that any of the grounds for 
     approval of the application described in paragraph (2) have 
     been met.
       ``(2) Grounds for approval.--The grounds for approval under 
     this paragraph are the grounds for approval described in 
     subparagraph (B), (C), and (D) of section 1855(a)(2), and 
     also include the application by a State of any grounds other 
     than those required under Federal law.
       ``(3) Application of waiver procedures.--With respect to an 
     application for a waiver (or a waiver granted) under this 
     subsection, the provisions of subparagraphs (E), (F), and (G) 
     of section 1855(a)(2) shall apply.
       ``(4) Licensure does not substitute for or constitute 
     certification.--The fact that an entity is licensed in 
     accordance with subsection (a)(1) does not deem the entity to 
     meet other requirements imposed under this part for a PDP 
     sponsor.
       ``(5) References to certain provisions.--For purposes of 
     this subsection, in applying provisions of section 1855(a)(2) 
     under this subsection to prescription drug plans and PDP 
     sponsors--
       ``(A) any reference to a waiver application under section 
     1855 shall be treated as a reference to a waiver application 
     under paragraph (1); and
       ``(B) any reference to solvency standards shall be treated 
     as a reference to solvency standards established under 
     subsection (d).
       ``(d) Solvency Standards for Non-Licensed Sponsors.--
       ``(1) Establishment.--The Administrator shall establish, by 
     not later than October 1, 2004, financial solvency and 
     capital adequacy standards that an entity that does not meet 
     the requirements of subsection (a)(1) must meet to qualify as 
     a PDP sponsor under this part.
       ``(2) Compliance with standards.--Each PDP sponsor that is 
     not licensed by a State under subsection (a)(1) and for which 
     a waiver application has been approved under subsection (c) 
     shall meet solvency and capital adequacy standards 
     established under paragraph (1). The Administrator shall 
     establish certification procedures for such PDP sponsors with 
     respect to such solvency standards in the manner described in 
     section 1855(c)(2).
       ``(e) Relation to State Laws.--
       ``(1) In general.--The standards established under this 
     part shall supersede any State law or regulation (other than 
     State licensing laws or State laws relating to plan solvency, 
     except as provided in subsection (d)) with respect to 
     prescription drug plans which are offered by PDP sponsors 
     under this part.
       ``(2) Prohibition of state imposition of premium taxes.--No 
     State may impose a premium tax or similar tax with respect to 
     premiums paid to PDP sponsors for prescription drug plans 
     under this part, or with respect to any payments made to such 
     a sponsor by the Administrator under this part.

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

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

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

       ``(a) Submission of Bids, Premiums, and Related 
     Information.--
       ``(1) In general.--Each PDP sponsor shall submit to the 
     Administrator the information described in paragraph (2) in 
     the same manner as information is submitted by an 
     organization under section 1854(a)(1).
       ``(2) Information submitted.--The information described in 
     this paragraph is the following:
       ``(A) Coverage provided.--Information on the qualified 
     prescription drug coverage to be provided.
       ``(B) Actuarial value.--Information on the actuarial value 
     of the coverage.
       ``(C) Bid and premium.--Information on the bid and the 
     premium for the coverage, including an actuarial 
     certification of--
       ``(i) the actuarial basis for such bid and premium;
       ``(ii) the portion of such bid and premium attributable to 
     benefits in excess of standard coverage;
       ``(iii) the reduction in such bid resulting from the 
     reinsurance subsidy payments provided under section 1860D-
     8(a)(2); and
       ``(iv) the reduction in such premium resulting from the 
     direct and reinsurance subsidy payments provided under 
     section 1860D-8.
       ``(D) Additional information.--Such other information as 
     the Administrator may require to carry out this part.

[[Page 16347]]

       ``(3) Review of information; negotiation and approval of 
     premiums.--
       ``(A) In general.--Subject to subparagraph (B), the 
     Administrator shall review the information filed under 
     paragraph (2) for the purpose of conducting negotiations 
     under section 1860D-4(b)(2) (relating to using OPM-like 
     authority under the FEHBP). The Administrator, using the 
     information provided (including the actuarial certification 
     under paragraph (2)(C)) shall approve the premium submitted 
     under this subsection only if the premium accurately reflects 
     both (i) the actuarial value of the benefits provided, and 
     (ii) the 73 percent average subsidy provided under section 
     1860D-8 for the standard benefit. The Administrator shall 
     apply actuarial principles to approval of a premium under 
     this part in a manner similar to the manner in which those 
     principles are applied in establishing the monthly part B 
     premium under section 1839.
       ``(B) Exception.--In the case of a plan described in 
     section 1851(a)(2)(C), the provisions of subparagraph (A) 
     shall not apply and the provisions of paragraph (5)(B) of 
     section 1854(a), prohibiting the review, approval, or 
     disapproval of amounts described in such paragraph, shall 
     apply to the negotiation and rejection of the monthly bid 
     amounts and proportion referred to in subparagraph (A).
       ``(b) Uniform Bid and Premium.--
       ``(1) In general.--The bid and premium for a prescription 
     drug plan under this section may not vary among enrollees in 
     the plan in the same service area.
       ``(2) Construction.--Nothing in paragraph (1) shall be 
     construed as preventing the imposition of a late enrollment 
     penalty under section 1860D-1(c)(2)(B).
       ``(c) Collection.--
       ``(1) Beneficiary's option of payment through withholding 
     from social security payment or use of electronic funds 
     transfer mechanism.--In accordance with regulations, a PDP 
     sponsor shall permit each enrollee, at the enrollee's option, 
     to make payment of premiums under this part to the sponsor 
     through withholding from benefit payments in the manner 
     provided under section 1840 with respect to monthly premiums 
     under section 1839 or through an electronic funds transfer 
     mechanism (such as automatic charges of an account at a 
     financial institution or a credit or debit card account) or 
     otherwise. All premium payments that are withheld under this 
     paragraph shall be credited to the Medicare Prescription Drug 
     Trust Fund and shall be paid to the PDP sponsor involved.
       ``(2) Offsetting.--Reductions in premiums for coverage 
     under parts A and B as a result of a selection of a MA-EFFS 
     Rx plan may be used to reduce the premium otherwise imposed 
     under paragraph (1).
       ``(d) Acceptance of Reference Premium Amount as Full 
     Premium for Subsidized Low-Income Individuals if No Standard 
     (or Equivalent) Coverage in an Area.--
       ``(1) In general.--If there is no standard prescription 
     drug coverage (as defined in paragraph (2)) offered in an 
     area, in the case of an individual who is eligible for a 
     premium subsidy under section 1860D-7 and resides in the 
     area, the PDP sponsor of any prescription drug plan offered 
     in the area (and any entity offering a MA-EFFS Rx plan in the 
     area) shall accept the reference premium amount (under 
     paragraph (3)) as payment in full for the premium charge for 
     qualified prescription drug coverage.
       ``(2) Standard prescription drug coverage defined.--For 
     purposes of this subsection, the term `standard prescription 
     drug coverage' means qualified prescription drug coverage 
     that is standard coverage or that has an actuarial value 
     equivalent to the actuarial value for standard coverage.
       ``(3) Reference premium amount defined.--For purposes of 
     this subsection, the term `reference premium amount' means, 
     with respect to qualified prescription drug coverage offered 
     under--
       ``(A) a prescription drug plan that--
       ``(i) provides standard coverage (or alternative 
     prescription drug coverage the actuarial value is equivalent 
     to that of standard coverage), the plan's PDP premium; or
       ``(ii) provides alternative prescription drug coverage the 
     actuarial value of which is greater than that of standard 
     coverage, the plan's PDP premium multiplied by the ratio of 
     (I) the actuarial value of standard coverage, to (II) the 
     actuarial value of the alternative coverage;
       ``(B) an EFFS plan, the EFFS monthly prescription drug 
     beneficiary premium (as defined in section 1860E-4(a)(3)(B)); 
     or
       ``(C) a Medicare Advantage, the Medicare Advantage monthly 
     prescription drug beneficiary premium (as defined in section 
     1854(b)(2)(B)).

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

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

       ``(a) Income-Related Subsidies for Individuals With Income 
     Below 150 Percent of Federal Poverty Level.--
       ``(1) Full premium subsidy and reduction of cost-sharing 
     for individuals with income below 135 percent of federal 
     poverty level.--In the case of a subsidy eligible individual 
     (as defined in paragraph (4)) who is determined to have 
     income that does not exceed 135 percent of the Federal 
     poverty level, the individual is entitled under this 
     section--
       ``(A) to an income-related premium subsidy equal to 100 
     percent of the amount described in subsection (b)(1); and
       ``(B) subject to subsection (c), to the substitution for 
     the beneficiary cost-sharing described in paragraphs (1) and 
     (2) of section 1860D-2(b) (up to the initial coverage limit 
     specified in paragraph (3) of such section) of amounts that 
     do not exceed $2 for a multiple source or generic drug (as 
     described in section 1927(k)(7)(A)) and $5 for a non-
     preferred drug.
       ``(2) Sliding scale premium subsidy for individuals with 
     income above 135, but below 150 percent, of federal poverty 
     level.--In the case of a subsidy eligible individual who is 
     determined to have income that exceeds 135 percent, but does 
     not exceed 150 percent, of the Federal poverty level, the 
     individual is entitled under this section to an income-
     related premium subsidy determined on a linear sliding scale 
     ranging from 100 percent of the amount described in 
     subsection (b)(1) for individuals with incomes at 135 percent 
     of such level to 0 percent of such amount for individuals 
     with incomes at 150 percent of such level.
       ``(3) Construction.--Nothing in this section shall be 
     construed as preventing a PDP sponsor or entity offering a 
     MA-EFFS Rx plan from reducing to 0 the cost-sharing otherwise 
     applicable to generic drugs.
       ``(4) Determination of eligibility.--
       ``(A) Subsidy eligible individual defined.--For purposes of 
     this section, subject to subparagraph (D), the term `subsidy 
     eligible individual' means an individual who--
       ``(i) is eligible to elect, and has elected, to obtain 
     qualified prescription drug coverage under this part;
       ``(ii) has income below 150 percent of the Federal poverty 
     line; and
       ``(iii) meets the resources requirement described in 
     subparagraph (D).
       ``(B) Determinations.--The determination of whether an 
     individual residing in a State is a subsidy eligible 
     individual and the amount of such individual's income shall 
     be determined under the State medicaid plan for the State 
     under section 1935(a) or by the Social Security 
     Administration. In the case of a State that does not operate 
     such a medicaid plan (either under title XIX or under a 
     statewide waiver granted under section 1115), such 
     determination shall be made under arrangements made by the 
     Administrator. There are authorized to be appropriated to the 
     Social Security Administration such sums as may be necessary 
     for the determination of eligibility under this subparagraph.
       ``(C) Income determinations.--For purposes of applying this 
     section--
       ``(i) income shall be determined in the manner described in 
     section 1905(p)(1)(B); and
       ``(ii) the term `Federal poverty line' means the official 
     poverty line (as defined by the Office of Management and 
     Budget, and revised annually in accordance with section 
     673(2) of the Omnibus Budget Reconciliation Act of 1981) 
     applicable to a family of the size involved.
       ``(D) Resource standard applied to be based on three times 
     ssi resource standard.--The resource requirement of this 
     subparagraph is that an individual's resources (as determined 
     under section 1613 for purposes of the supplemental security 
     income program) do not exceed--
       ``(i) for 2006 three times the maximum amount of resources 
     that an individual may have and obtain benefits under that 
     program; and
       ``(ii) for a subsequent year the resource limitation 
     established under this clause for the previous year increased 
     by the annual percentage increase in the consumer price index 
     (all items; U.S. city average) as of September of such 
     previous year.

     Any resource limitation established under clause (ii) that is 
     not a multiple of $10 shall be rounded to the nearest 
     multiple of $10.
       ``(E) Treatment of territorial residents.--In the case of 
     an individual who is not a resident of the 50 States or the 
     District of Columbia, the individual is not eligible to be a 
     subsidy eligible individual but may be eligible for financial 
     assistance with prescription drug expenses under section 
     1935(e).
       ``(F) Treatment of conforming medigap policies.--For 
     purposes of this section, the term `qualified prescription 
     drug coverage' includes a medicare supplemental policy 
     described in section 1860D-8(b)(4).
       ``(5) Indexing dollar amounts.--
       ``(A) For 2007.--The dollar amounts applied under 
     paragraphs (1)(B) for 2007 shall be the dollar amounts 
     specified in such paragraph increased by the annual 
     percentage increase described in section 1860D-2(b)(5) for 
     2007.
       ``(B) For subsequent years.--The dollar amounts applied 
     under paragraph (1)(B) for a year after 2007 shall be the 
     amounts (under this paragraph) applied under paragraph (1)(B) 
     for the preceding year increased by the annual percentage 
     increase described in section 1860D-2(b)(5) (relating to 
     growth in

[[Page 16348]]

     medicare prescription drug costs per beneficiary) for the 
     year involved.
       ``(b) Premium Subsidy Amount.--
       ``(1) In general.--The premium subsidy amount described in 
     this subsection for an individual residing in an area is the 
     benchmark premium amount (as defined in paragraph (2)) for 
     qualified prescription drug coverage offered by the 
     prescription drug plan or the MA-EFFS Rx plan in which the 
     individual is enrolled.
       ``(2) Benchmark premium amount defined.--For purposes of 
     this subsection, the term `benchmark premium amount' means, 
     with respect to qualified prescription drug coverage offered 
     under--
       ``(A) a prescription drug plan that--
       ``(i) provides standard coverage (or alternative 
     prescription drug coverage the actuarial value of which is 
     equivalent to that of standard coverage), the premium amount 
     for enrollment under the plan under this part (determined 
     without regard to any subsidy under this section or any late 
     enrollment penalty under section 1860D-1(c)(2)(B)); or
       ``(ii) provides alternative prescription drug coverage the 
     actuarial value of which is greater than that of standard 
     coverage, the premium amount described in clause (i) 
     multiplied by the ratio of (I) the actuarial value of 
     standard coverage, to (II) the actuarial value of the 
     alternative coverage; or
       ``(B) a MA-EFFS Rx plan, the portion of the premium amount 
     that is attributable to statutory drug benefits (described in 
     section 1853(a)(1)(A)(ii)(II)).
       ``(c) Rules in Applying Cost-Sharing Subsidies.--
       ``(1) In general.--In applying subsection (a)(1)(B), 
     nothing in this part shall be construed as preventing a plan 
     or provider from waiving or reducing the amount of cost-
     sharing otherwise applicable.
       ``(2) Limitation on charges.--In the case of an individual 
     receiving cost-sharing subsidies under subsection (a)(1)(B), 
     the PDP sponsor or entity offering a MA-EFFS Rx plan may not 
     charge more than $5 per prescription.
       ``(3) Application of indexing rules.--The provisions of 
     subsection (a)(5) shall apply to the dollar amount specified 
     in paragraph (2) in the same manner as they apply to the 
     dollar amounts specified in subsections (a)(1)(B).
       ``(d) Administration of Subsidy Program.--The Administrator 
     shall provide a process whereby, in the case of an individual 
     who is determined to be a subsidy eligible individual and who 
     is enrolled in prescription drug plan or is enrolled in a MA-
     EFFS Rx plan--
       ``(1) the Administrator provides for a notification of the 
     PDP sponsor or the entity offering the MA-EFFS Rx plan 
     involved that the individual is eligible for a subsidy and 
     the amount of the subsidy under subsection (a);
       ``(2) the sponsor or entity involved reduces the premiums 
     or cost-sharing otherwise imposed by the amount of the 
     applicable subsidy and submits to the Administrator 
     information on the amount of such reduction; and
       ``(3) the Administrator periodically and on a timely basis 
     reimburses the sponsor or entity for the amount of such 
     reductions.

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

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

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

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

     Any amount determined under subparagraph (B) that is not a 
     multiple of $10 shall be rounded to the nearest multiple of 
     $10.
       ``(5) Qualifying covered individual defined.--For purposes 
     of this subsection, the term `qualifying covered individual' 
     means an individual who--
       ``(A) is enrolled with a prescription drug plan under this 
     part; or
       ``(B) is enrolled with a MA-EFFS Rx plan.
       ``(d) Adjustment of Payments.--
       ``(1) Adjustment of reinsurance payments to assure 30 
     percent level of subsidy through reinsurance.--
       ``(A) Estimation of payments.--The Administrator shall 
     estimate--
       ``(i) the total payments to be made (without regard to this 
     subsection) during a year under subsections (a)(2) and (c); 
     and
       ``(ii) the total payments to be made by qualifying entities 
     for standard coverage under plans described in subsection (b) 
     during the year.

[[Page 16349]]

       ``(B) Adjustment.--The Administrator shall proportionally 
     adjust the payments made under subsections (a)(2) and (c) for 
     a coverage year in such manner so that the total of the 
     payments made under such subsections for the year is equal to 
     30 percent of the total payments described in subparagraph 
     (A)(ii).
       ``(2) Risk adjustment for direct subsidies.--To the extent 
     the Administrator determines it appropriate to avoid risk 
     selection, the payments made for direct subsidies under 
     subsection (a)(1) are subject to adjustment based upon risk 
     factors specified by the Administrator. Any such risk 
     adjustment shall be designed in a manner as to not result in 
     a change in the aggregate payments made under such 
     subsection.
       ``(e) Payment Methods.--
       ``(1) In general.--Payments under this section shall be 
     based on such a method as the Administrator determines. The 
     Administrator may establish a payment method by which interim 
     payments of amounts under this section are made during a year 
     based on the Administrator's best estimate of amounts that 
     will be payable after obtaining all of the information.
       ``(2) Source of payments.--Payments under this section 
     shall be made from the Medicare Prescription Drug Trust Fund.
       ``(f) Rules Relating to Qualified Retiree Prescription Drug 
     Plan.--
       ``(1) Definition.--For purposes of this section, the term 
     `qualified retiree prescription drug plan' means employment-
     based retiree health coverage (as defined in paragraph 
     (4)(A)) if, with respect to an individual who is a 
     participant or beneficiary under such coverage and is 
     eligible to be enrolled in a prescription drug plan or a MA-
     EFFS Rx plan under this part, the following requirements are 
     met:
       ``(A) Actuarial equivalence to standard coverage.--The 
     Administrator determines (based on an actuarial analysis 
     approved by the Administrator) that coverage provides at 
     least the same actuarial value as standard coverage. Such 
     determination may be made on an annual basis.
       ``(B) Audits.--The sponsor (or the administrator, if 
     designated by the sponsor) and the plan shall maintain, and 
     afford the Administrator access to, such records as the 
     Administrator may require for purposes of audits and other 
     oversight activities necessary to ensure the adequacy of 
     prescription drug coverage and the accuracy of payments made.
       ``(C) Provision of certification of prescription drug 
     coverage.--The sponsor of the plan shall provide for issuance 
     of certifications of the type described in section 1860D-
     1(c)(2)(D).
       ``(2) Limitation on benefit eligibility.--No payment shall 
     be provided under this section with respect to a participant 
     or beneficiary in a qualified retiree prescription drug plan 
     unless the individual is--
       ``(A) is covered under the plan; and
       ``(B) is eligible to obtain qualified prescription drug 
     coverage under section 1860D-1 but did not elect such 
     coverage under this part (either through a prescription drug 
     plan or through a MA-EFFS Rx plan).
       ``(3) Employer and union special subsidy amounts.--
       ``(A) In general.--For purposes of subsection (a), the 
     special subsidy payment amount under this paragraph for a 
     qualifying covered retiree (as defined in paragraph (6)) for 
     a coverage year (as defined in subsection (h)) enrolled in a 
     qualifying entity described in subsection (b)(3) under a 
     qualified retiree prescription drug plan is, for the portion 
     of the individual's gross covered prescription drug costs for 
     the year that exceeds the deductible amount specified in 
     subparagraph (B), an amount equal to, subject to subparagraph 
     (D), 28 percent of the allowable costs attributable to such 
     gross covered prescription drug costs, but only to the extent 
     such costs exceed the deductible under subparagraph (B) and 
     do not exceed the cost limit under such subparagraph in the 
     case of any such individual for the plan year.
       ``(B) Deductible and cost limit applicable.--Subject to 
     subparagraph (C)--
       ``(i) the deductible under this subparagraph is equal to 
     $250 for plan years that end in 2006; and
       ``(ii) the cost limit under this subparagraph is equal to 
     $5,000 for plan years that end in 2006.
       ``(C) Indexing.--The deductible and cost limit amounts 
     specified in subparagraphs (B) for a plan year that ends 
     after 2006 shall be adjusted in the same manner as the annual 
     deductible under section 1860D-2(b)(1) is annually adjusted 
     under such section.
       ``(4) Related definitions.--As used in this section:
       ``(A) Employment-based retiree health coverage.--The term 
     `employment-based retiree health coverage' means health 
     insurance or other coverage of health care costs for 
     individuals eligible to enroll in a prescription drug plan or 
     MA-EFFS Rx plan under this part (or for such individuals and 
     their spouses and dependents) under a group health plan 
     (including such a plan that is established or maintained 
     under or pursuant to one or more collective bargaining 
     agreements or that is offered under chapter 89 of title 5, 
     United States Code) based on their status as retired 
     participants in such plan.
       ``(B) Qualifying covered retiree.--The term `qualifying 
     covered retiree' means an individual who is eligible to 
     obtain qualified prescription drug coverage under section 
     1860D-1 but did not elect such coverage under this part 
     (either through a prescription drug plan or through a MA-EFFS 
     Rx plan) but is covered under a qualified retiree 
     prescription drug plan.
       ``(C) Sponsor.--The term `sponsor' means a plan sponsor, as 
     defined in section 3(16)(B) of the Employee Retirement Income 
     Security Act of 1974.
       ``(5) Construction.--Nothing in this subsection shall be 
     construed as--
       ``(A) precluding an individual who is covered under 
     employment-based retiree health coverage from enrolling in a 
     prescription drug plan or in a MA-EFFS plan;
       ``(B) precluding such employment-based retiree health 
     coverage or an employer or other person from paying all or 
     any portion of any premium required for coverage under such a 
     prescription drug plan or MA-EFFS plan on behalf of such an 
     individual; or
       ``(C) preventing such employment-based retiree health 
     coverage from providing coverage for retirees--
       ``(i) who are covered under a qualified retiree 
     prescription plan that is better than standard coverage; or
       ``(ii) who are not covered under a qualified retiree 
     prescription plan but who are enrolled in a prescription drug 
     plan or a MA-EFFS Rx plan, that is supplemental to the 
     benefits provided under such prescription drug plan or MA-
     EFFS Rx plan, except that any such supplemental coverage (not 
     including payment of any premium referred to in subparagraph 
     (B)) shall be treated as primary coverage to which section 
     1862(b)(2)(A)(i) is deemed to apply.
       ``(g) Computation of National Average Monthly Bid Amount.--
       ``(1) In general.--For each year (beginning with 2006) the 
     Administrator shall compute a national average monthly bid 
     amount equal to the average of the benchmark bid amounts for 
     each prescription drug plan and for each MA-EFFS Rx plan (as 
     computed under paragraph (2), but excluding plans described 
     in section 1851(a)(2)(C))) adjusted under paragraph (4) to 
     take into account reinsurance payments.
       ``(2) Benchmark bid amount defined.--For purposes of this 
     subsection, the term `benchmark bid amount' means, with 
     respect to qualified prescription drug coverage offered 
     under--
       ``(A) a prescription drug plan that--
       ``(i) provides standard coverage (or alternative 
     prescription drug coverage the actuarial value of which is 
     equivalent to that of standard coverage), the PDP bid; or
       ``(ii) provides alternative prescription drug coverage the 
     actuarial value of which is greater than that of standard 
     coverage, the PDP bid multiplied by the ratio of (I) the 
     actuarial value of standard coverage, to (II) the actuarial 
     value of the alternative coverage; or
       ``(B) a MA-EFFS Rx plan, the portion of the bid amount that 
     is attributable to statutory drug benefits (described in 
     section 1853(a)(1)(A)(ii)(II)).

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

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

       ``(a) In General.--There is created on the books of the 
     Treasury of the United States a trust fund to be known as the 
     `Medicare Prescription Drug Trust Fund' (in this section 
     referred to as the `Trust Fund'). The Trust Fund shall 
     consist of such gifts and bequests as may be made as provided 
     in section 201(i)(1), and such amounts as may be deposited 
     in, or appropriated to, such fund as provided in this part. 
     Except as otherwise provided in this section, the provisions 
     of subsections (b) through (i) of section 1841 shall

[[Page 16350]]

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

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

       ``(a) Definitions.--For purposes of this part:
       ``(1) Covered outpatient drugs.--The term `covered 
     outpatient drugs' is defined in section 1860D-2(f).
       ``(2) Initial coverage limit.--The term `initial coverage 
     limit' means such limit as established under section 1860D-
     2(b)(3), or, in the case of coverage that is not standard 
     coverage, the comparable limit (if any) established under the 
     coverage.
       ``(3) Medicare prescription drug trust fund.--The term 
     `Medicare Prescription Drug Trust Fund' means the Trust Fund 
     created under section 1860D-9(a).
       ``(4) PDP sponsor.--The term `PDP sponsor' means an entity 
     that is certified under this part as meeting the requirements 
     and standards of this part for such a sponsor.
       ``(5) Prescription drug plan.--The term `prescription drug 
     plan' means health benefits coverage that--
       ``(A) is offered under a policy, contract, or plan by a PDP 
     sponsor pursuant to, and in accordance with, a contract 
     between the Administrator and the sponsor under section 
     1860D-4(b);
       ``(B) provides qualified prescription drug coverage; and
       ``(C) meets the applicable requirements of the section 
     1860D-3 for a prescription drug plan.
       ``(6) Qualified prescription drug coverage.--The term 
     `qualified prescription drug coverage' is defined in section 
     1860D-2(a).
       ``(7) Standard coverage.--The term `standard coverage' is 
     defined in section 1860D-2(b).
       ``(8) Insurance risk.--The term `insurance risk' means, 
     with respect to a participating pharmacy, risk of the type 
     commonly assumed only by insurers licensed by a State and 
     does not include payment variations designed to reflect 
     performance-based measures of activities within the control 
     of the pharmacy, such as formulary compliance and generic 
     drug substitution.
       ``(b) Offer of Qualified Prescription Drug Coverage Under 
     Medicare Advantage and EFFS Programs.--
       ``(1) As part of medicare advantage plan.--Medicare 
     Advantage organizations are required to offer Medicare 
     Advantage plans that include qualified prescription drug 
     coverage under part C pursuant to section 1851(j).
       ``(2) As part of effs plan.--EFFS organizations are 
     required to offer EFFS plans that include qualified 
     prescription drug coverage under part E pursuant to section 
     1860E-2(d).
       ``(c) Application of Part C Provisions Under this Part.--
     For purposes of applying provisions of part C under this part 
     with respect to a prescription drug plan and a PDP sponsor, 
     unless otherwise provided in this part such provisions shall 
     be applied as if--
       ``(1) any reference to a Medicare Advantage or other plan 
     included a reference to a prescription drug plan;
       ``(2) any reference to a provider-sponsored organization 
     included a reference to a PDP sponsor;
       ``(3) any reference to a contract under section 1857 
     included a reference to a contract under section 1860D-4(b); 
     and
       ``(4) any reference to part C included a reference to this 
     part.
       ``(d) Report on Pharmacy Services Provided to Long-Term 
     Care Facility Patients.--
       ``(1) Review.--Within 6 months after the date of the 
     enactment of this section, the Secretary shall review the 
     current standards of practice for pharmacy services provided 
     to patients in nursing facilities and other long-term care 
     facilities.
       ``(2) Evaluations and recommendations.--Specifically in the 
     review under paragraph (1), the Secretary shall--
       ``(A) assess the current standards of practice, clinical 
     services, and other service requirements generally utilized 
     for pharmacy services in the long-term care setting;
       ``(B) evaluate the impact of those standards with respect 
     to patient safety, reduction of medication errors and quality 
     of care; and
       ``(C) recommend (in the Secretary's report under paragraph 
     (3)) necessary actions and appropriate reimbursement to 
     ensure the provision of prescription drugs to medicare 
     beneficiaries residing in nursing facilities and other long-
     term care facilities in a manner consistent with existing 
     patient safety and quality of care standards under applicable 
     State and Federal laws.
       ``(3) Report.--The Secretary shall submit a report to the 
     Congress on the Secretary's findings and recommendations 
     under this subsection, including a detailed description of 
     the Secretary's plans to implement this part in a manner 
     consistent with applicable State and Federal laws designed to 
     protect the safety and quality of care of patients of nursing 
     facilities and other long-term care facilities.''.
       (b) Additional Conforming Changes.--
       (1) Conforming references to previous part d.--Any 
     reference in law (in effect before the date of the enactment 
     of this Act) to part D of title XVIII of the Social Security 
     Act is deemed a reference to part F of such title (as in 
     effect after such date).
       (2) Conforming amendment permitting waiver of cost-
     sharing.--Section 1128B(b)(3) (42 U.S.C. 1320a-7b(b)(3)) is 
     amended--
       (A) by striking ``and'' at the end of subparagraph (E);
       (B) by striking the period at the end of subparagraph (F) 
     and inserting ``; and''; and
       (C) by adding at the end the following new subparagraph:
       ``(G) the waiver or reduction of any cost-sharing imposed 
     under part D of title XVIII.''.
       (3) Submission of legislative proposal.--Not later than 6 
     months after the date of the enactment of this Act, the 
     Secretary of Health and Human Services shall submit to the 
     appropriate committees of Congress a legislative proposal 
     providing for such technical and conforming amendments in the 
     law as are required by the provisions of this subtitle.
       (c) Study on Transitioning Part B Prescription Drug 
     Coverage.--Not later than January 1, 2005, the Medicare 
     Benefits Administrator shall submit a report to Congress that 
     makes recommendations regarding methods for providing 
     benefits under part D of title XVIII of the Social Security 
     Act for outpatient prescription drugs for which benefits are 
     provided under part B of such title.

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

       (a) Medicare Advantage.--Section 1851 (42 U.S.C. 1395w-21) 
     is amended by adding at the end the following new subsection:
       ``(j) Availability of Prescription Drug Benefits and 
     Subsidies.--
       ``(1) Offering of qualified prescription drug coverage.--A 
     Medicare Advantage organization on and after January 1, 
     2006--
       ``(A) may not offer a Medicare Advantage plan described in 
     section 1851(a)(2)(A) in an area unless either that plan (or 
     another Medicare Advantage plan offered by the organization 
     in that area) includes qualified prescription drug coverage; 
     and
       ``(B) may not offer the prescription drug coverage (other 
     than that required under parts A and B) to an enrollee under 
     a Medicare Advantage plan, unless such drug coverage is at 
     least qualified prescription drug coverage and unless the 
     requirements of this subsection with respect to such coverage 
     are met.
       ``(2) Requirement for election of part d coverage to obtain 
     qualified prescription drug coverage.--For purposes of this 
     part, an individual who has not elected qualified 
     prescription drug coverage under section 1860D-1(b) shall be 
     treated as being ineligible to enroll in a Medicare Advantage 
     plan under this part that offers such coverage.
       ``(3) Compliance with certain additional beneficiary 
     protections for prescription drug coverage.--With respect to 
     the offering of qualified prescription drug coverage by a 
     Medicare Advantage organization under this part on and after 
     January 1, 2006, the organization and plan shall meet the 
     requirements of subsections (a) through (d) of section 1860D-
     3 in the same manner as they apply to a PDP sponsor and a 
     prescription drug plan under part D and shall submit to the 
     Administrator the information described

[[Page 16351]]

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

     SEC. 103. MEDICAID AMENDMENTS.

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


  ``special provisions relating to medicare prescription drug benefit

       ``Sec. 1935. (a) Requirement for Making Eligibility 
     Determinations for Low-Income Subsidies.--As a condition of 
     its State plan under this title under section 1902(a)(66) and 
     receipt of any Federal financial assistance under section 
     1903(a), a State shall--
       ``(1) make determinations of eligibility for premium and 
     cost-sharing subsidies under (and in accordance with) section 
     1860D-7;
       ``(2) inform the Administrator of the Medicare Benefits 
     Administration of such determinations in cases in which such 
     eligibility is established; and
       ``(3) otherwise provide such Administrator with such 
     information as may be required to carry out part D of title 
     XVIII (including section 1860D-7).
       ``(b) Payments for Additional Administrative Costs.--
       ``(1) In general.--The amounts expended by a State in 
     carrying out subsection (a) are, subject to paragraph (2), 
     expenditures reimbursable under the appropriate paragraph of 
     section 1903(a); except that, notwithstanding any other 
     provision of such section, the applicable Federal matching 
     rates with respect to such expenditures under such section 
     shall be increased as follows (but in no case shall the rate 
     as so increased exceed 100 percent):
       ``(A) For expenditures attributable to costs incurred 
     during 2005, the otherwise applicable Federal matching rate 
     shall be increased by 6-\2/3\ percent of the percentage 
     otherwise payable (but for this subsection) by the State.
       ``(B)(i) For expenditures attributable to costs incurred 
     during 2006 and each subsequent year through 2018, the 
     otherwise applicable Federal matching rate shall be increased 
     by the applicable percent (as defined in clause (ii)) of the 
     percentage otherwise payable (but for this subsection) by the 
     State.
       ``(ii) For purposes of clause (i), the `applicable percent' 
     for--
       ``(I) 2006 is 13-\1/3\ percent; or
       ``(II) a subsequent year is the applicable percent under 
     this clause for the previous year increased by 6-\2/3\ 
     percentage points.
       ``(C) For expenditures attributable to costs incurred after 
     2018, the otherwise applicable Federal matching rate shall be 
     increased to 100 percent.
       ``(2) Coordination.--The State shall provide the 
     Administrator with such information as may be necessary to 
     properly allocate administrative expenditures described in 
     paragraph (1) that may otherwise be made for similar 
     eligibility determinations.''.
       (b) Phased-In Federal Assumption of Medicaid Responsibility 
     for Premium and Cost-Sharing Subsidies for Dually Eligible 
     Individuals.--
       (1) In general.--Section 1903(a)(1) (42 U.S.C. 1396b(a)(1)) 
     is amended by inserting before the semicolon the following: 
     ``, reduced by the amount computed under section 1935(c)(1) 
     for the State and the quarter''.
       (2) Amount described.--Section 1935, as inserted by 
     subsection (a)(2), is amended by adding at the end the 
     following new subsection:

[[Page 16352]]

       ``(c) Federal Assumption of Medicaid Prescription Drug 
     Costs for Dually-Eligible Beneficiaries.--
       ``(1) In general.--For purposes of section 1903(a)(1), for 
     a State that is one of the 50 States or the District of 
     Columbia for a calendar quarter in a year (beginning with 
     2005) the amount computed under this subsection is equal to 
     the product of the following:
       ``(A) Medicare subsidies.--The total amount of payments 
     made in the quarter under section 1860D-7 (relating to 
     premium and cost-sharing prescription drug subsidies for low-
     income medicare beneficiaries) that are attributable to 
     individuals who are residents of the State and are entitled 
     to benefits with respect to prescribed drugs under the State 
     plan under this title (including such a plan operating under 
     a waiver under section 1115).
       ``(B) State matching rate.--A proportion computed by 
     subtracting from 100 percent the Federal medical assistance 
     percentage (as defined in section 1905(b)) applicable to the 
     State and the quarter.
       ``(C) Phase-out proportion.--The phase-out proportion (as 
     defined in paragraph (2)) for the quarter.
       ``(2) Phase-out proportion.--For purposes of paragraph 
     (1)(C), the `phase-out proportion' for a calendar quarter 
     in--
       ``(A) 2006 is 93\1/3\ percent;
       ``(B) a subsequent year before 2021, is the phase-out 
     proportion for calendar quarters in the previous year 
     decreased by 6-\2/3\ percentage points; or
       ``(C) a year after 2020 is 0 percent.''.
       (c) Medicaid Providing Wrap-Around Benefits.--Section 1935, 
     as so inserted and amended, is further amended by adding at 
     the end the following new subsection:
       ``(d) Additional Provisions.--
       ``(1) Medicaid as secondary payor.--In the case of an 
     individual who is entitled to qualified prescription drug 
     coverage under a prescription drug plan under part D of title 
     XVIII (or under a MA-EFFS Rx plan under part C or E of such 
     title) and medical assistance for prescribed drugs under this 
     title, medical assistance shall continue to be provided under 
     this title (other than for copayment amounts specified in 
     section 1860D-7(a)(1)(B), notwithstanding section 1916) for 
     prescribed drugs to the extent payment is not made under the 
     prescription drug plan or MA-EFFS Rx plan selected by the 
     individual.
       ``(2) Condition.--A State may require, as a condition for 
     the receipt of medical assistance under this title with 
     respect to prescription drug benefits for an individual 
     eligible to obtain qualified prescription drug coverage 
     described in paragraph (1), that the individual elect 
     qualified prescription drug coverage under section 1860D-
     1.''.
       (d) Treatment of Territories.--
       (1) In general.--Section 1935, as so inserted and amended, 
     is further amended--
       (A) in subsection (a) in the matter preceding paragraph 
     (1), by inserting ``subject to subsection (e)'' after 
     ``section 1903(a)'';
       (B) in subsection (c)(1), by inserting ``subject to 
     subsection (e)'' after ``1903(a)(1)''; and
       (C) by adding at the end the following new subsection:
       ``(e) Treatment of Territories.--
       ``(1) In general.--In the case of a State, other than the 
     50 States and the District of Columbia--
       ``(A) the previous provisions of this section shall not 
     apply to residents of such State; and
       ``(B) if the State establishes a plan described in 
     paragraph (2) (for providing medical assistance with respect 
     to the provision of prescription drugs to medicare 
     beneficiaries), the amount otherwise determined under section 
     1108(f) (as increased under section 1108(g)) for the State 
     shall be increased by the amount specified in paragraph (3).
       ``(2) Plan.--The plan described in this paragraph is a plan 
     that--
       ``(A) provides medical assistance with respect to the 
     provision of covered outpatient drugs (as defined in section 
     1860D-2(f)) to low-income medicare beneficiaries; and
       ``(B) assures that additional amounts received by the State 
     that are attributable to the operation of this subsection are 
     used only for such assistance.
       ``(3) Increased amount.--
       ``(A) In general.--The amount specified in this paragraph 
     for a State for a year is equal to the product of--
       ``(i) the aggregate amount specified in subparagraph (B); 
     and
       ``(ii) the amount specified in section 1108(g)(1) for that 
     State, divided by the sum of the amounts specified in such 
     section for all such States.
       ``(B) Aggregate amount.--The aggregate amount specified in 
     this subparagraph for--
       ``(i) 2006, is equal to $25,000,000; or
       ``(ii) a subsequent year, is equal to the aggregate amount 
     specified in this subparagraph for the previous year 
     increased by annual percentage increase specified in section 
     1860D-2(b)(5) for the year involved.
       ``(4) Report.--The Administrator shall submit to Congress a 
     report on the application of this subsection and may include 
     in the report such recommendations as the Administrator deems 
     appropriate.''.
       (2) Conforming amendment.--Section 1108(f) (42 U.S.C. 
     1308(f)) is amended by inserting ``and section 
     1935(e)(1)(B)'' after ``Subject to subsection (g)''.
       (e) Amendment to Best Price.--Section 1927(c)(1)(C)(i) (42 
     U.S.C. 1396r-8(c)(1)(C)(i)) is amended--
       (1) by striking ``and'' at the end of subclause (III);
       (2) by striking the period at the end of subclause (IV) and 
     inserting ``; and''; and
       (3) by adding at the end the following new subclause:

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

     SEC. 104. MEDIGAP TRANSITION.

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

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

[[Page 16353]]

     benefits as the policy described in subparagraph (A), except 
     as follows:
       ``(i) Substitute `75 percent' for `50 percent' in clause 
     (i) of such subparagraph.
       ``(ii) Substitute `$2,000' for `$4,000' in clause (iv) of 
     such subparagraph.
       ``(4) Construction.--Any provision in this section or in a 
     medicare supplemental policy relating to guaranteed 
     renewability of coverage shall be deemed to have been met 
     through the offering of other coverage under this 
     subsection.''.
       (b) NAIC Report to Congress on Medigap Modernization.--The 
     Secretary shall request the National Association of Insurance 
     Commissioners to submit to Congress, not later than 18 months 
     after the date of the enactment of this Act, a report that 
     includes recommendations on the modernization of coverage 
     under the medigap program under section 1882 of the Social 
     Security Act (42 U.S.C. 1395ss).

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

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


 ``medicare prescription drug discount card endorsement and assistance 
                                program

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

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

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

     In carrying out clause (ii), the Secretary may consider a 
     change in residential setting (such as placement in a nursing 
     facility) to be an unusual circumstance.
       ``(C) Default selection.--In establishing such process, the 
     Secretary shall provide an equitable method for selecting an 
     eligible entity for individuals who enroll under this section 
     and fail to make such a selection.
       ``(2) Competition.--Eligible entities with a contract under 
     this section shall compete for beneficiaries on the basis of 
     discounts, formularies, pharmacy networks, and other services 
     provided for under the contract.
       ``(e) Providing Enrollment, Selection, and Coverage 
     Information to Beneficiaries.--
       ``(1) Activities.--The Secretary shall provide for 
     activities under this section to broadly disseminate 
     information to eligible beneficiaries (and prospective 
     eligible beneficiaries) regarding enrollment under this 
     section, the selection of eligible entities, and the 
     prescription drug coverage made available by eligible 
     entities with a contract under this section.
       ``(2) Special rule for first enrollment under the 
     program.--To the extent practicable, the activities described 
     in paragraph (1) shall ensure that eligible beneficiaries are 
     provided with such information at least 60

[[Page 16354]]

     days prior to the first enrollment period described in 
     subsection (c).
       ``(f) Enrollment Fee.--
       ``(1) Amount.--Except as provided in paragraph (3), 
     enrollment under the program under this section is 
     conditioned upon payment of an annual enrollment fee of $30. 
     Such fee for 2004 shall include any portion of 2003 in which 
     the program is implemented under this section.
       ``(2) Collection of enrollment fee.--The annual enrollment 
     fee shall be collected and credited to the Federal 
     Supplementary Medical Insurance Trust Fund in the same manner 
     as the monthly premium determined under section 1839 is 
     collected and credited to such Trust Fund under section 1840, 
     except that it shall be collected only 1 time per year.
       ``(3) Payment of enrollment fee by state for certain 
     beneficiaries.--
       ``(A) In general.--The Secretary shall establish an 
     arrangement under which a State may provide for payment of 
     some or all of the enrollment fee for some or all low income 
     enrollees in the State, as specified by the State under the 
     arrangement. Insofar as such a payment arrangement is made 
     with respect to an enrollee, the amount of the enrollment fee 
     shall be paid directly by the State and shall not be 
     collected under paragraph (2). In carrying out this 
     paragraph, the Secretary may apply procedures similar to that 
     applied under state agreements under section 1843.
       ``(B) No federal matching available under medicaid or 
     schip.--Expenditures made by a State described in 
     subparagraph (A) shall not be treated as State expenditures 
     for purposes of Federal matching payments under titles XIX 
     and XXI insofar as such expenditures are for an enrollment 
     fee under this subsection.
       ``(4) Distribution of portion of enrollment fee.--Of the 
     enrollment fee collected by the Secretary under this 
     subsection with respect to a beneficiary, \2/3\ of that fee 
     shall be made available to the eligible entity selected by 
     the eligible beneficiary.
       ``(g) Issuance of Card and Coordination.--Each eligible 
     entity shall--
       ``(1) issue, in a uniform standard format specified by the 
     Secretary, to each enrolled beneficiary a card and an 
     enrollment number that establishes proof of enrollment and 
     that can be used in a coordinated manner--
       ``(A) to identify the eligible entity selected to provide 
     access to negotiated prices under subsection (i); and
       ``(B) to make deposits to and withdrawals from a 
     prescription drug account under section 1807A; and
       ``(2) provide for electronic methods to coordinate with the 
     accounts established under section 1807A.
       ``(h) Enrollee Protections.--
       ``(1) Guaranteed issue and nondiscrimination.--
       ``(A) Guaranteed issue.--
       ``(i) In general.--An eligible beneficiary who is eligible 
     to select an eligible entity under subsection (b) for 
     prescription drug coverage under this section at a time 
     during which selections are accepted under this section with 
     respect to the coverage shall not be denied selection based 
     on any health status-related factor (described in section 
     2702(a)(1) of the Public Health Service Act) or any other 
     factor and may not be charged any selection or other fee as a 
     condition of such acceptance.
       ``(ii) Medicare advantage limitations permitted.--The 
     provisions of paragraphs (2) and (3) (other than subparagraph 
     (C)(i), relating to default enrollment) of section 1851(g) 
     (relating to priority and limitation on termination of 
     election) shall apply to selection of eligible entities under 
     this paragraph.
       ``(B) Nondiscrimination.--An eligible entity offering 
     prescription drug coverage under this section shall not 
     establish a service area in a manner that would discriminate 
     based on health or economic status of potential enrollees.
       ``(C) Coverage of all portions of a state.--If an eligible 
     entity with a contract under this section serves any part of 
     a State it shall serve the entire State.
       ``(2) Dissemination of information.--
       ``(A) General information.--An eligible entity with a 
     contract under this section shall disclose, in a clear, 
     accurate, and standardized form to each eligible beneficiary 
     who has selected the entity to provide access to negotiated 
     prices under this section at the time of selection and at 
     least annually thereafter, the information described in 
     section 1852(c)(1) relating to such prescription drug 
     coverage. Such information includes the following (in a 
     manner designed to permit and promote competition among 
     eligible entities):
       ``(i) Summary information regarding negotiated prices 
     (including discounts) for covered outpatient drugs.
       ``(ii) Access to such prices through pharmacy networks.
       ``(iii) How any formulary used by the eligible entity 
     functions.
       ``(B) Disclosure upon request of general coverage, 
     utilization, and grievance information.--Upon request of an 
     eligible beneficiary, the eligible entity shall provide the 
     information described in section 1852(c)(2) (other than 
     subparagraph (D)) to such beneficiary.
       ``(C) Response to beneficiary questions.--Each eligible 
     entity offering prescription drug coverage under this section 
     shall have a mechanism (including a toll-free telephone 
     number) for providing upon request specific information (such 
     as negotiated prices, including discounts) to individuals who 
     have selected the entity. The entity shall make available, 
     through an Internet website and in writing upon request, 
     information on specific changes in its formulary.
       ``(D) Coordination with prescription drug account 
     benefits.--Each such eligible entity shall provide for 
     coordination of such information as the Secretary may specify 
     to carry out section 1807A.
       ``(3) Access to covered benefits.--
       ``(A) Ensuring pharmacy access.--The provisions of 
     subsection (c)(1) of section 1860D-3 (other than payment 
     provisions under section 1860D-8 with respect to sponsors 
     under such subsection) shall apply to an eligible entity 
     under this section in the same manner as they apply to a PDP 
     sponsor under such section.
       ``(B) Access to negotiated prices for prescription drugs.--
     For requirements relating to the access of an eligible 
     beneficiary to negotiated prices (including applicable 
     discounts), see subsection (i).
       ``(C) Requirements on development and application of 
     formularies.--Insofar as an eligible entity with a contract 
     under this part uses a formulary, the entity shall comply 
     with the requirements of section 1860D-3(c)(3), insofar as 
     the Secretary determines that such requirements can be 
     implemented on a timely basis.
       ``(4) Cost and utilization management; quality assurance; 
     medication therapy management program.--
       ``(A) In general.--For purposes of providing access to 
     negotiated benefits under subsection (i), the eligible entity 
     shall have in place the programs and measure described in 
     section 1860D-3(d), including an effective cost and drug 
     utilization management program, quality assurance measures 
     and systems, and a program to control fraud, abuse, and 
     waste, insofar as the Secretary determines that such 
     provisions can be implemented on a timely basis.
       ``(B) Treatment of accreditation.--Section 1852(e)(4) 
     (relating to treatment of accreditation) shall apply to the 
     requirements for an endorsed program under this section with 
     respect to the following requirements, in the same manner as 
     they apply to Medicare Advantage plans under part C with 
     respect to the requirements described in a clause of section 
     1852(e)(4)(B):
       ``(i) Paragraph (3)(A) (relating to access to covered 
     benefits).
       ``(ii) Paragraph (7) (relating to confidentiality and 
     accuracy of enrollee records).
       ``(5) Grievance mechanism.--Each eligible entity shall 
     provide meaningful procedures for hearing and resolving 
     grievances between the organization consistent with the 
     requirements of section 1860D-3(e) insofar as they relate to 
     PDP sponsors of prescription drug plans.
       ``(6) Beneficiary services.--An eligible entity shall 
     provide for its enrollees pharmaceutical support services, 
     such as education and counseling, and services to prevent 
     adverse drug interactions.
       ``(7) Coverage determinations and reconsiderations.--An 
     eligible entity shall meet the requirements of paragraphs (1) 
     through (3) of section 1852(g) with respect to covered 
     benefits under the prescription drug coverage it offers under 
     this section in the same manner as such requirements apply to 
     a Medicare Advantage organization with respect to benefits it 
     offers under a Medicare Advantage plan under part C.
       ``(8) Confidentiality and accuracy of enrollee records.--An 
     eligible entity shall meet the requirements of section 
     1852(h) with respect to enrollees under this section in the 
     same manner as such requirements apply to a Medicare 
     Advantage organization with respect to enrollees under part 
     C. The eligible entity shall implement policies and 
     procedures to safeguard the use and disclosure of enrollees' 
     individually identifiable health information in a manner 
     consistent with the Federal regulations (concerning the 
     privacy of individually identifiable health information) 
     promulgated under section 264(c) of the Health Insurance 
     Portability and Accountability Act of 1996. The eligible 
     entity shall be treated as a covered entity for purposes of 
     the provisions of subpart E of part 164 of title 45, Code of 
     Federal Regulations, adopted pursuant to the authority of the 
     Secretary under section 264(c) of the Health Insurance 
     Portability and Accountability Act of 1996 (42 U.S. C. 1320d-
     2 note).
       ``(9) Periodic reports and oversight.--The eligible entity 
     shall submit to the Secretary periodic reports on 
     performance, utilization, finances, and such other matters as 
     the Secretary may specify. The Secretary shall provide 
     appropriate oversight to ensure compliance of eligible 
     entities with the requirements of this subsection, including 
     verification of the discounts and services provided.
       ``(10) Additional beneficiary protections.--The eligible 
     entity meets such additional requirements as the Secretary 
     identifies to protect and promote the interest of enrollees, 
     including requirements that ensure that enrollees are not 
     charged more than the lower of the negotiated retail price or 
     the usual and customary price.

[[Page 16355]]

       ``(i) Benefits Under the Program Through Savings to 
     Enrollees Through Negotiated Prices.--
       ``(1) In general.--Subject to paragraph (2), each eligible 
     entity with a contract under this section shall provide each 
     eligible beneficiary enrolled with the entity with access to 
     negotiated prices (including applicable discounts). For 
     purposes of this paragraph, the term `prescription drugs' is 
     not limited to covered outpatient drugs, but does not include 
     any over-the-counter drug that is not a covered outpatient 
     drug. The prices negotiated by an eligible entity under this 
     paragraph shall (notwithstanding any other provision of law) 
     not be taken into account for the purposes of establishing 
     the best price under section 1927(c)(1)(C).
       ``(2) Formulary restrictions.--Insofar as an eligible 
     entity with a contract under this part uses a formulary, the 
     negotiated prices (including applicable discounts) for 
     prescription drugs shall only be available for drugs included 
     in such formulary.
       ``(3) Prohibition on application only to mail order.--The 
     negotiated prices under this subsection shall apply to 
     prescription drugs that are available other than solely 
     through mail order.
       ``(4) Prohibition on charges for required services.--An 
     eligible entity (and any pharmacy contracting with such 
     entity for the provision of a discount under this section) 
     may not charge a beneficiary any amount for any services 
     required to be provided by the entity under this section.
       ``(5) Disclosure.--The eligible entity offering the 
     endorsed program shall disclose to the Secretary (in a manner 
     specified by the Secretary) the extent to which discounts or 
     rebates or other remuneration or price concessions made 
     available to the entity by a manufacturer are passed through 
     to enrollees through pharmacies and other dispensers or 
     otherwise. The provisions of section 1927(b)(3)(D) shall 
     apply to information disclosed to the Secretary under this 
     paragraph in the same manner as such provisions apply to 
     information disclosed under such section.
       ``(6) Public disclosure of pharmaceutical prices for 
     equivalent drugs.--Each eligible entity shall provide that 
     each pharmacy or other dispenser that arranges for the 
     dispensing of a covered outpatient drug in connection with 
     its endorsed program shall inform the enrollee in that 
     program at the time of purchase of the drug of any 
     differential between the price of the prescribed drug to the 
     enrollee and the price of the lowest cost available generic 
     drug covered under the program that is therapeutically 
     equivalent and bioequivalent.
       ``(j) Contribution Into Prescription Drug Account.--
       ``(1) In general.--In the case of an individual enrolled 
     under this section, the Secretary shall--
       ``(A) establish a prescription drug account for the 
     individual under section 1807A; and
       ``(B) subject to paragraph (5), deposit into such account 
     on a monthly or other periodic basis an amount that, on an 
     annual basis, is equivalent to the annual Federal 
     contribution amount specified in paragraph (2) for the 
     enrollee involved.
       ``(2) Annual federal contribution amount.--Subject to 
     paragraph (3), in the case of an accountholder whose income 
     is--
       ``(A) not more than 135 percent of the poverty line, the 
     annual Federal contribution amount for a year is $800;
       ``(B) more than 135 percent, but not more than 150 percent, 
     of the poverty line, the annual Federal contribution amount 
     for a year is $500; or
       ``(C) more than 150 percent of the poverty line, the annual 
     Federal contribution amount for a year is $100.
       ``(3) Income eligibility determinations.--The determination 
     of whether an individual residing in a State is a eligible 
     for a contribution under paragraph (1) shall be determined 
     under the State medicaid plan for the State under section 
     1935(a) or by the Social Security Administration. In the case 
     of a State that does not operate such a medicaid plan (either 
     under title XIX or under a statewide waiver granted under 
     section 1115), such determination shall be made under 
     arrangements made by the Secretary. There are authorized to 
     be appropriated to the Social Security Administration such 
     sums as may be necessary for the determination of eligibility 
     under this paragraph.
       ``(4) Partial year.--Insofar as the provisions of this 
     subsection and section 1807A are not implemented for all 
     months in 2004, the annual contribution amount under this 
     subsection for 2004 shall be prorated to reflect the portion 
     of that year in which such provisions are in effect.
       ``(5) Restriction on contributions.--There shall only be an 
     annual Federal contribution under paragraph (1) for an 
     individual if the individual is not eligible for coverage of, 
     or assistance for, outpatient prescription drugs under any of 
     the following:
       ``(A) A medicaid plan under title XIX (including under any 
     waiver approved under section 1115).
       ``(B) Enrollment under a group health plan or health 
     insurance coverage.
       ``(C) Enrollment under a medicare supplemental insurance 
     policy.
       ``(D) Chapter 55 of title 10, United States Code (relating 
     to medical and dental care for members of the uniformed 
     services).
       ``(E) Chapter 17 of title 38, United States Code (relating 
     to Veterans' medical care).
       ``(F) Enrollment under a plan under chapter 89 of title 5, 
     United States Code (relating to the Federal employees' health 
     benefits program).
       ``(G) The Indian Health Care Improvement Act (25 U.S.C. 
     1601 et seq.).
       ``(6) Appropriation to cover net program expenditures.--
     There are authorized to be appropriated from time to time, 
     out of any moneys in the Treasury not otherwise appropriated, 
     to the Federal Supplementary Medical Insurance Trust Fund 
     established under section 1841, an amount equal to the amount 
     by which the benefits and administrative costs of providing 
     the benefits under this section exceed the sum of the portion 
     of the enrollment fees retained by the Secretary.
       ``(k) Definitions.--In this part and section 1807A:
       ``(1) Covered outpatient drug.--
       ``(A) In general.--Except as provided in this paragraph, 
     for purposes of this section, the term `covered outpatient 
     drug' means--
       ``(i) a drug that may be dispensed only upon a prescription 
     and that is described in subparagraph (A)(i) or (A)(ii) of 
     section 1927(k)(2); or
       ``(ii) a biological product described in clauses (i) 
     through (iii) of subparagraph (B) of such section or insulin 
     described in subparagraph (C) of such section and medical 
     supplies associated with the injection of insulin (as defined 
     in regulations of the Secretary),

     and such term includes a vaccine licensed under section 351 
     of the Public Health Service Act and any use of a covered 
     outpatient drug for a medically accepted indication (as 
     defined in section 1927(k)(6)).
       ``(B) Exclusions.--
       ``(i) In general.--Such term does not include drugs or 
     classes of drugs, or their medical uses, which may be 
     excluded from coverage or otherwise restricted under section 
     1927(d)(2), other than subparagraph (E) thereof (relating to 
     smoking cessation agents), or under section 1927(d)(3).
       ``(ii) Avoidance of duplicate coverage.--A drug prescribed 
     for an individual that would otherwise be a covered 
     outpatient drug under this section shall not be so considered 
     if payment for such drug is available under part A or B for 
     an individual entitled to benefits under part A and enrolled 
     under part B.
       ``(C) Application of formulary restrictions.--A drug 
     prescribed for an individual that would otherwise be a 
     covered outpatient drug under this section shall not be so 
     considered under an endorsed program if the eligible entity 
     offering the program excludes the drug under a formulary and 
     a review of such exclusion is not successfully resolved under 
     subsection (h)(5).
       ``(D) Application of general exclusion provisions.--An 
     eligible entity offering an endorsed program may exclude from 
     qualified prescription drug coverage any covered outpatient 
     drug--
       ``(i) for which payment would not be made if section 
     1862(a) applied to part D; or
       ``(ii) which are not prescribed in accordance with the 
     program or this section.

     Such exclusions are determinations subject to review pursuant 
     to subsection (h)(5).
       ``(2) Poverty line.--The term `poverty line' means the 
     income official poverty line (as defined by the Office of 
     Management and Budget, and revised annually in accordance 
     with section 673(2) of the Omnibus Budget Reconciliation Act 
     of 1981) applicable to a family of the size involved.
       ``(l) Authorization of Appropriations.--There are 
     authorized to be appropriated such sums as may be necessary 
     to carry out this section and section 1807A.
       ``(e) Interim, Final Regulatory Authority.--In order to 
     carry out this section and section 1807A in a timely manner, 
     the Secretary may promulgate regulations that take effect on 
     an interim basis, after notice and pending opportunity for 
     public comment.


                      ``prescription drug accounts

       ``Sec. 1807A. ``(a) Establishment of Accounts.--
       ``(1) In general.--The Secretary shall establish and 
     maintain for each eligible beneficiary who is enrolled under 
     section 1807 at the time of enrollment a prescription drug 
     account (in this section and section 1807 referred to as an 
     `account').
       ``(2) Reserve accounts.--In cases described in subsections 
     (b)(3)(A), (b)(3)(B)(i), and (b)(3)(B)(ii)(I), the Secretary 
     shall establish and maintain for each surviving spouse who is 
     not enrolled under section 1807 a reserve prescription drug 
     account (in this section referred to as an `reserve 
     account').
       ``(3) Accountholder defined.--In this section and section 
     1807A, the term `accountholder' means an individual for whom 
     an account or reserve account has been established under this 
     section.
       ``(4) Expenditures from account.--Nothing in this section 
     shall be construed as requiring the Federal Government to 
     obligate funds for amounts in any account until such time as 
     a withdrawal from such account is authorized under this 
     section.
       ``(b) Use of Accounts.--
       ``(1) Application of account.--Except as provided in this 
     subsection, amounts credited to an account shall only be used 
     for the

[[Page 16356]]

     purchase of covered outpatient drugs for the accountholder. 
     Any amounts remaining at the end of a year remain available 
     for expenditures in succeeding years.
       ``(2) Account rules for public and private contributions.--
     The Secretary shall establish a ongoing process for the 
     determination of the amount in each account that is 
     attributable to public and private contributions (including 
     spousal rollover contributions) based on the following rules:
       ``(A) Treatment of expenditures.--Expenditures from the 
     account shall--
       ``(i) first be counted against any public contribution; and
       ``(ii) next be counted against private contributions.
       ``(B) Treatment of spousal rollover contributions.--With 
     respect to any spousal rollover contribution, the portions of 
     such contribution that were attributable to public and 
     private contributions at the time of its distribution under 
     subsection (b)(3) shall be treated under this paragraph as if 
     it were a direct public or private contribution, 
     respectively, into the account of the spouse.
       ``(3) Death of accountholder.--In the case of the death of 
     an accountholder, the balance in any account (taking into 
     account liabilities accrued before the time of death) shall 
     be distributed as follows:
       ``(A) Treatment of public contributions.--If the 
     accountholder is married at the time of death, the amount in 
     the account that is attributable to public contributions 
     shall be credited to the account (if any) of the surviving 
     spouse of the accountholder (or, if the surviving spouse is 
     not an eligible beneficiary, into a reserve account to be 
     held for when that spouse becomes an eligible beneficiary).
       ``(B) Treatment of private contributions.--The amount in 
     the account that is attributable to private contributions 
     shall be distributed as follows:
       ``(i) Designation of distributee.--If the accountholder has 
     made a designation, in a form and manner specified by the 
     Secretary, for the distribution of some or all of such 
     amount, such amount shall be distributed in accordance with 
     the designation. Such designation may provide for the 
     distribution into an account (including a reserve account) of 
     a surviving spouse.
       ``(ii) Absence of designation.--Insofar as the 
     accountholder has not made such a designation--

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

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

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

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

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

[[Page 16357]]

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

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

     SEC. 107. STATE PHARMACEUTICAL ASSISTANCE TRANSITION 
                   COMMISSION.

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

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

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

       (a) In General.--Section 1817 (42 U.S.C. 1395i) is amended 
     by adding at the end the following new subsection:
       ``(l) Combined Report on Operation and Status of the Trust 
     Fund, the Federal Supplementary Medical Insurance Trust Fund, 
     and Medicare Prescription Drug Trust Fund.--
       ``(1) In general.--In addition to the duty of the Board of 
     Trustees to report to Congress under subsection (b), on the 
     date the Board submits the report required under subsection 
     (b)(2), the Board shall submit to Congress a report on the 
     operation and status of the Trust Fund, the Federal 
     Supplementary Medical Insurance Trust Fund established under 
     section 1841, and the Medicare Prescription Drug Trust Fund 
     under section 1860D-9(a) (in this subsection collectively 
     referred to as the `Trust Funds'). Such report shall included 
     the following information:
       ``(A) Overall spending from the general fund of the 
     treasury.--A statement of total amounts obligated during the 
     preceding fiscal year from the General Revenues of the 
     Treasury to the Trust Funds for payment for benefits covered 
     under this title, stated in terms of the total amount and in 
     terms of the percentage such amount bears to all other 
     amounts obligated from such General Revenues during such 
     fiscal year.
       ``(B) Historical overview of spending.--From the date of 
     the inception of the program of insurance under this title 
     through the fiscal year involved, a statement of the total 
     amounts referred to in subparagraph (A).
       ``(C) 10-year and 75-year projections.--An estimate of 
     total amounts referred to in subparagraph (A) required to be 
     obligated for payment for benefits covered under this title 
     for each of the 10 fiscal years succeeding the fiscal year 
     involved and for the 75-year period beginning with the 
     succeeding fiscal year.
       ``(D) Relation to gdp growth.--A comparison of the rate of 
     growth of the total amounts referred to in subparagraph (A) 
     to the rate of growth in the gross domestic product for the 
     same period.
       ``(2) Publication.--Each report submitted under paragraph 
     (1) shall be published jointly by the Committee on Ways and 
     Means and the Committee on Energy and Commerce as a public 
     document and shall be made available by such Committees on 
     the Internet.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply with respect to fiscal years beginning on or 
     after the date of the enactment of this Act.

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

     SEC. 200. MEDICARE MODERNIZATION AND REVITALIZATION.

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

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

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

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

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


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

       ``Sec. 1860E-1. (a) Establishment of Program.--

[[Page 16358]]

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


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

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


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

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

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

     and the actuarial basis for determining such proportions.
       ``(iii) Such additional information as the Administrator 
     may require to verify the actuarial bases described in 
     clauses (i) and (ii).
       ``(B) Statutory benefits defined.--For purposes of this 
     part:
       ``(i) The term `statutory non-drug benefits' means benefits 
     under section 1852(a)(1).
       ``(ii) The term `statutory prescription drug benefits' 
     means benefits under part D.
       ``(iii) The term `statutory benefits' means statutory 
     prescription drug benefits and statutory non-drug benefits.
       ``(C) Acceptance and negotiation of bid amounts.--The 
     Administrator has the authority to negotiate regarding 
     monthly bid amounts submitted under subparagraph (A) (and the 
     proportion described in subparagraph (A)(ii)), and for such 
     purpose, the Administrator has negotiation authority that the 
     Director of the Office of Personnel Management has with 
     respect to health benefits plans under chapter 89 of title 5, 
     United States Code. The Administrator may reject such a bid 
     amount or proportion if the Administrator determines that 
     such amount or proportion is not supported by the actuarial 
     bases provided under subparagraph (A).
       ``(D) Contract authority.--The Administrator may, taking 
     into account the unadjusted EFFS statutory non-drug monthly 
     bid amounts accepted under subparagraph (C), enter into 
     contracts for the offering of EFFS plans by up to 3 EFFS 
     organizations in any region.
       ``(b) Provision of Beneficiary Savings for Certain Plans.--
       ``(1) Beneficiary rebate rule.--
       ``(A) Requirement.--The EFFS plan shall provide to the 
     enrollee a monthly rebate equal to 75 percent of the average 
     per capita savings (if any) described in paragraph (2) 
     applicable to the plan and year involved.
       ``(B) Form of rebate.--A rebate required under this 
     paragraph shall be provided--
       ``(i) through the crediting of the amount of the rebate 
     towards the EFFS monthly prescription drug beneficiary 
     premium (as defined in section 1860E-4(a)(3)(B)) and the EFFS 
     monthly supplemental beneficiary premium (as defined in 
     section 1860E-4(a)(3)(C));
       ``(ii) through a direct monthly payment (through electronic 
     funds transfer or otherwise); or
       ``(iii) through other means approved by the Medicare 
     Benefits Administrator,
     or any combination thereof.
       ``(2) Computation of average per capita monthly savings.--
     For purposes of paragraph (1)(A), the average per capita 
     monthly savings referred to in such paragraph for an EFFS 
     plan and year is computed as follows:
       ``(A) Determination of region-wide average risk 
     adjustment.--
       ``(i) In general.--The Medicare Benefits Administrator 
     shall determine, at the same time rates are promulgated under 
     section 1853(b)(1) (beginning with 2006), for each EFFS 
     region the average of the risk adjustment factors described 
     in subsection (c)(3) to be applied to enrollees under this 
     part in that region. In the case of an EFFS region in which 
     an EFFS plan was offered in the previous year, the 
     Administrator may compute

[[Page 16359]]

     such average based upon risk adjustment factors applied under 
     subsection (c)(3) in that region in a previous year.
       ``(ii) Treatment of new regions.--In the case of a region 
     in which no EFFS plan was offered in the previous year, the 
     Administrator shall estimate such average. In making such 
     estimate, the Administrator may use average risk adjustment 
     factors applied to comparable EFFS regions or applied on a 
     national basis.
       ``(B) Determination of risk adjusted benchmark and risk-
     adjusted bid.--For each EFFS plan offered in an EFFS region, 
     the Administrator shall--
       ``(i) adjust the EFFS region-specific non-drug monthly 
     benchmark amount (as defined in paragraph (3)) by the 
     applicable average risk adjustment factor computed under 
     subparagraph (A); and
       ``(ii) adjust the unadjusted EFFS statutory non-drug 
     monthly bid amount by such applicable average risk adjustment 
     factor.
       ``(C) Determination of average per capita monthly 
     savings.--The average per capita monthly savings described in 
     this subparagraph is equal to the amount (if any) by which--
       ``(i) the risk-adjusted benchmark amount computed under 
     subparagraph (B)(i), exceeds
       ``(ii) the risk-adjusted bid computed under subparagraph 
     (B)(ii).
       ``(3) Computation of effs region-specific non-drug monthly 
     benchmark amount.--For purposes of this part, the term `EFFS 
     region-specific non-drug monthly benchmark amount' means, 
     with respect to an EFFS region for a month in a year, an 
     amount equal to \1/12\ of the average (weighted by number of 
     EFFS eligible individuals in each payment area described in 
     section 1853(d)) of the annual capitation rate as calculated 
     under section 1853(c)(1) for that area.
       ``(c) Payment of Plans Based on Bid Amounts.--
       ``(1) Non-drug benefits.--Under a contract under section 
     1860E-4(c) and subject to section 1853(g) (as made applicable 
     under subsection (d)), the Administrator shall make monthly 
     payments under this subsection in advance to each EFFS 
     organization, with respect to coverage of an individual under 
     this part in an EFFS region for a month, in an amount 
     determined as follows:
       ``(A) Plans with bids below benchmark.--In the case of a 
     plan for which there are average per capita monthly savings 
     described in subsection (b)(2)(C), the payment under this 
     subsection is equal to the unadjusted EFFS statutory non-drug 
     monthly bid amount, adjusted under paragraphs (3) and (4), 
     plus the amount of the monthly rebate computed under 
     subsection (b)(1)(A) for that plan and year.
       ``(B) Plans with bids at or above benchmark.--In the case 
     of a plan for which there are no average per capita monthly 
     savings described in subsection (b)(2)(C), the payment amount 
     under this subsection is equal to the EFFS region-specific 
     non-drug monthly benchmark amount, adjusted under paragraphs 
     (3) and (4).
       ``(2) For federal drug subsidies.--In the case in which an 
     enrollee who elects under part D to be provided qualified 
     prescription drug coverage through the plan, the EFFS 
     organization offering such plan also is entitled--
       ``(A) to direct subsidy payment under section 1860D-
     8(a)(1);
       ``(B) to reinsurance subsidy payments under section 1860D-
     8(a)(2); and
       ``(C) to reimbursement for premium and cost-sharing 
     reductions for low-income individuals under section 1860D-
     7(c)(3).
       ``(3) Demographic risk adjustment, including adjustment for 
     health status.--The Administrator shall adjust under 
     paragraph (1)(A) the unadjusted EFFS statutory non-drug 
     monthly bid amount and under paragraph (1)(B) the EFFS 
     region-specific non-drug monthly benchmark amount for such 
     risk factors as age, disability status, gender, institutional 
     status, and such other factors as the Administrator 
     determines to be appropriate, including adjustment for health 
     status under section 1853(a)(3) (as applied under subsection 
     (d)), so as to ensure actuarial equivalence. The 
     Administrator may add to, modify, or substitute for such 
     adjustment factors if such changes will improve the 
     determination of actuarial equivalence.
       ``(4) Adjustment for intra-regional geographic 
     variations.--The Administrator shall also adjust such amounts 
     in a manner to take into account variations in payments rates 
     under part C among the different payment areas under such 
     part included in each EFFS region.
       ``(d) Application of Additional Payment Rules.--The 
     provisions of section 1853 (other than subsections (a)(1)(A), 
     (d), and (e)) shall apply to an EFFS plan under this part, 
     except as otherwise provided in this section.


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

       ``Sec. 1860E-4. (a) Premiums.--
       ``(1) In general.--The provisions of section 1854 (other 
     than subsections (a)(6)(C) and (h)), including subsection 
     (b)(5) relating to the consolidation of drug and non-drug 
     beneficiary premiums and subsection (c) relating to uniform 
     bids and premiums, shall apply to an EFFS plan under this 
     part, subject to paragraph (2).
       ``(2) Cross-walk.--In applying paragraph (1), any reference 
     in section 1854(b)(1)(A) or 1854(d) to--
       ``(A) a Medicare Advantage monthly basic beneficiary 
     premium is deemed a reference to the EFFS monthly basic 
     beneficiary premium (as defined in paragraph (3)(A));
       ``(B) a Medicare Advantage monthly prescription drug 
     beneficiary premium is deemed a reference to the EFFS monthly 
     prescription drug beneficiary premium (as defined in 
     paragraph (3)(B)); and
       ``(C) a Medicare Advantage monthly supplemental beneficiary 
     premium is deemed a reference to the EFFS monthly 
     supplemental beneficiary premium (as defined in paragraph 
     (3)(C)).
       ``(3) Definitions.--For purposes of this part:
       ``(A) EFFS monthly basic beneficiary premium.--The term 
     `EFFS monthly basic beneficiary premium' means, with respect 
     to an EFFS plan--
       ``(i) described in section 1860E-3(c)(1)(A) (relating to 
     plans providing rebates), zero; or
       ``(ii) described in section 1860E-3(c)(1)(B), the amount 
     (if any) by which the unadjusted EFFS statutory non-drug 
     monthly bid amount exceeds the EFFS region-specific non-drug 
     monthly benchmark amount (as defined in section 1860E-
     3(b)(3)).
       ``(B) EFFS monthly prescription drug beneficiary premium.--
     The term `EFFS monthly prescription drug beneficiary premium' 
     means, with respect to an EFFS plan, the portion of the 
     aggregate monthly bid amount submitted under clause (i) of 
     section 1860E-3(a)(3)(A) for the year that is attributable 
     under such section to the provision of statutory prescription 
     drug benefits.
       ``(C) EFFS monthly supplemental beneficiary premium.--The 
     term `EFFS monthly supplemental beneficiary premium' means, 
     with respect to an EFFS plan, the portion of the aggregate 
     monthly bid amount submitted under clause (i) of section 
     1860E- 3(a)(3)(A) for the year that is attributable under 
     such section to the provision of nonstatutory benefits.
       ``(b) Organizational and Financial Requirements.--The 
     provisions of section 1855 shall apply to an EFFS plan 
     offered by an EFFS organization under this part.
       ``(c) Standards.--The provisions of paragraphs (1), (3), 
     and (4) of section 1856(b) shall apply to an EFFS plan 
     offered by an EFFS organization under this part.
       ``(d) Contracts with EFFS Organizations.--The provisions of 
     section 1857 shall apply to an EFFS plan offered by an EFFS 
     organization under this part, except that any reference in 
     such section to part C is deemed a reference to this part.''.
       (b) Application of Medigap Provisions to EFFS Plans.--
     Section 1882 of the Social Security Act (42 U.S.C. 1395ss) 
     shall be administered as if any reference to a 
     Medicare+Choice organization offering a Medicare+Choice plan 
     under part C of title XVIII of such Act were a reference both 
     to a Medicare Advantage organization offering a Medicare 
     Advantage plan under such part and an EFFS organization 
     offering an EFFS plan under part E of such title.

                 Subtitle B--Medicare Advantage Program

                  CHAPTER 1--IMPLEMENTATION OF PROGRAM

     SEC. 211. IMPLEMENTATION OF MEDICARE ADVANTAGE PROGRAM.

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

     SEC. 212. MEDICARE ADVANTAGE IMPROVEMENTS.

       (a) Equalizing Payments With Fee-For-Service.--
       (1) In general.--Section 1853(c)(1) (42 U.S.C. 1395w-
     23(c)(1)) is amended by adding at the end the following:
       ``(D) Based on 100 percent of fee-for-service costs.--
       ``(i) In general.--For 2004, the adjusted average per 
     capita cost for the year involved, determined under section 
     1876(a)(4) for the Medicare Advantage payment area for 
     services covered under parts A and B for individuals entitled 
     to benefits under part A and enrolled under part B who are 
     not enrolled in a Medicare Advantage under this part for the 
     year, but adjusted to exclude costs attributable to payments 
     under section 1886(h).
       ``(ii) Inclusion of costs of va and dod military facility 
     services to medicare-eligible beneficiaries.--In determining 
     the adjusted average per capita cost under clause (i) for a 
     year, such cost shall be adjusted to include the Secretary's 
     estimate, on a per capita basis, of the amount of additional 
     payments that would have been made in the area involved under 
     this title if individuals entitled to benefits under this 
     title had not received services from facilities of the 
     Department of Veterans Affairs or the Department of 
     Defense.''.

[[Page 16360]]

       (2) Conforming amendment.--Such section is further amended, 
     in the matter before subparagraph (A), by striking ``or (C)'' 
     and inserting ``(C), or (D)''.
       (b) Change in Budget Neutrality for Blend.--Section 1853(c) 
     (42 U.S.C. 1395w-23(c)) is amended--
       (1) in paragraph (1)(A), by inserting ``(for a year other 
     than 2004)'' after ``multiplied''; and
       (2) in paragraph (5), by inserting ``(other than 2004)'' 
     after ``for each year''.
       (c) Increasing Minimum Percentage Increase to National 
     Growth Rate.--
       (1) In general.--Section 1853(c)(1) (42 U.S.C. 1395w-
     23(c)(1)) is amended--
       (A) in subparagraph (A), by striking ``The sum'' and 
     inserting ``For a year before 2005, the sum'';
       (B) in subparagraph (B)(iv), by striking ``and each 
     succeeding year'' and inserting ``, 2003, and 2004'';
       (C) in subparagraph (C)(iv), by striking ``and each 
     succeeding year'' and inserting ``and 2003''; and
       (D) by adding at the end of subparagraph (C) the following 
     new clause:
       ``(v) For 2004 and each succeeding year, the greater of--

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

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

            CHAPTER 2--IMPLEMENTATION OF COMPETITION PROGRAM

     SEC. 221. COMPETITION PROGRAM BEGINNING IN 2006.

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


                      ``premiums and bid amount'';

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

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

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

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

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

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

     or any combination thereof.''; and
       (B) by adding at the end the following new paragraphs:

[[Page 16361]]

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

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

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

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

       ``(iv) Demographic adjustment, including adjustment for 
     health status.--The Administrator shall adjust the payment 
     amount under clause (i), the unadjusted Medicare Advantage 
     statutory non-drug monthly bid amount under clause (ii)(I), 
     and the Medicare Advantage area-specific non-drug monthly 
     benchmark amount under clause (ii)(II) for such risk factors 
     as age, disability status, gender, institutional status, and 
     such other factors as the Administrator determines to be 
     appropriate, including adjustment for health status under 
     paragraph (3), so as to ensure actuarial equivalence. The 
     Administrator may add to, modify, or substitute for such 
     adjustment factors if such changes will improve the 
     determination of actuarial equivalence.''.
       (d) Conforming Amendments.--
       (1) Protection against beneficiary selection.--Section 
     1852(b)(1)(A) (42 U.S.C. 1395w-22(b)(1)(A)) is amended by 
     adding at the end the following: ``The Administrator shall 
     not approve a plan of an organization if the Administrator 
     determines that the benefits are designed to substantially 
     discourage enrollment by certain Medicare Advantage eligible 
     individuals with the organization.''.
       (2) Conforming amendment to premium terminology.--Section 
     1854(b)(2) (42 U.S.C. 1395w-24(b)(2)) is amended by 
     redesignating subparagraph (C) as subparagraph (D) and by 
     striking subparagraphs (A) and (B) and inserting the 
     following:
       ``(A) Medicare advantage monthly basic beneficiary 
     premium.--The term `Medicare Advantage monthly basic 
     beneficiary premium' means, with respect to a Medicare 
     Advantage plan--
       ``(i) described in section 1853(a)(1)(A)(ii)(I) (relating 
     to plans providing rebates), zero; or
       ``(ii) described in section 1853(a)(1)(A)(ii)(II), the 
     amount (if any) by which the unadjusted Medicare Advantage 
     statutory non-drug monthly bid amount exceeds the Medicare 
     Advantage area-specific non-drug monthly benchmark amount.
       ``(B) Medicare advantage monthly prescription drug 
     beneficiary premium.--The term `Medicare Advantage monthly 
     prescription drug beneficiary premium' means, with respect to 
     a Medicare Advantage plan, that portion of the bid amount 
     submitted under clause (i) of subsection (a)(6)(A) for the 
     year that is attributable under such section to the provision 
     of statutory prescription drug benefits.
       ``(C) Medicare advantage monthly supplemental beneficiary 
     premium.--The term `Medicare Advantage monthly supplemental 
     beneficiary premium' means, with respect to a Medicare 
     Advantage plan, the portion of the aggregate monthly bid 
     amount submitted under clause (i) of subsection (a)(6)(A) for 
     the year that is attributable under such section to the 
     provision of nonstatutory benefits.''.
       (3) Requirement for uniform premium and bid amounts.--
     Section 1854(c) (42 U.S.C. 1395w-24(c)) is amended to read as 
     follows:
       ``(c) Uniform Premium and Bid Amounts.--The Medicare 
     Advantage monthly bid amount submitted under subsection 
     (a)(6), the Medicare Advantage monthly basic, prescription 
     drug, and supplemental beneficiary premiums, and the Medicare 
     Advantage monthly MSA premium charged under subsection (b) of 
     a Medicare Advantage organization under this part may not 
     vary among individuals enrolled in the plan.''.
       (4) Permitting beneficiary rebates.--
       (A) Section 1851(h)(4)(A) (42 U.S.C. 1395w-21(h)(4)(A)) is 
     amended by inserting ``except as provided under section 
     1854(b)(1)(C)'' after ``or otherwise''.
       (B) Section 1854(d) (42 U.S.C. 1395w-24(d)) is amended by 
     inserting ``, except as provided under subsection 
     (b)(1)(C),'' after ``and may not provide''.
       (5) Other conforming amendments relating to bids.--Section 
     1854 (42 U.S.C. 1395w-24) is amended--
       (A) in the heading of subsection (a), by inserting ``and 
     Bid Amounts'' after ``Premiums''; and
       (B) in subsection (a)(5)(A), by inserting ``paragraphs (2), 
     (3), and (4) of'' after ``filed under''.

[[Page 16362]]

       (e) Additional Conforming Amendments.--
       (1) Annual determination and announcement of certain 
     factors.--Section 1853(b)(1) (42 U.S.C. 1395w-23(b)(1)) is 
     amended by striking ``the respective calendar year'' and all 
     that follows and inserting the following: ``the calendar year 
     concerned with respect to each Medicare Advantage payment 
     area, the following:
       ``(A) Pre-competition information.--For years before 2006, 
     the following:
       ``(i) Medicare advantage capitation rates.--The annual 
     Medicare Advantage capitation rate for each Medicare 
     Advantage payment area for the year.
       ``(ii) Adjustment factors.--The risk and other factors to 
     be used in adjusting such rates under subsection (a)(1)(A) 
     for payments for months in that year.
       ``(B) Competition information.--For years beginning with 
     2006, the following:
       ``(i) Benchmark.--The Medicare Advantage area-specific non-
     drug benchmark under section 1853(j).
       ``(ii) Adjustment factors.--The adjustment factors applied 
     under section 1853(a)(1)(A)(iv) (relating to demographic 
     adjustment), section 1853(a)(1)(B) (relating to adjustment 
     for end-stage renal disease), and section 1853(a)(3) 
     (relating to health status adjustment).''.
       (2) Repeal of provisions relating to adjusted community 
     rate (acr).--
       (A) In general.--Subsections (e) and (f) of section 1854 
     (42 U.S.C. 1395w-24) are repealed.
       (B) Conforming amendments.--(i) Section 1839(a)(2) (42 
     U.S.C. 1395r(a)(2)) is amended by striking ``, and to 
     reflect'' and all that follows and inserting a period.
       (ii) Section 1852(a)(1) (42 U.S.C. 1395w-22(a)(1)) is 
     amended by striking ``title XI'' and all that follows and 
     inserting the following: ``title XI those items and services 
     (other than hospice care) for which benefits are available 
     under parts A and B to individuals residing in the area 
     served by the plan.''.
       (iii) Section 1857(d)(1) (42 U.S.C. 1395w-27(d)(1)) is 
     amended by striking ``, costs, and computation of the 
     adjusted community rate'' and inserting ``and costs''.
       (f) References Under Part E.--Section 1859 (42 U.S.C. 
     1395w-29) is amended by adding at the end the following new 
     subsection:
       ``(f) Application Under Part E.--In the case of any 
     reference under part E to a requirement or provision of this 
     part in the relation to an EFFS plan or organization under 
     such part, except as otherwise specified any such requirement 
     or provision shall be applied to such organization or plan in 
     the same manner as such requirement or provision applies to a 
     Medicare Advantage private fee-for-service plan (and the 
     Medicare Advantage organization that offers such plan) under 
     this part.''.
       (g) Effective Date.--The amendments made by this section 
     shall apply to payments and premiums for months beginning 
     with January 2006.

                     CHAPTER 3--ADDITIONAL REFORMS

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

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

     SEC. 232. AVOIDING DUPLICATIVE STATE REGULATION.

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

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

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

     SEC. 234. MEDICARE MSAS.

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

[[Page 16363]]



     SEC. 235. EXTENSION OF REASONABLE COST CONTRACTS.

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

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

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

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

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

       Subtitle C--Application of FEHBP-Style Competitive Reforms

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

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

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

       ``(ii) Exception.--In the case of an EFFS region that was a 
     competitive EFFS region for the previous year, the Medicare 
     Benefits Administrator may continue to treat the region as 
     meeting the requirement of subparagraph (A)(ii) if the region 
     would meet such requirement but for a de minimis reduction 
     below the percentage specified in clause (i).
       ``(2) Competitive effs non-drug monthly benchmark amount.--
     For purposes of this part, the term `competitive EFFS non-
     drug monthly benchmark amount' means, with respect to an EFFS 
     region for a month in a year and subject to paragraph (8), 
     the sum of the 2 components described in paragraph (3) for 
     the region and year. The Administrator shall compute such 
     benchmark amount for each competitive EFFS region before the 
     beginning of each annual, coordinated election period under 
     section 1851(e)(3)(B) for each year (beginning with 2010) in 
     which it is designated as such a region.
       ``(3) 2 components.--For purposes of paragraph (2), the 2 
     components described in this paragraph for an EFFS region and 
     a year are the following:
       ``(A) EFFS component.--The product of the following:
       ``(i) Weighted average of plan bids in region.--The 
     weighted average of the EFFS plan bids for the region and 
     year (as determined under paragraph (4)(A)).
       ``(ii) Non-ffs market share.--1 minus the fee-for-service 
     market share percentage determined under paragraph (5) for 
     the region and the year.
       ``(B) Fee-for-service component.--The product of the 
     following:
       ``(i) Fee-for-service region-specific non-drug amount.--The 
     fee-for-service region-specific non-drug amount (as defined 
     in paragraph (6)) for the region and year.
       ``(ii) Fee-for-service market share.--The fee-for-service 
     market share percentage (determined under paragraph (5)) for 
     the region and the year.
       ``(4) Determination of weighted average effs plan bids for 
     a region.--
       ``(A) In general.--For purposes of paragraph (3)(A)(i), the 
     weighted average of EFFS plan bids for an EFFS region and a 
     year is the sum of the following products for EFFS plans 
     described in subparagraph (C) in the region and year:
       ``(i) Unadjusted effs statutory non-drug monthly bid 
     amount.--The unadjusted EFFS statutory non-drug monthly bid 
     amount (as defined in subsection (a)(3)(A)(ii)(I)) for the 
     region and year.
       ``(ii) Plan's share of effs enrollment in region.--The 
     number of individuals described in subparagraph (B), divided 
     by the total number of such individuals for all EFFS plans 
     described in subparagraph (C) for that region and year.
       ``(B) Counting of individuals.--The Administrator shall 
     count, for each EFFS plan described in subparagraph (C) for 
     an EFFS region and year, the number of individuals who reside 
     in the region and who were enrolled under such plan under 
     this part during March of the previous year.
       ``(C) Exclusion of plans not offered in previous year.--For 
     an EFFS region and year, the EFFS plans described in this 
     subparagraph are plans that are offered in the region and 
     year and were offered in the region in March of the previous 
     year.
       ``(5) Computation of fee-for-service market share 
     percentage.--The Administrator shall determine, for a year 
     and an EFFS region, the proportion (in this subsection 
     referred to as the `fee-for-service market share percentage') 
     of the EFFS eligible individuals who are residents of the 
     region during March of the previous year, of such individuals 
     who were not enrolled in an EFFS plan or in a Medicare 
     Advantage plan (or, if greater, such proportion determined 
     for individuals nationally).
       ``(6) Fee-for-service region-specific non-drug amount.--
       ``(A) In general.--For purposes of paragraph (3)(B)(i) and 
     section 1839(h)(2)(A), subject to subparagraph (C), the term 
     `fee-for-service region-specific non-drug amount' means, for 
     a competitive EFFS region and a year, the adjusted average 
     per capita cost for the year involved, determined under 
     section 1876(a)(4) for such region for services covered under 
     parts A and B for individuals entitled to benefits under part 
     A and enrolled under this part who are not enrolled in an 
     EFFS plan under part E or a Medicare Advantage plan under 
     part C for the year, but adjusted to exclude costs 
     attributable to payments under section 1886(h).
       ``(B) Use of full risk adjustment to standardize fee-for-
     service costs to typical beneficiary.--In determining the 
     adjusted average per capita cost for a region and year under 
     subparagraph (A), such costs shall be adjusted to fully take 
     into account the demographic and health status risk factors 
     established under subsection (c)(3) so that such per capita 
     costs reflect the average costs for a typical beneficiary 
     residing in the region.
       ``(C) Inclusion of costs of va and dod military facility 
     services to medicare-eligible beneficiaries.--In determining 
     the adjusted average per capita cost under subparagraph (A) 
     for a year, such cost shall be adjusted to include the 
     Administrator's estimate, on a per capita basis, of the 
     amount of

[[Page 16364]]

     additional payments that would have been made in the region 
     involved under this title if individuals entitled to benefits 
     under this title had not received services from facilities of 
     the Department of Veterans Affairs or the Department of 
     Defense.
       ``(7) Application of competition.--In the case of an EFFS 
     region that is a competitive EFFS region for a year, for 
     purposes of applying subsections (b) and (c)(1) and section 
     1860E-4(a), any reference to an EFFS region-specific non-drug 
     monthly benchmark amount shall be treated as a reference to 
     the competitive EFFS non-drug monthly benchmark amount under 
     paragraph (2) for the region and year.
       ``(8) Phase-in of benchmark for each region.--
       ``(A) Use of blended benchmark.--In the case of a region 
     that has not been a competitive EFFS region for each of the 
     previous 4 years, the competitive EFFS non-drug monthly 
     benchmark amount shall be equal to the sum of the following:
       ``(i) New competitive component.--The product of--

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

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

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

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

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

       ``(ii) Exception.--In the case of an area that was a 
     competitive area for the previous year, the Medicare Benefits 
     Administrator may continue to treat the area as meeting the 
     requirement of subparagraph (A)(ii) if the area would meet 
     such requirement but for a de minimis reduction below the 
     percentage specified in clause (i).
       ``(2) Competitive medicare advantage non-drug monthly 
     benchmark amount.--For purposes of this part, the term 
     `competitive Medicare Advantage non-drug monthly benchmark 
     amount' means, with respect to a competitive Medicare 
     Advantage area for a month in a year subject to paragraph 
     (8), the sum of the 2 components described in paragraph (3) 
     for the area and year. The Administrator shall compute such 
     benchmark amount for each competitive Medicare Advantage area 
     before the beginning of each annual, coordinated election 
     period under section 1851(e)(3)(B) for each year (beginning 
     with 2010) in which it is designated as such an area.
       ``(3) 2 components.--For purposes of paragraph (2), the 2 
     components described in this paragraph for a competitive 
     Medicare Advantage area and a year are the following:
       ``(A) Medicare advantage component.--The product of the 
     following:
       ``(i) Weighted average of medicare advantage plan bids in 
     area.--The weighted average of the plan bids for the area and 
     year (as determined under paragraph (4)(A)).
       ``(ii) Non-ffs market share.--1 minus the fee-for-service 
     market share percentage, determined under paragraph (5) for 
     the area and year.
       ``(B) Fee-for-service component.--The product of the 
     following:
       ``(i) Fee-for-service area-specific non-drug amount.--The 
     fee-for-service area-specific non-drug amount (as defined in 
     paragraph (6)) for the area and year.
       ``(ii) Fee-for-service market share.--The fee-for-service 
     market share percentage, determined under paragraph (5) for 
     the area and year.
       ``(4) Determination of weighted average medicare advantage 
     bids for an area.--
       ``(A) In general.--For purposes of paragraph (3)(A)(i), the 
     weighted average of plan bids for an area and a year is the 
     sum of the following products for Medicare Advantage plans 
     described in subparagraph (C) in the area and year:
       ``(i) Monthly medicare advantage statutory non-drug bid 
     amount.--The unadjusted Medicare Advantage statutory non-drug 
     monthly bid amount.
       ``(ii) Plan's share of medicare advantage enrollment in 
     area.--The number of individuals described in subparagraph 
     (B), divided by the total number of such individuals for all 
     Medicare Advantage plans described in subparagraph (C) for 
     that area and year.
       ``(B) Counting of individuals.--The Administrator shall 
     count, for each Medicare Advantage plan described in 
     subparagraph (C) for an area and year, the number of 
     individuals who reside in the area and who were enrolled 
     under such plan under this part during March of the previous 
     year.
       ``(C) Exclusion of plans not offered in previous year.--For 
     an area and year, the Medicare Advantage plans described in 
     this subparagraph are plans described in the first sentence 
     of section 1851(a)(2)(A) that are offered in the area and 
     year and were offered in the area in March of the previous 
     year.
       ``(5) Computation of fee-for-service market share 
     percentage.--The Administrator shall determine, for a year 
     and a competitive Medicare Advantage area, the proportion (in 
     this subsection referred to as the `fee-for-service market 
     share percentage') of Medicare Advantage eligible individuals 
     residing in the area who during March of the previous year 
     were not enrolled in a Medicare Advantage plan or in an EFFS 
     plan (or, if greater, such proportion determined for 
     individuals nationally).
       ``(6) Fee-for-service area-specific non-drug amount.--
       ``(A) In general.--For purposes of paragraph (3)(B)(i) and 
     section 1839(h)(1)(A), subject to subparagraph (C), the term 
     `fee-for-service area-specific non-drug amount' means, for a 
     competitive Medicare Advantage area and a year, the adjusted 
     average per capita cost for the year involved, determined 
     under section 1876(a)(4) for such area for services covered 
     under parts A and B for individuals entitled to benefits 
     under part A and enrolled under this part who are not 
     enrolled in a Medicare Advantage plan under part C or an EFFS 
     plan under part E for the year, but adjusted to exclude costs 
     attributable to payments under section 1886(h).
       ``(B) Use of full risk adjustment to standardize fee-for-
     service costs to typical beneficiary.--In determining the 
     adjusted average per capita cost for an area and year under 
     subparagraph (A), such costs shall be adjusted to fully take 
     into account the demographic and health status risk factors 
     established under subsection (a)(1)(A)(iv) so that such per 
     capita costs reflect the average costs for a typical 
     beneficiary residing in the area.

[[Page 16365]]

       ``(C) Inclusion of costs of va and dod military facility 
     services to medicare-eligible beneficiaries.--In determining 
     the adjusted average per capita cost under subparagraph (A) 
     for a year, such cost shall be adjusted to include the 
     Administrator's estimate, on a per capita basis, of the 
     amount of additional payments that would have been made in 
     the area involved under this title if individuals entitled to 
     benefits under this title had not received services from 
     facilities of the Department of Veterans Affairs or the 
     Department of Defense.
       ``(7) Application of competition.--In the case of an area 
     that is a competitive Medicare Advantage area for a year, for 
     purposes of applying subsection (a)(1)(A)(ii) and sections 
     1854(b)(2)(A)(ii) and 1854(b)(3)(B)(i), any reference to a 
     Medicare Advantage area-specific non-drug monthly benchmark 
     amount shall be treated as a reference to the competitive 
     Medicare Advantage non-drug monthly benchmark amount under 
     paragraph (2) for the area and year.
       ``(8) Phase-in of benchmark for each area.--
       ``(A) Use of blended benchmark.--In the case of an area 
     that has not been a competitive Medicare Advantage area for 
     each of the previous 4 years, the competitive Medicare 
     Advantage non-drug monthly benchmark amount shall be equal to 
     the sum of the following:
       ``(i) New competitive component.--The product of--

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

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

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

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

[[Page 16366]]

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

             TITLE III--COMBATTING WASTE, FRAUD, AND ABUSE

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

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

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

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


        ``competitive acquisition of certain items and services

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

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

       ``(ii) among items and services in a manner such that the 
     programs apply to the highest cost and highest volume items 
     and services first.
       ``(C) Waiver of certain provisions.--In carrying out the 
     programs, the Secretary may waive such provisions of the 
     Federal Acquisition Regulation as are necessary for the 
     efficient implementation of this section, other than 
     provisions relating to confidentiality of information and 
     such other provisions as the Secretary determines 
     appropriate.
       ``(2) Items and services described.--The items and services 
     referred to in paragraph (1) are the following:
       ``(A) Durable medical equipment and medical supplies.--
     Covered items (as defined in section 1834(a)(13)) for which 
     payment is otherwise made under section 1834(a), including 
     items used in infusion and drugs and supplies used in 
     conjunction with durable medical equipment, but excluding 
     class III devices under the Federal Food, Drug, and Cosmetic 
     Act.
       ``(B) Other equipment and supplies.--Items, equipment, and 
     supplies (as described in section 1842(s)(2)(D) other than 
     enteral nutrients).
       ``(C) Off-the-shelf orthotics.--Orthotics (described in 
     section 1861(s)(9)) for which payment is otherwise made under 
     section 1834(h) which require minimal self-adjustment for 
     appropriate use and does not require expertise in trimming, 
     bending, molding, assembling, or customizing to fit to the 
     patient.

[[Page 16367]]

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

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

[[Page 16368]]

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

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

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

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

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


 ``competitive acquisition of covered outpatient drugs and biologicals

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

     This section shall not apply in the case of a physician who 
     elects section 1847B to apply.
       ``(C) Waiver of certain provisions.--In order to promote 
     competition, efficient service, and product quality, in 
     carrying out the program the Secretary may waive such 
     provisions of the Federal Acquisition Regulation as are 
     necessary for the efficient implementation of this section, 
     other than provisions relating to confidentiality of 
     information and such other provisions as the Secretary 
     determines appropriate.
       ``(D) Exclusion authority.--The Secretary may exclude 
     covered outpatient drugs and biologicals (including a class 
     of such drugs and biologicals) from the competitive bidding 
     system under this section if the drugs or biologicals (or 
     class) are not appropriate

[[Page 16369]]

     for competitive bidding due to low volume of utilization by 
     beneficiaries under this part or a unique mode or method of 
     delivery or similar reasons.
       ``(2) Covered outpatient drugs and biologicals, categories, 
     program defined.--For purposes of this section--
       ``(A) Covered outpatient drugs and biologicals defined.--
     The term `covered outpatient drugs and biologicals' means 
     drugs and biologicals to which section 1842(o) applies and 
     which are not covered under section 1847 (relating to 
     competitive acquisition for items of durable medical 
     equipment). Such term does not include the following:
       ``(i) Blood clotting factors.
       ``(ii) Drugs and biologicals furnished to individuals in 
     connection with the treatment of end stage renal disease.
       ``(iii) Radiopharmaceuticals.
       ``(iv) Vaccines.
       ``(B) 2 categories.--Each of the following shall be a 
     separate category of covered outpatient drugs and 
     biologicals, as identified by the Secretary:
       ``(i) Oncology category.--A category (in this section 
     referred to as the `oncology category') consisting of those 
     covered outpatient drugs and biologicals that, as determined 
     by the Secretary, are typically primarily billed by 
     oncologists or are otherwise used to treat cancer.
       ``(ii) Non-oncology categories.--Such numbers of categories 
     (in this section referred to as the `non-oncology 
     categories') consisting of covered outpatient drugs and 
     biologicals not described in clause (i), and appropriate 
     subcategories of such drugs and biologicals as the Secretary 
     may specify.
       ``(C) Program.--The term `program' means the competitive 
     acquisition program under this section.
       ``(D) Competitive acquisition area; area.--The terms 
     `competitive acquisition area' and `area' mean an appropriate 
     geographic region established by the Secretary under the 
     program.
       ``(E) Contractor.--The term `contractor' means an entity 
     that has entered into a contract with the Secretary under 
     this section.
       ``(3) Application of program payment methodology.--With 
     respect to covered outpatient drugs and biologicals which are 
     supplied under the program in an area and which are 
     prescribed by a physician who has not elected section 1847B 
     to apply--
       ``(A) the claim for such drugs and biologicals shall be 
     submitted by the contractor that supplied the drugs and 
     biologicals;
       ``(B) collection of amounts of any deductible and 
     coinsurance applicable with respect to such drugs and 
     biologicals shall be the responsibility of such contractor 
     and shall not be collected unless the drug or biological is 
     administered to the beneficiary involved; and
       ``(C) the payment under this section (and related 
     coinsurance amounts) for such drugs and biologicals--
       ``(i) shall be made only to such contractor;
       ``(ii) shall be conditioned upon the administration of such 
     drugs and biologicals; and
       ``(iii) shall be based on the average of the bid prices for 
     such drugs and biologicals in the area, as computed under 
     subsection (d).

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

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

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

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

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

[[Page 16370]]

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


       ``optional use of average sales price payment methodology

       ``Sec. 1847B. (a) In General.--

[[Page 16371]]

       ``(1) Election.--In connection with the annual election 
     made by a physician under section 1847A(a)(5), the physician 
     may elect to apply this section to the payment for covered 
     outpatient drugs and biologicals instead of the payment 
     methodology under section 1847A.
       ``(2) Implementation.--This section shall be implemented 
     with respect to categories of covered outpatient drugs and 
     biologicals described in section 1847A(a)(2)(B).
       ``(3) Covered outpatient drugs and biologicals defined.--
     For purposes of this section, the term `covered outpatient 
     drugs and biologicals' has the meaning given such term in 
     section 1847A(a)(2)(A).
       ``(b) Computation of Payment Amount.--
       ``(1) In general.--If this section applies with respect to 
     a covered outpatient drug or biological, the amount payable 
     for the drug or biological (based on a minimum dosage unit) 
     is, subject to applicable deductible and coinsurance--
       ``(A) in the case of a multiple source drug (as defined in 
     subsection (c)(6)(C)), 100 percent (or in the case of covered 
     outpatient drugs and biologicals furnished during 2005 and 
     2006, 112 percent) of the amount determined under paragraph 
     (3); or
       ``(B) in the case of a single source drug (as defined in 
     subsection (c)(6)(D)), 100 percent (or in the case of covered 
     outpatient drugs and biologicals furnished during 2005 and 
     2006, 112 percent) of the amount determined under paragraph 
     (4).
       ``(2) Specification of unit.--
       ``(A) Specification by manufacturer.--The manufacturer of a 
     covered outpatient drug shall specify the unit associated 
     with each National Drug Code as part of the submission of 
     data under section 1927(b)(3)(A)(iii).
       ``(B) Unit defined.--In this section, the term `unit' 
     means, with respect to a covered outpatient drug, the lowest 
     identifiable quantity (such as a capsule or tablet, milligram 
     of molecules, or grams) of the drug that is dispensed, 
     exclusive of any diluent without reference to volume measures 
     pertaining to liquids.
       ``(3) Multiple source drug.--For all drug products included 
     within the same multiple source drug, the amount specified in 
     this paragraph is the volume-weighted average of the average 
     sales prices reported under section 1927(b)(3)(A)(iii) 
     computed as follows:
       ``(A) Compute the sum of the products (for each national 
     drug code assigned to such drug products) of--
       ``(i) the manufacturer's average sales price (as defined in 
     subsection (c)); and
       ``(ii) the total number of units specified under paragraph 
     (2) sold, as reported under section 1927(b)(3)(A)(iii).
       ``(B) Divide the sum computed under subparagraph (A) by the 
     sum of the total number of units under subparagraph (A)(ii) 
     for all national drug codes assigned to such drug products.
       ``(4) Single source drug.--The amount specified in this 
     paragraph for a single source drug is the lesser of the 
     following:
       ``(A) Manufacturer's average sales price.--The 
     manufacturer's average sales price for a national drug code, 
     as computed using the methodology applied under paragraph 
     (3).
       ``(B) Wholesale acquisition cost (wac).--The wholesale 
     acquisition cost (as defined in subsection (c)(6)(B)) 
     reported for the single source drug.
       ``(5) Basis for determination.--The payment amount shall be 
     determined under this subsection based on information 
     reported under subsection (e) and without regard to any 
     special packaging, labeling, or identifiers on the dosage 
     form or product or package.
       ``(c) Manufacturer's Average Sales Price.--
       ``(1) In general.--For purposes of this subsection, subject 
     to paragraphs (2) and (3), the manufacturer's `average sales 
     price' means, of a covered outpatient drug for a NDC code for 
     a calendar quarter for a manufacturer for a unit--
       ``(A) the manufacturer's total sales (as defined by the 
     Secretary in regulations for purposes of section 1927(c)(1)) 
     in the United States for such drug in the calendar quarter; 
     divided by
       ``(B) the total number of such units of such drug sold by 
     the manufacturer in such quarter.
       ``(2) Certain sales exempted from computation.--In 
     calculating the manufacturer's average sales price under this 
     subsection, the following sales shall be excluded:
       ``(A) Sales exempt from best price.--Sales exempt from the 
     inclusion in the determination of `best price' under section 
     1927(c)(1)(C)(i).
       ``(B) Sales at nominal charge.--Such other sales as the 
     Secretary identifies by regulation as sales to an entity that 
     are nominal in price or do not reflect a market price paid by 
     an entity to which payment is made under this section.
       ``(3) Sale price net of discounts.--In calculating the 
     manufacturer's average sales price under this subsection, 
     such price shall be determined taking into account volume 
     discounts, prompt pay discounts, cash discounts, the free 
     goods that are contingent on any purchase requirement, 
     chargebacks, and rebates (other than rebates under section 
     1927), that result in a reduction of the cost to the 
     purchaser. A rebate to a payor or other entity that does not 
     take title to a covered outpatient drug shall not be taken 
     into account in determining such price unless the 
     manufacturer has an agreement with the payor or other entity 
     under which the purchaser's price for the drug is reduced as 
     a consequence of such rebate.
       ``(4) Authority to disregard average sales price during 
     first quarter of sales.--In the case of a covered outpatient 
     drug during an initial period (not to exceed a full calendar 
     quarter) in which data on the prices for sales for the drug 
     is not sufficiently available from the manufacturer to 
     compute an average sales price for the drug, the Secretary 
     may determine the amount payable under this section for the 
     drug without considering the manufacturer's average sales 
     price of that manufacturer for that drug.
       ``(5) Frequency of determinations.--
       ``(A) In general on a quarterly basis.--The manufacturer's 
     average sales price, for a covered outpatient drug of a 
     manufacturer, shall be determined by such manufacturer under 
     this subsection on a quarterly basis. In making such 
     determination insofar as there is a lag in the reporting of 
     the information on rebates and chargebacks under paragraph 
     (3) so that adequate data are not available on a timely 
     basis, the manufacturer shall apply a methodology established 
     by the Secretary based on a 12-month rolling average for the 
     manufacturer to estimate costs attributable to rebates and 
     chargebacks.
       ``(B) Updates in rates.--The payment rates under subsection 
     (b)(1) and (b)(2)(A) shall be updated by the Secretary on a 
     quarterly basis and shall be applied based upon the 
     manufacturer's average sales price determined for the most 
     recent calendar quarter.
       ``(C) Use of contractors; implementation.--The Secretary 
     may use a carrier, fiscal intermediary, or other contractor 
     to determine the payment amount under subsection (b). 
     Notwithstanding any other provision of law, the Secretary may 
     implement, by program memorandum or otherwise, any of the 
     provisions of this section.
       ``(6) Definitions and other rules.--In this section:
       ``(A) Manufacturer.--The term `manufacturer' means, with 
     respect to a covered outpatient drug, the manufacturer (as 
     defined in section 1927(k)(5)) whose national drug code 
     appears on such drug.
       ``(B) Wholesale acquisition cost.--The term `wholesale 
     acquisition cost' means, with respect to a covered outpatient 
     drug, the manufacturer's list price for the drug to 
     wholesalers or direct purchasers in the United States, not 
     including prompt pay or other discounts, rebates or 
     reductions in price, for the most recent month for which the 
     information is available, as reported in wholesale price 
     guides or other publications of drug pricing data.
       ``(C) Multiple source drug.--The term `multiple source 
     drug' means, for a calendar quarter, a covered outpatient 
     drug for which there are 2 or more drug products which--
       ``(i) are rated as therapeutically equivalent (under the 
     Food and Drug Administration's most recent publication of 
     `Approved Drug Products with Therapeutic Equivalence 
     Evaluations'),
       ``(ii) except as provided in subparagraph (E), are 
     pharmaceutically equivalent and bioequivalent, as determined 
     under subparagraph (F) and as determined by the Food and Drug 
     Administration, and
       ``(iii) are sold or marketed in the United States during 
     the quarter.
       ``(D) Single source drug.--The term `single source drug' 
     means a covered outpatient drug which is not a multiple 
     source drug and which is produced or distributed under an 
     original new drug application approved by the Food and Drug 
     Administration, including a drug product marketed by any 
     cross-licensed producers or distributors operating under the 
     new drug application, or which is a biological.
       ``(E) Exception from pharmaceutical equivalence and 
     bioequivalence requirement.--Subparagraph (C)(ii) shall not 
     apply if the Food and Drug Administration changes by 
     regulation the requirement that, for purposes of the 
     publication described in subparagraph (C)(i), in order for 
     drug products to be rated as therapeutically equivalent, they 
     must be pharmaceutically equivalent and bioequivalent, as 
     defined in subparagraph (F).
       ``(F) Determination of pharmaceutical equivalence and 
     bioequivalence.--For purposes of this paragraph--
       ``(i) drug products are pharmaceutically equivalent if the 
     products contain identical amounts of the same active drug 
     ingredient in the same dosage form and meet compendial or 
     other applicable standards of strength, quality, purity, and 
     identity; and
       ``(ii) drugs are bioequivalent if they do not present a 
     known or potential bioequivalence problem, or, if they do 
     present such a problem, they are shown to meet an appropriate 
     standard of bioequivalence.
       ``(G) Inclusion of vaccines.--In applying provisions of 
     section 1927 under this section, `other than a vaccine' is 
     deemed deleted from section 1927(k)(2)(B).

[[Page 16372]]

       ``(d) Authority To Use Alternative Payment in Response to 
     Public Health Emergency.--In the case of a public health 
     emergency under section 319 of the Public Health Service Act 
     in which there is a documented inability to access covered 
     outpatient drugs and biologicals, and a concomitant increase 
     in the price, of a drug or biological which is not reflected 
     in the manufacturer's average sales price for one or more 
     quarters, the Secretary may use the wholesale acquisition 
     cost (or other reasonable measure of drug price) instead of 
     the manufacturer's average sales price for such quarters and 
     for subsequent quarters until the price and availability of 
     the drug or biological has stabilized and is substantially 
     reflected in the applicable manufacturer's average sales 
     price.
       ``(e) Reports.--
       ``(1) Quarterly report on average sales price.--For 
     requirements for reporting the manufacturer's average sales 
     price (and, if required to make payment, the manufacturer's 
     wholesale acquisition cost) for the covered outpatient drug 
     or biological, see section 1927(b)(3).
       ``(2) Annual report to congress.--The Secretary shall 
     submit to the Committees on Energy and Commerce and Ways and 
     Means of the House of Representatives and the Committee on 
     Finance of the Senate an annual report on the operation of 
     this section. Such report shall include information on the 
     following:
       ``(A) Trends in average sales price under subsection (b).
       ``(B) Administrative costs associated with compliance with 
     this section.
       ``(C) Total value of payments made under this section.
       ``(D) Comparison of the average manufacturer price as 
     applied under section 1927 for a covered outpatient drug or 
     biological with the manufacturer's average sales price for 
     the drug or biological under this section.
       ``(f) Restriction on administrative and judicial review.--
     There shall be no administrative or judicial review under 
     section 1869, section 1878, or otherwise, of determinations 
     of manufacturer's average sales price under subsection 
     (c).''.
       (c) Continuation of Payment Methodology for 
     Radiopharmaceuticals.--Nothing in the amendments made by this 
     section shall be construed as changing the payment 
     methodology under part B of title XVIII of the Social 
     Security Act for radiopharmaceuticals, including the use by 
     carriers of invoice pricing methodology.
       (d) Conforming Amendments.--
       (1) In general.--Section 1842(o) (42 U.S.C. 1395u(o)) is 
     amended--
       (A) in paragraph (1), by inserting ``, subject to section 
     1847A and 1847B,'' before ``the amount payable for the drug 
     or biological''; and
       (B) by adding at the end of paragraph (2) the following: 
     ``This paragraph shall not apply in the case of payment under 
     section 1847A or 1847B.''.
       (2) No change in coverage basis.--Section 1861(s)(2)(A) (42 
     U.S.C. 1395x(s)(2)(A)) is amended by inserting ``(or would 
     have been so included but for the application of section 
     1847A or 1847B)'' after ``included in the physicians' 
     bills''.
       (3) Payment.--Section 1833(a)(1)(S) (42 U.S.C. 
     1395l(a)(1)(S)) is amended by inserting ``(or, if applicable, 
     under section 1847A or 1847B)'' after ``1842(o)''.
       (4) Consolidated reporting of pricing information.--Section 
     1927 (42 U.S.C. 1396r-8) is amended--
       (A) in subsection (a)(1), by inserting ``or under part B of 
     title XVIII'' after ``section 1903(a)'';
       (B) in subsection (b)(3)(A)--
       (i) in clause (i), by striking ``and'' at the end;
       (ii) in clause (ii), by striking the period and inserting 
     ``; and''; and
       (iii) by adding at the end the following new clause:
       ``(iii) for calendar quarters beginning on or after April 
     1, 2004, in conjunction with reporting required under clause 
     (i) and by national drug code (NDC)--

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

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

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

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

[[Page 16373]]

       (e) Construction Relating to Conduct of Investigation of 
     Fraud.--A recovery of an overpayment to a provider by a 
     recovery audit contractor shall not be construed to prohibit 
     the Secretary or the Attorney General from investigating and 
     prosecuting, if appropriate, allegations of fraud or abuse 
     arising from such overpayment.
       (f) Report.--The Secretary of Health and Human Services 
     shall submit to Congress a report on the project not later 
     than 6 months after the date of its completion. Such reports 
     shall include information on the impact of the project on 
     savings to the medicare program and recommendations on the 
     cost-effectiveness of extending or expanding the project.

                TITLE IV--RURAL HEALTH CARE IMPROVEMENTS

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

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

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

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

     SEC. 403. ESTABLISHMENT OF ESSENTIAL RURAL HOSPITAL 
                   CLASSIFICATION.

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

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

[[Page 16374]]

       (c) Effective Date.--The amendments made by this section 
     shall apply to cost reporting periods beginning on or after 
     October 1, 2004.

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

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

     SEC. 405. IMPROVEMENTS TO CRITICAL ACCESS HOSPITAL PROGRAM.

       (a) Increase in Payment Amounts.--
       (1) In general.--Sections 1814(l), 1834(g)(1), and 
     1883(a)(3) (42 U.S.C. 1395f(l); 1395m(g)(1); 42 U.S.C. 
     1395tt(a)(3)) are each amended by inserting ``equal to 102 
     percent of'' before ``the reasonable costs''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply to payments for services furnished during cost 
     reporting periods beginning on or after October 1, 2003.
       (b) Coverage of Costs for Certain Emergency Room On-Call 
     Providers.--
       (1) In general.--Section 1834(g)(5) (42 U.S.C. 1395m(g)(5)) 
     is amended--
       (A) in the heading--
       (i) by inserting ``certain'' before ``emergency''; and
       (ii) by striking ``physicians'' and inserting 
     ``providers'';
       (B) by striking ``emergency room physicians who are on-call 
     (as defined by the Secretary)'' and inserting ``physicians, 
     physician assistants, nurse practitioners, and clinical nurse 
     specialists who are on-call (as defined by the Secretary) to 
     provide emergency services''; and
       (C) by striking ``physicians' services'' and inserting 
     ``services covered under this title''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply with respect to costs incurred for services 
     provided on or after January 1, 2004.
       (c) Modification of the Isolation Test for Cost-Based CAH 
     Ambulance Services.--
       (1) In general.--Section 1834(l)(8) (42 U.S.C. 1395m(l)), 
     as added by section 205(a) of BIPA (114 Stat. 2763A-482), is 
     amended by adding at the end the following: ``The limitation 
     described in the matter following subparagraph (B) in the 
     previous sentence shall not apply if the ambulance services 
     are furnished by such a provider or supplier of ambulance 
     services who is a first responder to emergencies in 
     accordance with local protocols (as determined by the 
     Secretary).''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to ambulances services furnished on or after the 
     first cost reporting period that begins after the date of the 
     enactment of this Act.
       (d) Reinstatement of Periodic Interim Payment (PIP).--
       (1) In general.--Section 1815(e)(2) (42 U.S.C. 1395g(e)(2)) 
     is amended--
       (A) in the matter before subparagraph (A), by inserting ``, 
     in the cases described in subparagraphs (A) through (D)'' 
     after ``1986''; and
       (B) by striking ``and'' at the end of subparagraph (C);
       (C) by adding ``and'' at the end of subparagraph (D); and
       (D) by inserting after subparagraph (D) the following new 
     subparagraph:
       ``(E) inpatient critical access hospital services;''.
       (2) Development of alternative methods of periodic interim 
     payments.--With respect to periodic interim payments to 
     critical access hospitals for inpatient critical access 
     hospital services under section 1815(e)(2)(E) of the Social 
     Security Act, as added by paragraph (1), the Secretary shall 
     develop alternative methods for such payments that are based 
     on expenditures of the hospital.
       (3) Reinstatement of pip.--The amendments made by paragraph 
     (1) shall apply to payments made on or after January 1, 2004.
       (e) Condition for Application of Special Physician Payment 
     Adjustment.--
       (1) In general.--Section 1834(g)(2) (42 U.S.C. 1395m(g)(2)) 
     is amended by adding after and below subparagraph (B) the 
     following:
     ``The Secretary may not require, as a condition for applying 
     subparagraph (B) with respect to a critical access hospital, 
     that each physician providing professional services in the 
     hospital must assign billing rights with respect to such 
     services, except that such subparagraph shall not apply to 
     those physicians who have not assigned such billing 
     rights.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall be effective as if included in the enactment of section 
     403(d) of the Medicare, Medicaid, and SCHIP Balanced Budget 
     Refinement Act of 1999 (113 Stat. 1501A-371).
       (f) Flexibility in Bed Limitation for Hospitals.--Section 
     1820 (42 U.S.C. 1395i-4) is amended--
       (1) in subsection (c)(2)(B)(iii), by inserting ``subject to 
     paragraph (3)'' after ``(iii) provides'';
       (2) by adding at the end of subsection (c) the following 
     new paragraph:
       ``(3) Increase in maximum number of beds for hospitals with 
     strong seasonal census fluctuations.--
       ``(A) In general.--Subject to subparagraph (C), in the case 
     of a hospital that demonstrates that it meets the standards 
     established under subparagraph (B) and has not made the 
     election described in subsection (f)(2)(A), the bed 
     limitations otherwise applicable under paragraph (2)(B)(iii) 
     and subsection (f) shall be increased by 5 beds.
       ``(B) Standards.--The Secretary shall specify standards for 
     determining whether a critical access hospital has 
     sufficiently strong seasonal variations in patient admissions 
     to justify the increase in bed limitation provided under 
     subparagraph (A).''; and
       (3) in subsection (f)--
       (A) by inserting ``(1)'' after ``(f)''; and
       (B) by adding at the end the following new paragraph:
       ``(2)(A) A hospital may elect to treat the reference in 
     paragraph (1) to `15 beds' as a reference to `25 beds', but 
     only if no more than 10 beds in the hospital are at any time 
     used for non-acute care services. A hospital that makes such 
     an election is not eligible for the increase provided under 
     subsection (c)(3)(A).
       ``(B) The limitations in numbers of beds under the first 
     sentence of paragraph (1) are subject to adjustment under 
     subsection (c)(3).''.
       (4) Effective date.--The amendments made by this subsection 
     shall apply to designations made before, on, or after January 
     1, 2004.
       (g) Additional 5-Year Period of Funding for Grant 
     Program.--
       (1) In general.--Section 1820(g) (42 U.S.C. 1395i-4(g)) is 
     amended by adding at the end the following new paragraph:
       ``(4) Funding.--
       ``(A) In general.--Subject to subparagraph (B), payment for 
     grants made under this subsection during fiscal years 2004 
     through 2008 shall be made from the Federal Hospital 
     Insurance Trust Fund.
       ``(B) Annual aggregate limitation.--In no case may the 
     amount of payment provided for under subparagraph (A) for a 
     fiscal year exceed $25,000,000.''.
       (2) Conforming amendment.--Section 1820 (42 U.S.C. 1395i-4) 
     is amended by striking subsection (j).

     SEC. 406. REDISTRIBUTION OF UNUSED RESIDENT POSITIONS.

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

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

       ``(ii) Redistribution.--

       ``(I) In general.--The Secretary is authorized to increase 
     the otherwise applicable resident limits for hospitals by an 
     aggregate number estimated by the Secretary that does not 
     exceed the aggregate reduction in such limits attributable to 
     clause (i) (without taking into account any adjustment under 
     subclause (IV) of such clause).

[[Page 16375]]

       ``(II) Effective date.--No increase under subclause (I) 
     shall be permitted or taken into account for a hospital for 
     any portion of a cost reporting period that occurs before 
     July 1, 2004, or before the date of the hospital's 
     application for an increase under this clause. No such 
     increase shall be permitted for a hospital unless the 
     hospital has applied to the Secretary for such increase by 
     December 31, 2005.
       ``(III) Considerations in redistribution.--In determining 
     for which hospitals the increase in the otherwise applicable 
     resident limit is provided under subclause (I), the Secretary 
     shall take into account the need for such an increase by 
     specialty and location involved, consistent with subclause 
     (IV).
       ``(IV) Priority for rural and small urban areas.--In 
     determining for which hospitals and residency training 
     programs an increase in the otherwise applicable resident 
     limit is provided under subclause (I), the Secretary shall 
     first distribute the increase to programs of hospitals 
     located in rural areas or in urban areas that are not large 
     urban areas (as defined for purposes of subsection (d)) on a 
     first-come-first-served basis (as determined by the 
     Secretary) based on a demonstration that the hospital will 
     fill the positions made available under this clause and not 
     to exceed an increase of 25 full-time equivalent positions 
     with respect to any hospital.
       ``(V) Application of locality adjusted national average per 
     resident amount.--With respect to additional residency 
     positions in a hospital attributable to the increase provided 
     under this clause, notwithstanding any other provision of 
     this subsection, the approved FTE resident amount is deemed 
     to be equal to the locality adjusted national average per 
     resident amount computed under subparagraph (E) for that 
     hospital.
       ``(VI) Construction.--Nothing in this clause shall be 
     construed as permitting the redistribution of reductions in 
     residency positions attributable to voluntary reduction 
     programs under paragraph (6) or as affecting the ability of a 
     hospital to establish new medical residency training programs 
     under subparagraph (H).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

       (a) In General.--Section 1128B(b)(3) (42 U.S.C. 1320a-
     7(b)(3)), as amended by section 101(b)(2), is amended--
       (1) in subparagraph (F), by striking ``and'' after the 
     semicolon at the end;
       (2) in subparagraph (G), by striking the period at the end 
     and inserting ``; and''; and
       (3) by adding at the end the following new subparagraph:
       ``(H) any remuneration between a public or nonprofit 
     private health center entity described under clause (i) or 
     (ii) of section 1905(l)(2)(B) and any individual or entity 
     providing goods, items, services, donations or loans, or a 
     combination thereof, to such health center entity pursuant to 
     a contract, lease, grant, loan, or other agreement, if such 
     agreement contributes to the ability of the health center 
     entity to maintain or increase the availability, or enhance 
     the quality, of services provided to a medically underserved 
     population served by the health center entity.''.
       (b) Rulemaking for Exception for Health Center Entity 
     Arrangements.--
       (1) Establishment.--

[[Page 16376]]

       (A) In general.--The Secretary of Health and Human Services 
     (in this subsection referred to as the ``Secretary'') shall 
     establish, on an expedited basis, standards relating to the 
     exception described in section 1128B(b)(3)(H) of the Social 
     Security Act, as added by subsection (a), for health center 
     entity arrangements to the antikickback penalties.
       (B) Factors to consider.--The Secretary shall consider the 
     following factors, among others, in establishing standards 
     relating to the exception for health center entity 
     arrangements under subparagraph (A):
       (i) Whether the arrangement between the health center 
     entity and the other party results in savings of Federal 
     grant funds or increased revenues to the health center 
     entity.
       (ii) Whether the arrangement between the health center 
     entity and the other party restricts or limits a patient's 
     freedom of choice.
       (iii) Whether the arrangement between the health center 
     entity and the other party protects a health care 
     professional's independent medical judgment regarding 
     medically appropriate treatment.

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

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

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

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

       (a) In General.--Section 1886(b)(3)(I) (42 U.S.C. 
     1395ww(b)(3)(I)) is amended by adding at the end the 
     following new clause:
       ``(iii) In no case shall a hospital be denied treatment as 
     a sole community hospital or payment (on the basis of a 
     target rate as such as a hospital) because data are 
     unavailable for any cost reporting period due to changes in 
     ownership, changes in fiscal intermediaries, or other 
     extraordinary circumstances, so long as data for at least one 
     applicable base cost reporting period is available.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to cost reporting periods beginning on or after 
     January 1, 2004.

     SEC. 415. EXTENSION OF TELEMEDICINE DEMONSTRATION PROJECT.

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

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

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

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

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

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

     There is no administrative or judicial review respecting the 
     identification of a county or area or the assignment of a 
     specialty of any physician under this paragraph.
       ``(5) Rural census tracks.--To the extent feasible, the 
     Secretary shall treat a rural census tract of a metropolitan 
     statistical area (as determined under the most recent 
     modification of the Goldsmith Modification, originally 
     published in the Federal Register on February 27, 1992 (57 
     Fed. Reg. 6725) as an equivalent area for purposes of 
     qualifying as a primary care scarcity county or specialist 
     care scarcity county under this subsection.
       ``(6) Physician Defined.--For purposes of this paragraph, 
     the term `physician' means a physician described in section 
     1861(r)(1) and the term `primary care physician' means a 
     physician who is identified in the available data as a 
     general practitioner, family practice practitioner, general 
     internist, or obstetrician or gynecologist.
       ``(7) Publication of list of counties.--In carrying out 
     this subsection for a year, the Secretary shall include, as 
     part of the proposed and final rule to implement the 
     physician fee schedule under section 1848 for the year, a 
     list of all areas which will qualify as a primary care 
     scarcity county or specialist

[[Page 16377]]

     care scarcity county under this subsection for the year 
     involved.''.
       (2) Effective date.--The amendments made by subsection (a) 
     shall apply to physicians' services furnished or after 
     January 1, 2004.
       (b) Improvement to Medicare Incentive Payment Program.--
       (1) In general.--Section 1833(m) (42 U.S.C. 1395l(m)) is 
     amended--
       (A) by inserting ``(1)'' after ``(m)''; and
       (B) by adding at the end the following new paragraphs:
       ``(2) The Secretary shall establish procedures under which 
     the Secretary, and not the physician furnishing the service, 
     is responsible for determining when a payment is required to 
     be made under paragraph (1).
       ``(3) In carrying out paragraph (1) for a year, the 
     Secretary shall include, as part of the proposed and final 
     rule to implement the physician fee schedule under section 
     1848 for the year, a list of all areas which will qualify as 
     a health professional shortage area under paragraph (1) for 
     the year involved.''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply to physicians' services furnished or after 
     January 1, 2004.

     SEC. 418. RURAL HOSPICE DEMONSTRATION PROJECT.

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

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

                 TITLE V--PROVISIONS RELATING TO PART A

                Subtitle A--Inpatient Hospital Services

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

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

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

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

[[Page 16378]]

     case of an application for a classification of a medical 
     service or technology as a new medical service or technology 
     under section 1886(d)(5)(K) of the Social Security Act (42 
     U.S.C. 1395ww(d)(5)(K)) that was filed for fiscal year 2004 
     and that is denied--
       (A) the Secretary shall automatically reconsider the 
     application as an application for fiscal year 2005 under the 
     amendments made by this section; and
       (B) the maximum time period otherwise permitted for such 
     classification of the service or technology shall be extended 
     by 12 months.

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

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

     SEC. 504. WAGE INDEX ADJUSTMENT RECLASSIFICATION REFORM .

       (a) In General.--Section 1886(d) (42 U.S.C. 1395ww(d)) is 
     amended by adding at the end the following:
       ``(11)(A) In order to recognize commuting patterns among 
     Metropolitan Statistical Areas and between such Areas and 
     rural areas, the Secretary shall establish a process, upon 
     application of a subsection (d) hospital that establishes 
     that it is a qualifying hospital described in subparagraph 
     (B), for an increase of the wage index applied under 
     paragraph (3)(E) for the hospital in the amount computed 
     under subparagraph (D).
       ``(B) A qualifying hospital described in this subparagraph 
     is a subsection (d) hospital--
       ``(i) the average wages of which exceed the average wages 
     for the area in which the hospital is located; and
       ``(ii) which has at least 10 percent of its employees who 
     reside in one or more higher wage index areas.
       ``(C) For purposes of this paragraph, the term `higher wage 
     index area' means, with respect to a hospital, an area with a 
     wage index that exceeds that of the area in which the 
     hospital is located.
       ``(D) The increase in the wage index under subparagraph (A) 
     for a hospital shall be equal to the percentage of the 
     employees of the hospital that resides in any higher wage 
     index area multiplied by the sum of the products, for each 
     higher wage index area of--
       ``(i) the difference between (I) the wage index for such 
     area, and (II) the wage index of the area in which the 
     hospital is located (before the application of this 
     paragraph); and
       ``(ii) the number of employees of the hospital that reside 
     in such higher wage index area divided by the total number of 
     such employees that reside in all high wage index areas.
       ``(E) The process under this paragraph shall be based upon 
     the process used by the Medicare Geographic Classification 
     Review Board under paragraph (10) with respect to data 
     submitted by hospitals to the Board on the location of 
     residence of hospital employees and wages under the 
     applicable schedule established for geographic 
     reclassification.
       ``(F) A reclassification under this paragraph shall be 
     effective for a period of 3 fiscal years, except that the 
     Secretary shall establish procedures under which a subsection 
     (d) hospital may elect to terminate such reclassification 
     before the end of such period.
       ``(G) A hospital that is reclassified under this paragraph 
     for a period is not eligible for reclassification under 
     paragraphs (8) or (10) during that period.
       ``(H) Any increase in a wage index under this paragraph for 
     a hospital shall not be taken into account for purposes of--
       ``(i) computing the wage index for the area in which the 
     hospital is located or any other area; or
       ``(ii) applying any budget neutrality adjustment with 
     respect to such index under paragraph (8)(D).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall first apply to the wage index for discharges occurring 
     on or after October 1, 2004.

     SEC. 505. MEDPAC REPORT ON SPECIALTY HOSPITALS.

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

                      Subtitle B--Other Provisions

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

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

     SEC. 512. COVERAGE OF HOSPICE CONSULTATION SERVICES.

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

     SEC. 513. CORRECTION OF TRUST FUND HOLDINGS.

       (a) In General.--Within 120 days after the effective date 
     of this section, the Secretary of the Treasury shall take the 
     actions described in subsection (b) with respect to the 
     Federal Hospital Insurance Trust Fund (in this section 
     referred to as the ``Trust Fund'') with the goal being that, 
     after the actions are taken, the holdings of the Trust Fund 
     will replicate, to the extent practicable in the judgment of 
     the Secretary of the Treasury, in consultation with the 
     Secretary, the obligations that would have been held by the 
     trust fund if the clerical error had not occurred.
       (b) Obligations Issued and Redeemed.--The Secretary of the 
     Treasury shall--
       (1) issue to the Trust Fund obligations under chapter 31 of 
     title 31, United States Code, that bear issue dates, interest 
     rates, and maturity dates as the obligations that--
       (A) would have been issued to the Trust Fund if the 
     clerical error had not occurred; or

[[Page 16379]]

       (B) were issued to the Trust Fund and were redeemed by 
     reason of the clerical error; and
       (2) redeem from the Trust Fund obligations that would have 
     been redeemed from the Trust Fund if the clerical error had 
     not occurred.
       (c) Appropriation to Trust Fund.--Within 120 days after the 
     effective date of this section, there is hereby appropriated 
     to the Trust Fund, out of any money in the Treasury not 
     otherwise appropriated, an amount determined by the Secretary 
     of the Treasury, in consultation with the Secretary of Health 
     and Human Services, to be equal to the interest income lost 
     by the trust fund through the date of credit by reason of the 
     clerical error.
       (d) Clerical Error Defined.--For purposes of this section, 
     the term ``clerical error'' means the failure to have 
     transferred the correct amount from the general fund to the 
     Trust Fund, which failure occurred on April 15, 2001.

                TITLE VI--PROVISIONS RELATING TO PART B

                    Subtitle A--Physicians' Services

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

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

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

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

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

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

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

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

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

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

                    Subtitle B--Preventive Services

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

       (a) Coverage.--Section 1861(s)(2) (42 U.S.C. 1395x(s)(2)) 
     is amended--
       (1) in subparagraph (U), by striking ``and'' at the end;
       (2) in subparagraph (V), by inserting ``and'' at the end; 
     and
       (3) by adding at the end the following new subparagraph:

[[Page 16380]]

       ``(W) an initial preventive physical examination (as 
     defined in subsection (ww));''.
       (b) Services Described.--Section 1861 (42 U.S.C. 1395x) is 
     amended by adding at the end the following new subsection:

               ``Initial Preventive Physical Examination

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

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

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

           ``Cholesterol and Other Blood Lipid Screening Test

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

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

       (a) In General.--The first sentence of section 1833(b) (42 
     U.S.C. 1395l(b)), as amended by section 611(c)(1), is 
     amended--
       (1) by striking ``and'' before ``(7)''; and
       (2) by inserting before the period at the end the 
     following: ``, and (8) such deductible shall not apply with 
     respect to colorectal cancer screening tests (as described in 
     section 1861(pp)(1))''.
       (b) Conforming Amendments.--Paragraphs (2)(C)(ii) and 
     (3)(C)(ii) of section 1834(d) (42 U.S.C. 1395m(d)) are each 
     amended--
       (1) by striking ``deductible and'' in the heading; and
       (2) in subclause (I), by striking ``deductible or'' each 
     place it appears.
       (c) Effective Date.--The amendment made by this section 
     shall apply to items and services furnished on or after 
     Janaury 1, 2004.

     SEC. 614. IMPROVED PAYMENT FOR CERTAIN MAMMOGRAPHY SERVICES.

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

                       Subtitle C--Other Services

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

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

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

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

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

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

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

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

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

       ``(D) Payment for new drugs until temporary HCPCS code 
     assigned.--With respect to payment for covered OPD services 
     that includes a covered outpatient drug (as defined in 
     1927(k)) for a which a temporary HCPCS code has not been 
     assigned, the amount provided for payment for such drug under 
     the payment system under this subsection shall be equal to 95 
     percent of the average wholesale price for the drug.
       ``(E) Classes of drugs.--For purposes of this paragraph, 
     each of the following shall be treated as a separate class of 
     drugs:
       ``(i) Sole source drugs.--A sole source drug which for 
     purposes of this paragraph means a drug or biological that is 
     not a multiple source drug (as defined in subclauses (I) and 
     (II) of section 1927(k)(7)(A)(i)) and is not a drug approved 
     under an abbreviated new drug application under section 
     355(j) of the Federal Food, Drug, and Cosmetic Act.
       ``(ii) Innovator multiple source drugs.--Innovator multiple 
     source drugs (as defined in section 1927(k)(7)(A)(ii)).
       ``(iii) Noninnovator multiple source drugs.--Noninnovator 
     multiple source drugs (as defined in section 
     1927(k)(7)(A)(iii)).
       ``(F) Inapplicability of expenditures in determining 
     conversion factors.--Additional expenditures resulting from 
     this paragraph and paragraph (14)(C) in a year shall not be 
     taken into account in establishing the conversion factor for 
     that year.''.
       (2) Reduction in threshold for separate apcs for drugs.--
     Section 1833(t)(14), as redesignated by paragraph (1)(A), is 
     amended by adding at the end the following new subparagraph:
       ``(B) Threshold for establishment of separate apcs for 
     drugs.--The Secretary

[[Page 16381]]

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

     SEC. 622. PAYMENT FOR AMBULANCE SERVICES.

       (a) Phase-In Providing Floor Using Blend of Fee Schedule 
     and Regional Fee Schedules.--Section 1834(l) (42 U.S.C. 
     1395m(l)), as amended by section 410(a), is amended--
       (1) in paragraph (2)(E), by inserting ``consistent with 
     paragraph (11)'' after ``in an efficient and fair manner''; 
     and
       (2) by adding at the end the following new paragraph:
       ``(11) Phase-in providing floor using blend of fee schedule 
     and regional fee schedules.--In carrying out the phase-in 
     under paragraph (2)(E) for each level of service furnished in 
     a year, the portion of the payment amount that is based on 
     the fee schedule shall be the greater of the amount 
     determined under such fee schedule (without regard to this 
     paragraph) or the following blended rate of the fee schedule 
     under paragraph (1) and of a regional fee schedule for the 
     region involved:
       ``(A) For 2004, the blended rate shall be based 20 percent 
     on the fee schedule under paragraph (1) and 80 percent on the 
     regional fee schedule.
       ``(B) For 2005, the blended rate shall be based 40 percent 
     on the fee schedule under paragraph (1) and 60 percent on the 
     regional fee schedule.
       ``(C) For 2006, the blended rate shall be based 60 percent 
     on the fee schedule under paragraph (1) and 40 percent on the 
     regional fee schedule.
       ``(D) For 2007, 2008, and 2009, the blended rate shall be 
     based 80 percent on the fee schedule under paragraph (1) and 
     20 percent on the regional fee schedule.
       ``(E) For 2010 and each succeeding year, the blended rate 
     shall be based 100 percent on the fee schedule under 
     paragraph (1).
     For purposes of this paragraph, the Secretary shall establish 
     a regional fee schedule for each of the 9 Census divisions 
     using the methodology (used in establishing the fee schedule 
     under paragraph (1)) to calculate a regional conversion 
     factor and a regional mileage payment rate and using the same 
     payment adjustments and the same relative value units as used 
     in the fee schedule under such paragraph.''.
       (b) Adjustment in Payment for Certain Long Trips.--Section 
     1834(l), as amended by subsection (a), is further amended by 
     adding at the end the following new paragraph:
       ``(12) Adjustment in payment for certain long trips.--In 
     the case of ground ambulance services furnished on or after 
     January 1, 2004, and before January 1, 2009, regardless of 
     where the transportation originates, the fee schedule 
     established under this subsection shall provide that, with 
     respect to the payment rate for mileage for a trip above 50 
     miles the per mile rate otherwise established shall be 
     increased by \1/4\ of the payment per mile otherwise 
     applicable to such miles.''.
       (c) GAO Report on Costs and Access.--Not later than 
     December 31, 2005, the Comptroller General of the United 
     States shall submit to Congress an initial report on how 
     costs differ among the types of ambulance providers and on 
     access, supply, and quality of ambulance services in those 
     regions and States that have a reduction in payment under the 
     medicare ambulance fee schedule (under section 1834(l) of the 
     Social Security Act, as amended by this section). Not later 
     than December 31, 2007, the Comptroller General shall submit 
     to Congress a final report on such access and supply.
       (d) Effective Date.--The amendments made by this section 
     shall apply to ambulance services furnished on or after 
     January 1, 2004.

     SEC. 623. RENAL DIALYSIS SERVICES.

       (a) Demonstration of Alternative Delivery Models.--
       (1) Use of advisory board.--In carrying out the 
     demonstration project relating to improving care for people 
     with end-stage renal disease through alternative delivery 
     models (as published in the Federal Register of June 4, 
     2003), the Secretary shall establish an advisory board 
     comprised of representatives described in paragraph (2) to 
     provide advice and recommendations with respect to the 
     establishment and operation of such demonstration project.
       (2) Representatives.--Representatives referred to in 
     paragraph (1) include representatives of the following:
       (A) Patient organizations.
       (B) Clinicians.
       (C) The medicare payment advisory commission, established 
     under section 1805 of the Social Security Act (42 U.S.C. 
     1395b-6).
       (D) The National Kidney Foundation.
       (E) The National Institute of Diabetes and Digestive and 
     Kidney Diseases of National Institutes of Health.
       (F) End-stage renal disease networks.
       (G) Medicare contractors to monitor quality of care.
       (I) Providers of services and renal dialysis facilities 
     furnishing end-stage renal disease services.

[[Page 16382]]

       (J) Economists.
       (K) Researchers.
       (b) Restoring Composite Rate Exceptions for Pediatric 
     Facilities.--
       (1) In general.--Section 422(a)(2) of BIPA is amended--
       (A) in subparagraph (A), by striking ``and (C)'' and 
     inserting ``, (C), and (D)'';
       (B) in subparagraph (B), by striking ``In the case'' and 
     inserting ``Subject to subparagraph (D), in the case''; and
       (C) by adding at the end the following new subparagraph:
       ``(D) Inapplicability to pediatric facilities.--
     Subparagraphs (A) and (B) shall not apply, as of October 1, 
     2002, to pediatric facilities that do not have an exception 
     rate described in subparagraph (C) in effect on such date. 
     For purposes of this subparagraph, the term `pediatric 
     facility' means a renal facility at least 50 percent of whose 
     patients are individuals under 18 years of age.''.
       (2) Conforming amendment.--The fourth sentence of section 
     1881(b)(7) (42 U.S.C. 1395rr(b)(7)), as amended by subsection 
     (b), is further amended by striking ``Until'' and inserting 
     ``Subject to section 422(a)(2) of the Medicare, Medicaid, and 
     SCHIP Benefits Improvement and Protection Act of 2000, and 
     until''.
       (c) Increase in Renal Dialysis Composite Rate for Services 
     Furnished in 2004.--Notwithstanding any other provision of 
     law, with respect to payment under part B of title XVIII of 
     the Social Security Act for renal dialysis services furnished 
     in 2004, the composite payment rate otherwise established 
     under section 1881(b)(7) of such Act (42 U.S.C. 1395rr(b)(7)) 
     shall be increased by 1.6 percent.

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

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

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

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

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

       (a) In General.--Section 1833(o) (42 U.S.C. 1395l(o)) is 
     amended--
       (1) in paragraph (1), by striking ``no more than the limits 
     established under paragraph (2)'' and inserting ``no more 
     than the amount of payment applicable under paragraph (2)''; 
     and
       (2) in paragraph (2), to read as follows:
       ``(2)(A) Except as provided by the Secretary under 
     subparagraphs (B) and (C), the amount of payment under this 
     paragraph for custom molded shoes, extra depth shoes, and 
     inserts shall be the amount determined for such items by the 
     Secretary under section 1834(h).
       ``(B) The Secretary or a carrier may establish payment 
     amounts for shoes and inserts that are lower than the amount 
     established under section 1834(h) if the Secretary finds that 
     shoes and inserts of an appropriate quality are readily 
     available at or below the amount established under such 
     section.
       ``(C) In accordance with procedures established by the 
     Secretary, an individual entitled to benefits with respect to 
     shoes described in section 1861(s)(12) may substitute 
     modification of such shoes instead of obtaining one (or more, 
     as specified by the Secretary) pair of inserts (other than 
     the original pair of inserts with respect to such shoes). In 
     such case, the Secretary shall substitute, for the payment 
     amount established under section 1834(h), a payment amount 
     that the Secretary estimates will assure that there is no net 
     increase in expenditures under this subsection as a result of 
     this subparagraph.''.
       (b) Conforming Amendments.--(1) Section 1834(h)(4)(C) (42 
     U.S.C. 1395m(h)(4)(C)) is amended by inserting ``(and 
     includes shoes described in section 1861(s)(12))'' after ``in 
     section 1861(s)(9)''.
       (2) Section 1842(s)(2) (42 U.S.C. 1395u(s)(2)) is amended 
     by striking subparagraph (C).
       (c) Effective Date.--The amendments made by this section 
     shall apply to items furnished on or after January 1, 2004.

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

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

     SEC. 628. PART B DEDUCTIBLE.

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

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

       (a) In General.--Section 1861 (42 U.S.C. 1395x), as amended 
     by sections 611(a) and 612(a) is amended--
       (1) in subsection (s)(2)--
       (A) by striking ``and'' at the end of subparagraph (W);
       (B) by adding ``and'' at the end of subparagraph (X); and

[[Page 16383]]

       (C) by adding at the end the following new subparagraph:
       ``(Y) intravenous immune globulin for the treatment of 
     primary immune deficiency diseases in the home (as defined in 
     subsection (yy));''; and
       (2) by adding at the end the following new subsection:

                     ``Intravenous Immune Globulin

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

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

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

                ``Diabetes Screening Tests and Services

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

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

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

            TITLE VII--PROVISIONS RELATING TO PARTS A AND B

                    Subtitle A--Home Health Services

     SEC. 701. UPDATE IN HOME HEALTH SERVICES.

       (a) Change to Calender Year Update.--
       (1) In general.--Section 1895(b) (42 U.S.C. 1395fff(b)(3)) 
     is amended--
       (A) in paragraph (3)(B)(i)--
       (i) by striking ``each fiscal year (beginning with fiscal 
     year 2002)'' and inserting ``fiscal year 2002 and for fiscal 
     year 2003 and for each subsequent year (beginning with 
     2004)''; and
       (ii) by inserting ``or year'' after ``the fiscal year'';
       (B) in paragraph (3)(B)(ii)(II), by striking ``any 
     subsequent fiscal year'' and inserting ``2004 and any 
     subsequent year'';
       (C) in paragraph (3)(B)(iii), by inserting ``or year'' 
     after ``fiscal year'' each place it appears;
       (D) in paragraph (3)(B)(iv)--
       (i) by inserting ``or year'' after ``fiscal year'' each 
     place it appears; and
       (ii) by inserting ``or years'' after ``fiscal years''; and
       (E) in paragraph (5), by inserting ``or year'' after 
     ``fiscal year''.
       (2) Transition rule.--The standard prospective payment 
     amount (or amounts) under section 1895(b)(3) of the Social 
     Security Act for the calendar quarter beginning on October 1, 
     2003, shall be such amount (or amounts) for the previous 
     calendar quarter.
       (b) Changes in Updates for 2004, 2005, and 2006.--Section 
     1895(b)(3)(B)(ii) (42 U.S.C. 1395fff(b)(3)(B)(ii)), as 
     amended by subsection (a)(1)(B), is amended--
       (1) by striking ``or'' at the end of subclause (I);
       (2) by redesignating subclause (II) as subclause (III);
       (3) in subclause (III), as so redesignated, by striking 
     ``2004'' and inserting ``2007''; and
       (4) by inserting after subclause (I) the following new 
     subclause:

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

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

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

[[Page 16384]]

       (B) by striking ``or (a)(4)'' and inserting ``(a)(4), or 
     (a)(5)''.

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

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

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

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

             Subtitle B--Direct Graduate Medical Education

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

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

                  Subtitle C--Chronic Care Improvement

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

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


                       ``chronic care improvement

       ``Sec. 1808. (a) In General.--
       ``(1) In general.--The Secretary shall establish a process 
     for providing chronic care improvement programs in each CCIA 
     region for medicare beneficiaries who are not enrolled under 
     part C or E and who have certain chronic conditions, such as 
     congestive heart failure, diabetes, chronic obstructive 
     pulmonary disease (COPD), stroke, prostate and colon cancer, 
     hypertension, or other disease as identified by the Secretary 
     as appropriate for chronic care improvement. Such a process 
     shall begin to be implemented no later than 1 year after the 
     date of the enactment of this section.
       ``(2) Terminology.--For purposes of this section:
       ``(A) CCIA region.--The term `CCIA region' means a chronic 
     care improvement administrative region delineated under 
     subsection (b)(2).
       ``(B) Chronic care improvement program.--The terms `chronic 
     care improvement program' and `program' means such a program 
     provided by a contractor under this section.
       ``(C) Contractor.--The term `contractor' means an entity 
     with a contract to provide a chronic care improvement program 
     in a CCIA region under this section.
       ``(D) Individual plan.--The term `individual plan' means a 
     chronic care improvement plan established under subsection 
     (c)(5) for an individual.
       ``(3) Construction.--Nothing in this section shall be 
     construed as expanding the amount, duration, or scope of 
     benefits under this title.
       ``(b) Competitive Bidding Process.--
       ``(1) In general.--Under this section the Secretary shall 
     award contracts to qualified entities for chronic care 
     improvement programs for each CCIA region under this section 
     through a competitive bidding process.
       ``(2) Process.--Under such process--
       ``(A) the Secretary shall delineate the United States into 
     multiple chronic care improvement administrative regions; and
       ``(B) the Secretary shall select at least 2 winning bidders 
     in each CCIA region on the basis of the ability of each 
     bidder to carry out a chronic care improvement program in 
     accordance with this section, in order to achieve improved 
     health and financial outcomes.
       ``(3) Eligible contractor.--A contractor may be a disease 
     improvement organization, health insurer, provider 
     organization, a group of physicians, or any other legal 
     entity that the Secretary determines appropriate.
       ``(c) Chronic Care Improvement Programs.--
       ``(1) In general.--Each contract under this section shall 
     provide for the operation of a chronic care improvement 
     program by a contractor in a CCIA region consistent with this 
     subsection.
       ``(2) Identification of prospective program participants.--
     Each contractor shall have a method for identifying medicare 
     beneficiaries in the region to whom it will offer services 
     under its program. The contractor shall identify such 
     beneficiaries through claims or other data and other

[[Page 16385]]

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

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

       (a) Under Medicare Advantage Program.--Section 1852 (42 
     U.S.C. 1395w-22) is amended--
       (1) by amending subsection (e) to read as follows:
       ``(e) Implementation of Chronic Care Improvement Programs 
     for Beneficiaries with Multiple or Sufficiently Severe 
     Chronic Conditions.--
       ``(1) In general.--Each Medicare Advantage organization 
     with respect to each Medicare Advantage plan it offers shall 
     have in effect, for enrollees with multiple or sufficiently 
     severe chronic conditions, a chronic care improvement program 
     that is designed to manage the needs of such enrollees and 
     that meets the requirements of this subsection.
       ``(2) Enrollee with multiple or sufficiently severe chronic 
     conditions.--For purposes of this subsection, the term 
     `enrollee with multiple or sufficiently severe chronic 
     conditions' means, with respect to an enrollee in a Medicare 
     Advantage plan of a Medicare Advantage organization, an 
     enrollee in the plan who has one or more chronic conditions, 
     such as congestive heart failure, diabetes, COPD, stroke, 
     prostate and colon cancer, hypertension, or other disease as 
     identified by the organization as appropriate for chronic 
     care improvement.
       ``(3) General requirements.--
       ``(A) In general.--Each chronic care improvement program 
     under this subsection shall be conducted consistent with this 
     subsection.
       ``(B) Identification of enrollees.--Each such program shall 
     have a method for monitoring and identifying enrollees with 
     multiple or sufficiently severe chronic conditions that meet 
     the organization's criteria for participation under the 
     program.
       ``(C) Development of plans.--For an enrollee identified 
     under subparagraph (B) for participation in a program, the 
     program shall develop, with the enrollee's consent, an 
     individualized, goal-oriented chronic care improvement plan 
     for chronic care improvement.
       ``(D) Elements of plans.--Each chronic care improvement 
     plan developed under subparagraph (C) shall include a single 
     point of contact to coordinate care and the following, as 
     appropriate:
       ``(i) Self-improvement education for the enrollee (such as 
     education for disease management through medical nutrition 
     therapy) and support education for health care providers, 
     primary caregivers, and family members.
       ``(ii) Coordination of health care services, such as 
     application of a prescription drug regimen and home health 
     services.
       ``(iii) Collaboration with physicians and other providers 
     to enhance communication of relevant clinical information.
       ``(iv) The use of monitoring technologies that enable 
     patient guidance through the exchange of pertinent clinical 
     information, such as vital signs, symptomatic information, 
     and health self-assessment.
       ``(v) The provision of information about hospice care, pain 
     and palliative care, and end-of-life care.
       ``(E) Organization responsibilities.--In establishing and 
     carrying out chronic care improvement plans for participants 
     under

[[Page 16386]]

     this paragraph, a Medicare Advantage organization shall, 
     directly or through subcontractors--
       ``(i) guide participants in managing their health, 
     including all their co-morbidities, and in performing the 
     activities as specified under the elements of the plan;
       ``(ii) use decision support tools such as evidence-based 
     practice guidelines or other criteria as determined by the 
     Secretary; and
       ``(iii) develop a clinical information database to track 
     and monitor each participant across settings and to evaluate 
     outcomes.
       ``(3) Additional requirements.--The Secretary may establish 
     additional requirements for chronic care improvement programs 
     under this section.
       ``(4) Accreditation.--The Secretary may provide that 
     chronic care improvement programs that are accredited by 
     qualified organizations may be deemed to meet such 
     requirements under this subsection as the Secretary may 
     specify.
       ``(5) Outcomes report.--Each Medicare Advantage 
     organization with respect to its chronic care improvement 
     program under this subsection shall monitor and report to the 
     Secretary information on the quality of care and efficacy of 
     such program as the Secretary may require.''; and
       (2) by amending subparagraph (I) of subsection (c)(1) to 
     read as follows:
       ``(I) Chronic care improvement program.--A description of 
     the organization's chronic care improvement program under 
     subsection (e).''.
       (b) Application Under Enhanced Fee-for-Service Program.--
     Section 1860E-2(c)(3), as inserted by section 201(a), is 
     amended by inserting ``, including subsection (e) (relating 
     to implementation of chronic care improvement programs)'' 
     after ``The provisions of section 1852''.
       (c) Effective Date.--The amendments made by this section 
     shall apply for contract years beginning on or after 1 year 
     after the date of the enactment of this Act.

     SEC. 723. INSTITUTE OF MEDICINE REPORT.

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

     SEC. 724. MEDPAC REPORT.

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

                      Subtitle D--Other Provisions

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

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

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

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

[[Page 16387]]

     term in section 1861(o) of the Social Security Act (42 U.S.C. 
     1395x(o)).
       (2) Medical adult day care facility.--The term ``medical 
     adult day care facility'' means a facility that--
       (A) has been licensed or certified by a State to furnish 
     medical adult day care services in the State for a continuous 
     2-year period;
       (B) is engaged in providing skilled nursing services and 
     other therapeutic services directly or under arrangement with 
     a home health agency;
       (C) meets such standards established by the Secretary to 
     assure quality of care and such other requirements as the 
     Secretary finds necessary in the interest of the health and 
     safety of individuals who are furnished services in the 
     facility; and
       (D) provides medical adult day care services.
       (3) Medical adult day care services.--The term ``medical 
     adult day care services'' means--
       (A) home health service items and services described in 
     paragraphs (1) through (7) of section 1861(m) furnished in a 
     medical adult day care facility;
       (B) a program of supervised activities furnished in a group 
     setting in the facility that--
       (i) meet such criteria as the Secretary determines 
     appropriate; and
       (ii) is designed to promote physical and mental health of 
     the individuals; and
       (C) such other services as the Secretary may specify.
       (4) Medicare beneficiary.--The term ``medicare 
     beneficiary'' means an individual entitled to benefits under 
     part A of this title, enrolled under part B of this title, or 
     both.

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

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

     SEC. 734. TREATMENT OF CERTAIN PHYSICIAN PATHOLOGY SERVICES.

       (a) In General.--Section 1848(i) (42 U.S.C. 1395w-4(i)) is 
     amended by adding at the end the following new paragraph:
       ``(4) Treatment of certain inpatient physician pathology 
     services.--
       ``(A) In general.--With respect to services furnished on or 
     after January 1, 2004, and before January 1, 2009, if an 
     independent laboratory furnishes the technical component of a 
     physician pathology service to a fee-for-service medicare 
     beneficiary who is an inpatient or outpatient of a covered 
     hospital, the Secretary shall treat such component as a 
     service for which payment shall be made to the laboratory 
     under this section and not as an inpatient hospital service 
     for which payment is made to the hospital under section 
     1886(d) or as a hospital outpatient service for which payment 
     is made to the hospital under section 1833(t).
       ``(B) Definitions.--In this paragraph:
       ``(i) Covered hospital.--

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

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

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

       (b) Conforming Amendment.--Section 542 of the Medicare, 
     Medicaid, and SCHIP Benefits Improvement and Protection Act 
     of 2000 (114 Stat. 2763A-550), as enacted into law by

[[Page 16388]]

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

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

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

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

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

              TITLE VIII--MEDICARE BENEFITS ADMINISTRATION

     SEC. 801. ESTABLISHMENT OF MEDICARE BENEFITS ADMINISTRATION.

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


                   ``medicare benefits administration

       ``Sec. 1809. (a) Establishment.--There is established 
     within the Department of Health and Human Services an agency 
     to be known as the Medicare Benefits Administration.
       ``(b) Administrator; Deputy Administrator; Chief Actuary.--
       ``(1) Administrator.--
       ``(A) In general.--The Medicare Benefits Administration 
     shall be headed by an administrator to be known as the 
     `Medicare Benefits Administrator' (in this section referred 
     to as the `Administrator') who shall be appointed by the 
     President, by and with the advice and consent of the Senate. 
     The Administrator shall be in direct line of authority to the 
     Secretary.
       ``(B) Compensation.--The Administrator shall be paid at the 
     rate of basic pay payable for level III of the Executive 
     Schedule under section 5314 of title 5, United States Code.
       ``(C) Term of office.--The Administrator shall be appointed 
     for a term of 4 years. In any case in which a successor does 
     not take office at the end of an Administrator's term of 
     office, that Administrator may continue in office until the 
     entry upon office of such a successor. An Administrator 
     appointed to a term of office after the commencement of such 
     term may serve under such appointment only for the remainder 
     of such term.
       ``(D) General authority.--The Administrator shall be 
     responsible for the exercise of all powers and the discharge 
     of all duties of the Administration, and shall have authority 
     and control over all personnel and activities thereof.
       ``(E) Rulemaking authority.--The Administrator may 
     prescribe such rules and regulations as the Administrator 
     determines necessary or appropriate to carry out the 
     functions of the Administration. The regulations prescribed 
     by the Administrator shall be subject to the rulemaking 
     procedures established under section 553 of title 5, United 
     States Code. The Administrator shall provide for the issuance 
     of new regulations to carry out parts C, D, and E.
       ``(F) Authority to establish organizational units.--The 
     Administrator may establish, alter, consolidate, or 
     discontinue such organizational units or components within 
     the Administration as the Administrator considers necessary 
     or appropriate, except as specified in this section.
       ``(G) Authority to delegate.--The Administrator may assign 
     duties, and delegate, or authorize successive redelegations 
     of, authority to act and to render decisions, to such 
     officers and employees of the Administration as the 
     Administrator may find necessary. Within the limitations of 
     such delegations, redelegations, or assignments, all official 
     acts and decisions of such officers and employees shall have 
     the same force and effect as though performed or rendered by 
     the Administrator.
       ``(2) Deputy administrator.--
       ``(A) In general.--There shall be a Deputy Administrator of 
     the Medicare Benefits Administration who shall be appointed 
     by the President, by and with the advice and consent of the 
     Senate.
       ``(B) Compensation.--The Deputy Administrator shall be paid 
     at the rate of basic pay payable for level IV of the 
     Executive Schedule under section 5315 of title 5, United 
     States Code.
       ``(C) Term of office.--The Deputy Administrator shall be 
     appointed for a term of 4 years. In any case in which a 
     successor does not take office at the end of a Deputy 
     Administrator's term of office, such Deputy Administrator may 
     continue in office until the entry upon office of such a 
     successor. A Deputy Administrator appointed to a term of 
     office after the commencement of such term may serve under 
     such appointment only for the remainder of such term.
       ``(D) Duties.--The Deputy Administrator shall perform such 
     duties and exercise such powers as the Administrator shall 
     from time to time assign or delegate. The Deputy 
     Administrator shall be Acting Administrator of the 
     Administration during the absence or disability of the 
     Administrator and, unless the President designates another 
     officer of the Government as Acting Administrator, in the 
     event of a vacancy in the office of the Administrator.
       ``(3) Chief actuary.--
       ``(A) In general.--There is established in the 
     Administration the position of Chief Actuary. The Chief 
     Actuary shall be appointed by, and in direct line of 
     authority to, the Administrator of such Administration. The 
     Chief Actuary shall be appointed from among individuals who 
     have demonstrated, by their education and experience, 
     superior expertise in the actuarial sciences. The Chief 
     Actuary may be removed only for cause.
       ``(B) Compensation.--The Chief Actuary shall be compensated 
     at the highest rate of basic pay for the Senior Executive 
     Service under section 5382(b) of title 5, United States Code.
       ``(C) Duties.--The Chief Actuary shall exercise such duties 
     as are appropriate for the office of the Chief Actuary and in 
     accordance with professional standards of actuarial 
     independence.
       ``(4) Secretarial coordination of program administration.--
     The Secretary shall ensure appropriate coordination between 
     the Administrator and the Administrator of the Centers for 
     Medicare & Medicaid Services in carrying out the programs 
     under this title.
       ``(c) Duties; Administrative Provisions.--
       ``(1) Duties.--
       ``(A) General duties.--The Administrator shall carry out 
     parts C, D, and E, including--
       ``(i) negotiating, entering into, and enforcing, contracts 
     with plans for the offering of Medicare Advantage plans under 
     part C and EFFS plans under part E, including the offering of 
     qualified prescription drug coverage under such plans; and
       ``(ii) negotiating, entering into, and enforcing, contracts 
     with PDP sponsors for the offering of prescription drug plans 
     under part D.
       ``(B) Other duties.--The Administrator shall carry out any 
     duty provided for under

[[Page 16389]]

     part C, part D, or part E, including demonstration projects 
     carried out in part or in whole under such parts, the 
     programs of all-inclusive care for the elderly (PACE program) 
     under section 1894, the social health maintenance 
     organization (SHMO) demonstration projects (referred to in 
     section 4104(c) of the Balanced Budget Act of 1997), medicare 
     cost contractors under section 1876(h), and through a 
     Medicare Advantage project that demonstrates the application 
     of capitation payment rates for frail elderly medicare 
     beneficiaries through the use of a interdisciplinary team and 
     through the provision of primary care services to such 
     beneficiaries by means of such a team at the nursing facility 
     involved).
       ``(C) Prescription drug card.--The Administrator shall 
     carry out section 1807 (relating to the medicare prescription 
     drug discount card endorsement program).
       ``(D) Noninterference.--In carrying out its duties with 
     respect to the provision of qualified prescription drug 
     coverage to beneficiaries under this title, the Administrator 
     may not--
       ``(i) require a particular formulary or institute a price 
     structure for the reimbursement of covered outpatient drugs;
       ``(ii) interfere in any way with negotiations between PDP 
     sponsors and Medicare Advantage organizations and EFFS 
     organizations and drug manufacturers, wholesalers, or other 
     suppliers of covered outpatient drugs; and
       ``(iii) otherwise interfere with the competitive nature of 
     providing such coverage through such sponsors and 
     organizations.
       ``(E) Annual reports.--Not later March 31 of each year, the 
     Administrator shall submit to Congress and the President a 
     report on the administration of parts C, D, and E during the 
     previous fiscal year.
       ``(2) Staff.--
       ``(A) In general.--The Administrator, with the approval of 
     the Secretary, may employ, without regard to chapter 31 of 
     title 5, United States Code, other than sections 3102 through 
     3108, 3110 through 3113, 3136m and 3151, such officers and 
     employees as are necessary to administer the activities to be 
     carried out through the Medicare Benefits Administration. The 
     Administrator shall employ staff with appropriate and 
     necessary expertise in negotiating contracts in the private 
     sector.
       ``(B) Flexibility with respect to compensation.--
       ``(i) In general.--The staff of the Medicare Benefits 
     Administration shall, subject to clause (ii), be paid without 
     regard to the provisions of chapter 51 (other than section 
     5101) and chapter 53 (other than section 5301) of such title 
     (relating to classification and schedule pay rates).
       ``(ii) Maximum rate.--In no case may the rate of 
     compensation determined under clause (i) exceed the rate of 
     basic pay payable for level IV of the Executive Schedule 
     under section 5315 of title 5, United States Code.
       ``(C) Limitation on full-time equivalent staffing for 
     current cms functions being transferred.--The Administrator 
     may not employ under this paragraph a number of full-time 
     equivalent employees, to carry out functions that were 
     previously conducted by the Centers for Medicare & Medicaid 
     Services and that are conducted by the Administrator by 
     reason of this section, that exceeds the number of such full-
     time equivalent employees authorized to be employed by the 
     Centers for Medicare & Medicaid Services to conduct such 
     functions as of the date of the enactment of this Act.
       ``(3) Redelegation of certain functions of the centers for 
     medicare & medicaid services.--
       ``(A) In general.--The Secretary, the Administrator, and 
     the Administrator of the Centers for Medicare & Medicaid 
     Services shall establish an appropriate transition of 
     responsibility in order to redelegate the administration of 
     part C from the Secretary and the Administrator of the 
     Centers for Medicare & Medicaid Services to the Administrator 
     as is appropriate to carry out the purposes of this section.
       ``(B) Transfer of data and information.--The Secretary 
     shall ensure that the Administrator of the Centers for 
     Medicare & Medicaid Services transfers to the Administrator 
     of the Medicare Benefits Administration such information and 
     data in the possession of the Administrator of the Centers 
     for Medicare & Medicaid Services as the Administrator of the 
     Medicare Benefits Administration requires to carry out the 
     duties described in paragraph (1).
       ``(C) Construction.--Insofar as a responsibility of the 
     Secretary or the Administrator of the Centers for Medicare & 
     Medicaid Services is redelegated to the Administrator under 
     this section, any reference to the Secretary or the 
     Administrator of the Centers for Medicare & Medicaid Services 
     in this title or title XI with respect to such responsibility 
     is deemed to be a reference to the Administrator.
       ``(d) Office of Beneficiary Assistance.--
       ``(1) Establishment.--The Secretary shall establish within 
     the Medicare Benefits Administration an Office of Beneficiary 
     Assistance to coordinate functions relating to outreach and 
     education of medicare beneficiaries under this title, 
     including the functions described in paragraph (2). The 
     Office shall be separate operating division within the 
     Administration.
       ``(2) Dissemination of information on benefits and appeals 
     rights.--
       ``(A) Dissemination of benefits information.--The Office of 
     Beneficiary Assistance shall disseminate, directly or through 
     contract, to medicare beneficiaries, by mail, by posting on 
     the Internet site of the Medicare Benefits Administration and 
     through a toll-free telephone number, information with 
     respect to the following:
       ``(i) Benefits, and limitations on payment (including cost-
     sharing, stop-loss provisions, and formulary restrictions) 
     under parts C, D, and E.
       ``(ii) Benefits, and limitations on payment under parts A 
     and B, including information on medicare supplemental 
     policies under section 1882.
     Such information shall be presented in a manner so that 
     medicare beneficiaries may compare benefits under parts A, B, 
     D, and medicare supplemental policies with benefits under 
     Medicare Advantage plans under part C and EFFS plans under 
     part E.
       ``(B) Dissemination of appeals rights information.--The 
     Office of Beneficiary Assistance shall disseminate to 
     medicare beneficiaries in the manner provided under 
     subparagraph (A) a description of procedural rights 
     (including grievance and appeals procedures) of beneficiaries 
     under the original medicare fee-for-service program under 
     parts A and B, the Medicare Advantage program under part C, 
     the Voluntary Prescription Drug Benefit Program under part D, 
     and the Enhanced Fee-for-Service program under part E.
       ``(e) Medicare Policy Advisory Board.--
       ``(1) Establishment.--There is established within the 
     Medicare Benefits Administration the Medicare Policy Advisory 
     Board (in this section referred to the `Board'). The Board 
     shall advise, consult with, and make recommendations to the 
     Administrator of the Medicare Benefits Administration with 
     respect to the administration of parts C, D, and E, including 
     the review of payment policies under such parts.
       ``(2) Reports.--
       ``(A) In general.--With respect to matters of the 
     administration of parts C, D, and E the Board shall submit to 
     Congress and to the Administrator of the Medicare Benefits 
     Administration such reports as the Board determines 
     appropriate. Each such report may contain such 
     recommendations as the Board determines appropriate for 
     legislative or administrative changes to improve the 
     administration of such parts, including the topics described 
     in subparagraph (B). Each such report shall be published in 
     the Federal Register.
       ``(B) Topics described.--Reports required under 
     subparagraph (A) may include the following topics:
       ``(i) Fostering competition.--Recommendations or proposals 
     to increase competition under parts C, D, and E for services 
     furnished to medicare beneficiaries.
       ``(ii) Education and enrollment.--Recommendations for the 
     improvement to efforts to provide medicare beneficiaries 
     information and education on the program under this title, 
     and specifically parts C, D, and E, and the program for 
     enrollment under the title.
       ``(iii) Implementation of risk-adjustment.--Evaluation of 
     the implementation under section 1853(a)(3)(C) of the risk 
     adjustment methodology to payment rates under that section to 
     Medicare Advantage organizations offering Medicare Advantage 
     plans (and the corresponding payment provisions under part E) 
     that accounts for variations in per capita costs based on 
     health status, geography, and other demographic factors.
       ``(iv) Rural access.--Recommendations to improve 
     competition and access to plans under parts C, D, and E in 
     rural areas.
       ``(C) Maintaining independence of board.--The Board shall 
     directly submit to Congress reports required under 
     subparagraph (A). No officer or agency of the United States 
     may require the Board to submit to any officer or agency of 
     the United States for approval, comments, or review, prior to 
     the submission to Congress of such reports.
       ``(3) Duty of administrator of medicare benefits 
     administration.--With respect to any report submitted by the 
     Board under 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.

[[Page 16390]]

       ``(B) Qualifications.--The members shall be chosen on the 
     basis of their integrity, impartiality, and good judgment, 
     and shall be individuals who are, by reason of their 
     education and experience in health care benefits management, 
     exceptionally qualified to perform the duties of members of 
     the Board.
       ``(C) Prohibition on inclusion of federal employees.--No 
     officer or employee of the United States may serve as a 
     member of the Board.
       ``(5) Compensation.--Members of the Board shall receive, 
     for each day (including travel time) they are engaged in the 
     performance of the functions of the board, compensation at 
     rates not to exceed the daily equivalent to the annual rate 
     in effect for level IV of the Executive Schedule under 
     section 5315 of title 5, United States Code.
       ``(6) Terms of office.--
       ``(A) In general.--The term of office of members of the 
     Board shall be 3 years.
       ``(B) Terms of initial appointees.--As designated by the 
     President at the time of appointment, of the members first 
     appointed--
       ``(i) one shall be appointed for a term of 1 year;
       ``(ii) three shall be appointed for terms of 2 years; and
       ``(iii) three shall be appointed for terms of 3 years.
       ``(C) Reappointments.--Any person appointed as a member of 
     the Board may not serve for more than 8 years.
       ``(D) Vacancy.--Any member appointed to fill a vacancy 
     occurring before the expiration of the term for which the 
     member's predecessor was appointed shall be appointed only 
     for the remainder of that term. A member may serve after the 
     expiration of that member's term until a successor has taken 
     office. A vacancy in the Board shall be filled in the manner 
     in which the original appointment was made.
       ``(7) Chair.--The Chair of the Board shall be elected by 
     the members. The term of office of the Chair shall be 3 
     years.
       ``(8) Meetings.--The Board shall meet at the call of the 
     Chair, but in no event less than three times during each 
     fiscal year.
       ``(9) Director and staff.--
       ``(A) Appointment of director.--The Board shall have a 
     Director who shall be appointed by the Chair.
       ``(B) In general.--With the approval of the Board, the 
     Director may appoint, without regard to chapter 31 of title 
     5, United States Code, such additional personnel as the 
     Director considers appropriate.
       ``(C) Flexibility with respect to compensation.--
       ``(i) In general.--The Director and staff of the Board 
     shall, subject to clause (ii), be paid without regard to the 
     provisions of chapter 51 and chapter 53 of such title 
     (relating to classification and schedule pay rates).
       ``(ii) Maximum rate.--In no case may the rate of 
     compensation determined under clause (i) exceed the rate of 
     basic pay payable for level IV of the Executive Schedule 
     under section 5315 of title 5, United States Code.
       ``(D) Assistance from the administrator of the medicare 
     benefits administration.--The Administrator of the Medicare 
     Benefits Administration shall make available to the Board 
     such information and other assistance as it may require to 
     carry out its functions.
       ``(10) Contract authority.--The Board may contract with and 
     compensate government and private agencies or persons to 
     carry out its duties under this subsection, without regard to 
     section 3709 of the Revised Statutes (41 U.S.C. 5).
       ``(f) Funding.--There is authorized to be appropriated, in 
     appropriate part from the Federal Hospital Insurance Trust 
     Fund and from the Federal Supplementary Medical Insurance 
     Trust Fund (including the Medicare Prescription Drug 
     Account), such sums as are necessary to carry out this 
     section.''.
       (b) Effective Date.--
       (1) In general.--The amendment made by subsection (a) shall 
     take effect on the date of the enactment of this Act.
       (2) Duties with respect to eligibility determinations and 
     enrollment.--The Administrator of the Medicare Benefits 
     Administration shall carry out enrollment under title XVIII 
     of the Social Security Act, make eligibility determinations 
     under such title, and carry out parts C and E of such title 
     for years beginning or after January 1, 2006.
       (3) Transition.--Before the date the Administrator of the 
     Medicare Benefits Administration is appointed and assumes 
     responsibilities under this section and section 1807 of the 
     Social Security Act, the Secretary of Health and Human 
     Services shall provide for the conduct of any 
     responsibilities of such Administrator that are otherwise 
     provided under law.
       (c) Miscellaneous Administrative Provisions.--
       (1) Administrator as member of the board of trustees of the 
     medicare trust funds.--Section 1817(b) and section 1841(b) 
     (42 U.S.C. 1395i(b), 1395t(b)) are each amended by striking 
     ``and the Secretary of Health and Human Services, all ex 
     officio,'' and inserting ``the Secretary of Health and Human 
     Services, and the Administrator of the Medicare Benefits 
     Administration, all ex officio,''.
       (2) Increase in grade to executive level iii for the 
     administrator of the centers for medicare & medicaid 
     services; level for medicare benefits administrator.--
       (A) In general.--Section 5314 of title 5, United States 
     Code, by adding at the end the following:
       ``Administrator of the Centers for Medicare & Medicaid 
     Services.
       ``Administrator of the Medicare Benefits Administration.''.
       (B) Conforming amendment.--Section 5315 of such title is 
     amended by striking ``Administrator of the Health Care 
     Financing Administration.''.
       (C) Effective date.--The amendments made by this paragraph 
     take effect on January 1, 2004.

         TITLE IX--REGULATORY REDUCTION AND CONTRACTING REFORM

                     Subtitle A--Regulatory Reform

     SEC. 901. CONSTRUCTION; DEFINITION OF SUPPLIER.

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

                               ``Supplier

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

     SEC. 902. ISSUANCE OF REGULATIONS.

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

[[Page 16391]]

     regulations published on or after the date of the enactment 
     of this Act.

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

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

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

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

                     Subtitle B--Contracting Reform

     SEC. 911. INCREASED FLEXIBILITY IN MEDICARE ADMINISTRATION.

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


          ``contracts with medicare administrative contractors

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

[[Page 16392]]

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

[[Page 16393]]

       ``(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,'' in the matter 
     preceding clause (i); and
       (II) by striking ``carrier'' and inserting ``medicare 
     administrative contractor'' in clause (i);

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

[[Page 16394]]

       (2) Status of implementation.--The Secretary shall submit a 
     report to Congress not later than October 1, 2008, that 
     describes the status of implementation of such amendments and 
     that includes a description of the following:
       (A) The number of contracts that have been competitively 
     bid as of such date.
       (B) The distribution of functions among contracts and 
     contractors.
       (C) A timeline for complete transition to full competition.
       (D) A detailed description of how the Secretary has 
     modified oversight and management of medicare contractors to 
     adapt to full competition.

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

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

                   Subtitle C--Education and Outreach

     SEC. 921. PROVIDER EDUCATION AND TECHNICAL ASSISTANCE.

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


             ``provider education and technical assistance

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

[[Page 16395]]

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

     SEC. 922. SMALL PROVIDER TECHNICAL ASSISTANCE DEMONSTRATION 
                   PROGRAM.

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

[[Page 16396]]

     Health and Human Services, shall conduct an evaluation of the 
     demonstration program. The evaluation shall include a 
     determination of whether claims error rates are reduced for 
     small providers of services or suppliers who participated in 
     the program and the extent of improper payments made as a 
     result of the demonstration program. The Comptroller General 
     shall submit a report to the Secretary and the Congress on 
     such evaluation and shall include in such report 
     recommendations regarding the continuation or extension of 
     the demonstration program.
       (f) Financial Participation by Providers.--The provision of 
     technical assistance to a small provider of services or 
     supplier under the demonstration program is conditioned upon 
     the small provider of services or supplier paying an amount 
     estimated (and disclosed in advance of a provider's or 
     supplier's participation in the program) to be equal to 25 
     percent of the cost of the technical assistance.
       (g) Authorization of Appropriations.--There are authorized 
     to be appropriated to the Secretary (in appropriate part from 
     the Federal Hospital Insurance Trust Fund and the Federal 
     Supplementary Medical Insurance Trust Fund) to carry out the 
     demonstration program--
       (1) for fiscal year 2005, $1,000,000, and
       (2) for fiscal year 2006, $6,000,000.

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

       (a) Medicare Provider Ombudsman.--Section 1868 (42 U.S.C. 
     1395ee) is amended--
       (1) by adding at the end of the heading the following: ``; 
     medicare provider ombudsman'';
       (2) by inserting ``Practicing Physicians Advisory 
     Council.--(1)'' after ``(a)'';
       (3) in paragraph (1), as so redesignated under paragraph 
     (2), by striking ``in this section'' and inserting ``in this 
     subsection'';
       (4) by redesignating subsections (b) and (c) as paragraphs 
     (2) and (3), respectively; and
       (5) by adding at the end the following new subsection:
       ``(b) Medicare Provider Ombudsman.--The Secretary shall 
     appoint within the Department of Health and Human Services a 
     Medicare Provider Ombudsman. The Ombudsman shall--
       ``(1) provide assistance, on a confidential basis, to 
     providers of services and suppliers with respect to 
     complaints, grievances, and requests for information 
     concerning the programs under this title (including 
     provisions of title XI insofar as they relate to this title 
     and are not administered by the Office of the Inspector 
     General of the Department of Health and Human Services) and 
     in the resolution of unclear or conflicting guidance given by 
     the Secretary and medicare contractors to such providers of 
     services and suppliers regarding such programs and provisions 
     and requirements under this title and such provisions; and
       ``(2) submit recommendations to the Secretary for 
     improvement in the administration of this title and such 
     provisions, including--
       ``(A) recommendations to respond to recurring patterns of 
     confusion in this title and such provisions (including 
     recommendations regarding suspending imposition of sanctions 
     where there is widespread confusion in program 
     administration), and
       ``(B) recommendations to provide for an appropriate and 
     consistent response (including not providing for audits) in 
     cases of self-identified overpayments by providers of 
     services and suppliers.
     The Ombudsman shall not serve as an advocate for any 
     increases in payments or new coverage of services, but may 
     identify issues and problems in payment or coverage 
     policies.''.
       (b) Medicare Beneficiary Ombudsman.--Title XVIII, as 
     previously amended, is amended by inserting after section 
     1809 the following new section:


                    ``medicare beneficiary ombudsman

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

     SEC. 924. BENEFICIARY OUTREACH DEMONSTRATION PROGRAM.

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

[[Page 16397]]

     shall include in such report recommendations regarding the 
     feasibility of permanently out-stationing medicare 
     specialists at local offices of the Social Security 
     Administration.

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

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

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

       (a) Availability of Data.--The Secretary shall publicly 
     provide information that enables hospital discharge planners, 
     medicare beneficiaries, and the public to identify skilled 
     nursing facilities that are participating in the medicare 
     program.
       (b) Inclusion of Information in Certain Hospital Discharge 
     Plans.--
       (1) In general.--Section 1861(ee)(2)(D) (42 U.S.C. 
     1395x(ee)(2)(D)) is amended--
       (A) by striking ``hospice services'' and inserting 
     ``hospice care and post-hospital extended care services''; 
     and
       (B) by inserting before the period at the end the 
     following: ``and, in the case of individuals who are likely 
     to need post-hospital extended care services, the 
     availability of such services through facilities that 
     participate in the program under this title and that serve 
     the area in which the patient resides''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply to discharge plans made on or after such date as 
     the Secretary shall specify, but not later than 6 months 
     after the date the Secretary provides for availability of 
     information under subsection (a).

                    Subtitle D--Appeals and Recovery

     SEC. 931. TRANSFER OF RESPONSIBILITY FOR MEDICARE APPEALS.

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

     SEC. 932. PROCESS FOR EXPEDITED ACCESS TO REVIEW.

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

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

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

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

       ``(iii) Venue.--Such action shall be brought in the 
     district court of the United States for the judicial district 
     in which the appellant is located (or, in the case of an 
     action brought jointly by more than one applicant, the 
     judicial district in which the greatest number of applicants 
     are located) or in the district court for the District of 
     Columbia.

[[Page 16398]]

       ``(iv) Interest on amounts in controversy.--Where a 
     provider of services or supplier seeks judicial review 
     pursuant to this paragraph, the amount in controversy shall 
     be subject to annual interest beginning on the first day of 
     the first month beginning after the 60-day period as 
     determined pursuant to clause (ii) and equal to the rate of 
     interest on obligations issued for purchase by the Federal 
     Hospital Insurance Trust Fund and by the Federal 
     Supplementary Medical Insurance Trust Fund for the month in 
     which the civil action authorized under this paragraph is 
     commenced, to be awarded by the reviewing court in favor of 
     the prevailing party. No interest awarded pursuant to the 
     preceding sentence shall be deemed income or cost for the 
     purposes of determining reimbursement due providers of 
     services or suppliers under this Act.
       ``(D) Review panels.--For purposes of this subsection, a 
     `review panel' is a panel consisting of 3 members (who shall 
     be administrative law judges, members of the Departmental 
     Appeals Board, or qualified individuals associated with a 
     qualified independent contractor (as defined in subsection 
     (c)(2)) or with another independent entity) designated by the 
     Secretary for purposes of making determinations under this 
     paragraph.''.
       (b) Application to Provider Agreement Determinations.--
     Section 1866(h)(1) (42 U.S.C. 1395cc(h)(1)) is amended--
       (1) by inserting ``(A)'' after ``(h)(1)''; and
       (2) by adding at the end the following new subparagraph:
       ``(B) An institution or agency described in subparagraph 
     (A) that has filed for a hearing under subparagraph (A) shall 
     have expedited access to judicial review under this 
     subparagraph in the same manner as providers of services, 
     suppliers, and individuals entitled to benefits under part A 
     or enrolled under part B, or both, may obtain expedited 
     access to judicial review under the process established under 
     section 1869(b)(2). Nothing in this subparagraph shall be 
     construed to affect the application of any remedy imposed 
     under section 1819 during the pendency of an appeal under 
     this subparagraph.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to appeals filed on or after October 1, 2004.
       (d) Expedited Review of Certain Provider Agreement 
     Determinations.--
       (1) Termination and certain other immediate remedies.--The 
     Secretary shall develop and implement a process to expedite 
     proceedings under sections 1866(h) of the Social Security Act 
     (42 U.S.C. 1395cc(h)) in which the remedy of termination of 
     participation, or a remedy described in clause (i) or (iii) 
     of section 1819(h)(2)(B) of such Act (42 U.S.C. 1395i-
     3(h)(2)(B)) which is applied on an immediate basis, has been 
     imposed. Under such process priority shall be provided in 
     cases of termination.
       (2) Increased financial support.--In addition to any 
     amounts otherwise appropriated, to reduce by 50 percent the 
     average time for administrative determinations on appeals 
     under section 1866(h) of the Social Security Act (42 U.S.C. 
     1395cc(h)), there are authorized to be appropriated (in 
     appropriate part from the Federal Hospital Insurance Trust 
     Fund and the Federal Supplementary Medical Insurance Trust 
     Fund) to the Secretary such additional sums for fiscal year 
     2005 and each subsequent fiscal year as may be necessary. The 
     purposes for which such amounts are available include 
     increasing the number of administrative law judges (and their 
     staffs) and the appellate level staff at the Departmental 
     Appeals Board of the Department of Health and Human Services 
     and educating such judges and staffs on long-term care 
     issues.
       (e) Process for Reinstatement of Approval of Certain Snf 
     Training Programs.--
       (1) In general.--In the case of a termination of approval 
     of a nurse aide training program described in paragraph (2) 
     of a skilled nursing facility, the Secretary shall develop 
     and implement a process for the reinstatement of approval of 
     such program before the end of the mandatory 2 year 
     disapproval period if the facility and program is certified 
     by the Secretary, in coordination with the applicable State 
     survey and certification agency and after public notice, as 
     being in compliance with applicable requirements and as 
     having remedied any deficiencies in the facility or program 
     that resulted in noncompliance.
       (2) Termination of approval described.--A termination of 
     approval of a training program described in this paragraph is 
     a mandatory 2-year disapproval provided for under section 
     1819(f)(2)(B)(iii) of the Social Security Act (42 U.S.C. 
     1395i-3(f)(2)(B)(iii)) if the only basis for the mandatory 
     disapproval was the assessment of a civil money penalty of 
     not less than $5,000.

     SEC. 933. REVISIONS TO MEDICARE APPEALS PROCESS.

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

[[Page 16399]]

       (B) by adding at the end the following new subparagraph:
       ``(K) Independence requirements.--
       ``(i) In general.--Subject to clause (ii), a qualified 
     independent contractor shall not conduct any activities in a 
     case unless the entity--

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

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

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

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

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

     SEC. 934. PREPAYMENT REVIEW.

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

[[Page 16400]]

     the date of the enactment of this Act) as the Secretary shall 
     specify.
       (c) Application to Fiscal Intermediaries and Carriers.--The 
     provisions of section 1874A(h) of the Social Security Act, as 
     added by subsection (a), shall apply to each fiscal 
     intermediary under section 1816 of the Social Security Act 
     (42 U.S.C. 1395h) and each carrier under section 1842 of such 
     Act (42 U.S.C. 1395u) in the same manner as they apply to 
     medicare administrative contractors under such provisions.

     SEC. 935. RECOVERY OF OVERPAYMENTS.

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

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

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

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

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

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

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

[[Page 16401]]

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

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

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

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

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

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

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


[[Page 16402]]


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

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

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

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

                  Subtitle V--Miscellaneous Provisions

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

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

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

[[Page 16403]]

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

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

       (a) Council for Technology and Innovation.--Section 1868 
     (42 U.S.C. 1395ee), as amended by section 921(a), is amended 
     by adding at the end the following new subsection:
       ``(c) Council for Technology and Innovation.--
       ``(1) Establishment.--The Secretary shall establish a 
     Council for Technology and Innovation within the Centers for 
     Medicare & Medicaid Services (in this section referred to as 
     `CMS').
       ``(2) Composition.--The Council shall be composed of senior 
     CMS staff and clinicians and shall be chaired by the 
     Executive Coordinator for Technology and Innovation 
     (appointed or designated under paragraph (4)).
       ``(3) Duties.--The Council shall coordinate the activities 
     of coverage, coding, and payment processes under this title 
     with respect to new technologies and procedures, including 
     new drug therapies, and shall coordinate the exchange of 
     information on new technologies between CMS and other 
     entities that make similar decisions.
       ``(4) Executive coordinator for technology and 
     innovation.--The Secretary shall appoint (or designate) a 
     noncareer appointee (as defined in section 3132(a)(7) of 
     title 5, United States Code) who shall serve as the Executive 
     Coordinator for Technology and Innovation. Such executive 
     coordinator shall report to the Administrator of CMS, shall 
     chair the Council, shall oversee the execution of its duties, 
     and shall serve as a single point of contact for outside 
     groups and entities regarding the coverage, coding, and 
     payment processes under this title.''.
       (b) Methods for Determining Payment Basis For New Lab 
     Tests.--Section 1833(h) (42 U.S.C. 1395l(h)) is amended by 
     adding at the end the following:
       ``(8)(A) The Secretary shall establish by regulation 
     procedures for determining the basis for, and amount of, 
     payment under this subsection for any clinical diagnostic 
     laboratory test with respect to which a new or substantially 
     revised HCPCS code is assigned on or after January 1, 2005 
     (in this paragraph referred to as `new tests').
       ``(B) Determinations under subparagraph (A) shall be made 
     only after the Secretary--
       ``(i) makes available to the public (through an Internet 
     site and other appropriate mechanisms) a list that includes 
     any such test for which establishment of a payment amount 
     under this subsection is being considered for a year;
       ``(ii) on the same day such list is made available, causes 
     to have published in the Federal Register notice of a meeting 
     to receive comments and recommendations (and data on which 
     recommendations are based) from the public on the appropriate 
     basis under this subsection for establishing payment amounts 
     for the tests on such list;
       ``(iii) not less than 30 days after publication of such 
     notice convenes a meeting, that includes representatives of 
     officials of the Centers for Medicare & Medicaid Services 
     involved in determining payment amounts, to receive such 
     comments and recommendations (and data on which the 
     recommendations are based);
       ``(iv) taking into account the comments and recommendations 
     (and accompanying data) received at such meeting, develops 
     and makes available to the public (through an Internet site 
     and other appropriate mechanisms) a list of proposed 
     determinations with respect to the appropriate basis for 
     establishing a payment amount under this subsection for each 
     such code, together with an explanation of the reasons for 
     each such determination, the data on which the determinations 
     are based, and a request for public written comments on the 
     proposed determination; and
       ``(v) taking into account the comments received during the 
     public comment period, develops and makes available to the 
     public (through an Internet site and other appropriate 
     mechanisms) a list of final determinations of the payment 
     amounts for such tests under this subsection, together with 
     the rationale for each such determination, the data on which 
     the determinations are based, and responses to comments and 
     suggestions received from the public.
       ``(C) Under the procedures established pursuant to 
     subparagraph (A), the Secretary shall--
       ``(i) set forth the criteria for making determinations 
     under subparagraph (A); and
       ``(ii) make available to the public the data (other than 
     proprietary data) considered in making such determinations.
       ``(D) The Secretary may convene such further public 
     meetings to receive public comments on payment amounts for 
     new tests under this subsection as the Secretary deems 
     appropriate.
       ``(E) For purposes of this paragraph:
       ``(i) The term `HCPCS' refers to the Health Care Procedure 
     Coding System.
       ``(ii) A code shall be considered to be `substantially 
     revised' if there is a substantive change to the definition 
     of the test or procedure to which the code applies (such as a 
     new analyte or a new methodology for measuring an existing 
     analyte-specific test).''.
       (c) GAO Study on Improvements in External Data Collection 
     for Use in the Medicare Inpatient Payment System.--
       (1) Study.--The Comptroller General of the United States 
     shall conduct a study that analyzes which external data can 
     be collected in a shorter time frame by the Centers for 
     Medicare & Medicaid Services for use in computing payments 
     for inpatient hospital services. The study may include an 
     evaluation of the feasibility and appropriateness of using of 
     quarterly samples or special surveys or any other methods. 
     The study shall include an analysis of whether other 
     executive agencies, such as the Bureau of Labor Statistics in 
     the Department of Commerce, are best suited to collect this 
     information.
       (2) Report.--By not later than October 1, 2004, the 
     Comptroller General shall submit a report to Congress on the 
     study under paragraph (1).
       (d) Process for Adoption of ICD Codes as Data Standard.--
     Section 1172(f) (42 U.S.C.

[[Page 16404]]

     1320d-1(f)) is amended by inserting after the first sentence 
     the following: ``Notwithstanding the first sentence of this 
     subsection, if the National Committee on Vital and Health 
     Statistics has not made a recommendation to the Secretary, 
     within 1 year after the date of the enactment of this 
     sentence, with respect to the adoption of the International 
     Classification of Diseases, 10th Revision, Procedure Coding 
     System (`ICD-10-PCS') and the International Classification of 
     Diseases, 10th Revision, Clinical Modification (`ICD-10-CM') 
     as a standard under this part, then the Secretary may adopt 
     ICD-10-PCS and ICD-10-CM as such a standard.''.

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

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

     SEC. 944. EMTALA IMPROVEMENTS.

       (a) Payment for EMTALA-Mandated Screening and Stabilization 
     Services.--
       (1) In general.--Section 1862 (42 U.S.C. 1395y) is amended 
     by inserting after subsection (c) the following new 
     subsection:
       ``(d) For purposes of subsection (a)(1)(A), in the case of 
     any item or service that is required to be provided pursuant 
     to section 1867 to an individual who is entitled to benefits 
     under this title, determinations as to whether the item or 
     service is reasonable and necessary shall be made on the 
     basis of the information available to the treating physician 
     or practitioner (including the patient's presenting symptoms 
     or complaint) at the time the item or service was ordered or 
     furnished by the physician or practitioner (and not on the 
     patient's principal diagnosis). When making such 
     determinations with respect to such an item or service, the 
     Secretary shall not consider the frequency with which the 
     item or service was provided to the patient before or after 
     the time of the admission or visit.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to items and services furnished on or after 
     January 1, 2004.
       (b) Notification of Providers When EMTALA Investigation 
     Closed.--Section 1867(d) (42 U.S.C. 42 U.S.C. 1395dd(d)) is 
     amended by adding at the end the following new paragraph:
       ``(4) Notice upon closing an investigation.--The Secretary 
     shall establish a procedure to notify hospitals and 
     physicians when an investigation under this section is 
     closed.''.
       (c) Prior Review by Peer Review Organizations in EMTALA 
     Cases Involving Termination of Participation.--
       (1) In general.--Section 1867(d)(3) (42 U.S.C. 
     1395dd(d)(3)) is amended--
       (A) in the first sentence, by inserting ``or in terminating 
     a hospital's participation under this title'' after ``in 
     imposing sanctions under paragraph (1)''; and
       (B) by adding at the end the following new sentences: 
     ``Except in the case in which a delay would jeopardize the 
     health or safety of individuals, the Secretary shall also 
     request such a review before making a compliance 
     determination as part of the process of terminating a 
     hospital's participation under this title for violations 
     related to the appropriateness of a medical screening 
     examination, stabilizing treatment, or an appropriate 
     transfer as required by this section, and shall provide a 
     period of 5 days for such review. The Secretary shall provide 
     a copy of the organization's report to the hospital or 
     physician consistent with confidentiality requirements 
     imposed on the organization under such part B.''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply to terminations of participation initiated on or 
     after the date of the enactment of this Act.
       (d) Modification of Requirment for Medical Screening 
     Examinations for Patients Not Requesting Emergency Department 
     Services.--
       (1) In general.--Section 1867(a) (42 U.S.C. 1395dd(a)) is 
     amended--
       (A) by designating all that follows ``(a) Medical Screening 
     Requirement.--'' as paragraph (1) with the heading ``In 
     general.--'';
       (B) by aligning such paragraph with the paragraph added by 
     paragraph (3); and
       (C) by adding at the end the following new paragraph:
       ``(2) Exception for certain cases.--The requirement for an 
     appropriate medical screening examination under paragraph (1) 
     shall not apply in the case of an individual who comes to the 
     emergency department and neither the individual, nor another 
     person on the individual's behalf, requests examination or 
     treatment for an emergency medical condition (such as a 
     request solely for preventive services, such as blood 
     pressure screening or non-emergency laboratory and diagnostic 
     tests).''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply to terminations of participation initiated on or 
     after the date of the enactment of this Act.

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

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

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

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

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

[[Page 16405]]

     made the arrangements shall bill and be paid for the hospice 
     care.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to hospice care provided on or after the date of 
     the enactment of this Act.

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

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

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

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

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

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

     SEC. 950. TREATMENT OF CERTAIN DENTAL CLAIMS.

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

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

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

     SEC. 952. REVISIONS TO REASSIGNMENT PROVISIONS.

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

     SEC. 953. OTHER PROVISIONS.

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

[[Page 16406]]

     an analysis of methods for monitoring the quality of care 
     provided to such recipients.
       (d) OIG Report on Notices Relating to Use of Hospital 
     Lifetime Reserve Days.--Not later than 1 year after the date 
     of the enactment of this Act, the Inspector General of the 
     Department of Health and Human Services shall submit a report 
     to Congress on--
       (1) the extent to which hospitals provide notice to 
     medicare beneficiaries in accordance with applicable 
     requirements before they use the 60 lifetime reserve days 
     described in section 1812(a)(1) of the Social Security Act 
     (42 U.S.C. 1395d(a)(1)); and
       (2) the appropriateness and feasibility of hospitals 
     providing a notice to such beneficiaries before they 
     completely exhaust such lifetime reserve days.

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

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

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

                           TITLE X--MEDICAID

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

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

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

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

             TITLE XI--ACCESS TO AFFORDABLE PHARMACEUTICALS

            Subtitle A--Access to Affordable Pharmaceuticals

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

       (a) Abbreviated New Drug Applications.--Section 505(j) of 
     the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)) 
     is amended--
       (1) in paragraph (2)--
       (A) by striking subparagraph (B) and inserting the 
     following:
       ``(B) Notice of opinion that patent is invalid or will not 
     be infringed.--
       ``(i) Agreement to give notice.--An applicant that makes a 
     certification described in subparagraph (A)(vii)(IV) shall 
     include in the application a statement that the applicant 
     will give notice as required by this subparagraph.
       ``(ii) Timing of notice.--An applicant that makes a 
     certification described in subparagraph (A)(vii)(IV) shall 
     give notice as required under this subparagraph--
       ``(I) if the certification is in the application, not later 
     than 20 days after the date of the postmark on the notice 
     with which the Secretary informs the applicant that the 
     application has been filed; or
       ``(II) if the certification is in an amendment or 
     supplement to the application, at the time at which the 
     applicant submits the amendment or supplement, regardless of 
     whether the applicant has already given notice with respect 
     to another such certification contained in the application or 
     in an amendment or supplement to the application.
       ``(iii) Recipients of notice.--An applicant required under 
     this subparagraph to give notice shall give notice to--
       ``(I) each owner of the patent that is the subject of the 
     certification (or a representative of the owner designated to 
     receive such a notice); and
       ``(II) the holder of the approved application under 
     subsection (b) for the drug that is claimed by the patent or 
     a use of which is claimed by the patent (or a representative 
     of the holder designated to receive such a notice).
       ``(iv) Contents of notice.--A notice required under this 
     subparagraph shall--
       ``(I) state that an application that contains data from 
     bioavailability or bioequivalence studies has been submitted 
     under this subsection for the drug with respect to which the 
     certification is made to obtain approval to engage in the 
     commercial manufacture, use, or sale of the drug before the 
     expiration of the patent referred to in the certification; 
     and
       ``(II) include a detailed statement of the factual and 
     legal basis of the opinion of the applicant that the patent 
     is invalid or will not be infringed.''; and
       (B) by adding at the end the following subparagraph:
       ``(D)(i) An applicant may not amend or supplement an 
     application to seek approval of a drug referring to a 
     different listed drug from the listed drug identified in the 
     application as submitted to the Secretary.
       ``(ii) With respect to the drug for which an application is 
     submitted, nothing in this subsection prohibits an applicant 
     from amending or supplementing the application to seek 
     approval of a different strength.''; and
       (2) in paragraph (5)--
       (A) in subparagraph (B)--
       (i) by striking ``under the following'' and inserting ``by 
     applying the following to each certification made under 
     paragraph (2)(A)(vii)''; and
       (ii) in clause (iii)--

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

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

[[Page 16407]]

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

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

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

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

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

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

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

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

       ``(iii) No damages.--An applicant shall not be entitled to 
     damages in a civil action under subparagraph (i) or a 
     counterclaim under subparagraph (ii).''.
       (b) Applications Generally.--Section 505 of the Federal 
     Food, Drug, and Cosmetic Act (21 U.S.C. 355) is amended--
       (1) in subsection (b)--
       (A) by striking paragraph (3) and inserting the following:
       ``(3) Notice of opinion that patent is invalid or will not 
     be infringed.--
       ``(A) Agreement to give notice.--An applicant that makes a 
     certification described in paragraph (2)(A)(iv) shall include 
     in the application a statement that the applicant will give 
     notice as required by this paragraph.
       ``(B) Timing of notice.--An applicant that makes a 
     certification described in paragraph (2)(A)(iv) shall give 
     notice as required under this paragraph--
       ``(i) if the certification is in the application, not later 
     than 20 days after the date of the postmark on the notice 
     with which the Secretary informs the applicant that the 
     application has been filed; or
       ``(ii) if the certification is in an amendment or 
     supplement to the application, at the time at which the 
     applicant submits the amendment or supplement, regardless of 
     whether the applicant has already given notice with respect 
     to another such certification contained in the application or 
     in an amendment or supplement to the application.
       ``(C) Recipients of notice.--An applicant required under 
     this paragraph to give notice shall give notice to--
       ``(i) each owner of the patent that is the subject of the 
     certification (or a representative of the owner designated to 
     receive such a notice); and
       ``(ii) the holder of the approved application under this 
     subsection for the drug that is claimed by the patent or a 
     use of which is claimed by the patent (or a representative of 
     the holder designated to receive such a notice).
       ``(D) Contents of notice.--A notice required under this 
     paragraph shall--
       ``(i) state that an application that contains data from 
     bioavailability or bioequivalence studies has been submitted 
     under this subsection for the drug with respect to which the 
     certification is made to obtain approval to engage in the 
     commercial manufacture, use, or sale of the drug before the 
     expiration of the patent referred to in the certification; 
     and
       ``(ii) include a detailed statement of the factual and 
     legal basis of the opinion of the applicant that the patent 
     is invalid or will not be infringed.''; and
       (B)(i) by redesignating paragraph (4) as paragraph (5); and
       (ii) by inserting after paragraph (3) the following 
     paragraph:
       ``(4)(A) An applicant may not amend or supplement an 
     application referred to in paragraph (2) to seek approval of 
     a drug that is a different drug than the drug identified in 
     the application as submitted to the Secretary.
       ``(B) With respect to the drug for which such an 
     application is submitted, nothing in this subsection or 
     subsection (c)(3) prohibits an applicant from amending or 
     supplementing the application to seek approval of a different 
     strength.''; and
       (2) in subsection (c)(3)--
       (A) in the first sentence, by striking ``under the 
     following'' and inserting ``by applying the following to each 
     certification made under subsection (b)(2)(A)(iv)'';
       (B) in subparagraph (C)--
       (i) in the first sentence, by striking ``unless'' and all 
     that follows and inserting ``unless, before the expiration of 
     45 days after the date on which the notice described in 
     subsection (b)(3) is received, an action is brought for 
     infringement of the patent that is the subject of the 
     certification and for which information was submitted to the 
     Secretary under paragraph (2) or subsection (b)(1) before the 
     date on which the application (excluding an amendment or 
     supplement to the application) was submitted.'';
       (ii) in the second sentence--

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

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

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

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

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

       ``(II) if the judgment of the district court is not 
     appealed or is affirmed, the approval

[[Page 16408]]

     shall be made effective on the date specified by the district 
     court in a court order under section 271(e)(4)(A) of title 
     35, United States Code;'';

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

       ``(II) Withdrawal of application.--The first applicant 
     withdraws the application or the Secretary considers the 
     application to have been withdrawn as a result of a 
     determination by the Secretary that the application does not 
     meet the requirements for approval under paragraph (4).

[[Page 16409]]

       ``(III) Amendment of certification.--The first applicant 
     amends or withdraws the certification for all of the patents 
     with respect to which that applicant submitted a 
     certification qualifying the applicant for the 180-day 
     exclusivity period.
       ``(IV) Failure to obtain tentative approval.--The first 
     applicant fails to obtain tentative approval of the 
     application within 30 months after the date on which the 
     application is filed, unless the failure is caused by a 
     change in or a review of the requirements for approval of the 
     application imposed after the date on which the application 
     is filed.
       ``(V) Agreement with another applicant, the listed drug 
     application holder, or a patent owner.--The first applicant 
     enters into an agreement with another applicant under this 
     subsection for the drug, the holder of the application for 
     the listed drug, or an owner of the patent that is the 
     subject of the certification under paragraph (2)(A)(vii)(IV), 
     the Federal Trade Commission or the Attorney General files a 
     complaint, and there is a final decision of the Federal Trade 
     Commission or the court with regard to the complaint from 
     which no appeal (other than a petition to the Supreme Court 
     for a writ of certiorari) has been or can be taken that the 
     agreement has violated the antitrust laws (as defined in 
     section 1 of the Clayton Act (15 U.S.C. 12), except that the 
     term includes section 5 of the Federal Trade Commission Act 
     (15 U.S.C. 45) to the extent that that section applies to 
     unfair methods of competition).
       ``(VI) Expiration of all patents.--All of the patents as to 
     which the applicant submitted a certification qualifying it 
     for the 180-day exclusivity period have expired.

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

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

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

     SEC. 1103. BIOAVAILABILITY AND BIOEQUIVALENCE.

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

     SEC. 1104. CONFORMING AMENDMENTS.

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

              Subtitle B--Federal Trade Commission Review

     SEC. 1111. DEFINITIONS.

       In this subtitle:
       (1) ANDA.--The term ``ANDA'' means an abbreviated drug 
     application, as defined under section 201(aa) of the Federal 
     Food, Drug, and Cosmetic Act.
       (2) Brand name drug.--The term ``brand name drug'' means a 
     drug for which an application is approved under section 
     505(c) of the Federal Food, Drug, and Cosmetic Act, including 
     an application referred to in section 505(b)(2) of such Act.
       (3) Brand name drug company.--The term ``brand name drug 
     company'' means the party that holds the approved application 
     referred to in paragraph (2) for a brand name drug that is a 
     listed drug in an ANDA, or a party that is the owner of a 
     patent for which information is submitted for such drug under 
     subsection (b) or (c) of section 505 of the Federal Food, 
     Drug, and Cosmetic Act.
       (4) Commission.--The term ``Commission'' means the Federal 
     Trade Commission.
       (5) Generic drug.--The term ``generic drug'' means a drug 
     for which an application under section 505(j) of the Federal 
     Food, Drug, and Cosmetic Act is approved.
       (6) Generic drug applicant.--The term ``generic drug 
     applicant'' means a person who has filed or received approval 
     for an ANDA under section 505(j) of the Federal Food, Drug, 
     and Cosmetic Act.
       (7) Listed drug.--The term ``listed drug'' means a brand 
     name drug that is listed under section 505(j)(7) of the 
     Federal Food, Drug, and Cosmetic Act.

     SEC. 1112. NOTIFICATION OF AGREEMENTS.

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

[[Page 16410]]

     to an agreement that is required in subsection (a) or (b) to 
     be filed in accordance with this subsection.
       (3) Description.--In the event that any agreement required 
     in subsection (a) or (b) to be filed in accordance with this 
     subsection has not been reduced to text, each of the parties 
     involved shall file written descriptions of such agreement 
     that are sufficient to disclose all the terms and conditions 
     of the agreement.

     SEC. 1113. FILING DEADLINES.

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

     SEC. 1114. DISCLOSURE EXEMPTION.

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

     SEC. 1115. ENFORCEMENT.

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

     SEC. 1116. RULEMAKING.

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

     SEC. 1117. SAVINGS CLAUSE.

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

     SEC. 1118. EFFECTIVE DATE.

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

             Subtitle C--Importation of Prescription Drugs

     SEC. 1121. IMPORTATION OF PRESCRIPTION DRUGS.

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

     ``SEC. 804. IMPORTATION OF PRESCRIPTION DRUGS.

       ``(a) Definitions.--In this section:
       ``(1) Importer.--The term `importer' means a pharmacist or 
     wholesaler.
       ``(2) Pharmacist.--The term `pharmacist' means a person 
     licensed by a State to practice pharmacy, including the 
     dispensing and selling of prescription drugs.
       ``(3) Prescription drug.--The term `prescription drug' 
     means a drug subject to section 503(b), other than--
       ``(A) a controlled substance (as defined in section 102 of 
     the Controlled Substances Act (21 U.S.C. 802));
       ``(B) a biological product (as defined in section 351 of 
     the Public Health Service Act (42 U.S.C. 262));
       ``(C) an infused drug (including a peritoneal dialysis 
     solution);
       ``(D) an intravenously injected drug;
       ``(E) a drug that is inhaled during surgery; or
       ``(F) a drug which is a parenteral drug, the importation of 
     which pursuant to subsection (b) is determined by the 
     Secretary to pose a threat to the public health, in which 
     case section 801(d)(1) shall continue to apply.
       ``(4) Qualifying laboratory.--The term `qualifying 
     laboratory' means a laboratory in the United States that has 
     been approved by the Secretary for the purposes of this 
     section.
       ``(5) Wholesaler.--
       ``(A) In general.--The term `wholesaler' means a person 
     licensed as a wholesaler or distributor of prescription drugs 
     in the United States under section 503(e)(2)(A).
       ``(B) Exclusion.--The term `wholesaler' does not include a 
     person authorized to import drugs under section 801(d)(1).
       ``(b) Regulations.--The Secretary shall promulgate 
     regulations permitting pharmacists and wholesalers to import 
     prescription drugs from Canada into the United States.
       ``(c) Limitation.--The regulations under subsection (b) 
     shall--
       ``(1) require that each prescription drug imported under 
     the regulations complies with section 505 (including with 
     respect to being safe and effective for the intended use of 
     the prescription drug), with sections 501 and 502, and with 
     all other applicable requirements of this Act;
       ``(2) require that an importer of a prescription drug under 
     the regulations comply with subsections (d)(1) and (e);
       ``(3) require that any prescription drug from Canada 
     imported by a domestic pharmacist or wholesaler under this 
     section be contained in packaging which the Secretary has 
     determined to be reasonably certain to be tamper-resistant 
     and not capable of counterfeiting;
       ``(4) require that all prescription drugs from Canada 
     imported by a domestic pharmacist or a wholesaler under this 
     section contain a statement designed to inform the end-user 
     of such drug that such drug has been imported from a foreign 
     seller other than a manufacturer;
       ``(5) require that only prescription drugs which have not 
     left the possession of the first Canadian recipient of such 
     prescription drugs after receipt from the manufacturer of 
     such prescription drugs be eligible for importation into the 
     United States under this section;
       ``(6) require, if determined appropriate by the Secretary, 
     that all prescription drugs imported from Canada under this 
     section by domestic pharmacists and wholesalers enter the 
     United States through ports of entry designated by the 
     Secretary for purposes of this section;
       ``(7) contain any additional provisions determined by the 
     Secretary to be appropriate to protect the public health; and
       ``(8) contain any additional provisions determined by the 
     Secretary to be appropriate to facilitate the importation of 
     prescription drugs that do not jeopardize the public health.
       ``(d) Information and Records.--
       ``(1) In general.--The regulations under subsection (b) 
     shall require an importer of a prescription drug under 
     subsection (b) to submit to the Secretary the following 
     information and documentation:
       ``(A) The name and quantity of the active ingredient of the 
     prescription drug.
       ``(B) A description of the dosage form of the prescription 
     drug.
       ``(C) The date on which the prescription drug is shipped.
       ``(D) The quantity of the prescription drug that is 
     shipped.
       ``(E) The point of origin and destination of the 
     prescription drug.
       ``(F) The price paid and the price charged by the importer 
     for the prescription drug.
       ``(G) Documentation from the foreign seller specifying--
       ``(i) the original source of the prescription drug; and
       ``(ii) the quantity of each lot of the prescription drug 
     originally received by the seller from that source.
       ``(H) The lot or control number assigned to the 
     prescription drug by the manufacturer of the prescription 
     drug.
       ``(I) The name, address, telephone number, and professional 
     license number (if any) of the importer.
       ``(J)(i) Documentation demonstrating that the prescription 
     drug was received by the recipient from the manufacturer and 
     subsequently shipped by the first foreign recipient to the 
     importer.
       ``(ii) Documentation of the quantity of each lot of the 
     prescription drug received by the first foreign recipient 
     demonstrating that the quantity being imported into the 
     United States is not more than the quantity that was received 
     by the first foreign recipient.
       ``(iii) In the case of an initial imported shipment, 
     documentation demonstrating that each batch of the 
     prescription drug in the shipment was statistically sampled 
     and tested for authenticity and degradation.
       ``(K) Certification from the importer or manufacturer of 
     the prescription drug that the prescription drug--
       ``(i) is approved for marketing in the United States and is 
     not adulterated or misbranded; and
       ``(ii) meets all labeling requirements under this Act.
       ``(L) Laboratory records, including complete data derived 
     from all tests necessary to ensure that the prescription drug 
     is in compliance with established specifications and 
     standards.
       ``(M) Documentation demonstrating that the testing required 
     by subparagraphs (J) and (L) was conducted at a qualifying 
     laboratory.

[[Page 16411]]

       ``(N) Any other information that the Secretary determines 
     is necessary to ensure the protection of the public health.
       ``(2) Maintenance by the secretary.--The Secretary shall 
     maintain information and documentation submitted under 
     paragraph (1) for such period of time as the Secretary 
     determines to be necessary.
       ``(e) Testing.--The regulations under subsection (b) shall 
     require--
       ``(1) that testing described in subparagraphs (J) and (L) 
     of subsection (d)(1) be conducted by the importer or by the 
     manufacturer of the prescription drug at a qualified 
     laboratory;
       ``(2) if the tests are conducted by the importer--
       ``(A) that information needed to--
       ``(i) authenticate the prescription drug being tested; and
       ``(ii) confirm that the labeling of the prescription drug 
     complies with labeling requirements under this Act;

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

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

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

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

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

  The SPEAKER pro tempore. After 3 hours of debate on the bill, it 
shall be in order to consider the amendment printed in House Report 
108-181, if offered by the gentleman from New York (Mr. Rangel) or his 
designee, which shall be considered read, and shall be debatable for 1 
hour, equally divided and controlled by the proponent and an opponent.
  The gentleman from California (Mr. Thomas), the gentleman from New 
York (Mr. Rangel), the gentleman from Louisiana (Mr. Tauzin), and the 
gentleman from Michigan (Mr. Dingell) each will control 45 minutes of 
debate on the bill.
  The Chair recognizes the gentleman from California (Mr. Thomas).
  Mr. THOMAS. Mr. Speaker, I yield myself such time as I may consume.
  As we begin the 3 hours of debate on the primary bill and an 
additional hour on the substitute, I do want to indicate that this day, 
in my opinion, has been too long in coming.
  I want to thank President Bush for his position during the campaign 
that Medicare needed to be modernized and we were overdue for putting 
prescription drugs in Medicare.

                              {time}  1900

  I believe he has continued to be firm in his resolve that both the 
House, and the Senate now for the first time, pass legislation so that 
we can conference a common bill and send it to him for his signature.
  I also want to thank the Speaker of the House. The gentleman from 
Illinois (Mr. Hastert) was involved in these discussions prior to our 
becoming the majority and, of course, prior to his becoming Speaker. If 
you examine H.R. 1, you will find that the Speaker has been willing to 
be the lead author. I think it is entirely proper and appropriate that 
the Speaker of the House lead the House through the most fundamental 
and important change in Medicare since its inception.
  I especially want to thank my colleague and friend and chairman of 
the Committee on Energy and Commerce, the gentleman from Louisiana (Mr. 
Tauzin). In this institution, where jurisdictions are guarded with a 
pretty vicious willingness to have turf wars whenever necessary to hang 
on to your jurisdiction, the working relationship with the shared 
jurisdiction of the Committee on Energy and Commerce and the Committee 
on Ways and Means has been a very pleasant experience,

[[Page 16412]]

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


                Announcement by the Speaker Pro Tempore

  The SPEAKER pro tempore (Mr. LaHood). Although it is permissible to 
refer to a Senator as the sponsor of legislation, other personal 
references are not permitted.
  Mr. RANGEL. Mr. Speaker, I yield such time as he may consume to the 
distinguished gentleman from Rhode Island (Mr. Kennedy).
  Mr. KENNEDY of Rhode Island. Mr. Speaker, I would just like to state 
for the record that the Senator from Massachusetts referred to is my 
father, and I rise in opposition to H.R. 1.
  Mr. Speaker, I rise in opposition to the Republican prescription drug 
bill.
  Our seniors know that Democrats have worked to provide them with 
universal, affordable, and reliable drug coverage.
  And they know that THIS bill is just another Republican attempt to 
dismantle Medicare.
  This bill won't help seniors . . . in fact, there is no guaranteed 
backstop to ensure that there will be drug coverage in their area. 
Indeed, seniors may end up without ANY drug coverage . . . or forced 
into an HMO that they do not want to be in.
  And the problems with the bill today will only increase in 2010, when 
premium support and competitive bidding kicks in.
  Republicans divide this issue between helping our Nation's elderly 
now or helping our young in the future, but we can help both.
  James, a Boy Scout from Lincoln, Rhode Island, wrote to me because he 
is worried about his two grandmothers who cannot afford their 
medications.
  I hope he doesn't grow up only to realize that we passed a bill in 
Congress that actually made it worse for his loved ones.
  We should not disappoint James, his family, or the forty million 
Medicare beneficiaries in this Nation.

[[Page 16413]]

  Vote ``no'' on H.R. 1.
  Mr. RANGEL. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I think this is one of those days that we will never 
forget as legislators. This is one of those days that I think as 
legislators we will never forget. And even though we have some people 
who have not studied the bill that are so anxious to believe that they 
are going to get prescription drug relief, I think at the end of the 
day that they might be able to see that this is the first step that has 
been specifically designed not to reform the Medicare system as we know 
it but to dissolve it.
  There are some people who are honest enough, at least outside of this 
hallway, to admit that that is exactly what they would want to do, to 
dissolve the Medicare. Many of the people on the other side of the 
aisle, and perhaps a handful on our side, believe that health care 
should not be an entitlement, Social Security should not be an 
entitlement; that the free marketplace should be able to work its will; 
that government should not be involved in providing these type of 
services.
  Ultimately, I do believe that when the bill is studied and they see 
that the transfer of the ability to determine how much prescription 
drugs will cost, which prescriptions would be filled, what is the 
recipient entitled to, when does the bill lock into place, and at the 
year 2010 what do they do with the voucher if we do not have Medicare, 
all of these things, I think, will be answered at some time, but I 
really hope that they are answered today.
  We have many people that have worked hard on this bill; certainly the 
gentleman from Michigan (Mr. Dingell) has been a champion for health 
care for decades; the gentleman from California (Mr. Stark), who will 
be handling the remainder of this bill, the gentleman from New Jersey 
(Mr. Pallone), the gentleman from Ohio (Mr. Brown), and so many others. 
But as I have said so many times publicly, at some point in time people 
will be asking, when they were moving to dissolve Medicare, where were 
you and what were you doing?
  I think, as so many votes in the past, that people will remember this 
vote. And those of us who oppose this piece of legislation will be 
giving our colleagues an opportunity on voting for legislation that 
provides all of the coverage that the letter requested from AARP, and 
while parts of the letter were read, I think it is safe to say that the 
objections that were raised to the bill or the questions that they had 
hoped that would be changed, that that is handled in the substitute.
  Mr. Speaker, I ask unanimous consent to allocate the remainder of my 
time to the gentleman from California (Mr. Stark), with the 
understanding that he be permitted to allocate the rest of the 
remaining time.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from New York?
  There was no objection.
  Mr. THOMAS. Mr. Speaker, I yield 2 minutes to the gentleman from 
Florida (Mr. Foley), a member of the Committee on Ways and Means.
  Mr. FOLEY. Mr. Speaker, I thank the chairman for yielding me this 
time, and to both chairmen who have brought this bill to the floor, I 
congratulate them for this landmark legislation.
  During the rule debate, it was a little depressing to me to hear so 
many people refer to the fact that our seniors would not be able to 
figure these programs out. These people we are talking about survived 
the Depression, they fought in World War II and Korea, they taught us 
how to read and write, they taught us how to ride our bikes and drive 
our cars. They are our parents. They are smart enough to figure this 
out.
  I come from a district in Florida, the fifth largest population of 
Medicare recipients in the Nation, the fifth largest Medicare 
recipients in the Nation. When I go to town hall meetings, they do not 
ask for anything free. They want a break. They want a discount. They 
want an opportunity to shop. They want freedom in the marketplace. But 
they want security to know they will not go broke. This bill provides 
that.
  The bill provides for a discount card that I helped author, along 
with Senator Hagel, which provides immediate access to discount 
pharmaceutical prices. Real reforms in Medicare allowing generics, 
something I have heard about on this floor repeatedly from the other 
side of the aisle. We have to get generics to the market place sooner, 
faster, quicker, cheaper. That is in this bill.
  This bill provides for increased rural funding for hospitals, which 
is an incredibly important thing for people in my community and rural 
communities like Glades, Okeechobee, Hendry, and Highlands County. 
These are Medicare reforms that will save billions of dollars.

                              {time}  1915

  Yes, this is an historic night, not one to be celebrating fear and 
animosity or negative pessimism about our seniors, but rejoicing in the 
fact that we are helping them provide for themselves and their 
families.
  Yes, there is a phenomenal opportunity tonight to pass a bill that 
will help seniors in my community. And the instructions they gave me 
when I first ran for office and have continued to give me is do not 
make it free, do not make it cheap, do not make it for political 
purposes, make it so it works. This bill works, and I applaud the 
leadership for giving us a chance to make history tonight on the floor 
of the House.
  Mr. STARK. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, it is difficult to know where to begin to warn the 
seniors in this country about this sham of a bill and the beginning of 
the destruction of Medicare, as the Republicans have wanted to do for a 
number of years. There is no question that this is a major move toward 
privatizing Medicare. By the calculations that we have from the last 
feeble attempt to do this, of course Health and Human Services refuses 
to give us the most recent actuarial computations, but using the last 
ones, the Medicare premium for B in this drug benefit would rise to 
$142 a month if the premium could hold at $35.
  By 2010, all Medicare will be privatized and immediately there will 
be a means test, the first time ever, an attempt to turn a government 
program into a welfare program, and the interesting thing is that every 
senior's income data will be turned over to any insurance company in 
the United States that requests it. So seniors, so much for their 
privacy. Every one of those people that calls on the phone to sell you 
some hokey insurance is going to have complete data on your income 
courtesy of the Republicans.
  Mr. Speaker, the sad part even further is that the Republicans would 
like to turn this over to private companies to operate it, and it is 
very interesting that one of the largest and best known private 
companies, Medco, a subsidiary of Merck, was just indicted, or as they 
say, essentially indicted, by the U.S. Attorney in Philadelphia for a 
series of crimes committed on our Federal employees' health insurance 
benefits. This company that the Republicans would turn the management 
of this drug benefit over to was indicted for canceling, deleting and 
destroying patients mail order prescriptions to avoid penalties for 
late filing and mailing; shortchanging patients on the number of pills 
paid for; making false statements to the insurance plan they were 
contracted with about compliance with mailing timelines; calling and 
inducing physicians to authorize switching to higher cost medications 
while representing that this would save money for the insurance 
company, which was untrue; fabricating records of calls by pharmacists 
to physicians, and the list goes on.
  This is the type of company who supports the Republicans, and they in 
turn are paying back that favor by offering Medco and Merck and their 
ilk the opportunity to provide a so-called benefit to seniors. I say 
so-called benefit because the next cruel hoax in this bill is there is 
no benefit defined in the bill. Nowhere in the bill does it define a 
premium, nowhere in the bill does it define a copay, and nowhere in the 
bill

[[Page 16414]]

does it define a benefit. Now, we can all do some math and the CBO 
actuaries tell us that the actuarial value of a suggested benefit might 
be $1,360. It is important to add that our actuarial benefit for our 
health employees' benefit plan is probably closer to $3,000, but there 
is nothing that states in this law that the U.S. Government shall 
create, provide, or require a benefit of any type. In other words, if 
the insurance companies cannot be induced or bribed into offering a 
benefit, there will not be any. This is a nothing bill. It does not 
provide a benefit.
  Now, I guess perhaps Members may not want to just take my word for 
it, so I think it is important to note what many others might say about 
the bill.
  Mr. Speaker, the Arizona Daily Star says that ``the Democratic bill 
is better in every respect,'' and that the House drug bill is ``awful'' 
and ``repulsive.''
  The Chicago Tribune says the Medicare debate ``has more to do with 
campaign 2004 than providing a prescription drug benefit.''
  The Long Island Newsday said that ``the proposals racing through the 
House are a mess. Unless they improve dramatically en route to passage, 
doing nothing would be better than enacting such flawed laws.''
  The Evansville Courier & Press says the ``ridiculously complex 
Medicare reform now being considered by Congress may be one of the more 
irresponsible measures in the long history of cradle-to-grave 
legislation.''
  The Akron Beacon Journal says that while the Medicare reform bills 
would address the lack of drug coverage in Medicare, beneficiaries 
might be ``no better off with the benefit than they are at present'' 
because ``on the key issues of affordability, the structure of 
premiums, deductibles and copayments, both versions follow an elaborate 
path to disappointment.'' The list goes on.
  In North Carolina, the Raleigh News Observer says the bill's actual 
benefit does not begin to outweigh the drawbacks of its so-called 
reforms.
  The Roanoke Times and World News says even if the drug bill passes, 
seniors still will have to fear the possibility they will face crushing 
drug bills.
  In Kansas, the Windfield Courier says the doughnut hole ``hurts many 
seniors when they need the help the most.'' ``The majority Republicans 
are at risk of passing a Medicare bill that looks, walks and talks like 
a political campaign creature.''
  Washington State, the Seattle Post-Intelligencer says what Congress 
finally sends to the White House will surely be a disappointment.
  The Oregonian says it is difficult to see the congressional proposals 
for Medicare drug coverage as much more than a big letdown. They are 
thin in coverage and convoluted in delivery.
  Mr. Speaker, I think we can sum this all up, people will say this is 
drug coverage for old folks. The truth is this bill is nothing but 
political coverage for the Republicans.
  Mr. Speaker, I reserve the balance of my time.
  Mr. THOMAS. Mr. Speaker, I yield myself 15 seconds.
  Mr. Speaker, Members will find periodically during this 3-hour debate 
that we will take a very short segment of time to make sure that when 
an outlandish, outrageous, untrue statement has been made, we will 
correct the record immediately.
  Mr. Speaker, I yield 1 minute to the gentlewoman from Connecticut 
(Mrs. Johnson), the chairman of the Subcommittee on Health for the 
Committee on Ways and Means.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, this bill does not allow 
the IRS to share your income information with insurance companies. The 
bill very clearly protects the confidentiality of your information, and 
there are criminal and civil penalties for violating those provisions. 
Violators can go to jail.
  It is true that for 5 percent of the seniors, they will have a higher 
threshold for catastrophic coverage. I personally do not believe that 
someone with a $200,000 income living in a gated community should have 
exactly the same subsidy as someone struggling along on $25,000 or 
$30,000 of income. I think that is a strength of this bill. But if 
someone does not want the government to tell you what your catastrophic 
threshold is, you can opt out and just take the highest threshold. That 
is your right. But only 5 percent will fall above the threshold, and we 
think that is progressive. We think we need to target this benefit at 
those who need it the most, and that is what we do.
  Mr. THOMAS. Mr. Speaker, I yield 2 minutes to the gentleman from 
Illinois (Mr. Crane), chairman of the Subcommittee on Trade, a long 
time member of the Committee on Ways and Means.
  Mr. CRANE. Mr. Speaker, I rise in support of H.R. 1, the Medicare 
Prescription Drug and Modernization Act of 2003. As a member of the 
Committee on Ways and Means' Subcommittee on Health, I can say with 
confidence that this bill is a fair and balanced approach towards 
providing millions of America's seniors with prescription drug 
coverage.
  Congress is long overdo in helping our seniors with the skyrocketing 
costs of their prescription medication. Seniors are struggling and we 
need to help them. But we cannot ignore that the current program 
without an expensive new drug benefit is not financially stable. The 
Medicare program is already struggling to provide a finite number of 
health services to nearly 41 million elderly and disabled. It is 
imperative that this House takes action before the retirement of the 
baby boom generation, which will add another 36 million beneficiaries 
to the Medicare roll. Simply adding a new drug benefit is not the 
answer.
  I support H.R. 1 because it includes a number of reforms that will 
ensure the long-term fiscal integrity of Medicare through 
modernization. This legislation gives seniors the same range of private 
health insurance plans available to Members of Congress and other 
Federal employees. If seniors do not want to enroll in a private plan, 
they have the option of staying in traditional fee-for-service.
  The time has come for Congress to work together to move past 
political rhetoric and provide prescription drug coverage for seniors. 
More importantly, it is time to institute reforms to ensure that future 
generations will have the security of knowing that Medicare will be 
there when they retire. I urge my colleagues on both sides of the aisle 
to support H.R. 1.
  Mr. STARK. Mr. Speaker, I yield 3 minutes to the gentleman from 
California (Mr. Matsui), a member of the Committee on Ways and Means.
  Mr. MATSUI. Mr. Speaker, I thank the gentleman for yielding me this 
time.
  I have to first of all say that I am extremely disappointed that my 
colleagues on the other side of the aisle have put this bill before us. 
It is a shame because if they would have thought through the matter 
better and instead of bringing up those tax cuts, particularly the 
dividend tax cut and the capital gains tax cut, we could have gotten a 
bill on the floor that all Americans could be proud of, and every 
senior citizen in this country would not only be proud of, but would 
have an adequate benefit.
  I think this bill is a sham and I think instead of covering senior 
citizens, what we are doing is giving my Republican colleagues cover, 
political cover that eventually the senior citizens will lift and begin 
to understand what this bill is really all about. I guarantee Members 
by the fall of this year, senior citizens in America will understand 
this bill and they will be very, very unhappy with a vote in favor of 
this legislation.
  When we think about it for a minute, this bill does not do much at 
all. If a senior citizen has $5,000 worth of prescription drug coverage 
in any given year, the senior citizen will have to pay $4,000 
immediately, $4,000 of the first $5,000 of coverage before they can 
even get $1 of Federal government benefit. They have to have $670 that 
they have to pay out in the form of monthly premiums, in the form of 
copayments.

                              {time}  1930

  And so this bill is not a good bill for senior citizens.

[[Page 16415]]

  In addition to that, this bill will ultimately in the next 5 years 
begin the erosion of Medicare as we know it. Newt Gingrich had said 
when he became Speaker of the House a few years ago that he wanted to 
see Medicare wither on the vine. We had the gentleman from California 
(Mr. Thomas) just the other day say on national television, ``Those who 
say that the bill would end Medicare as we know it, our answer is, `We 
certainly hope so.''' Because what they really want to do is privatize 
Medicare, make it so that insurance companies could increase premiums 
to whatever they want to do and only insure the healthy senior citizen 
so that the chronically ill will ultimately wither on the vine.
  This system that is being put forward today is one that will in fact 
do major damage to the Medicare system in America. Why did we have 
Medicare in 1964 in the first place? Because we knew senior citizens 
could not get coverage because seniors by their very nature are the 
ones that get ill and the ones that ultimately go into very, very 
difficult physical situations. And so ultimately what we are going to 
have is going back to 1964 with this legislation. That is their intent, 
because they want to see Medicare wither on the vine.
  This bill is a bad bill and we need to vote ``no'' on it so the 
American public understands exactly what my colleagues on the other 
side of the aisle are attempting to do.
  Mr. THOMAS. Mr. Speaker, I yield myself such time as I may consume.
  This is the first mention of the quote that I made, and it is not 
surprising that the quote is certainly truncated. Perhaps a journalism 
spot on The New York Times might be available to some of my colleagues 
given their ability to take reality and distort it. Here is my quote:
  ``Some of our friends on the other side of the aisle are saying that 
if this bill becomes law, it will be the end of Medicare as we know it. 
Our answer to that is, We certainly hope so. Why should seniors be the 
last group that pays retail prices for drugs?'' We have not heard that 
from the other side.
  ``Old-fashioned Medicare isn't very good. Why should the insurance 
for seniors be called MediGap? I think that indicates just how good the 
insurance is.'' We have not heard that from the other side.
  But what I did say was, you will hear scare tactics. But seniors with 
extremely high drug costs when this becomes law will save more than 60 
percent of their current costs if they spend $10,000 a year on 
prescription drugs today. That is real change. That is real progress, 
making Medicare a real day-to-day benefit. I would say to my 
colleagues, if you really think that current Medicare should not end, 
why in the world did you put up such a fit to have a substitute so that 
if we accept your bill, current Medicare as we know it will end as 
well? Half quotes are not going to get it done. Try the full quote, 
because if you do, you will vote ``yes'' on this bill.
  Mr. Speaker, it is my pleasure to yield to the gentleman from 
Pennsylvania (Mr. Gerlach) to enter into a colloquy.
  Mr. GERLACH. Mr. Speaker, I thank the gentleman from California for 
his dedication to adding a prescription drug benefit to Medicare. 
Members of the Pennsylvania delegation have some concerns as to whether 
State pharmaceutical assistance programs like PACE and PACENET in 
Pennsylvania will be able to fully coordinate their programs with 
Medicare drug plans to provide a seamless transition for beneficiaries 
and States that already have prescription drug plans.
  Mr. THOMAS. I will tell the gentleman from Pennsylvania that we have 
a generous amount, and we believe it will be appropriate; but certainly 
as we get to conference, our intent is to provide a seamless transition 
for beneficiaries and States and that will be done.
  Mr. GERLACH. I thank the gentleman.
  Mr. THOMAS. Mr. Speaker, it is my pleasure to yield 2 minutes to the 
gentleman from Pennsylvania (Mr. English), a member of the Committee on 
Ways and Means.
  Mr. ENGLISH. Mr. Speaker, I rise in strong support of the bill before 
the House today. This bill is the most historic and significant 
addition to Medicare in the program's history. This Medicare bill 
offers enormous benefits for all of Pennsylvania's seniors while saving 
the Commonwealth hundreds of millions of dollars. The Medicare 
Prescription Drug and Modernization Act provides all seniors with a 
thorough, flexible, and voluntary prescription drug plan while at the 
same time augmenting Pennsylvania's PACE plan. Importantly, for the 
nearly 2 million seniors in Pennsylvania, this bill would allow PACE to 
wrap around the Federal benefit which would largely supplant and build 
on PACE's current benefits. And to ensure that Pennsylvania's seniors 
get maximum drug coverage, this Medicare bill would allow PACE to pay 
for beneficiaries' copays under Medicare while at the same time 
counting those contributions toward out-of-pocket expenditures to more 
rapidly trigger catastrophic coverage.
  Our seniors have waited too long to receive the benefits that they 
deserve. This flexible, voluntary, and affordable plan would provide 
seniors with dependable benefits. This is a huge benefit for seniors in 
the roughly 10 States that have a significant State plan already in 
place.
  Mr. Speaker, this bill also provides real help to America's rural 
health providers to allow them to deliver the highest quality care to 
seniors and meet the demanding fiscal challenges that they currently 
face. In many rural areas like my own district of western Pennsylvania, 
inequities in Medicare's wage reimbursements and payments for hospitals 
often drive workers, especially skilled nurses, to look for jobs in 
higher-paying metropolitan hospitals and contribute to staffing 
shortages in many local communities.
  Several provisions in this bill mirror legislation I introduced 
earlier this year to help alleviate those high costs by increasing 
Medicare's salary reimbursements to our hospitals. These two provisions 
would pump $13.3 billion into the struggling rural health systems, and 
I am pleased to note that hospitals in my district alone would receive 
approximately $65 million as part of this fix. I ask for support for 
the bill.
  Mr. STARK. Mr. Speaker, I am pleased to yield 3 minutes to the 
gentleman from Michigan (Mr. Levin).
  Mr. LEVIN. Mr. Speaker, the Republican bill contains a ticking time 
bomb, a ticking time bomb of Medicare privatization set to go off in 
2010. Under this bill, starting in 2010, seniors, in essence, would 
receive a voucher instead of Medicare's guaranteed benefits, instead of 
open access to doctors and hospitals and predictable costs.
  Seniors who cannot afford to pay more than they do right now would 
have to leave Medicare and join HMOs. This so-called benefit for 
prescription drugs in the Republican bill serves as a decoy, but it is 
not a very good one.
  The Republican drug plan is insurance without assurance. No assured 
premium, no assured deductible, no assured size of the gap between the 
basic coverage and stop-loss, no assured list of drugs, no assured list 
of pharmacies, no assured plan from one year to the next. It could 
change from year to year.
  From the very beginning, Republicans have wanted to use prescription 
drugs as leverage to end Medicare. The President said earlier to 
seniors, we will give you some prescription drug help depending on 
whether you leave Medicare and join an HMO. And now what this 
Republican bill is doing is using a very inferior drug insurance plan 
in 2006, not until then, to make everything except HMOs unaffordable 
for seniors in 2010. The chairman did say just a few days ago, ``Old-
fashioned Medicare isn't very good,'' and I quote his quote. What 
Republicans call old-fashioned Medicare is the system of guaranteed 
benefits, set premiums and deductibles and access to doctors and 
hospitals that have served seniors so well since 1965. Republicans want 
to end all that, but current and future Medicare beneficiaries do not. 
And we Democrats intend to keep fighting for those good aspects of old-
fashioned Medicare. Indeed, it has been very, very, very good.

[[Page 16416]]


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

                              {time}  1945

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

[[Page 16417]]

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

[[Page 16418]]

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

                              {time}  2000

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

[[Page 16419]]

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

                              {time}  2015

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

[[Page 16420]]

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

                                         House of Representatives,


                                  Committee on Ways and Means,

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

                                         House of Representatives,


                               Committee on Government Reform,

                                    Washington, DC, June 25, 2003.
     Hon. William M. Thomas,
     Chairman, Committee on Ways and Means,
     House of Representatives, Washington, DC.
       Dear Chairman Thomas: I am writing to confirm our mutual 
     understanding with respect to the consideration of H.R. 2473, 
     the Medicare Prescription Drug and Modernization Act of 2003, 
     which was referred to the Committees on Ways and Means and 
     Energy and Commerce. I am writing specifically regarding 
     Sections 302 and 303, which waive provisions of the Federal 
     Acquisition Regulation and exempts a newly established 
     advisory committee from the Federal Advisory Committee Act 
     (FACA). As you know, the Federal Acquisition Regulation and 
     the Federal Advisory Committee Act are within the 
     jurisdiction of the Committee on Government Reform.

[[Page 16421]]

       I have concerns regarding the appropriateness of waiving 
     FACA, as it would pertain to the Program Advisory and 
     Oversight Commit proposed in section 302. I would welcome the 
     opportunity to work with you and Chairman Tauzin to address 
     the applicability of FACA to this proposed committee.
       In the interests of moving this important legislation 
     forward, I do not intend to ask for sequential referral of 
     this bill. However, I do so only with the understanding that 
     this procedural route should not be construed to prejudice 
     the Committee on Government Reform's jurisdictional interest 
     and prerogatives on these provisions or any other similar 
     legislation and will not be considered as precedent for 
     consideration of matters of jurisdictional interest to my 
     Committee in the future. Furthermore, should these provisions 
     or similar provisions be considered in a conference with the 
     Senate, I would expect Members of the Committee on Government 
     Reform be appointed as outside conferees on those provisions.
       Finally, I would ask that you include a copy of our 
     exchange of letters on this matter in the Congressional 
     Record during House debate of the bill. If you have questions 
     regarding this matter, please do not hesitate to call me. I 
     thank you for your consideration.
           Sincerely,
                                                        Tom Davis,
                                                         Chairman.

  I also include for the Record a quote:

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

                   Prescription Drug Benefit Imminent

                          (By Norah O'Donnell)

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


                            gaps in coverage

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

  Mr. THOMAS. Mr. Speaker, I yield myself 15 seconds.
  I see the gentleman from Texas (Mr. Doggett) had two quotes connected 
with a description of myself, rather than the continuation of the real 
quote, and I can understand why he would fabricate the quote in that 
way. Because what I said was, why should seniors be the last group that 
pays retail prices for drugs? That really did not fit the intention of 
the gentleman's thrust, but that is simply the truth.
  Mr. Speaker, I yield 2 minutes to the gentleman from Iowa (Mr. 
Nussle), the chairman of the Committee on Budget, but I proudly say 
also a member of Committee on Ways and Means.
  Mr. NUSSLE. Mr. Speaker, I thank the gentleman for yielding me time 
and for his partnership and hard work on this bill.
  The Democrats are living in 1965. Boy, we have heard a lot about that 
tonight. We have heard about Bob Dole and Lyndon Baines Johnson. Well, 
that is great but it is not 1965. Medicare is going bankrupt. Tax cuts 
did not cause that. Health care costs are out of control. The 
reimbursement system under

[[Page 16422]]

Medicare is broken and it is not paying the bills. Hospitals are 
closing. Doctors are leaving rural areas or not taking Medicare 
patients at all. Cost shifting is running rampant onto the private pay 
side, and as a result, problems are running rampant within our health 
care system.
  Benefits have not improved. We do not have drugs. We do not have 
prevention. We do not have disease management. We have a sick care 
system, and the Democrats have done nothing about it for the past 30 
years since they did pass Medicare in 1965.
  Doing nothing tonight is not an option, and that is why in the budget 
we put $400 billion to improve Medicare, increasing Medicare by $400 
billion, hardly withering on anybody's vine, because doing nothing is 
not an option. Tonight, H.R. 1 is the choice. It modernizes Medicare, 
saves it from bankruptcy, controls costs, modernizes benefits, fixes 
the Iowa and other rural reimbursement problems, keeps these hospitals 
open and viable so that they can pay the bills as a result of 
amendments that have been passed in both the Committee on Ways and 
Means and the Committee on Energy and Commerce.
  Quality health care will be available in rural areas on into the 
future as a result of what we have done tonight. Inaction is not an 
option.
  But there is one other choice. The Democrats will offer a $1 trillion 
Medicare drug benefit tonight; one that CBO says costs $1 trillion. 
Guess what? That not only busts the Republican budget, but it busts the 
Democratic budget and it busts both of our budgets combined. Do not 
bankrupt Medicare. Save it by passing H.R. 1.
  Mr. STARK. Mr. Speaker, I yield 2\1/4\ minutes to the gentlewoman 
from Ohio (Mrs. Jones), a member of the Committee on Ways and Means who 
understands that the Republican bill does not extend the life of the 
Medicare Trust Fund at all. In fact, it probably reduces it some.
  Mrs. JONES of Ohio. Mr. Speaker, I will begin with a quote. ``Seniors 
face a confusing hodgepodge of co-payments and deductibles in Medicare. 
The system is irrational and difficult to navigate. Simplifying and 
modernizing cost sharing will make coverage easier to understand and 
will strengthen the Medicare program over the long term. I believe we 
can better design both Medicare and Medigap so that seniors and people 
with disabilities get the most of the health care dollars they spent.''
  That is a quote from a Republican colleague. But let me report from 
Howard Brown, 77 years old, from Cleveland, Ohio. He complained about 
the complexity of the program that will involve choosing a plan, 
tracking out-of-pocket expenses, and knowing when the coverage kicks 
in, lapses and then resumes in severe cases, all according to a sliding 
scale of benefit.
  Mr. Brown said, ``I am too old to try to figure all this out. Make it 
simple. Make it plain so I can understand it.''
  The people in the United States, the seniors who are on Medicare, 
they want a defined benefit giving them an entitlement and a guarantee. 
They want it to be affordable with reasonable premiums and deductibles. 
They want it to be designed to significantly reduce the price of their 
prescriptions, and they want a meaningful Medicare prescription drug 
bill that provides absolutely no gaps and no separate privatized 
ambulance.

                              {time}  2030

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

[[Page 16423]]

those senior citizens who cannot afford the medicine. Government is 
there for something. They do not want it privatized.
  Mr. Speaker, let me just say this from one of my constituents, and I 
want to read this note. He said: ``I am a 74-year-old retired senior on 
Medicare and this Medicare drug prescription plan is just a stone's 
throw away from privatization of Medicare. That should not be allowed 
to happen.'' Let us not let it happen.

                                               Snellville, GA,

                                                    June 14, 2003.
     Representative David Scott,
     Jonesboro, GA.
       Dear Representative Scott: I'm a 74 year old retired senior 
     that's on Medicare at home recovering from a massive heart 
     attack and bladder infection so I am very concerned about 
     what course of action Congress is presently taking on the 
     Medicare Drug Prescription Plan.
       When the news first came out that Congress was finally 
     going to add prescription drugs to Medicare in order to 
     provide financial relief for seniors that are paying way too 
     much for their medication versus their meaner yearly income 
     from Social Security and if they have one, their pension fund 
     and any life savings they may have. At that time I heard that 
     Congress would be working on such a plan Medicare 
     beneficiaries would be given a choice if they needed and 
     wanted their prescription drugs covered by Medicare. If they 
     did all they had to do is sign up for it and pay whatever the 
     cost of the plan covers. For the rest of us who are happy 
     staying with Medicare and our present secondary insurance 
     coverage that provides better prescription drug coverage at a 
     lower cost would not have to participate in any Medicare 
     prescription drug plan.
       Seniors that don't have prescription drug coverage should 
     be covered by this plan as a matter of choice, however; I 
     feel it is unfair for Congress to make it a mandatory 
     requirement for all seniors to pay for this plan which would 
     override their own secondary insurance plan for their 
     prescription drug plan. It just isn't fair. Why should we 
     have to give up our plan and end up paying far more than what 
     we are presently paying? I'm sure if all seniors were aware 
     of what really is going on they would want to make it a 
     matter of choice also.
       Representative Scott please give us Medicare beneficiaries 
     a choice to join or not to join the Medicare prescription 
     drug coverage. Even though I'm not in your district I'm 
     asking you to please support us many seniors by making sure 
     this choice provision will get covered in the final bill that 
     is sent to President Bush. If this choice does not become 
     part of this Medicare Drug Prescription plan it is just a 
     stone's throw away from the privatization of Medicare and 
     that should not be allowed to happen. Please remember when 
     you vote whatever the outcome is on this plan it will affect 
     all Americans nation wide and in some way or other I'm sure 
     it will have some sort of a bearing on the outcome of the 
     2004 elections.
       May God Bless you and may God Bless America.
           Sincerely yours,
                                                   Richard McGraw.

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

[[Page 16424]]

plans, change doctors, change pharmacies, and even change the drugs 
they take every twelve months. Medicare expert Marilyn Moon told the 
Senate Finance Committee on Friday that ``There will be a lot of 
confused and angry consumers in line at their local pharmacies in the 
fall,'' if the Republican approach is not changed. She's right.
  The Republican plan provides poor benefits, and has a giant gap in 
coverage. Under the House Republican plan, many seniors would be 
required to pay high premiums even when they don't receive benefits. 
Reportedly, under the House GOP plan, Medicare beneficiaries have a 
high $250 deductible. After they reach that deductible, they would then 
be required to pay a portion of their first $2,000 in drug costs--that 
is a fairly normal system. But, after a senior's costs hit $2000 for a 
year--that is when it becomes obvious just how bad this plan is. Once a 
senior's drug costs hit $2000, the Republican plan cuts them off. Even 
though they must continue to pay premiums, they get no assistance in 
paying their drug costs at all until their costs reach $5,100. Let me 
say that again. It seems so crazy, it is almost unbelievable. The 
sickest of our seniors, the ones on the most medications--once their 
costs reach the $2000 mark--they fall into the Republican gap. They are 
left to pay the next $3000 out of their own pockets, while continuing 
to pay premiums. Almost half of seniors would be affected by this gap 
in coverage. They will be outraged, and our offices will be hearing 
about it. Already we are hearing that 4 out of 5 seniors, the people we 
are trying to help, are against this plan.
  I have attended hundreds of health care briefings, and have read 
everything I can get my hands on, on the subject of improving Medicare 
and getting good health insurance to the American people. And I have 
never heard anyone say that a hallmark of a smart health insurance 
program is to have a giant gap in coverage for those who need help the 
most. Why would our Republican colleagues put in this ditch in the road 
to health for seniors? Because they wasted all of our nation's hard 
earned money, on massive tax breaks for the rich, and an unnecessary 
war.
  So now they have placed an arbitrary budget cap on vital programs, 
pushed by President Bush, in order to compensate for the irresponsible 
Republican tax cut they jammed through this Congress and last Congress. 
The way they are dealing with the mess that they have made is by 
throwing bad policy after bad policy. To remain within their own 
arbitrary budget cap, they are pitching a bill that will provide a 
confusing, insubstantial benefit to the majority of seniors.
  If the Republicans wanted to save money, they could have put in a 
provision that I and many Democrats have pushed for--and that is to 
allow the Secretary of the HHS to negotiate with the pharmaceutical to 
get fairer prices for the American people. I believe that the American 
pharmaceuticals industry is the best in the world. They make good 
products that benefit the world. But Americans are now paying double 
the cost for drugs than their counterparts in other rich nations such 
as Germany, Canada, Great Britain, or Japan. I am glad our companies 
are making money. But as we enact a prescription drug benefit under 
Medicare, access to drugs will rise--and drug company profits will rise 
as well. It is only fair that the Secretary should have the power to 
negotiate a good price for American consumers, to make sure we get the 
best returns possible on our federal investment.
  Not only did the Republicans not put in a provision to allow such 
negotiations, they went out of their way to forbid the Secretary from 
trying to get better prices for Americans. Why? Because they value the 
profits of their corporate sponsors at Pharma, more than they do the 
well-being of our nation's seniors. American consumers are now 
subsidizing the drug costs of the rest of the world. The Canadians, 
British, Germans, Japanese--the rich nations of the world--still pay 
half of what we pay for drugs. We need to bring leaders in the 
Pharmaceutical companies to the table. They want to sell their products 
to more Americans, and we want more Americans to have access to their 
products. Surely, the Secretary should be able work with the industry 
to negotiate a compromise that serves all Americans well.
  Similarly, the Republican plan's design wastes billions in kickbacks 
for HMOs--instead of using that money to bring down the premiums and 
out-of-pocket costs that seniors and the disabled are forced to pay.
  The Republican plan is to privatize Medicare starting in 2010. The 
whole reason that Medicare was developed in the first place, was that 
private industry would not rise to the challenge of taking care of our 
nation's seniors the way they deserve.
  The Republican plan is a risky scheme only an HMO could love. The 
Bush Administration's Medicare Administrator has called traditional 
Medicare ``dumb'' and ``a disaster,'' highlighting Republicans' disdain 
for a program that Democrats have been fighting for since 1965. While 
Democrats have worked to modernize Medicare with prescription drugs, 
preventive care and other new benefits, Republicans are insisting on a 
riskier course even the Wall Street Journal calls a business and social 
``experiment.''
  The Republican plan destroys Employer Retiree coverage. The 
Congressional Budget Office has concluded that about one third of 
private employers will drop their retiree drug coverage under a 
proposal like the one being contemplated. In order to lower its cost, 
the House Republican plan stipulates that any dollar an employer pays 
for an employee's drug costs would not count towards the employee's 
$3,700 out-of-pocket catastrophic cap. This would therefore 
disadvantage seniors with employer retiree coverage because it would be 
almost impossible for them to ever reach the $3,700 catastrophic cap, 
over which Medicare would pay 100 percent of their drug costs. The 
practical effect of this is that employers will stop offering retiree 
coverage. That is a step in the wrong direction.
  We can do better. The House Democrats' legislation, that I am a proud 
cosponsor of, is designed to help seniors and people with disabilities, 
not HMOs and the pharmaceuticals industry. Under the Democratic 
proposal, the new Medicare prescription drug program would be 
affordable for seniors and Americans with disabilities and available to 
all no matter where they lived. It offers a meaningful benefit with a 
guaranteed low premium; and would be available as a new ``Medicare Part 
D'' within the traditional Medicare program that seniors know and 
trust.
  I am committed to getting seniors the prescription medications that 
their doctors deem they need. I want to work with our Colleagues on the 
other side of the aisle, and the Administration to make that happen. 
But unless I see a plan without a gap--with a consistent benefit--with 
some smart cost-controls--and some protections for Medicare, an 
excellent program for Americans, I cannot support this Republican drug 
scheme.
  This bill is a sham. Our seniors have been looking forward to getting 
relief from the high cost of drugs. They will be waiting with 
anticipation until after the next elections, when this bill 
conveniently kicks in. When it does, they will be furious. Let's do 
better.
  The SPEAKER pro tempore (Mr. Hastings of Washington). The Chair would 
remind the gentleman from California (Mr. Stark) that he has 30 seconds 
remaining.
  Mr. STARK. Mr. Speaker, I yield myself the remaining time and will 
use it to sum up because that is about all the time it will take to 
explain what is in the Republican bill, which is nothing. It privatizes 
Medicare, and it promises a benefit as good as we Members of Congress 
get, and it does not get a third of the way there.
  It is a hoax. It is phony. It is a fig leaf. It only gives coverage 
to the Republicans because there is nothing, absolutely nothing in this 
bill that requires anybody to provide a drug benefit to the seniors, 
and perhaps they will give the Republicans enough campaign money or 
promises and favors of other sorts to get them to change this in the 
future; but right now, sexual favors will not do it, nothing will do 
it. We are not giving the seniors anything but a hoax.
  The SPEAKER pro tempore. All time for the gentleman from California 
(Mr. Stark) has expired.
  The gentleman from California (Mr. Thomas) has 4\1/2\ minutes 
remaining.
  Mr. THOMAS. Mr. Speaker, I yield the remaining time to the 
gentlewoman from Connecticut (Mrs. Johnson), to close for our side, to 
continue to talk about the bill that for the first time in the history 
of Medicare provides low-income help, and she is the chairwoman of the 
Subcommittee on Health of the Committee on Ways and Means.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I thank the gentleman for 
yielding me the time.
  Today, is an historic day for America's seniors. Congress is about to 
fulfill the promise and the potential of Medicare, which has been one 
of our greatest success stories in our history; but when Medicare was 
created in 1965, prescription drugs were few and far between. Instead, 
painful and invasive surgeries were standard treatment; but now, with 
the health security of our seniors tied directly to medicines,

[[Page 16425]]

medicines that extend life and restore hope, we must add prescription 
drugs to Medicare for all our seniors.
  A Medicare program without a drug benefit is a false promise in the 
21st century. I am proud to stand here on this House floor and bring 
prescription drugs to Medicare for all of our seniors and a benefit 
that is simple, generous, and fair.
  It is simple because it pays 80 percent of the first $2,000 of drug 
costs; and it guarantees the peace of mind of our seniors, protecting 
them against catastrophic drug costs, covering all costs above $3,500.
  It is generous because the average senior spends $1,200 on 
prescription drugs every year. Yet in this bill we cover 80 percent of 
the cost up to $2,000.
  It is fair because it helps the low-income seniors more than any 
other group. It not only helps the very poor, below 150 percent of 
poverty, but for the first time, by allowing State subsidies to help 
seniors toward that threshold of catastrophic coverage, we help the 
next income group to have that security that seniors depend on in their 
retirement.
  In addition, there is fairness at both ends of this bill. Should 
someone with a $200,000 income have the same level of catastrophic 
protection as a low-income senior? Of course not.
  But modernizing Medicare cannot be just about prescription drugs, as 
important as prescription drugs are. It must also be about addressing 
the most crippling threat to our seniors' well-being and their 
retirement. It must address chronic illness.

                              {time}  2045

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

[[Page 16426]]

so adequately described, a much better bill, a bill richer in benefits, 
more secure in the texture of its structure, to make sure that seniors 
would, in fact, have more choices. Those like my mother, who want to 
stay in Medicare, cannot only stay in Medicare but enjoy a prescription 
drug benefit now; and those who might enter their senior years knowing 
about choice, liking choice, preferring choice, having the availability 
of different plans offered in the private sector that they could choose 
their prescription drug benefit from.
  That is the kind of world we hope to create when we pass this bill 
tonight, a bill that historically modernizes the Medicare system and, 
at the same time, brings some more stores to town and makes sure that 
every store, the government store and the private stores, all have the 
products that seniors need so desperately, and that is prescription 
drugs.
  In this bill this year, we do a number of other things. We address 
the concerns of many of our health care providers in terms of their 
lack of proper reimbursement from the government, and we add 
reimbursements to hospitals and physicians and caregivers across 
America. We have an excellent, and I thank the Committee on Ways and 
Means again for their work on this, we have an excellent rural package 
that will provide $27.2 billion of assistance to rural health care 
givers and hospitals to beef up care in America where care is 
desperately short and, unfortunately, hospitals are closing and doctors 
are leaving their practices.
  Indeed, because this bill adds to the mix of choices that seniors 
will have in the future, there are predictions from CBO that Medicare 
will get back on its feet, will not necessarily have to go insolvent. 
It will have a chance to be one of the options that seniors wish to 
choose for a long time in the future.
  These benefits are going to benefit all Americans. I know there is 
some talk about how the plan has coverage and then there is a donut 
hole and there is coverage again for catastrophic coverage. The 
discounts provided to seniors in this bill will be available at all 
stages of prescription drug coverage, at all stages of prescription 
drug use and purchase throughout the bill. Seniors will see lower drug 
expenses in this bill. CBO estimates, in many cases, by as much as 50 
to 70 percent. All seniors will benefit.
  And for the seniors who live below 135 percent of poverty, and there 
are thousands and millions of those seniors living across America, this 
bill provides a 100 percent subsidy, 100 percent coverage for the drugs 
they are going to need under this prescription drug plan. And that is a 
pretty good effort and that is a pretty good reform of our system.
  Indeed, we are also going to do some interesting things. We are 
concerned about the high prices of drugs. And like the Senate, we 
include reforms in the Hatch-Waxman laws that will speed the approval 
of generic drugs into the marketplace. And we reformed that awful, that 
awful wholesale price system that the government currently uses with 
phony wholesale prices that force seniors to pay 20 percent of phony 
prices whenever they suffer cancer and have to endure cancer therapies 
and urinary tract therapies and respiratory therapies. In short, we are 
going to lower the cost of drugs to America across the board, and we 
are going to increase the availability of drug coverage for every 
senior in this country and build new options for seniors to choose 
from. That is a pretty good package.
  I want to again congratulate all who worked on it and all in the two 
committees who contributed so much to it. In the House Committee on 
Energy and Commerce we had 65 amendments, I think 29 recorded votes, 
over 22\1/2\ hours of debate again this year. Are we ready for this 
vote tonight? You bet we are. Are seniors ready for the debate to end? 
You bet they are. Are seniors ready for us to really do it this year? 
You know it. Are seniors ready for this House, the Senate, and the 
President to come together and actually sign a law that gives them 
these benefits, instead of constantly just debating the issue? You know 
that is true.
  This is a historic moment, and this is our time to get it done.
  Mr. Speaker, I reserve the balance of my time.
  The SPEAKER pro tempore. The gentleman from Michigan (Mr. Dingell) is 
recognized for 45 minutes.
  Mr. DINGELL. Mr. Speaker, I yield myself 3 minutes.
  Mr. Speaker, three things: One, this is a bad bill. Two, it is not 
the Senate bill. And, three, it destroys Medicare as we now know it.
  And if you do not believe it, take the words of my good friend, the 
chairman of the Committee on Ways and Means, who says, ``To those who 
say this bill would end Medicare as we know it. Our answer is, we 
certainly hope so. Old-fashioned Medicare isn't very good.''
  Well, it is a safety net that has preserved and protected the health 
and the well-being of Americans for 38 years. It has been a fabulous 
system for the protection of the health and the welfare of the people.
  This thought echoes the words of Speaker Gingrich, who wanted 
Medicare to wither on the vine.
  Well, it is a fraud upon the American people. It provides very little 
for most people who are looking for the benefit of receiving 
prescription pharmaceuticals. What it does is it subsidizes the 
insurance companies. It does not control prices. It does not stimulate 
competition. It affords to the senior citizens a situation where they 
wait 2 years. And after they wait 2 years, what do they get? An 
enormous donut hole into which they fall after they have spent $2,000, 
during which period, for a period of about $2,900, they get no 
additional help from their government, but during which time they have 
to pay more money, more money, to not draw any benefits.
  And it should be noted there is no requirement whatsoever, none in 
this legislation, that requires the insurance companies, who will begin 
getting subsidized enormously in just 2 years after the enactment, to 
do a single thing to provide for prescription pharmaceuticals for the 
benefit of their subscribers. Indeed, most insurance companies have 
said they do not want to participate in the pharmaceutical-only care 
benefit that would be offered by this legislation. So they have set up 
this wonderful situation where there will be enormous boundless 
subsidies to try to induce somebody to come in and set up HMOs which 
will serve the people in the area or provide prescription 
pharmaceuticals to them.
  The Democrats have a simple, easy-to-understand piece of legislation, 
one which builds upon the practices which we have used in Medicare with 
such great success and so efficiently for so long to see to it that the 
people get the benefit on the payments of a modest sum and a modest 
deductible and then they get their benefits. No donut hole during which 
they do not gain benefits.
  And I would note that, by an interesting circumstance, many people 
under this wonderful Republican bill will pay a lot more than they will 
get out of this legislation. It is a piece of legislation which can 
best and most kindly be defined as a fraud upon a group of people who 
have high hopes that their Congress is going to take care of them.

                              {time}  2100

  Well, this Congress is going to take care of them; it is going to 
give them a deceitful piece of legislation which benefits them very 
little, if at all.
  Mr. Speaker, less than 2 weeks ago, the House Republicans divorced 
themselves from the Senate bipartisan legislation and unveiled their 
lengthy and complicated proposal to make sweeping changes in Medicare. 
After taking months to develop more than 300 pages of fine print in 
secret consultation with selected corporate allies, they rammed the 
bill through committees last week and are ramming it through the House 
today under a rule developed in the wee hours this morning. No 
hearings, no significant opportunity for public comment, no 
concessions--just the way the House Republican leadership wants things.
  But the Republican leadership is playing with fire. Not content 
merely to privatize a watered-down drug benefit, this bill, H.R. 1 
privatizes the entire program in 7 years. As Chairman Thomas said 
yesterday, ``[t]o those who say that [the bill] would end Medicare as 
we know it, our answer is: We certainly hope so. * * * Old fashioned 
Medicare isn't very

[[Page 16427]]

good.'' And a Republican Senate leader was quoted last month as saying 
that ``I believe the standard benefit, the traditional Medicare 
program, has to be phased out,'' echoing Speaker Gingrich's 1995 
prediction that traditional Medicare would ``wither on the vine.'' The 
list goes on. Former Majority Leader Dick Armey said, also in 1995, 
that Medicare was ``a program I would have no part of in a free 
world.'' Most recently, the Bush administration official in charge of 
Medicare, Tom Scully, 2 months ago called Medicare an ``unbelievable 
disaster'' and a ``dumb system.'' And, of course, I was here in 1965 to 
witness the overwhelming majority of Republicans vote for the motion to 
recommit the legislation that created Medicare.
  How will seniors react when told they will be forced to pay more to 
see their family doctor, or accept whatever doctors and benefits a 
private plan chooses to give them? How will seniors react when 
traditional fee-for-service Medicare is no longer a trusted safety net? 
How will seniors react when given a voucher and told to fend for 
themselves in the insurance marketplace--the same marketplace that 
failed them before Medicare? They should, and will, be outraged.
  Seniors will also be angry when they learn that the Republican drug 
benefit helps insurance companies more than them. Democrats propose a 
true benefit provided under Medicare, with set premiums and benefits. 
Republicans propose payments to insurers to offer uncertain benefits, 
with uncertain premiums. The only certainty in the Republican plan is a 
huge coverage gap, when seniors will continue to pay premiums after 
substantial out-of-pocket expenses, and yet receive no benefit. And 
drug costs will continue to rise, because the Republicans prevent 
bargaining by Medicare to make prescription drugs more affordable to 
seniors.
  Other nasty surprises will hurt seniors as well. Cuts in payments to 
hospital, when many are closing down. Inadequate payments to doctors, 
when seniors' access already is jeopardized. Increasing seniors' costs 
by $8.3 billion for their Part B coverage. These are shortsighted acts 
of extraordinary callousness.
  I urge my colleagues to reject this dangerous Republican plan. Our 
senior citizens deserve better than to be guinea pigs for risky 
ideological experimentation.
  Mr. Speaker, I reserve the balance of my time.
  Mr. TAUZIN. Mr. Speaker, I yield 3 minutes to the gentleman from 
Florida (Mr. Bilirakis), the chairman of the Subcommittee on Health.
  Mr. BILIRAKIS. Mr. Speaker, I thank the gentleman for yielding me 
this time.
  Mr. Speaker, I rise in support of H.R. 1, and I urge my colleagues to 
lend their support to this very important bill. We have before us a 
historic opportunity to provide our constituents with a meaningful 
prescription drug benefit that our Nation can afford. While the bill 
before us certainly is not perfect, it targets the $400 billion 
available under our budget resolution towards areas where it can do the 
most good.
  Our bill provides a great deal of assistance to our lower-income 
seniors for whom we waive a deductible and coinsurance requirements. 
These seniors, those with incomes below 150 percent of the poverty 
level, which in 2002 was $13,290 for an individual and $17,910 for a 
married couple, will only be responsible for a small copayment per 
prescription.
  In addition, the bill targets the prescription drug benefit towards 
where the need is greatest. Beneficiaries are only responsible for 20 
percent of their drug costs between a $250 deductible and a $2,000 
initial coverage limit. When we consider that the 2003 median drug 
costs for Medicare beneficiaries are estimated to be $1,390, it is 
clear that our bill provides a very good, up-front benefit.
  Finally, the bill ensures that seniors will have the peace of mind of 
knowing that their annual drug costs will be capped at no more than 
$3,500 out of pocket. While that number does rise for some wealthier 
seniors, I would note that 95 percent of seniors will qualify for the 
$3,500 figure. Our bill makes other improvements to the Medicare 
program, and includes some Medicare payment modifications to ensure 
that beneficiaries will still have access to high-quality health care.
  I would like to close by noting my great disappointment with my 
colleagues on the other side of the aisle, who for 30 years when they 
controlled this House did not do a thing for Medicare. I had to sit 
through a 3-day markup where my intentions and those of my colleagues 
were constantly questioned. Republicans were often accused of not being 
willing to commit adequate resources to a Medicare prescription drug 
benefit. I find that odd since in 2001, 2 years ago, the Democratic 
substitute to the budget resolution included only $330 billion for a 
new drug benefit. Republicans added $70 billion to that number only 2 
years later, and still our colleagues accuse us of underfunding that 
benefit.
  Mr. Speaker, all this tells me is that most Democrats only care about 
engaging in a reckless bidding war with Republicans and not about 
developing a reasonable, affordable benefit. H.R. 1 is a good bill, and 
its passage today will move us one step closer to a law which will 
provide real help to tens of millions of Medicare beneficiaries.
  Mr. DINGELL. Mr. Speaker, I yield 3 minutes to the gentleman from 
Ohio (Mr. Brown), the ranking member of the Subcommittee on Health.
  Mr. BROWN of Ohio. Mr. Speaker, for years Republicans have tried to 
frighten seniors by telling them that Medicare was going broke. The 
media in this country scolded the Republicans for their Mediscare 
tactics. Well tonight, Republicans have graduated from using Mediscare 
tactics to a new level, and that is scam.
  Mediscam number one: my Republican colleagues tout H.R. 1 as the 
largest expansion of Medicare since the program's inception calling 
their plan generous. But under H.R. 1, seniors will be required to pay 
$4,000 out of pocket to receive $5,000 in benefits. That is not 
generous; that is not even insurance.
  Mediscam number two: my Republican colleagues say we should pass H.R. 
1 because seniors deserve better coverage options like those available 
to Members of Congress, yet this bill's drug coverage is less generous 
than the least generous coverage available to Members of Congress. That 
is not treating seniors like Members of Congress; that is treating 
seniors for suckers.
  Mediscam number three: my Republican colleagues say H.R. 1 gives 
seniors coverage they can trust. It is an expansion of the old, failed 
Medicare+Choice program which has dropped coverage for 2 million 
seniors outright. H.R. 1 is not coverage you can trust; H.R. 1 is 
coverage that cashes the check, then leaves seniors hanging.
  Mediscam number four: my Republican colleagues say H.R. 1 will 
enhance the security of America's retirees, but the nonpartisan 
Congressional Budget Office says about one-third of employers will drop 
their retiree benefits if H.R. 1 becomes law. In other words, H.R. 1 
will force seniors out of the drug coverage they now have. It will 
force seniors out of the drug coverage they now have.
  Mediscam number five: my Republican colleagues say H.R. 1 will bring 
prices down through the magic of competition. How could that be? The 
drug industry wrote this legislation; the insurance industry wrote this 
legislation. They do not want lower prices, they want higher prices, 
and that is why my Republican colleagues took out any ability for the 
Secretary of Health and Human Services to lower drug prices. In fact, 
the drug companies gave $85 million to my Republican friends for their 
reelection in 2002 and tens of millions of dollars to President Bush.
  Mediscam number six: my Republican colleagues say forcing seniors 
into private health insurance will reduce health care costs because 
private plans are more efficient. My Republican friends know that 
private insurance plans actually operate less efficiently than Medicare 
with administrative costs five times higher than Medicare.
  Mr. Speaker, it is irresponsible to spend tax dollars bribing HMOs. 
It is irresponsible to provoke employers into dropping retiree health 
coverage. Vote ``no'' on H.R. 1.
  Mr. TAUZIN. Mr. Speaker, I yield myself 30 seconds.
  Mr. Speaker, the Mediscam bill that the gentleman just described is 
patterned after H.R. 1495, authored by the gentleman from California 
(Mr. Stark), the gentleman from Michigan

[[Page 16428]]

(Mr. Dingell), the gentleman from California (Mr. Waxman), and the 
gentleman from Ohio (Mr. Brown) just a few sessions ago in the 106th 
Congress.
  It provided a $220 deductible, 20 percent cost share up to $1,700, a 
doughnut hole with a $3,000 catastrophic coverage, and no defined 
premiums. Does that sound familiar? The bill we wrote today is 
patterned after a bill written by my friends on the other side of the 
aisle back then, and they complain today that it is Mediscam.
  Mr. Speaker, I yield 3 minutes to the gentleman from Florida (Mr. 
Stearns), the chairman of the Subcommittee on Commerce, Trade and 
Consumer Protection.
  Mr. STEARNS. Mr. Speaker, we have heard from the Democrats that this 
is a plan that will not work and is a fraud. We had 2 days of hearing, 
and I never heard a plan from the gentleman from Michigan (Mr. Dingell) 
or the gentleman from Ohio (Mr. Brown). We had 64 amendments.


                         Parliamentary Inquiry

  Mr. BROWN of Ohio. Mr. Speaker, parliamentary inquiry.
  The SPEAKER pro tempore (Mr. Hastings of Washington). Will the 
gentleman yield for a parliamentary inquiry?
  Mr. STEARNS. Mr. Speaker, I do not yield.
  The SPEAKER pro tempore. The gentleman from Florida (Mr. Stearns) 
controls the time.
  Mr. STEARNS. Mr. Speaker, what we have here is a plan that the 
Republicans have been on their knees trying to come up with to try and 
solve this problem. It is voluntary. It brings choice, everything that 
the Federal employees health benefit plan has, the same program that 
all these folks have.
  Joshua Hammond wrote a book called ``The 7 Cultural Forces,'' which 
defines who we are as Americans; and one of those cultural forces is we 
are ready, fire, aim. That is, sometimes we do not get it perfect. We 
do the best we can, and that has been our history for 230 years. Is 
this bill perfect? No. In fact, the people on this side will argue back 
and forth, but all of us know this bill is not perfect. However, we 
have carefully balanced the needs and resources from home health to 
physical therapy.
  This bill contains the long-overdue addition of a prescription drug 
benefit. Our seniors and disabled beneficiaries have waited many years, 
particularly true in Florida; and I am pleased to be part of the 
solution and part of that markup that we did for 2 days.
  Now the folks on this side of the aisle say they have a bill. Their 
bill is for $1 trillion. Ours meets the budget demands of $400 billion. 
If we could spend all we want in the world, that would be the 
Democrat's plan.
  But at long last Medicare beneficiaries will have available the same 
options that the President of the United States has, the Senate and the 
House and the staff here in Congress, a choice to choose the plan that 
best meets their needs.
  Mr. Speaker, I am very happy that part of this plan that we have here 
has a demonstration project in consumer directed care for chronic 
conditions such as folks with diabetes. It is analogous to the 
successful consumer-directed care demonstration and evaluation 
projects, known as cash and counseling in Florida, Arkansas and New 
Jersey. It is consumer-directed, and in fact this type of plan is part 
of the American Postal Workers Union. It has a consumer-directed 
option. So what we have with Medicaid, we are going to have with 
Medicare. I am glad that is part of the solution we have.
  So I would conclude by saying to my colleagues who are wondering what 
to do on this side of the aisle, come along with us. It is a start. It 
is not perfect. We can move it to the Senate, have a conference on it, 
and improve it. In fact, the gentleman from Louisiana (Mr. Tauzin) in 
the markup amended the bill with a GAO study of the impact of this new 
cost regime. It is my hope that this will provide an objective, 
balanced approach and give us a proper understanding of how much this 
whole thing is going to cost. I commend the chairman every step of the 
way trying to be balanced, listening to the Democrats' amendments, many 
of which were accepted, many we defeated.
  Mr. Speaker, thank you for bringing this package of Medicare 
additions, updates and reforms here to the Floor today. There is much 
here to applaud. We have carefully balanced needs and resources varying 
from home health to the physical therapy cap. Most significantly, this 
bill contains the long-overdue addition of a prescription drug benefit 
to Medicare. Our seniors and disabled beneficiaries have waited for 
this for many years now, and I am pleased to be part of the solution. 
At long last, Medicare's beneficiaries will have available to them the 
same options that we, and the Senators, and all of our staff and 
employees have: a choice of selections from which to choose the plan 
that best meets their needs.
  Leading off with ``choice,'' I am pleased that my provision for a 
voluntary, small-scale, controlled demonstration project in consumer-
directed care for Medicare beneficiaries with chronic conditions, my 
particular interest is diabetes, is included in H.R. 1 as Section 736.
  This would be an analog to the successful Consumer-Directed Care 
Demonstration and Evaluation Projects, known nationally as ``Cash and 
Counseling,'' in Medicaid in Florida, Arkansas, and New Jersey. the 
Energy and Commerce Committee held a hearing June 5 on Consumer-
Directed Care, and every single Member praised that demonstration's 
progress, but many cautioned not to overreach expanding its 
application. I agree. To that end, at markup I agreed to language from 
my friend, the ranking Member of the Committee, the gentleman of 
Michigan, Mr. Dingell, tightening some boundaries for the demonstration 
project. The Consumer-Directed Care demo is working, let's expand the 
elements of Consumer-Directed Care that have been successful in a 
voluntary, incremental fashion and see how the demonstration in 
Medicare might be evaluated down the road.
  Section 736 will direct the Secretary to design a demonstration 
project allowing for participating Medicare beneficiaries to cash out 
the value of certain services. They then, with the assistance of a 
designated ``counselor'' of their choosing, and government-provided 
fiscal intermediary, would have some flexibility in making decisions 
directing care for their condition.
  Furthermore, Consumer-Directed Care type models are now offered in 
major health plans in the private sector: in 2003, the American Postal 
Workers Union (APWU-AFL-CIO) are the very first Federal employee group 
with a Consumer-Directed Care plan available to them. Do our Medicare 
beneficiaries deserve any less choice?
  At the June 5 hearing, the National Director of Cash and Counseling, 
Dr. Kevin Mahoney, outlined that there are generally three 
characteristics of a condition that make it a good fit for the 
consumer-directed care model. Disabilities fit these three, and I 
believe diabetes does, too: (1) It is chronic, and one of the most 
self-managed diseases; (2) it follows a relatively predictable course 
of treatment; and (3) there is room for choice, in tailoring a 
treatment plan to the individual.
  I remind my colleagues that under the Medicaid demonstration, 
satisfaction has been in the high 90 percentage, no adverse health 
outcomes have occurred (in some measures it has improved), and fraud 
has been virtually zero.
  From that, I must turn to other provisions of the bill. I do not 
stand here without some reservations. For example, the reform of 
reimbursement for oncologists. No one, no Member, no oncologist, and no 
patient wishes for the accounting mismatch of Average Wholesale Price 
(AWP), to perpetuate, and we should never let dialogue about AWP 
degrade into accusations about gaming the system. It is true that H.R. 
1 eliminates the current overpayment on Medicare-covered drugs, while 
concurrently increasing the practice expense reimbursement to 
appropriate levels that reflect their costs. But my understanding is 
that this is still a net decrease for the practice. I ask that the 
negotiations continue in good faith. In Energy and Commerce, Chairman 
Tauzin amended the bill with a GAO study of the impact of this new cost 
regime, and it is my hope that this will provide an objective, accepted 
arbiter on true proper costs of administering total community-based 
cancer care.
  Further, I harbor concerns that this bill not become a runaway money 
train. We have budgeted $400 billion over 10 years: is that a ceiling, 
or a floor? It is a logical modernization to add prescription drug 
coverage to the Medicare program; none of us would choose a health plan 
in FEHBP (Federal Employee Health Benefits Program) that lacked drug 
coverage. And, through economies of scale, both the traditional fee-
for-service program and the participating private sector plans will 
have the purchasing power to contain costs.

[[Page 16429]]

However, there always runs the risk of this exploding beyond our 
control. We have a responsibility for the fiscal health of this nation, 
and it is essential that proper cost containment be addressed in 
conference, as I understand the Speaker has assured.
  Mr. TAUZIN. Mr. Speaker, I yield myself 15 seconds.
  Mr. Speaker, just to correct the record, the Democrats did offer a 
substitute plan in our committee which was defeated, and I think it is 
pretty close to the substitute plan we will see later tonight.
  Mr. Speaker, I yield 10 seconds to the gentleman from Florida (Mr. 
Stearns).
  Mr. STEARNS. Mr. Speaker, if the Democrats' plan is for $1 trillion 
and ours is for $400 billion, we cannot say they offered a plan that 
met the budget requirements. I would like to ask the Democrats tonight: 
Do you have a plan that is under $400 billion like the Republicans?
  Mr. DINGELL. Mr. Speaker, I yield 2 minutes to the gentleman from 
Florida (Mr. Deutsch).
  Mr. DEUTSCH. Mr. Speaker, the House bill in front of us, as the 
ranking Democrat of our full committee has ably quoted the chairman of 
the Committee on Ways and Means in his own words, ``To those who say 
the bill would end Medicare as we know it, the answer is we certainly 
hope so.''
  This bill is a nonstarter. The Republicans in the Senate oppose it. 
It will not happen. It destroys Medicare. I am going to take my 2 
minutes and even talk about that.
  Mr. Speaker, I am going to talk about the disingenuous nature of the 
proposal that the Republicans are fostering at this point as a final 
product. And I say disingenuous because both this bill and that 
proposal does absolutely nothing about cost containment. How can they 
have a prescription drug bill that does nothing on cost containment? It 
is totally disingenuous.
  For real seniors, and I would encourage all of my colleagues to talk 
to seniors because one of the things that is going on in America today 
is we do not know the number. We just had the FDA in our committee 
again several times. We do not know the number of how many seniors are 
availing themselves of purchases through Canada by the Internet, but it 
is easily 10 million seniors. We have 10 million seniors who are 
purchasing drugs in Canada where the benefits of purchasing drugs in 
Canada far exceed any proposal the Republicans have made. Just because 
people are old, just because they are sick does not mean they are 
stupid. They are going to continue to purchase them. So this bill for 
most seniors, for probably over 95 percent of the seniors in America, 
does absolutely nothing.

                              {time}  2115

  What it does is even worse, though. In a Congress, in a country, in a 
society that is facing the largest budget deficits in the history of 
the world, we take $400 billion out of working Americans, give it to 
seniors, but effectively take that $400 billion and flush it down the 
toilet and we get absolutely nothing from my Republican colleagues' 
proposal.
  Mr. TAUZIN. Mr. Speaker, I first want to take 15 seconds, if I may, 
to point out that the bill before us does now contain the drug 
reimportation provisions similar to the Senate provisions and adds 
language directing the FDA to conduct rulemaking to make sure that 
there is safe packaging, to make sure when we do get drugs under any 
such program, that they are safe and effective.
  Mr. Speaker, I yield 4 minutes to the gentleman from Pennsylvania 
(Mr. Greenwood), distinguished chairman of the Subcommittee on 
Oversight and Investigations of the Committee on Energy and Commerce, 
our grand inquisitor.
  Mr. GREENWOOD. I thank the gentleman for yielding me this time.
  Mr. Speaker, my parents, my mother and father, are 81 years of age, 
alive and well, and I would like to dedicate all the work that I have 
put into this bill to them and I know it will benefit them immensely. 
My father used to say when I was a young lad, ``Jim, there are three 
kinds of people in this world. There are shirkers, there are workers 
and there are jerkers. The shirkers are the people who just don't do 
anything. They don't contribute. They don't help. The workers are the 
people who roll up their sleeves and get the job done. The jerkers are 
the ones that all the time the workers are working they keep tugging at 
them, pulling at them, jerking them around trying to interfere with the 
work.''
  I would submit that the Democratic Party, in all due respect, between 
1965 and 1994, when they lost control of the House, were shirkers when 
it came to the issue of a prescription drug benefit, for they did 
nothing. They did not provide a big plan, a little plan, a medium-sized 
plan, they did not provide a plan with a doughnut, without a doughnut. 
They did not provide a plan of any kind. They did nothing. We have been 
the worker party. We have passed a prescription drug bill in this House 
year after year since we have had control. That is hard to do. That is 
hard to do because mature legislators have to figure out how to strike 
a balance.
  We have people in this House who do not want to vote for this bill. 
They do not want to vote for this bill because they think it is too 
liberal. They think it is a big new entitlement program that will 
bankrupt the country. They are against it because it is too liberal. 
There are a whole lot of people in this House who cannot vote for this 
and will not vote for it because it is too conservative; it does not 
spend enough money; it is not big government enough; it uses private 
sector factors, influences to curb prices. If you want to get 218 votes 
for a bill to provide a prescription drug benefit to the elderly and 
the disabled in this country, you have to work very hard with very 
complex issues and strike a political balance down the center through 
the eye of the needle to get the job done, and that is what this bill 
before the House of Representatives stands for. That is what it results 
from.
  Now we have got the jerkers. We are trying to get this carefully 
balanced, incredibly complicated piece of work that our staff on both 
sides of the aisle have labored over for years to get done, want to try 
to move it through the House today, get it over to Senate, we have got 
some bipartisan support here, we have got some bipartisan support in 
the Senate, and we are going to get it done. And at the end of the day 
when the little old ladies and the little old men in my district and 
your districts who have been writing us letters and saying, with tears 
rolling down their cheeks, I have got a prescription for cholesterol 
drugs, I have got a prescription for antidepressants, I have got a 
prescription for my arthritis, I have got a prescription for this and 
for that and I can't afford them, what am I going to do. We have all 
been getting those letters for years and years. And when this year is 
over and when we stand with the President of the United States and he 
signs these bills, we will say to the little old men and the little old 
ladies and the disabled people of all ages in our district, we got the 
job done, when nobody else could or nobody else would. Whether the 
shirkers did not do their job or the jerkers tried to get in the way, 
the workers will get the job done and this will be an historic year for 
the Medicare program of this United States.
  I am proud of everyone on either side of the aisle who actually 
rolled up their sleeves and contributed to the product.
  Mr. DINGELL. Mr. Speaker, I yield 2 minutes to the distinguished 
gentlewoman from California (Ms. Eshoo).
  Ms. ESHOO. I thank the distinguished ranking member of the committee 
for yielding me this time.
  Mr. Speaker, for those that are listening in this evening, besides 
the vote that some Members of Congress have had to take on going to 
war, I consider this the most important vote in the House of 
Representatives. Tonight we debate a bill where there is only one thing 
that the two parties agree on, and that is that our seniors deserve 
prescription drug coverage.
  For 38 years, there has been a gold standard for those that are 65 
years and older and it was named Medicare. How dare my colleagues on 
this side of the aisle say that the Democrats have not done a damn 
thing. I regret those

[[Page 16430]]

words in the Record. We love Medicare. We put it on the books, and we 
have defended it ever since then. And we want a policy in Medicare that 
is ennobling and recognizes what senior citizens are.
  The advertisers are very busy, but beware. Beware of the advertising. 
Read the bill. If your insurance salesman comes to you, the first thing 
you say is, how much is this going to cost a month? Read the bill. 
There is no premium cost in the bill. It says choice. Yes, there will 
be choice of insurance companies but not choices of doctors.
  By 2010, every senior citizen that is listening in, you will be 
forced, you will be mandated to go into a private insurance program. 
That is what our friends have written.
  Mr. TAUZIN. Mr. Speaker, I am pleased to yield 2 minutes to the 
distinguished gentleman from the great State of Nebraska (Mr. Osborne).
  Mr. OSBORNE. Mr. Speaker, rural health care is struggling. The 
hospitals are closing and many doctors are leaving. If you are in a 
small community and the doctor leaves or the hospital closes, the whole 
community begins to unravel. H.R. 1 addresses the troubles that we see 
currently in rural health care. Number one, it lowers the labor share 
of the wage index for rural hospitals. This allows them to be more 
competitive with urban areas in terms of salary scale.
  Number two, H.R. 1 increases Medicare reimbursement for rural 
doctors. Sixty percent of the patient load in my district and many 
other rural districts are Medicare patients. Doctors simply cannot 
afford to treat Medicare patient loads of this size because on many 
Medicare patients they lose money. As a result, they cut back Medicare 
patients or sometimes leave the area.
  Thirdly, H.R. 1 provides a full and permanent equalization of 
Medicare payments to rural hospitals. An appendectomy is not cheaper in 
a small hospital than in a large urban hospital. In some cases it is 
actually more expensive. Also, H.R. 1 provides additional home health 
care payments and provides provision for rural ambulance.
  Mr. Speaker, the reason I want to come to the floor tonight is simply 
to thank the gentleman from Louisiana for all that he has done for 
rural health care. This is probably, as far as I am concerned, the most 
important part of the bill. I would also like to say I represent a 
rural area. Many retirees in my area live on fixed incomes. Most of 
these people are making 15, $20,000 a year. Most of them are spending 
30, 40, 50 percent of their income on prescription drugs. And so the 
number one concern that I see in rural America is the prescription drug 
bill. This bill offers considerable help to these people.
  Again, I would like to thank the gentleman from Louisiana, the 
gentleman from California (Mr. Thomas) and also the gentleman from Iowa 
(Mr. Nussle). I urge the passage of H.R. 1.
  Mr. DINGELL. Mr. Speaker, I yield 2 minutes to the distinguished 
gentleman from New York (Mr. Engel).
  Mr. ENGEL. I thank my friend for yielding me this time.
  Mr. Speaker, I rise in strong opposition to this bill. This bill is a 
cruel hoax perpetrated on America's seniors. This bill is not about 
helping seniors. It is all about privatizing Medicare. This is not the 
Senate bill. This bill is a wolf in sheep's clothing. It purports to 
help seniors. All it does is create a goal that many people on the 
other side of the aisle have wanted for years, the privatization of 
Medicare. This bill drains the lifeblood out of the Medicare program 
and breaks the promise we made to seniors 38 years ago when Medicare 
was created.
  I wish this Congress could have come together for an historic moment 
that would finally provide seniors with the type of prescription drug 
coverage they need and deserve. Unfortunately, we are doing a 
disservice to our seniors by shortchanging them with a woefully 
inadequate drug benefit. Why is it inadequate? Let us face it, there is 
not enough money in this bill because my friends on the other side of 
the aisle have bankrupted this government with huge tax cuts, huge tax 
cuts to benefit the rich, huge tax cuts which make it impossible to 
help entitlement programs like Medicare. When the leaders over there 
said they wanted Medicare to wither on the vine, they were speaking the 
truth and that is what is happening today. With the enactment of this 
bill, Medicare is withering on the vine.
  When I came to Congress 15 years ago, my goal was to provide 
meaningful prescription drug benefits. My bill and others, 1045, would 
keep the promise of Medicare, which was created to prevent seniors from 
having their life savings ravaged by health care costs. Today we are 
considering no such thing. The legislation before us is not a promise 
kept to seniors, it is a promise kept to HMOs and insurance companies. 
This is not the Senate bill. The Senate bill was a starting point to 
improve upon. This bill bankrupts Medicare, privatizes it by the year 
2010. American seniors will not have Medicare as they know it by 2010. 
Again, when you have tax cuts for the rich and you do it to help your 
rich friends and you want to strangle social programs and entitlement 
programs, you do not have an adequate bill.
  This bill should be rejected.
  Mr. DINGELL. Mr. Speaker, I yield 2 minutes to the distinguished 
gentleman from Maryland (Mr. Wynn).
  Mr. WYNN. Mr. Speaker, I thank the gentleman for yielding me this 
time. I rise in strong opposition to the Republican plan. This Medicare 
reform plan is woefully inadequate. Everyone agrees that a real 
prescription drug plan would cost between $600 and $800 billion. This 
plan only provides $400 billion. Why? My Republican colleagues will 
say, well, this is because that's all we can afford. The truth of the 
matter is that is all we can afford because of their big tax cuts. But 
keep in mind, you did not get a big tax cut. The wealthy got a big tax 
cut. Mr. and Mrs. Average American got cuts in service, cuts in 
benefits and cuts in quality. What we have here this evening is an 
attempt by the Republicans to do prescription drug coverage on the 
cheap.
  There are three problems with this. First, in their plan, there are 
no guaranteed drug benefits. The private insurers determine what drugs 
are going to be available to you, not your needs. So that if your drugs 
are not covered, then you have to pay the full price. This is no 
prescription drug benefit. Second, there are no fixed premiums. You 
hear the Republicans tell you, well, it's going to be $35 a month. Wait 
a minute. $35 a month is nowhere in their bill. These premiums could 
rise to as much as $85 a month. You will drive seniors into bankruptcy 
with that.
  The third problem with this plan is the hole in the doughnut, the 
gap. Under the Republican plan, this plan they are talking about 
tonight, after the first $2,000 of prescription drug costs, you have to 
pay the rest up to $5,000. That is a gap of $3,000. Again, that would 
drive seniors into bankruptcy. The neediest, sickest seniors do not get 
the benefits when they need it, the consequence of doing prescription 
drug coverage on the cheap. Forty-eight percent of Medicare 
beneficiaries will fall into this gap. This is not a true prescription 
drug plan.
  Second, this bill contains something called Medicare reform. That is 
another name for privatizing and destroying Medicare as we know it. 
Plans will have to compete. Medicare will compete against private plans 
and our seniors will be forced out of a plan that they have come to 
trust. This plan will not work, will not provide the benefits as a 
safety net for our seniors. I urge its rejection.
  Mr. TAUZIN. Mr. Speaker, I yield myself 10 seconds to ask a question. 
If this plan funded at $400 billion is prescription drugs on the cheap, 
what do you call the $330 billion that was allotted by the Democratic 
budget for the year 2002?

                              {time}  2130

  Mr. Speaker, I yield 3 minutes to the gentleman from North Carolina 
(Mr. Burr), the distinguished vice chairman of the Committee on Energy 
and Commerce.
  Mr. BURR. Mr. Speaker, I am here tonight to thank the chairman of the 
Committee on Energy and Commerce and the gentleman from Michigan (Mr.

[[Page 16431]]

Dingell), ranking member, our colleagues on the House Committee on Ways 
and Means, the leadership of the House for having the foresight to move 
forward with legislation to recognize that there is a problem in 
America, a problem that we have ignored for a decade, the need to add a 
prescription drug plan. I did not come here to argue with anybody. I 
came here because I believe we can do better. I believe we can do 
better than the bill we have proposed. I believe we can do better than 
the substitute that is offered.
  America understands why we have not solved this because all they need 
to do is listen to us. We talk about each other's bills in a way that 
we point out things that we think are bad. We forget that we are 
talking about a population that has nothing. I wish we could have 
started with something smaller, but something that was targeted to 
people who are faced with the decision every day of do I buy drugs or 
do I buy food? But we have been convinced by this town that our only 
action has to be something comprehensive, something that includes 
everybody, something that includes those who have a minimal income and 
those who have an income of $1 million a year. We have not excluded 
anybody. We will not exclude them over here and we will not exclude 
them over here, because there are associations and groups that 
represent seniors, and they have never met those seniors, but we have.
  Mr. Speaker, we owe our constituents more than to sit on this floor 
and tear up each other's legislation. We have to be for something. To 
get up here and debate that we are against this and we are against that 
and it is bad, it is inadequate is only a suggestion that we are not 
good enough to serve here, that they ought to look for replacements. I 
would challenge all of us.
  I do not know what the outcome of tonight would be. I will vote no on 
both proposals that come up. I do not suggest on either side of the 
aisle that Members do that. That is what I am going to do. I have come 
to the conclusion, but never forget if we want a real solution to this, 
a real solution that affects real people, then we have got to put our 
heads together and work together and remember who it is that we are 
trying to provide for in this bill. I reluctantly say that I will vote 
against this.
  Mr. DINGELL. Mr. Speaker, I yield 2 minutes to the distinguished 
gentleman from Texas (Mr. Green).
  Mr. GREEN of Texas. Mr. Speaker, following the gentleman from North 
Carolina, my good friend, it is frustrating because I feel the same 
thing, that we were given a plan and even though we spent 3 days and a 
long night debating it in committee we did not really get to legislate 
because we really had a plan given to us and it was either take it or 
leave it. But this is the most important issue that we will consider 
this year not only for our seniors but for everyone. I know a lot of my 
colleagues feel that we should support any legislation because it is a 
step in the right direction or maybe it is like the Senate bill.
  This is not the Senate bill. The Senate has a better idea. It is not 
as good as I would like, but it is better than what we have on the 
floor today.
  This legislation would require Medicare to move to a competitive 
program by 2010. A lot of different terms are used to describe the 
model in this bill, whether it is called defined contribution, voucher, 
premium support, or something else, but it abolishes Medicare as we 
know it. The bottom line is it is privatization of Medicare. It will 
take the responsibility of providing meaningful, affordable, quality 
health insurance away from the government, like 1965, and shift the 
burden onto the shoulders of our seniors. The legislation relies 
entirely on private insurance plans to provide drug benefits for 
seniors. No government fall-back plan, no safety nets for seniors 
living in areas where drug plans do not offer coverage. It places blind 
faith in private drug plans that they will sign people up. That is the 
ultimate in faith-based policy making. There is a huge gap in this 
coverage that will disproportionately hurt individuals who need drug 
coverage. Those with the highest drug costs, they will fall into this 
doughnut hole. Once one has a little over $3,000 a year up to a little 
over $5,000, they fall in this hole.
  I talked to a senior this evening who has a little over $300 a month 
in prescription drug cost. They will still pay their $35 plus a month, 
but they will not get one dime of benefits because they will be in this 
doughnut hole.
  The ultimate anti-competitive part is that this bill prohibits the 
Secretary from negotiating lower drug costs. The VA does it, Medicare 
does it, private insurance does it, but we are prohibiting in this bill 
the Secretary of Health and Human Services to reduce costs for our 
seniors. That is why it is outrageous.
  The substitute, on the other hand, is the kind of benefit that 
seniors support. It is affordable, comprehensive, and will actually 
help drive down the costs of prescription drugs.
  Yes, it's more expensive than the base bill, but you cannot provide a 
prescription drug benefit on the cheap.
  Finally, there's one issue that I'd like to raise about a provision 
that would limit the ability of physicians to refer patients to 
specialty hospitals in which they have a financial interest.
  There is language in the Senate bill which could hurt some innovative 
practices that are occurring in specialty hospitals.
  Patients need access to a broad range of facilities, and should be 
able to choose a hospital that has expertise in their specific health 
needs.
  I know that some have suggested limiting the percentage profit that 
physicians can enjoy under these arrangements, or to limit the 
percentage of physician ownership and I hope that both sides can sit 
down and reach a solution to this problem.
  Mr. TAUZIN. Mr. Speaker, I reserve the balance of my time.
  Mr. DINGELL. Mr. Speaker, I yield 2 minutes to the distinguished 
gentlewoman from Missouri (Ms. McCarthy).
  Ms. McCARTHY of Missouri. Mr. Speaker, the Republican Medicare bill 
fails to provide seniors with meaningful prescription drug coverage and 
is an attempt to end Medicare as we know it. With their plan seniors 
will have no assurance from 1 year to the next on what plan will be 
available to them, what drugs will cost them nor what doctors will 
serve them. Under their plan many seniors will have to pay a premium 
without receiving any assistance with their drug costs.
  Seniors deserve affordable prescription drugs without gaps in 
coverage. Our seniors should not be forced to pay more to keep their 
choice of doctors. Not only would the plan before us limit or charge 
extra for choice, it would force seniors to go to a primary care 
physician before seeing a specialist.
  The Republicans have produced a plan that fails to make prescription 
drugs more affordable and, disturbingly, ends the Medicare system that 
has been an irreplaceable safety net to millions of people for the past 
four decades. Instead they are creating a plan that costs seniors a lot 
and gives them very little.
  Mr. Speaker, I urge my colleagues to oppose H.R. 1, the so-called 
Medicare Prescription Drug and Modernization Act of 2003, and to 
support the Democratic motion to recommit which will preserve Medicare 
and provide our seniors with the affordable prescription drugs they 
need.
  Mr. TAUZIN. Mr. Speaker, I yield 2 minutes to the distinguished 
gentleman from New Jersey (Mr. Ferguson), one of our newer members on 
the Committee on Energy and Commerce.
  Mr. FERGUSON. Mr. Speaker, I thank the chairman and ranking member 
and members of the committee who have worked so hard on this bill.
  I rise in strong support of H.R. 1. It includes an amendment that I 
offered in the Committee on Energy and Commerce which will assist our 
most vulnerable seniors by allowing State drug spending to count 
towards a senior's catastrophic limit. Especially in States like New 
Jersey, this provision is going to dramatically reduce seniors' out-of-
pocket spending while saving our States $5 billion.
  About a year ago I stood in the well of this House when we debated 
the drug bill last year and I told the Members about my mom who has 
been battling cancer and who is only alive today by

[[Page 16432]]

the grace of God and because she has had access to great medical care 
and the prescription drugs which have quite literally saved her life. I 
am proud that my State of New Jersey is home to thousands of 
researchers and scientists and companies which have spent their entire 
lives and billions of dollars on research to find the cures of 
tomorrow. This very day, today, they are working on finding the cures 
to cancers and diabetes and AIDS and Alzheimer's.
  What are we here to do tonight? We are here to make these great 
products more affordable and more available to more people.
  As much as I love my mom, her situation is not unique. She is like 
millions of other Americans who depend on prescription drugs for their 
quality of life. Our responsibility today is to pass this generous and 
responsible bill, to make the miracle cures of tomorrow available to 
people like my mom. Just as importantly, though, we have to do so in a 
way which values and encourages the incredible research and innovation 
which will create the cures of tomorrow because I do not only love my 
mom, but my wife and I love and treasure our three young children and 
it is they who will benefit as well because the lives of our children 
and our children's children will be better and stronger and more 
fulfilling because of the new cures that will be found and the fact 
that they will be affordable because of this plan. That is our charge. 
That is our responsibility. Let us pass this plan tonight.
  Mr. DINGELL. Mr. Speaker, I yield 2\1/2\ minutes to the distinguished 
gentleman from Maryland (Mr. Hoyer), the very able and respected 
minority whip.
  Mr. HOYER. Mr. Speaker, I thank the gentleman for yielding me this 
time.
  Mr. Speaker, if truth in advertising applies to legislation, we would 
have a duty to warn America's seniors, beware, the Republicans' 
prescription drug bill could be hazardous to your health. This bill is 
nothing less than an historic betrayal of America's seniors. The GOP 
pretends that it is merely extending Medicare, but in fact the bill is 
the most dangerous attempt yet to dismantle the most popular health 
care program in history.
  The Republicans fought the adoption of Medicare in 1965. Their 
majority leader said that Medicare should not exist in a free society. 
Yesterday the chairman of the Committee on Ways and Means, the 
architect of this bill, said on television, and the Members can read it 
here, ``To those who say that [the bill] would end Medicare as we know 
it, our answer is we certainly hope so.''
  This bill would drive seniors out of Medicare and into the arms of 
private insurers. There is no guaranteed monthly premium. There is no 
defined benefit for seniors. There is no guaranteed access to drugs 
seniors must have. The only guarantee in this bill is that it would 
leave a huge gap in coverage. Seniors would pay a $250 deductible, $420 
a year in premiums, and all costs between $2,000 and $5,100 in drug 
expenses. That is $3,100 left to seniors to pay. This bill even 
prohibits the government from negotiating lower drug prices for 
seniors.
  In contrast, the Democratic substitute offered by the gentleman from 
Michigan (Mr. Dingell) and the gentleman from New York (Mr. Rangel) 
would provide a prescription drug benefit that guarantees affordable, 
universal and voluntary Medicare coverage for prescription drugs. There 
are no gaps in coverage. Seniors would pay $25 a month, $100 
deductible, and then 20 percent coinsurance. Their out-of-pocket 
expenses would be limited to $2,000 a year. That is 1,100 under the gap 
that exists in the Republican bill.
  The Republican plan also does not give the Secretary of Health and 
Human Services the authority to negotiate prices. Our bill does. I 
would ask the Members to vote for this substitute which guarantees 
prescription drug coverage for seniors.
  Mr. TAUZIN. Mr. Speaker, I reserve the balance of my time.
  Mr. DINGELL. Mr. Speaker, I am always happy to accommodate the 
gentleman from Louisiana (Mr. Tauzin), my dear friend, even when he is 
pushing an outrageous piece of legislation under an appallingly 
constrictive rule.
  Mr. Speaker, I yield 2\1/2\ minutes to the distinguished gentleman 
from Massachusetts (Mr. Markey), and I ask the chairman from the 
Committee on Energy and Commerce to listen closely.
  Mr. MARKEY. Watch out, Grandma. Watch out, Grandpa. The GOP is 
selling snake oil off the back of a wagon, and, boy, do they have a 
prescription for you.
  Mr. Speaker, every senior citizen gets a bottle with three bitter 
pills. Bitter pill number one is a lethal dose of privatization poison. 
The Republicans are diverting Medicare funds into private drug plans 
with no maximum premiums, no guaranteed coverage, and a cynical drive 
to destroy the Medicare program.
  Bitter pill number two is a dose of crushing costs. Incredibly the 
Republican bill injects $400 billion into Medicare but spends it in 
such a tangled, convoluted, copay-riddled, incomprehensible, doughnut-
hole-hollowed maze of bureaucracy and lacks any effective effort to 
keep prescription drug prices from continuing to soar, that Grandma is 
actually going to spend more under this proposal than if we had just 
left well enough alone.

                              {time}  2145

  Bitter pill number three is a privacy piracy pill in the form of 
income tax forms. The Republicans require senior citizens to hand over 
to corporations sensitive personal information from income tax returns 
and the most intimate details of their medical care as a condition of 
qualifying for any catastrophic coverage. This information will then be 
turned against seniors in marketing schemes intended to cherry-pick the 
most desirable recruits into private plans, further weakening the 
foundation of Medicare for the seniors who need it most.
  This is a black day for Medicare. Mr. Speaker, GOP used to stand for 
Grand Old Party. Now it stands for Forget Old People.
  Mr. TAUZIN. Mr. Speaker, now that we have heard from the doctor of 
showmanship, we are going to hear from a real OB-GYN doctor.
  Mr. Speaker, I yield 2\1/2\ minutes to the gentleman from Georgia 
(Mr. Gingrey).
  Mr. GINGREY. Mr. Speaker, I thank the gentleman from Louisiana for 
yielding me this time.
  Mr. Speaker, as a physician Member of this body, I rise in strong 
support of H.R. 1, the Medicare Prescription Drug and Modernization Act 
of 2003.
  I do not take lightly voting for a Federal program that expends $400 
billion of the taxpayers' money. Being responsible with that money is a 
burden that I take very seriously. As appropriators of the people's 
revenue, we must assure that each dollar is spent wisely. That is a 
high hurdle, but I believe the Medicare Modernization Act clears that 
hurdle.
  This act is an investment that brings Medicare into the 21st century. 
We will save money as we expand the focus of Medicare spending to 
include preventive care. Seniors who take the right drugs at the right 
time are more likely to stay healthy; and they are less likely to need 
expensive, prolonged hospitalizations, painful and complicated surgical 
procedures and, sometimes, yes, extended nursing home stays. For that 
reason, I do not think that this program will really cost $400 billion 
over 10 years. It will only cost that much if it does not work.
  My experience as a physician for more than 28 years teaches that a 
prescription drug program for preventive care will pay dividends and 
increase health and a better quality of life. It is true what they say: 
an ounce of prevention is worth a pound of cure. And it is a lot less 
expensive.
  This Congress has a great opportunity to expand the coverage for 
seniors, particularly our needy seniors, while, at the same time, 
strengthening the system so that it will be around to serve the baby 
boom generation as it moves into retirement. We will serve tomorrow's 
seniors as we are serving today's.
  Some of our friends on the other side of the aisle insisted today 
that this bill

[[Page 16433]]

could be the death of Medicare. They were even grandstanding around 
with black arm bands. That is interesting, Mr. Speaker, because their 
Democratic alternative would cost nearly $1 trillion, threatening to 
slam the entire Medicare system onto the rocks of financial insolvency 
long before 2030.
  The plan that we will vote on tonight provides a good, strong benefit 
for our seniors; but just as important, it provides a sustainable 
benefit that will be there for future generations of seniors.
  I encourage my colleagues on both sides of the aisle to bring 
Medicare into the 21st century. Vote for the Medicare Prescription Drug 
and Modernization Act tonight and deliver on your promise to our 
beloved seniors.
  Mr. DINGELL. Mr. Speaker, I yield 2 minutes to the distinguished 
gentleman from Ohio (Mr. Strickland).
  Mr. STRICKLAND. Mr. Speaker, I would just like to point out to my 
friend, the gentleman who just spoke, my understanding is that he voted 
recently to give $800 billion to about 200,000 people. Surely to God we 
can do a little better than that for our 40 million senior citizens.
  Make no mistake about it. This bill will provide no stable, 
affordable prescription drug benefit for our seniors, but I will tell 
my colleagues what it will do. It will ultimately destroy Medicare's 
social insurance structure, a structure that has provided successful 
services to our seniors since 1965.
  Let me give a clear example of how this bill will fail. The 
Republicans claim that premiums offered by the private plans will be 
about $35 a month. But there is no provision in this bill that will 
guarantee a $35 monthly premium or even a range of premiums near $35. 
Despite what we have heard, despite what we have heard, understand 
this: there is nothing in this bill to keep the private plans from 
charging any premium they choose to charge.
  Now, in fact, Nevada is the only place this model has been tried; and 
in Nevada, the premiums were $85 a month. Furthermore, premiums will be 
different from State to State, from county to county, even from ZIP 
code to ZIP code.
  Finally, private plans will be able to increase their premiums each 
year without any regulation, leaving seniors subject to the possibility 
of wildly fluctuating premiums.
  Now, I offered a simple amendment in the Committee on Energy and 
Commerce last week that would have corrected this problem and 
guaranteed seniors a $35 monthly premium, regardless of which drug plan 
they chose to enroll in or where they lived. Every single Republican 
voted against that amendment. Last night, I asked the Committee on 
Rules. On a party line vote, they denied me the right to offer this 
amendment.
  Republicans continue to say their bill will cost $35 a month. It is 
not true. They ought to stop saying it.
  Mr. TAUZIN. Mr. Speaker, what is absolutely true is that 529,000 
citizens of Ohio are given free coverage under this bill because they 
live under 135 percent of poverty.
  Mr. Speaker, I yield 3 minutes to the gentleman from Rockwall, Texas 
(Mr. Hall), a Democrat and my dear friend.
  Mr. HALL. Mr. Speaker, I rise in support of this bill because I am 
for a bill. I want to see a bill passed. I want a bill that can pass 
this House. I want a bill that can get to the conference committee. I 
want a bill that we can consider along with the Senate bill and get the 
best of both bills for the best people of this country.
  Almost 40 years ago when I was in the Texas senate, Members of this 
Congress came to Texas, came to the Texas house and the senate, touting 
two great programs that they were going to introduce and pass. They 
named them Medicare and Medicaid. And they said by 1990, Medicare could 
cost $9 billion a year. And as I remember, they said Medicaid could 
cost almost $1 billion a year. They told us that we really needed to 
monitor the program closely or the costs could double.
  Well, my colleagues know what has happened to the cost, what has 
happened to Medicaid and Medicare. There is an awful lot to do, and we 
need to be doing it.
  There is no doubt that Medicare has helped millions of seniors escape 
dire poverty and live fuller lives. There is also no doubt that medical 
costs have far outstripped inflation due to a number of factors, 
including expansion of benefits, increased use, and coverage of the 
disabled population. Our seniors are staring into their pocketbooks to 
find the money they need for their care. We desperately need to do 
something to save a great program for people in their golden years.
  Mr. Speaker, Medicare needs to be modernized to include a meaningful 
provision for drug coverage. In my lifetime, we have seen how 
prescription drugs have greatly improved and extended the lives of 
Americans. We have also seen how the cost of those life-providing drugs 
can trouble families every day. Unfortunately, Congress has almost been 
timid in seeking parity between the prices drug companies have charged 
domestic dispensers compared to the nondomestic dispensers just across 
our borders.
  While American drug companies need added alliance for research and 
development, and I am willing to give them that, for 10 key drugs for 
seniors, Americans pay an average of 150 percent more for the drugs 
than Canadians. This is unacceptable. I do not like price controls. The 
marketplace provides the competition necessary to deliver the best 
price for the people in need. We have to lower the cost of prescription 
drugs, and my hope is that we can all work together, including drug 
companies, to come up with new, better, and more creative ways to 
achieve affordable prescription drugs.
  As we look at introducing new competition among providers for 
services, we should consider provisions that respect the choices 
available to current Medicare beneficiaries. These seniors and the 
disabled have paid for and have come to expect a traditional Medicare 
system and the safety net that it provides them, and they should be 
able to retain their current plans if they continue to be pleased with 
them. The Senate improved upon this provision, and I hope that is 
included in the final bill.
  The Senate and the House bills have good provisions to achieve our 
goal. Like many people, I am not completely satisfied with this bill, 
but I am very hopeful that we can pass a bill.
  I am particularly pleased that we are introducing long-overdue 
Medicare reforms that will bring health care into the 21st century; 
namely--regulatory reforms and provider reimbursement issues. We are 
all aware that providers nationwide, including our rural providers, 
have been diminishing in the face of increasing costs and decreasing 
reimbursement. We simply must confront this issue because without 
access, the rest of the program is meaningless.
  Like many people,I am not completely satisfied with this bill, but I 
am also not satisfied to see this program collapse. We are closer than 
we have ever been to making some meaningful reforms and providing a 
prescription drug benefit to seniors. I am hopeful that we will improve 
this bill in the conference committee as we seek to find a bipartisan 
solution to our common problem. This is just a first step in an ongoing 
process of reform to ensure that our seniors get the care that they 
deserve. Congress, through its oversight and yearly appropriations 
process, will continue to monitor the program--making necessary changes 
and improvements to guarantee healthy years for our Medicare 
population.
  Mr. DINGELL. Mr. Speaker, I yield 2 minutes to the distinguished 
gentlewoman from California (Mrs. Capps).
  Mrs. CAPPS. Mr. Speaker, I thank my distinguished ranking member for 
yielding me this time.
  Mr. Speaker, the Medicare bill before us is not a good bill. The 
coverage it provides is unreliable and insufficient. After a senior has 
used $2,000 in medications, they get no more help until they have spent 
another $2,900 out of pocket without help and while continuing to pay 
premiums. And that is only if a private plan chooses to come into their 
area. This bill turns Medicare into a voucher, handing it over to the 
insurance companies and forcing seniors to pay more. It reneges on a 
promise that we have made to America's seniors by ending Medicare as 
they know it.
  In addition, the bill before us cuts cancer care by hundreds of 
millions of

[[Page 16434]]

dollars, jeopardizing access to cancer care for seniors who face this 
dreaded diagnosis. If this bill passes, many cancer centers will close. 
Others will curtail their services, admit fewer patients, and lay off 
oncology nurses and critical support staff. This bill is supposed to 
make it easier for patients to get health care, but it will actually 
make it harder for cancer patients to get the care they need.
  It is true that Medicare beneficiaries are paying too much for their 
oncology medications. We all agree we must fix this. But Medicare also 
pays way too little for essential oncology services, and so the 
overpayment for oncology drugs has been used to pay for treatments 
oncologists provide to cancer patients. We must fix both parts of this 
problem, but this bill still cuts hundreds of millions of dollars from 
cancer care. And it still risks the lives of cancer patients.
  We will all go home after passing a Medicare bill, and we will face 
our constituents. I, for one, do not want to tell the cancer patients 
in my district that Congress has decided to curtail their treatment and 
endanger their care.
  We can do better. We must. I urge my colleagues to vote against this 
bill.
  Mr. TAUZIN. Mr. Speaker, I yield myself 10 seconds. I want to point 
out our bill provides 430 million new dollars to oncologists in 
America, twice that provided to any other specialist for nonpractice 
expenses, twice as much as any other specialist.
  Mr. Speaker, I am pleased to yield 3 minutes to the distinguished 
gentleman from Texas (Mr. Barton), the chairman of the Subcommittee on 
Energy of the Committee on Energy and Commerce.
  Mr. BARTON of Texas. Mr. Speaker, first, I want to commend my 
chairman, the gentleman from Louisiana (Mr. Tauzin), for his work in 
this noble effort, and I want to thank him for allowing the reform 
group that I have been a part of in his committee the opportunity to 
present an alternative and to try to make that a part of the package. I 
really appreciate that.
  I would say to my friends on the Democratic side of the aisle, as 
they have talked about privatizing Medicare, that the first thing that 
we need to do is preserve Medicare. I would point out that if we do 
nothing to the existing Medicare program, the projections are that 
within the next 5 to 10 years, there will be no Medicare, because 
doctors and hospitals will opt out of the system because they are not 
able to be reimbursed adequately for the services they are providing.
  So the first thing that we need to do is to preserve the current 
Medicare system, and the bill before us does that with such things as 
competitive bidding for durable medical equipment and other reforms.
  The second thing I would like to point out is that we understand that 
seniors need a prescription drug benefit.

                              {time}  2200

  And my reform group was able to get into this bill a transition 
program that if this bill becomes law within 90 days of enactment, 17 
million seniors in this country will begin to get a prescription drug 
benefit immediately. They will get a prescription drug card, and if 
they are low income those drug cards will have $800 of benefits on 
them; and if they are moderate income, they will have $500; and if they 
are upper income, they will have $100. Their families and employers can 
add money to those cards, up to $5,000, and within 90 days of enactment 
there will be a prescription drug benefit. Not 3 years from now, not 4 
years from now but within 90 days. And that drug benefit will not 
require a deductible, and it will not require any paperwork. It will 
not have any doughnuts.
  It will require a modest co-pay, but then you get your prescription 
drugs plus any discounts that the prescription drug benefit card allows 
you. And I think that is important that we as a country say to our 
senior citizens, not that we want to get old people but that we want to 
give our parents and our grandparents a break. We want to give them a 
benefit and we want to do it sooner rather than later.
  I think the most important thing about this bill is that there is an 
acknowledgment and a guarantee that there will be a benefit, there will 
be a prescription drug benefit.
  Now, we can debate and we will debate whether it is adequate or it 
needs to be more generous or whether it needs to be more universal or 
whether it needs to be more targeted to the people that need it the 
most, but the important step is we are giving the benefit, we are 
adding the benefit and we are doing it now. And our transition program 
will kick in within 90 days of enactment, no later than September of 
2004. So I will vote for this bill and hope we can perfect it as we go 
through the process.
  Mr. DINGELL. Mr. Speaker, I yield 2 minutes to the distinguished 
gentleman from Pennsylvania (Mr. Doyle).
  Mr. DOYLE. Mr. Speaker, I represent Allegheny County, Pennsylvania, 
the second oldest county in the country. And this is indeed a sad day 
for seniors in Allegheny County because instead of providing our 
seniors with an affordable prescription drug plan under Medicare, 
instead, tonight we will give seniors a Medicare+Choice style drug 
plan.
  Now, we all remember in Pennsylvania what Medicare+Choice is. That is 
the HMOs trying to provide Medicare, the same companies that left 
hundreds of thousands of Pennsylvanians high and dry, not only in my 
State but all across this country, when they pulled out of their plans.
  This plan is nothing more than a huge subsidy to drug companies and 
will eventually lead to the privatization of Medicare. Do not just take 
our work for it. The AARP, which represents more senior citizens than 
any other organization in this country, says, The provisions that would 
establish a premium support structure beginning in 2010 could 
destabilize the traditional Medicare program and lead to much higher 
costs for beneficiaries. Rather than expand choice, this provision 
could limit choice by leading to a substantially higher cost for 
beneficiaries who want to stay in the traditional Medicare program. 
Those who choose not to enroll in private plans should not be put at a 
financial disadvantage.
  The other part of this plan that I just find unbelievable right here 
in title VIII, section 801 is we prohibit the administrator of the 
program from negotiating better prices from the drug companies on 
behalf of taxpayers. We are going to spend $400 billion of taxpayers' 
money, and we always hear from our friends, let us run government like 
a business. Well, what business does not negotiate for more favorable 
prices? But not this plan.
  Our government is prohibited from negotiating lower prices on behalf 
of senior citizens. I watch seniors in Pittsburg get on buses every 
month and drive to Canada to buy their drugs, because they cannot 
afford them in this country, for half the price of what they have to 
pay for in the United States. And now when we finally have an 
opportunity to take the buying power of all these senior citizens and 
negotiate more favorable prices from the drug companies, this bill 
specifically prohibits us from doing that.
  Mr. Speaker, this is a bad bill. We should vote it down.
  Mr. TAUZIN. Mr. Speaker, I yield 2 minutes to the gentleman from 
Georgia (Mr. Burns).
  Mr. BURNS. Mr. Speaker, I appreciate the chairman for yielding me 
time.
  Mr. Speaker, we have a bill before us tonight that will improve and 
it will preserve Medicare. This bill will continue to provide seniors 
with fundamental health care they so desperately need but provide 
something more. It provides something that my constituents want and 
need in affordable prescription drug plan for all Americans and 
seniors.
  Mr. Speaker, I am a co-sponsor of H.R. 1 for one simple reason: 
Because seniors in my home State of Georgia must have an improved 
Medicare system. They must have prescription drug coverage. They do not 
want excuses. They want action. They want it now. The time for stale 
ideas and old systems and gimmickry are over.
  H.R. 1 is legislation we can support because it preserves a system 
our seniors know and love, while it addresses

[[Page 16435]]

the issues of increased coverage and solvency of a program for baby 
boom generations. Make no mistake, we are far from finished in our 
efforts to fix our Nation's health care challenges, but this is the 
first step into a new world of advanced health care. Through H.R. 1, 
seniors in Georgia can decide the coverage plan that best fits their 
needs. Seniors in Georgia will be able to decide which prescription 
drug plan through Medicare is the best option. For those who have no 
coverage and pay exorbitant prices for their drugs out of their own 
pocket, these benefits are real. We are providing them with real 
savings and real choices.
  Mr. Speaker, it is time for Congress to step up to the plate and 
ensure Medicare's future for all Americans.
  Mr. DINGELL. Mr. Speaker, I yield 2 minutes to the distinguished 
gentleman from Maine (Mr. Allen).
  Mr. ALLEN. Mr. Speaker, I thank the gentleman for yielding me time.
  Mr. Speaker, the Republican prescription drug bill transforms 
Medicare into Maybe care. Depending on where you live, maybe you get 
your traditional Medicare and maybe you do not. Depending on what plan 
you have, maybe you keep your doctor or maybe you do not. Depending on 
what year it is, maybe you keep a good package of benefits or maybe you 
pay very high prices for a low, low package of benefits.
  And the Republicans are here tonight saying choices, choices, 
choices. We are giving America's seniors choice. Well, what kind of 
choice are they giving America's seniors? Well, not a choice of doctors 
and not a choice of hospitals. What they are saying is we are going to 
give you a choice of insurance plans. Well, no one in my State of Maine 
has ever come up to me and said, You know what I really want is not a 
choice of doctors or hospitals, I want to see different brochures, 
different insurance brochures. Please have some insurance agents call 
me and talk about their different plans.
  What is happening in Maine, in the private sector with this wonderful 
competition for the employed market is every year 20 percent increases, 
30 percent increases, higher payments, lower benefits. That is 
competition and choice and what the Republicans are saying is that is 
what America's seniors need. It is unbelievable. Every senior I talk to 
says we want lower prices. Please give us lower prices. We are buying 
from Canada. We are taking buses to Canada, and this bill prevents the 
administrator from negotiating lower prices for America's seniors.
  This bill is never likely to work in my opinion, but if it did, you 
ought to follow the money. Who gains from this bill? The insurance 
companies will make millions, hundreds of millions of dollars. The 
pharmaceutical industry will be able to keep charging the highest 
prices in the world. America's seniors lose. You follow the money to 
the insurance companies and the pharmaceutical industry and you can 
tell who wins under this bill.
  This bill is a nightmare for America's seniors. Reject this bill and 
support the Democratic substitute.
  Mr. TAUZIN. Mr. Speaker, how much time remains on each side?
  The SPEAKER pro tempore (Mr. Hastings of Washington). The gentleman 
from Louisiana (Mr. Tauzin) has 8 minutes remaining. The gentleman from 
Michigan (Mr. Dingell) has 14\1/2\ minutes remaining.
  Mr. TAUZIN. Mr. Speaker, I reserve the balance of my time.
  Mr. DINGELL. Mr. Speaker, I yield 2 minutes to the distinguished 
gentleman from Louisiana (Mr. John).
  Mr. JOHN. Mr. Speaker, I thank the gentleman for yielding me time.
  Mr. Speaker, I strongly support a drug benefit in Medicare. And in 
some aspects, the Democrats have won because it has not been that long 
ago, just a few short years, that the Republicans wanted to take a 
privatized outside-of-Medicare, a drug benefit. But now all of the 
debate is about it being a part of Medicare. So in that aspect, I think 
that we have won as Democrats. But I do believe that what they have 
done with this bill is continue to try to privatize Medicare and the 
benefits that are in it.
  An entire generation of baby boomers are upon us, Mr. Speaker, and in 
just a few years away we are going to have to deal with this. 
Unfortunately, this bill falls short of what our seniors deserve as it 
has holes in it that the Republicans refuse to plug.
  Perhaps the $174 billion bill that we passed just previous to this 
debate could have been used for the doughnut to be plugged. Efforts to 
fix this problem were denied us through the amendment process in this 
body on this debate. I offered amendments to try to bring some 
certainty with 2 years for our seniors to try to provide our rural 
ambulance services, our rural home health care and our rural doctors a 
fair reimbursement. In particular, I believe this bill falls short in 
addressing the needs of rural seniors and rural Americans. In fact, our 
previous experience should tell us that it has not worked. It is not 
profitable to offer plans to seniors in rural areas. In southwest 
Louisiana we have no Medicare+Choice plans.
  I urge Members to vote against this, and I urge the other side to 
work, as the Senate did, in a bipartisan fashion to fashion a bill that 
our seniors can use.
  Mr. TAUZIN. Mr. Speaker, I reserve the balance of my time.
  Mr. DINGELL. Mr. Speaker, I yield 2 minutes to the distinguished 
gentleman from Florida (Mr. Davis).
  Mr. DAVIS of Florida. Mr. Speaker, one of the things that Democrats 
and Republicans ought to be able to agree upon tonight is that we owe 
our seniors truthfulness. We should be very clear and honest with them 
and ourselves as to exactly what is happening. Our failure to do so is 
a cardinal sin because it is ultimately to disrespect our seniors.
  This bill offered by the House Republicans is based on a remarkable 
fixation with private insurance companies. Private insurance companies 
throughout the country in Washington have said once again they do not 
want the money that is being offered under this bill to write these 
private insurance plans.
  The distinguished chairman of the committee's response to that is we 
will subsidize 99 percent of this cost as necessary to get private 
insurance companies to sell this benefit. How often in Washington, D.C. 
do you hear somebody turn down that type of money the government is 
offering them? Something is wrong with this plan.
  I salute the Republicans on the committee who acknowledge they were 
concerned about whether private insurance companies would offer this 
benefit to seniors. Some of them are going to vote against the bill 
tonight based on that concern. A number of Democrats have said to those 
Republicans and others, we will work with you on a bill that fits 
within our budget constraints but let us have a traditional Medicare 
benefit that provides drug coverage.
  What does this bill do? It does not set any maximum premium. It does 
not set any maximum deductible. It has a doughnut hole that almost 50 
percent of seniors will experience after they have spent $2,000 on drug 
costs. During that time period they will be forced to pay a premium for 
basically nothing.
  I would like to bring a chart up here to also show you just how 
complicated this plan will be that is being foisted on seniors. This 
represents a relatively detailed description of what this bill attempts 
to do.
  Would somebody on the majority please explain to me how this bill 
works and how any senior at home, Democrat, Republican or Independent, 
is expected to understand how to use this drug benefit?
  Mr. Speaker, I ask unanimous consent for 2 additional hours to 
explain the chart.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Florida?
  Mr. TAUZIN. Mr. Speaker, I object.
  The SPEAKER pro tempore. Objection is heard.
  Mr. TAUZIN. Mr. Speaker, I yield 2 minutes to the gentleman from 
Kentucky (Mr. Whitfield), a distinguished member of the Committee on 
Energy and Commerce.
  Mr. WHITFIELD. Mr. Speaker, I thank the gentleman for yielding me 
time.
  Mr. Speaker, tonight is the culmination of 4 or 5 years of debate of 
a prescription drug benefit for our senior

[[Page 16436]]

citizens here in America. I hear a lot of the criticism and I have 
heard it all day today about private insurance companies being involved 
in this program that we are submitting tonight. Yet, I would remind 
those on the other side of the aisle that private insurance companies 
are involved in Medicare as it exists today and has been for some time 
because it is the private companies that are responsible for the 
reimbursement of our health care.

                              {time}  2215

  So private companies are already very much involved in our Medicare 
system today.
  I would also say, what benefit are seniors going to get from this 
program? First of all, if they are 135 percent of the poverty level and 
below, and I can tell my colleagues, in my district that is about 60 
percent of them, they are not going to have to pay anything. The 
government's going to pay their premium for them. The only thing that 
they will have to pay is a $2 small copay for a generic drug and a $5 
copay for a name-brand drug. What is wrong with a program that provides 
free medicines for seniors who today cannot get them?
  I would also say that in addition to that tremendous benefit, and we 
provide catastrophic coverage for them as well, but in addition to that 
tremendous benefit, we have a rural health package in this bill that is 
going to help rural America, rural health providers. It is going to 
provide $27 billion over 10 years for our rural areas, and the 
disproportionate share payment for our rural hospitals, children's 
hospitals around the country, urban hospitals that treat our citizens 
on Medicaid, our hospitals over the next 10 years are going to get $3.8 
billion for those who treat the neediest in our society.
  This is a program that we should all be supporting, and certainly we 
should not support the Democratic substitute.
  Mr. DINGELL. Mr. Speaker, I yield 2 minutes to the distinguished 
gentlewoman from California (Ms. Solis).
  Ms. SOLIS. Mr. Speaker, I thank our ranking member for yielding me 
the time.
  I rise tonight in opposition to this bill. We have heard a lot 
tonight about how this bill is going to help our seniors from the other 
side of the aisle. Well, I want to talk about the seniors that I 
represent in my hometown in the San Gabriel Valley in East Los Angeles, 
California.
  In my congressional district, I represent nearly 6,000, 6,000 seniors 
in poverty, making less than $11,000 a year. For them the cost of 
prescription drugs is so overwhelming that they often have to forgo 
between paying their medicine or having a meal or paying a phone bill. 
That is what it means to seniors in my district.
  This is a choice that no senior citizen should have to make. Yet the 
Republican bill does nothing to reduce the cost of prescription drugs. 
It does not allow us to use the purchasing power of Medicare 
beneficiaries to negotiate lower drug prices. How ironic, just like we 
do for the Veterans Administration.
  So what do we tell Grandma, living alone on a fixed income who cannot 
afford her medicine? Sorry, but Medicare has a new drug benefit, but it 
is not for you? Sorry, but Medicare is raising part B deductibles by 
eight times as much as our Social Security cost-of-living increase?
  Only the Democratic alternative that we will debate later on tonight 
will do what I think my senior citizens want to hear, and it will 
provide them with the guaranteed, affordable, easy-to-use drug benefit 
that is part of Medicare.
  Let us be clear tonight. For our seniors, for our grandmothers, our 
uncles, our fathers and our mothers, there is only one thing to talk 
about tonight and it is about medicine. This should not be about 
privatization or insurance companies or anything else. Let us give our 
senior citizens the help they need to pay for that medicine.
  Let us oppose this proposal being put forward tonight by the 
Republicans and support the Democratic prescription drug bill.
  Mr. TAUZIN. Mr. Speaker, how much time remains on each side?
  The SPEAKER pro tempore (Mr. Hastings of Washington). The gentleman 
from Louisiana (Mr. Tauzin) has 6 minutes remaining. The gentleman from 
Michigan (Mr. Dingell) has 8\1/2\ minutes remaining.
  Mr. TAUZIN. Mr. Speaker, I reserve the balance of my time.
  Mr. DINGELL. Mr. Speaker, I yield 2 minutes to the distinguished 
gentleman from Arkansas (Mr. Berry).
  Mr. BERRY. Mr. Speaker, I thank the distinguished gentleman from 
Michigan for yielding me the time, and I appreciate his leadership on 
this and all other matters before this House.
  Mr. Speaker, one thing we understand is the Republicans are in the 
majority. They are in charge. You can do whatever you want to do. You 
have got the Senate. You have got the White House. Now, you may talk 
more trash than a $3 radio, but you are in charge.
  The difference in these two plans is very simple. The Democrats would 
offer you the best plan, the best price, and we will pay 80 percent and 
let the patient, the Medicare beneficiary, pay 20 percent. The 
Republicans only, on the other hand, will allow the pharmaceutical 
companies, by law, statutorily, to continue to rob our senior citizens, 
charge them the highest price and let them pay 80 percent; and they 
will pay 20 percent of the bill, if you are lucky enough to live long 
enough.
  They come to the floor repeatedly this evening and talk about this 
bill is not perfect. Boy, you have got that right. I will agree with 
you on that one.
  They say it is historic, and they are right. Never before in the 
history of this Republic has there been such an outrageous attempt to 
provide the ability to insurance companies, as if they needed any help, 
to rob and deceive and cheat our senior citizens. Never before have 
they been presented with an opportunity, the pharmaceutical companies, 
to cheat and continue to rob our senior citizens.
  It is indeed historic by their own admission. The chairman of the 
Committee on Ways and Means says we want to end Medicare as you know 
it. I suggest you all get you a buckeye. It will bring you good luck 
and keep rheumatism away. That is all you are going to get through this 
Medicare program.
  Mr. TAUZIN. Mr. Speaker, I yield 2 minutes to the distinguished 
gentleman from Texas (Mr. Burgess).
  Mr. BURGESS. Mr. Speaker, I thank the chairman for yielding me the 
time, and certainly I want to acknowledge the great leadership of our 
chairman and the gentleman from Texas (Mr. Barton), as well, who 
proposed the prescription drug card.
  I rise tonight to support H.R. 1, the Medicare Prescription Drug and 
Modernization Act of 2003.
  Mr. Speaker, this debate is about taking care of America. This debate 
is about making a guarantee to senior citizens that they will have 
access to quality medical care which includes prescription drugs. This 
debate is about ensuring the future of Medicare. This debate is about 
delivering better outcomes at lower cost.
  H.R. 1 is a strong solution to these serious problems. Providing 
prescription drugs for America's seniors is the right thing to do. I 
cannot picture what medicine would look like today if pharmaceuticals 
were not an available treatment option. Physicians and other providers 
would have no option but to resort to seriously invasive treatments 
when confronted with acute medical conditions.
  There is no doubt that Americans have benefited from the development 
of new and innovative medicines. New drugs can improve and extend 
lives. New drugs exist that can dramatically reduce cholesterol, fight 
cancer, alleviate debilitating arthritis.
  An entirely new class of medicines, collectively known as selective 
estrogen receptor modulators, are available for reducing breast cancer 
mortality rates, and one day may see an expanded role in preventing 
this disease.
  Unfortunately, Medicare has been deeply rooted in the medicine of 
1965, not the medicine of today; and this has negatively impacted the 
health of our senior citizens.
  Tonight, the House of Representatives will take a bold step to 
improve the lives of senior citizens. Not only will seniors have 
greater access to prescription drugs, but built-in reforms

[[Page 16437]]

will hold down the cost of these medications.
  In a report released today by Secretary Tommy Thompson, seniors will 
save substantially through upfront drug discounts under the House plan. 
The Medicare actuary estimates seniors will see an immediate savings of 
25 percent off their current prescription drug costs.
  On the other side of the aisle, those who were wearing the arm bands 
earlier today, where were those arm bands in 1998 and 1999? Where were 
those arm bands when that administration refused to even open the book 
and look at the Medicare commission, bipartisan commission?
  Mr. DINGELL. Mr. Speaker, I yield 1 minute to the distinguished 
gentlewoman from Michigan (Ms. Kilpatrick).
  Ms. KILPATRICK. Mr. Speaker, I thank the ranking member for yielding 
me the time in this most difficult discussion, but what a sham we have 
today for our seniors of America who built this country. Not only do 
you not have a prescription drug benefit, but this one you will not get 
till 2006, if you get it at all. It will privatize Medicare by the year 
2010.
  What most people want in America, including seniors, is to contain 
the high costs of prescription drugs. This bill prohibits the Secretary 
of Health and Human Services from negotiating lower prices for 
prescription drugs. That in itself is enough to say vote ``no'' on this 
bill. What a sham for the seniors who built this country.
  This plan will destroy the retirement benefits that companies in my 
district like General Motors, like Daimler Chrysler already are giving 
to their retirees. This plan is a disincentive for them to keep giving 
that. Vote ``no'' on this plan. It is unfortunate I do not have any 
more time. Vote ``no.''
  Mr. Speaker, I rise today to express my disappointment and opposition 
to H.R. 1. We, in Congress, over the last few years, have repeatedly 
pledged to provide seniors with the prescription drug coverage they so 
desperately need--and deserve. My Republican colleagues have touted 
this day as a ``historical day.'' Unfortunately, for Democrats, who 
support a meaningful, universal, and comprehensive drug plan under 
Medicare, this day is not a ``historical day'' in the positive sense 
but a day when we failed on our promise to come through for our 
seniors. What this bill does do is afford the Republicans the ability 
to say to seniors, ``We came through on our pledge.'' Unfortunately, 
their rhetoric does not match up to the emptiness that will be felt in 
our seniors' pocketbooks. Nor does it match up in providing seniors 
with real choice and a meaningful, comprehensive prescription drug 
program.
  The GOP Prescription Drug Plan is a flawed plan, period. It would put 
the power in the hands of private insurers--those same insurers who 
have abandoned seniors in providing essential health care services in 
the past. Why our Republican colleagues want to give even more power to 
HMOs and private insurers is a question I cannot answer. However, the 
consequences of such actions will be felt by the most vulnerable in our 
society.
  The majority of seniors across our nation live on fixed monthly 
incomes. With so many seniors today living longer, this also means that 
they need to save as much money as they can to ensure their survival 
over the years. They cannot afford to pay exorbitant costs for their 
drugs. Moreover, seniors need security. What they do not need is to be 
forced into private managed care plans that are able to opt-out of 
coverage for seniors at their free will. Seniors deserve better--they 
deserve a universal, comprehensive, affordable, and meaningful drug 
plan under Medicare.
  The House Republican prescription drug bill is even worse than the 
one considered by Congress last year and goes much further in 
privatizing Medicare. Seniors would need to use private insurance 
companies for drug coverage and these private insurance companies and 
managed care plans would design the new prescription drug plans. These 
insurance plans would also need to commit to the program for only one 
year. What does this mean? It means that seniors can be dropped from 
their plan year-to-year. They would have to change their plan, their 
doctor, and the drugs they take every 12 months. This puts seniors at 
the mercy of private insurance companies, rather than giving them an 
option that provides them with the security and stability they need. 
Seniors do not want to be forced into an HMO. In fact, 72 percent of 
seniors polled say they do not want to be forced into getting coverage 
through an HMO. We need to listen to those we are trying to serve.
  The GOP plan also receives an ``F'' on the affordability scale. Under 
their plan, seniors would be required to pay high premiums even if they 
are not receiving coverage. The Republican plan would deny assistance 
to those seniors with drug costs between $2,000 and $4,900. Nearly half 
of Medicare beneficiaries would fall into this ``coverage gap'' every 
year; however, they would still be expected to pay the monthly premium. 
Seniors would be asked to continue paying for a service they are not 
receiving--a service that does not honor seniors with meaningful 
support in the first place.
  Another glitch in the Republican bill is its inability to deal with 
the underlying problem--the rising costs of prescription drugs. Seniors 
want help in curbing the increasing costs of prescription drugs. In 
fact, seniors prefer cost control measures by a vote of two to one. 
While seniors want help in purchasing their medicines, they also want 
solutions in curbing the rising costs. The Republican bill does not do 
this. It neglects to include an important provision supported by 
Democrats to provide the Secretary of Health and Human Services with 
the authority to negotiate for lower prices like the Veterans' 
Administration has done. Including cost-control provisions is the right 
and responsible thing to do; however, our Republican friends do not see 
the benefit of this. How unfortunate.
  The Democratic Substitute, which I proudly support, is the coverage 
that will fulfill our pledge to seniors. It provides them with real 
assistance within Medicare and includes provisions to curb the high 
cost of prescription drugs. Seniors do not need to worry about paying 
more in the future if they decide to stay in the traditional Medicare 
program. They do need to worry about this with the Republican bill, 
since the ``competitive bidding'' provision would force seniors to pay 
more for their prescription drugs than they do now. Seniors want a plan 
that is straight up, no-nonsense, and significant. That is what 
Democrats have provided in the substitute measure.
  I want to do right by the seniors in my district and for seniors all 
across the nation who are struggling to pay for the prescription drugs 
they need to live fulfilling and healthy lives. H.R. 1 was constructed 
with the interests of pharmaceutical companies and private insurance 
companies at heart. The voice of seniors was nothing but a faint echo 
in the rooms where this bill was constructed and their best interests 
have been left in the dust. For these reasons, I vote against passage 
of H.R. 1. We need to safeguard our nation's seniors, not private 
insurance companies.
  Mr. DINGELL. Mr. Speaker, I yield 1 minute to the distinguished 
gentleman from New Jersey (Mr. Pascrell).
  Mr. PASCRELL. Mr. Speaker, I really suggest that the other side go to 
see the movie, it is an old movie, ``Thelma and Louise.'' Thelma turns 
to Louise and says, ``Do not settle, Louise.''
  You have settled. You blew it. In fact, the seniors already are 
angry. The plan does not even go into effect until 2006. Why are they 
angry? They are angry because this is a question of values. Just when 
you need it most, the plan ends.
  The second reason why they are angry is you are going to force them 
into HMOs. Look what happened in New Jersey on Medicare+Choice. Now you 
are going to call it Medicare plus advantage. Bill Safire would have a 
picnic on this.
  This is a joke and a sham, and you know it. Look at that record that 
you have provided, that we provided, all of us in the State of New 
Jersey, where they lost 100,000 people. What we are going to do, as the 
gentleman from Pennsylvania said just a few moments ago, is subsidize 
insurance plans. That is what we are going to do.
  The third reason why they are ticked off is that there is no control 
over prices. Boy, are they angry. You blew it.
  Mr. DINGELL. Mr. Speaker, I yield 1 minute to the distinguished 
gentlewoman from California (Ms. Waters).
  Ms. WATERS. Mr. Speaker, last night we debated the Homeland Security 
appropriations bill. The Republicans made excuses about not spending 
enough money to truly secure our homeland. Tonight, the Republicans are 
crying broke and claiming we do not have enough money to fund credible 
prescription drug coverage for our seniors.
  This bill provides no coverage when a senior's prescription drug 
costs are between $2,000 and $4,900 per year. This

[[Page 16438]]

huge coverage gap affects 47 percent of Medicare beneficiaries.
  This bill is also a giveaway to pharmaceutical companies, as it 
prohibits the Secretary of Health and Human Services from negotiating 
lower drug prices. The primary beneficiaries of this bill are not the 
beneficiaries of Medicare. They are the wealthy special interests and 
the pharmaceutical industry and the insurance industry that give huge 
campaign contributions to the Republicans.
  Mr. Speaker, the Republicans have given huge tax cuts to the wealthy, 
promised the Iraqis a universal health care plan. They are spending 
millions attempting to buy the loyalty of warlords in Afghanistan, and 
the President just gave Musharraf $3 billion.
  Seniors, call your Republican Members and ask them why they do not 
take care of the seniors of this country.
  Mr. DINGELL. Mr. Speaker, I yield 1 minute to the gentleman from 
Arkansas (Mr. Ross).
  Mr. ROSS. Mr. Speaker, I thank the gentleman from Michigan (Mr. 
Dingell), the ranking member, for yielding me the time.
  As the owner of a small-town family pharmacy, I got sick and tired of 
seeing seniors who could not afford their medicine or could not afford 
to take it properly. That is why back in 2000 I decided to run for the 
United States House of Representatives.

                              {time}  2230

  But tonight, what we are debating is nothing more than a false 
promise for our seniors. Seniors need an accountant to figure out this 
plan.
  I put a calculator to it, and here is what the Republican national 
leadership plan offers our seniors. Seniors will pay the first $2,520 
of the first $3,500 worth of medicine they need every year. Now, let us 
contrast that a moment to a health care plan provided for Members of 
Congress, those who wrote this plan. Guess what they pay? Seven hundred 
dollars of the first $3,500 worth of medicine.
  They want to provide seniors with little help while continuing to 
take care of Members of Congress. It is simply wrong. This is not a 
seniors bill, this is a bill written by the big drug manufacturers for 
one reason only. To privatize Medicare. To privatize Medicare so that 
Medicare cannot command discounts.
  Mr. DINGELL. Mr. Speaker, I would inform the gentleman from Louisiana 
at this time that I have one speaker remaining.
  Mr. TAUZIN. Mr. Speaker, who has the right to close?
  The SPEAKER pro tempore (Mr. Hastings of Washington). The gentleman 
from Louisiana has the right to close.
  Mr. TAUZIN. Mr. Speaker, I reserve the balance of my time and the 
right to close.
  Mr. DINGELL. Mr. Speaker, I yield the balance of my time to the 
distinguished gentlewoman from California (Ms. Pelosi), the minority 
leader, to close.
  Ms. PELOSI. Mr. Speaker, I thank the distinguished gentleman from 
Michigan for yielding me this time and for his tremendous leadership. 
He has been fighting this fight for America's seniors for access to 
quality health care for all Americans and an affordable prescription 
drug benefit for America's seniors. We are all in your debt.
  Mr. Speaker, today is a sad day for America's seniors. Another sad 
day, late at night in the Chamber of the House of Representatives, 
where the budget priorities of our country should be debated to their 
fullest extent, but where the limitation on time is placed so that the 
American people can never really get the full story. This prescription 
drug benefit bill discussion is an historic occasion for our country 
because it does indeed, it does indeed give us the opportunity to 
expand Medicare to provide a guaranteed affordable defined benefit for 
our seniors. The Senate has taken up the bill for the past 2 weeks. 
They have considered 30 amendments to the bill. Thirty amendments. The 
House is considering the bill this evening with no opportunity for 
amendment.
  I do want to commend the gentleman from Michigan (Mr. Dingell) and 
the gentleman from New York (Mr. Rangel), the ranking member on the 
Committee on Ways and Means, for the proposal that they will be putting 
forth tonight, which is a real prescription drug benefit for seniors. I 
commend the gentleman from California (Mr. Dooley) for his limited 
opportunity but great product that he put forth on the previous 
question on the rule earlier. Another excellent proposal. And I commend 
the Blue Dogs, the gentleman from California (Mr. Thompson) and the 
gentleman from Arkansas (Mr. Berry), for their hard work on our motion 
to recommit, which we hope will be allowed on the floor tonight.
  Any one of these would be far superior to the proposal that is being 
put forth by the Republicans today. Why it is so sad is because we are 
supposed to honor our parents. Our senior citizens built our country. 
They raised our families, the backbone of America. They fought our 
wars. Some of them are part of the greatest generation. Some of them 
lived through the New Deal, many of them the Fair Deal, and tonight 
they are getting a raw deal. What makes it so sad is that we had the 
opportunity to do it right, and one of those opportunities we will hear 
about next, the Dingell-Rangel/Rangel-Dingell Democratic proposal, of 
which we are very proud.
  Nearly 40 years ago, when Medicare came into existence, it came at a 
time when many, many seniors had no access to health care, and now 
almost every senior in America has access to quality health care. At 
the time, there was no prescription drug benefit included in the 
package. That was unfortunate. Today, it is imperative that we have a 
prescription drug benefit in the package. The advances to science have 
been so miraculous. Seniors today, if they have a prescription drug 
benefit, would be able to self-administer drugs, which would not only 
be an adjunct to physician or hospital care but be a supplement for it. 
It would be a substitute for it.
  So think of what it means to the quality of life for our seniors in 
order for them to have that independence and to be able to know that it 
is guaranteed, defined, and dependable. Think of what it means to the 
taxpayer in the reduction of cost in medical services to seniors 
because they can have access to prescription drug benefits. That is 
what makes this such a tragedy. It makes it such a tragedy.
  So tonight, instead of honoring our parents and our seniors, we are 
foisting a hoax upon them, at least the Republicans are. And a cruel 
hoax it is indeed. In doing so, the Republicans insult the 
intelligence, they insult the intelligence of America's seniors. Many 
of you are blessed to still have your parents with you, and some of us 
are even bordering on being seniors ourselves, but any of you who have 
your parents or dear relatives who are older know that they are into 
stats. They know their statistics. They know their blood count, they 
know their blood pressure, they know their bank account balance, they 
know the cost of everything, many of them, because many of them are on 
fixed incomes and the slightest change has an impact on their economic 
security.
  So I want those seniors who are so sensitive to changes in cost to 
take a look at this chart, which was in the New York Times this 
morning, and it says, ``Under House GOP Bill Seniors' Out-of-pocket 
Drug Costs Remain Staggering.'' Remain staggering. The average cost 
that seniors will pay in drug costs in 2006 is reported to be $3,155. 
So let us take the $3,000 line for the Republican hoax on seniors. If 
the beneficiary's annual drug costs are $3,000, seniors out there, if 
you are paying about $3,000, under the House bill your deductible will 
be $250. Your premium will be $420. The share of initial coverage is 
$350. Gap in coverage, here is where you fall into the gap, $1,000.
  So of that $3,000 worth of drug cost, you, America's seniors, will be 
paying $2,020 out-of-pocket. Where is the benefit? And this is the best 
case scenario. These prices that you see here are suggestions to the 
HMOs. The prices could be much more, and your out-of-pocket cost could 
be much more.
  I do not know how many of you think the hole is the most delicious 
part of

[[Page 16439]]

the donut, but seniors, when they fall into this donut hole where they 
get no coverage, they still pay the premium. They are paying a premium 
for something that is not there. It is not there. And of course, if 
they pay $4,500 in drug costs, they are paying $3,520 out-of-pocket. A 
cruel hoax on America's seniors. And they call that modernization. I 
call it humiliation. I call that insulting the intelligence of 
America's seniors.
  It was interesting, in this same article today one senior who was 
quoted on the subject said, ``Do you think anybody in Washington, D.C. 
has any idea what people on a limited income have to do to live?'' 
Clearly, the Republicans do not. They are just too busy giving the 
biggest tax breaks to the highest-end people in our country. They are 
just too busy giving those tax breaks that they cannot write a decent 
prescription drug benefit for seniors.
  In fact, I might add seniors and children. Where, oh where did the 
child tax credit go in all of this, as we adjourn tomorrow? Tax cuts 
instead of child tax credits. Tax cuts instead of prescription drug 
benefits. At the beginning of life; toward the end of life. It is a 
cruel hoax.
  And so, my colleagues, no matter what the Republicans tell you about 
their bill, the euphemism that it is a modernization of Medicare is 
really a laugh. It is an elimination of Medicare. Because no matter 
what they tell you, the facts are these: The Republicans do not provide 
a guaranteed defined benefit for seniors. The Republican bill does not 
reduce the high cost of prescription drugs.
  Indeed, the hardest to explain to anyone is that the bill prohibits 
the Secretary of Health and Human Services from negotiating for best 
prices. I repeat: Not only does the bill not bring down the cost of 
drugs, it prohibits the Secretary of HHS from negotiating for the best 
prices. Every business in America, indeed the VA, does that. Volume 
gives you leverage; gives you opportunity. Except in this bill it is 
prohibited.
  And at this point I want to say that the proposal put forth by the 
gentleman from Michigan (Mr. Dingell) and the gentleman from New York 
(Mr. Rangel), the cost of it would be cut in half, cut in half, if the 
Secretary had the authority, which our bill calls for, and indeed took 
that responsibility to negotiate for best prices.
  What the bill does also, instead of modernizing Medicare, is to 
unravel not only Medicare, and I hope seniors are listening, not only 
the prescription drug benefit, but part A and part B along with the 
prescription drug benefit, forcing seniors to compete and pay more to 
stay in Medicare, the Medicare they know and trust. I repeat: When this 
bill, in 2010, comes to fruition, seniors will have to pay more to stay 
in Medicare for part A, part B, and prescription drug benefits.
  And this is really a sad one in their bill. The employer piece. The 
employer piece. There are many businesses in America who honor their 
responsibility to their retirees. The CBO, the Congressional Budget 
Office, estimates that under the Republican bill one-third of all 
retirees who get their benefits from their employers will lose their 
coverage. Millions of seniors will be worse off.
  So that is why I say this is really a tragedy. It is a missed 
opportunity. It could be so good. It could be bipartisan. It could be 
what seniors expect and deserve. Democrats have a better idea. The 
Rangel-Dingell/Dingell-Rangel proposal, the two distinguished gentlemen 
who have spent a lifetime in public policy promoting access to quality 
health care, whose credentials are impeccable in this regard, they 
support Medicare. They have promoted a bill that is worthy of the 
seniors whom we respect. It is a guaranteed defined benefit under 
Medicare. It does give the authority to the Secretary to negotiate for 
best prices. It protects seniors' options in terms of their employers 
giving them benefits; not making millions of seniors be worse off.
  America's seniors deserve a benefit that is affordable, with 
reasonable premiums and deductibles. America's seniors deserve a 
benefit that is available to all seniors and disabled Americans, 
including Americans in rural areas.

                              {time}  2245

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

[[Page 16440]]

in shotput, and if you give her trouble, I will sic her on you.
  There are Members who have come to the floor and said seniors cannot 
understand choice. Let me tell Members something, I grew up in a 
poverty family. My mom and dad never earned above poverty. They made 
hard choices all their life for us. They sent three out of their four 
children to college. They fed and clothed us and gave us a great 
education and a chance for me to come to Congress. I love that woman 
and I loved my dad as long as I had him. How dare anyone suggest 
otherwise. We love our parents and grandparents the same.
  We differ on how to structure this program today. Apparently we did 
not a few years ago, but we do now. That is a legitimate debate and 
that is worthy of this House, but to suggest that any of us care less 
about old people, to suggest that any of us love those citizens who 
gave so much and made those hard choices for us any less than we do is 
a shame. My parents made hard choices. My mother knows how to make hard 
choices. If we give her choices, she will make the right ones, just 
like she did all her life. I trust her and I trust seniors in America. 
We are going to give them drug coverage in Medicare and we are going to 
give them other choices, too, if they want to make those choices. And 
if Members do not want to help us do it today, I suggest in a month 
from now when the conference committee report is back after a 
compromise with the Senate, you might want to join us then.
  Mr. ISTOOK. Mr. Speaker, this bill will hasten the day when Medicare 
will go bankrupt, and it also threatens to unravel our children's 
future.
  Medicare is already on shaky financial legs, and this will add 
enormous extra expenses that will make it worse. Do we expect our 
children to pay a lifetime of higher taxes, and still find there's 
nothing left for them when they retire? That is what we face.
  I would like to add prescription drug benefits, but it's wrong to 
promise something we cannot pay for.
  I want to preserve what's good about Medicare, not destroy it by 
making extravagant promises for political gain.
  The enormous extra spending under this bill will be far more than 
projected. Because today's Medicare is a huge price control system, 
many doctors already refuse to see Medicare patients. In just a few 
years this will make it worse, including price controls that will 
destroy the incentives for companies to create new medicines.
  What should we be doing?
  Since 76 percent of seniors already have drug coverage, we could 
focus on helping those who don't. But this bill undoes the coverage for 
those 76 percent, and puts them in a confusing new medical experiment.
  We should be stabilizing Medicare, so it can keep the promises 
already made, not making new promises that we don't have the money to 
keep.
  We should address the reasons why drug prices and healthcare costs 
are so high. By banning re-imported drugs, we're forcing Americans to 
subsidize far lower drug prices in other countries. We should change 
our policies so Americans only pay the lower world price, not a higher 
price.
  We should end the 130,000 pages of federal regulations that have 
driven the costs of medicine and healthcare through the roof. On 
average, for every hour they spend with a patient, doctors and nurses 
spend another half-hour doing government paperwork.
  We should stress personal responsibility in healthcare, just as we 
did in welfare reform, so government resources are focused on those who 
cannot care for themselves, not on those who can.
  Bit by bit, Congress is undoing the principles of welfare reform and 
undercutting basic American principles in the process. Both political 
parties are making extravagant promises today, trying to outbid each 
other to win votes. Unfortunately, they are bidding with taxpayers' own 
money, and our children's hopes will be crushed by the bills they will 
inherit.
  Mr. UDALL of New Mexico. Mr. Speaker, for far too long, as I traveled 
around the state of New Mexico, seniors have told me their 
heartbreaking stories of being forced to choose between purchasing 
their medicine and purchasing groceries as a result of the exploding 
costs of prescription drugs. Today we have an excellent opportunity to 
address this tragic situation by providing a prescription drug benefit 
for Medicare beneficiaries and put an end to the outrageous dilemma 
facing our seniors throughout the country. In addition, we have an 
historic opportunity to modernize the incredibly important Medicare 
program, including updating formulas for our health care providers in 
rural areas--an issue that is of particular importance to my 
constituents and me.
  Thankfully, H.R. 1 does address the latter concern, but unfortunately 
falls far short on the critically important issue of prescription drug 
coverage. The prescription drug benefit provided under H.R. 1 would be 
the first step toward privatizing one of the most successful government 
programs in history, leaves seniors at the mercy of insurance 
companies, forces seniors into HMOs, has an incredible gap in coverage, 
and does nothing to control the exploding costs of prescription drugs. 
As such, I am forced to vote against H.R. 1.
  Under this bill, seniors and disabled Medicare beneficiaries can 
obtain their prescription drug coverage only from HMOs and private 
insurance companies. Given the history of HMOs and other private health 
plans in rural areas, I have serious concerns about this approach. In 
fact, in 1997 in the state of New Mexico, HMOs dropped approximately 
18,000 individuals because of rising costs. These individuals were left 
with nowhere to turn.
  H.R. 1 would put beneficiaries at a similar risk by relying on 
untested private drug-only plans, which can decide whether or not to 
serve rural areas, and they can decide to leave every 12 months. 
Further contributing to the risk of this provision is the fact that 
there is no fallback option to allow traditional Medicare to provide 
prescription drug coverage if private plans decline to provide coverage 
in rural areas. Because much of my district is rural, this legislation 
would put the seniors in my district at particular risk. I cannot 
support this.
  This is greatly disappointing to me given the several major rural 
healthcare provisions that are included in this legislation. The labor 
share revision, the geographic physician payment adjustment, equalizing 
the Medicare disproportionate share payments, increasing home health 
services furnished in rural areas, critical access hospital 
improvements--these are all incredibly important provisions that I 
strongly support in order to help strengthen the health care system in 
rural areas. I cannot, however, vote in support of H.R. 1 with the 
extremely flawed prescription drug benefit included with these strong 
rural health provisions.
  Mr. Speaker, I strongly support adding a voluntary prescription drug 
benefit to Medicare. I strongly believe that we must take action to 
provide relief for our nation's seniors. I simply do not believe, 
however, that H.R. 1 is the most effective way to do so. Tonight I will 
be voting in support of the substitute being offered by Mr. Rangel and 
Mr. Dingell.
  In addition to including stronger rural provisions than those 
included in the Majority's bill, the substitute includes a guaranteed 
benefit of a $25 premium, a $100 deductible, 20% co-insurance, and a 
$2,000 catastrophic protection. The substitute also allows for lower 
drug prices by granting the Secretary of Health and Human Services the 
authority to use the collective purchasing power of Medicare's 40 
million beneficiaries to negotiate lower drug prices. Also, the 
substitute grants access to generic drugs, and allows the safe re-
importation of pharmaceuticals, providing further tools to seniors for 
gaining access to cheaper prescription drugs.
  Perhaps most importantly, the substitute will not force seniors to 
leave traditional Medicare to get drug coverage. Nor will they be 
forced to join a private insurance plan that will restrict access to 
needed drugs, deny coverage for the medicine their doctor prescribes, 
or force them to change pharmacies.
  Mr. Speaker, our seniors deserve a real prescription drug benefit, 
not the flawed benefit included in H.R. 1. I urge my colleagues to vote 
against H.R. 1 and support the substitute. Our seniors should not be 
forced into the unconscionable position of being forced to choose 
between medications and groceries any longer, and, unfortunately, H.R. 
1 will not adequately address this situation.
  Mr. SHAYS. Mr. Speaker, I rise in support of H.R. 1, the Medicare 
Modernization and Prescription Drug Act. I want to begin by 
appreciating the incredible time and energy that my colleague, Nancy 
Johnson, has put into crafting what I consider to be a good product, 
and thank her for her efforts.
  When Medicare was created in 1965, the program's principal purpose 
was to help seniors pay for their hospital costs. Since that time, 
Medicare has not kept pace with how health care is delivered. Today, we 
are bringing this program into the 21st Century by including coverage 
for prescription drugs.
  Our seniors need and deserve prescription drug coverage under 
Medicare. This legislation will give them tremendous assistance. After 
a $250 deductible, seniors will get 80 percent of their first $2,000 
paid for by the

[[Page 16441]]

program, catastrophic protection from any cost over $3,700, and a 
discount on all their pharmaceutical costs from an Rx Drug Discount 
Card. The card will save beneficiaries between 10 and 25 percent on 
every purchase.
  I believe this bill takes a positive step towards injecting 
competition into Medicare, but I regret we did not go further in 
reforming the program to ensure its solvency for future generations.
  I also believe anything free, even health care, is overutilized. I 
support the House proposal to add a small co-payment to home health 
care and to index Part B deductibles to inflation, and I support the 
Senate proposal to have seniors pay a portion of their catastrophic 
costs. This way, seniors have a greater incentive to get care because 
they need it, not just because it is offered.
  Finally, we must be concerned with what this program will ultimately 
cost. It could go well over the $400 billion we budgeted and accelerate 
the program's financial demise if we are not vigilant.
  There is a lot to like in the bill we hope to pass tonight, and the 
Senate has already passed a plan I can support. My hope is the House 
and Senate conferees will draft a final bill that takes the best 
approaches from each chamber and that we can ultimately send the 
President a Medicare prescription drug bill supported by both sides of 
the aisle. I urge my colleagues to support H.R. 1.
  Mr. DAVIS of Illinois. Mr. Speaker, late last night, the House Rules 
Committee sent a terrible message to our Nation's seniors and 
hospitals. Two amendments I proposed were not allowed to pass onto the 
House floor. The first amendment would have stricken the language 
regarding the ``market basket'' index. Under the current bill hospitals 
would lose $12 billion over the next ten years. My amendment would have 
kept the funding streams toward hospitals level so that hospitals would 
not be forced to make difficult cuts in services and jeopardize patient 
care.
  My second amendment would have assured that the prescription drug 
benefits we members of Congress enjoy would be comparable to those of 
Medicare beneficiaries. My colleagues in the Senate passed such an 
amendment, but the Members of the House Rules Committee seem reluctant 
to subject themselves to the very same benefits they would give our 
Nation's seniors. They have sent the clear message that these benefits 
are not good enough for them, the relatively young and healthy, but are 
adequate for our Nation's seniors and disabled persons.
  Once again this Congress has proven that the Democratic process is 
not working. Not only are the voices of America's seniors not being 
heard, but neither are those of Members of Congress. As we go home to 
celebrate our Nation's independence, we will have to explain to our 
seniors that yes, a prescription drug bill passed, but it will not 
benefit them. It will not benefit middle America, it will not benefit 
the poor, it will not benefit those who are already struggling to buy 
their prescription drugs. It will only benefit those who can currently 
afford their drugs, afford to pay more for hospital services, and 
afford to pass this bill. Mr. Speaker, I oppose this rule and I oppose 
the underlying bill.
  Mr. HOLT. Mr. Speaker, for forty years, the federal government has 
kept a promise to our nation's seniors. That promise is called 
Medicare, and it means that every senior will receive affordable, 
reliable health care in their later years.
  Four years ago, I came to this Congress having made a promise to the 
seniors in my Congressional district--that I would work to bring 
Medicare into the twenty-first century by including coverage for 
prescription drugs. Coverage that, like the original Medicare program, 
is comprehensive, voluntary, universal, and reliable--without hampering 
the innovation that has brought us so many miraculous drugs over the 
past few decades.
  Today I am voting to keep that promise by opposing a bill that would 
undermine the Medicare program itself. H.R. 1 purports to offer seniors 
coverage for the prescription drugs they rely on every day. 
Unfortunately, it falls far short when held up to the spirit and 
practice of Medicare.
  The most distressing aspect of this bill, to me, to my constituents, 
and to the AARP, is that it takes the entire Medicare program down a 
short road to privatization. By the year 2010, Medicare would be 
converted to a voucher program with competition between managed care 
plans and traditional fee-for-service--only the deck would be stacked 
against the traditional plans. Seniors would find themselves forced to 
enroll in managed care programs like the Medicare+Choice programs that 
have failed so miserably in central New Jersey.
  Rather than giving seniors what they want and deserve--a reliable, 
affordable drug benefit under Medicare, this provision, glibly called 
``premium support,'' will destabilize the program and lead to 
substantially higher costs for seniors who want to stay in traditional 
Medicare.
  Yet another element of confusion comes from the bizarre ``donut 
hole'' in coverage under this bill. Seniors would find themselves 
paying 20 percent of drug costs up to $2000 in drug costs--then having 
no coverage until they reach $4900 in drug costs, when a catastrophic 
cap finally kicks in. Not only is this extremely convoluted, it ends up 
leaving seniors with a very paltry benefit. A beneficiary with $5000 in 
annual drug costs would pay nearly $4000 out of their own pocket!
  This may be alarming to seniors who currently have no drug coverage. 
There are millions out there, however, who may think this debate won't 
really affect them because they already have coverage under their 
company's retiree benefit packages. I want them to know that the 
Republicans have quite a surprise in store for them.
  If this bill passes, nearly one-third of employers currently offering 
retiree drug benefits--covering 11 million seniors--would drop that 
coverage. Retiree benefits would not count towards the beneficiary's 
out-of-pocket limit, making it almost impossible for seniors with 
retiree coverage to ever reach the catastrophic cap. So the bill 
actually discriminates against seniors with existing coverage and will 
have the practical effect of employers ending their benefits. This 
provision makes no sense--why on earth do we want to have less private 
sector drug coverage?
  While I am disappointed with the underlying bill, I am pleased to see 
that the Rules Committee made the Dingell-Rangel substitute bill in 
order. This legislation would go a long way to fulfilling the promise I 
mentioned--it would provide a reliable, stable benefit under Medicare. 
Beneficiaries know exactly what they would pay--20 percent of drug 
costs up to $2000 in out-of-pocket costs with a defined premium of $25 
per month and a defined deductible of $100.
  Tonight, in this body, by passing H.R. 1 we could be bringing about 
the end of a program that served seniors so well. Instead, we should 
pass the Dingell-Rangel substitute. That is what seniors need and 
deserve.
  Ms. CHRISTENSEN. Mr. Speaker, I rise in strong opposition to the 
Republican prescription drug bill, and in favor of the Dingell/Rangel 
Substitute.
  We have been talking about a Medicare drug benefit for at least as 
long as I have been here--seven years. It is time to deliver. We owe it 
to our seniors who need it because their lives depend on it.
  I have longed for the day when all people living in this country have 
reliable, comprehensive insurance coverage. Today we can bring this 
within the reach of every person on Medicare.
  About 25 percent of my patients when I was in practice were on 
Medicare. Many could not get a full month's supply of medication 
because they could not afford it on their fixed income. We would try to 
make it up with samples, with medication that might not have been as 
effective but was within their price range, and better than nothing, 
and with a lot of prayer. It is probably the latter which got them 
through.
  The bill, H.R. 1, as usual comes with a good sounding name, but true 
to form it does nothing good at all. Instead, it misleads the older 
Americans who have been looking to us for help.
  We need a benefit that is truly a benefit--one that is affordable and 
fair--through a program they know, have used all along and trust.
  It needs to be available to all benies without having to navigate 
through the maze of managed care.
  And we need to make it reliable--no holes to fall through when they 
might need it most.
  Not dropping them like hot potatoes like happened with 
Medicare+Choice.
  Finally tonight, we have such a bill in the Democratic, Rangel/
Dingell substitute.
  In this bill, there are no slight of hands. What you see is what you 
get.
  And our plan strengthens Medicare, while the Republican plan would 
slowly kill it.
  No tricky numbers, no fancy words, just a simple, Medicare 
prescription drug plan. That is what the senior and disabled citizens 
have been asking for and that is what they deserve. It is what God-
willing; I hope I would have when I am on Medicare.
  I want for Medicare beneficiaries, who have played an important role 
in making this country what it is, and paved the way for all of us, and 
those who have special needs, what I want for my family and myself.
  The Democratic substitute, developed under the leadership of John 
Dingell and Charles Ringell, is the only bill before either body, which 
honors our seniors' gift to all of us.

[[Page 16442]]

  Let us do the right thing. Reject the Republican bill and pass the 
Democratic substitute.
  Mr. HINOJOSA. Mr. Speaker, I rise today in opposition to the 
Republican prescription drug bill. For years, our seniors have been 
begging for help to obtain affordable prescription drugs. 
Unfortunately, however, the bill before us today gives relief not to 
our vulnerable seniors, but to the large drug companies.
  It forces Medicare patients into multiple private drug plans and out 
of Medicare. It undercuts seniors' collective purchasing power and 
enables the drug industry to maintain its unjustifiably high prices.
  Seniors who live in rural and undeserved areas will find themselves 
without any coverage because insurance companies will not be required 
to serve them and are given no incentives to provide coverage. Because 
of a large coverage gap, over half of all seniors will still be 
required to pay thousands of dollars a year for prescription drugs as 
well as the program premiums.
  Hidden in this bill is also another provision that will change the 
way cancer patients are treated and subject them to delays and reduced 
access to care.
  By contrast, the Democratic plan offered by Mr. Rangel would provide 
voluntary prescription drug coverage for all Medicare beneficiaries. 
The plan curbs drug costs by allowing this Secretary to use the 
collective bargaining power of Medicare's 40 million beneficiaries to 
negotiate lower drug prices.
  I urge my colleagues to oppose the sham Republican proposal and 
support the Rangel substitute that provides real benefit to our 
Nation's seniors.
  Ms. MILLENDER-McDONALD. Mr. Speaker, I stand here with my colleagues 
tonight to talk about the need for affordable prescription drug 
coverage for women. Because women suffer more from chronic illnesses 
requiring medication than men do, they pay more out of pockets for 
medicine though their financial resources are often limited.
  The proposed House bill would fail to offer meaningful prescription 
drug coverage to the millions of low-income women with incomes below 
the 135 percent poverty level who do not meet the requirements of asset 
tests. Also, the House bill would raise the amount of co-payments that 
our country's poorest women Medicare beneficiaries are forced to pay.
  Unlike the House bill, the Senate proposal, while not perfect, would 
be far more helpful to elderly women who range from 74 to 160 percent 
of the poverty level. Under the House bill, the out-of-pocket costs 
paid by elderly women will still make it difficult for them to get 
their much-needed prescriptions filled. If the House bill is enacted, 
our struggling women seniors who are in greatest need of assistance 
will receive up to 40 percent fewer prescriptions than those seniors 
who are able to afford private insurance. Our elderly women, who are 
among our most vulnerable citizens, deserve far better treatment than 
this. It is critical that as Members of Congress, we help women and all 
seniors by expanding Medicare to offer a prescription drug benefit that 
is universal, affordable, dependable, and voluntary. We can do no less 
than to offer elderly women access to adequate healthcare that they can 
afford and easily access.
  Our Republican colleagues are offering a plan that gives no real 
guarantees or assistance to those who need quality prescription drug 
coverage the most.
  Furthermore, the House plan would force seniors to purchase their own 
private insurance, a tactic that will benefit insurance companies, and 
not seniors. This is a catastrophe we can avoid if we craft the right 
policy to benefit our elderly now. When it comes to our elderly women, 
we know that:
  Women make up 58 percent of the Medicare population at age 65, and 71 
percent of the Medicare population at age 85.
  Overall, elderly women have more chronic health problems than elderly 
men do.
  On average, women live another 19 years after retirement, while men 
typically live another 15 years after retiring.
  Due to the obstacles they face in enrolling, almost half of elderly 
women with incomes under the poverty limit are not enrolled in 
Medicare.
  As compared to married women, widows are four times as likely, and 
divorced or single women are five times as likely to live in poverty 
upon retiring.
  Many elderly women survive on fixed incomes. Over half of the older 
women age 65 and above earn less than $10,000 annually, and three out 
of four earn under $15,000 yearly. In contrast to elderly men, older 
women age 65 and above earned $14,820 as compared to $26,543 for men in 
the same age group.
  Once retired, women earn less than men because:
  Women tend to save less than men do throughout their lives which 
decreases their lifetime earnings.
  Elderly women usually have smaller Social Security benefits and 
pension incomes than men do.
  Minority women are much more likely to earn less and live in poverty 
than are White women. Even when they have similar educational 
backgrounds, minority women tend to earn less money and own fewer 
assets.
  The sad fact is, the older and poorer a woman is, the higher her out-
of-pocket health care costs will be, and the more help an elderly woman 
requires, the less likely she is to receive assistance. As a nation, 
though we are facing a great economic crisis, we are still obligated to 
provide assistance to our most needy citizens. Let us take good care of 
our elderly women and men by not enacting a prescription drug policy 
that will force them to choose between either buying food or paying for 
necessary medication.
  Mr. COSTELLO. Mr. Speaker, I rise in strong opposition to H.R. 1, the 
Medicare Prescription Drug and Modernization Act of 2003. I recently 
informed over 70,000 seniors in my district that I would not support 
legislation that would fundamentally change the nature of Medicare and 
provide a prescription drug benefit that relies solely on insurance 
companies. I am opposing the bill because it does just that.
  Medicare has been a success because it provides guaranteed coverage 
for all elderly and disabled Americans. H.R. 1 would end Medicare as we 
know it and may particularly harm rural areas that depend on the 
traditional Medicare program. Beginning in 2010, H.R. 1 would force the 
Medicare fee-for-service program for doctors and hospitals visits to 
compete with private insurance plans. People who wanted to remain in 
traditional Medicare would find their premiums going up as other 
beneficiaries opted for bargain private insurance coverage. Seniors and 
the disabled would essentially be forced out of the traditional fee-
for-service program and into some form of managed care.
  In addition, the Republican approach does not guarantee the same 
benefits for all seniors. Seniors who live where hospitals and doctors 
negotiate lucrative contracts with managed care plans would have to pay 
more; seniors with higher incomes would have to pay more; seniors in 
rural areas would have fewer choices of doctors and pharmacies; and 
seniors with low incomes but with assets such as a savings account 
might get nothing at all. These provisions violate the central promise 
of Medicare: to provide a consistent, guaranteed benefit that allows 
everyone, no matter where they live, how much they have, or how sick 
they are, access to quality medical care.
  Finally, H.R. 1 is flawed because it offers seniors an inadequate 
prescription drug benefit. I support a voluntary prescription drug 
benefit paid for by Medicare. I am committed to providing a 
comprehensive benefit that is affordable and dependable for all 
beneficiaries with no gaps or gimmicks in its coverage. The Senate is 
currently working on a prescription drug bill that provides a 
government fallback provision, providing Americans with more of a 
reliable, consistent benefit. The Senate is moving in the right 
direction and I am hopeful, progress will continue to be made when this 
legislation goes to conference.
  H.R. 1 relies too heavily on the insurance industry to bring drug 
costs down and does not guarantee seniors access to the medicine 
prescribed by their doctor or that they can get prescriptions filled at 
their local pharmacy. Seniors deserve fair drug prices and a real, 
affordable prescription drug plan.
  Mr. Speaker, for these reasons, I oppose H.R. 1. I urge my colleagues 
to do the same.
  Mr. FILNER. Mr. Speaker, I rise today to discuss the prescription 
drug benefit proposal that my colleagues on the other side of the aisle 
have rammed through the legislative process. I rise to decry this bill 
because it does not give seniors what they deserve. It seems pretty 
simple to me: a prescription drug benefit under Medicare ought to work 
the same way that Medicare has always worked. That is, it is a 
guaranteed benefit for all seniors, no matter where they live, how ill 
they are, or what kind of illness they have.
  This bill proposes to turn the prescription drug benefit over to HMOs 
and the private insurance industry. That means, for one thing, that 
premium prices are not guaranteed--the insurance industry would be able 
to charge what ever they wanted for the premium. In addition, it would 
be the insurance companies that get to decide which drugs would be 
covered. What this means for seniors is that there will not be a 
consistent, reliable program for all seniors is that there will not be 
a consistent, reliable program for all seniors across the country. 
Seniors in my district might pay higher premiums and get less coverage 
than their

[[Page 16443]]

counterparts in other areas of the country. Or, they may get better 
coverage for lower premiums. We just don't know because it will be left 
up to the private insurance companies and the HMOs.
  This bill also raises out-of-pocket costs for those who need the 
protection that Medicare had traditionally provided: the sickest and 
the poorest beneficiaries. In addition to the ``mystery'' premium, 
seniors will have to pay for the first $250 worth of drugs without any 
help from the Federal Government. After they have paid $250, they must 
pay 20 percent of all their drug costs. Once they reach $2,000 worth of 
medications, they must pay all of their drug costs until they reach 
$4,900 worth of drug costs. So, once they get to $2,000, in addition to 
the premium, the $250, the 20 percent copay, they must cover all of 
their prescription costs until they get to $4,900. That is quite a lot 
of money.
  Allowing HMOs and private insurance companies to take over the 
Medicare Prescription Drug benefit also presents a problem for rural 
areas. A very large portion of my district is rural. Everyone knows 
that for private companies, the bottom line rules. Rural areas aren't 
as profitable for insurance companies, so there is less incentive for 
them to offer benefits in those area. This means that there will be 
fewer choices--if any choices at all--for seniors in rural areas.
  In one fell swoop, this bill takes the great success story that is 
Medicare: Universal healthcare for all beneficiaries, and crushes it. 
Under this Republican bill, your benefits and your costs depend on your 
income, where you live and the whim of the insurance company or HMO 
that is running the program in your area.
  Mr. Speaker, I have received many letters and calls from my 
constituents who are worried about this proposal. They know that this 
proposal will cost them more money, may not even be available to them 
if they live in rural areas, and will not cover all their medication 
needs--especially for those with diabetes or even cancer. I will read 
one example from my constituent, Edna Monk:

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

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

[[Page 16444]]

  To be specific, the Democratic bill eliminates the 35-mile rule 
presently in place for Critical Access Hospital ambulance services. 
That improvement would save the hospital in Ely, Minnesota, and would 
strengthen ambulance services at nine other Critical Access Hospitals 
in my district.
  The Democratic plan would provide an additional $6 billion for all 
rural ambulance providers by increasing payments for ambulance 
services. The increases we propose would ensure the financial solvency 
of St. Mary's Life Flight, enabling it to continue assisting, for 
example, people who are injured while vacationing in the Boundary 
Waters Canoe Area Wilderness.
  On the whole, rural health care providers plan are better served, 
better funded, and treated more fairly under the Democratic plan, which 
also has the advantage of preserving Medicare. For that reason, I will 
be supporting the Rangel/Dingell bill.
  Mr. BURR. Mr. Speaker, as vice chairman of the Energy and Commerce 
Committee and a member of the Health Subcommittee, I have worked on 
Medicare prescription drug legislation for more than four years. The 
House has passed Medicare prescription drug legislation twice and I 
voted for both bills.
  Mr. Speaker, I will not vote for this bill.
  The $400 billion allocated for the Medicare drug benefit is not being 
spent widely under this legislation. High-income Medicare beneficiaries 
like Warren Buffett are subsidized 73 percent by the Federal government 
for their drug-only insurance plans. Low-income seniors who are not 
dually eligible have no cost-sharing assistance for their drug spending 
between $2,000 and $3,500. The Secretary is commanded to negotiate with 
insurance companies who will game the system to receive a 99.99-percent 
subsidy when 73 percent would have been fine. Mr. Speaker, that's not a 
negotiation--the insurance company will hold all of the cards. No money 
is being spent on a fallback plan. Seniors in rural areas of North 
Carolina will not have drug coverage if insurance companies refuse to 
offer a plan, even when the companies are bribed with an almost no-risk 
contract. This bill would benefit insurance companies, not extend a 
benefit to our Nation's seniors.
  Yet insurance companies do not want any part of this legislation. For 
four years insurance companies have been telling Congress that they do 
not want to insure Medicare beneficiaries' drug expenditures, but we 
keep throwing money at them in the hope that they will finally say yes. 
The premium subsidy used to be 67 percent, now it is 73 percent and 
Congress demands that it grow to 99.99 percent if need be. At the end 
of the day, who are we kidding? Of course it will be 99.99 percent.
  Our problem is that the Congressional Budget Office has written this 
bill. The last time I checked, Mr. Speaker, it was not the job of the 
Congressional Budget Office to write highly technical and important 
health care legislation. But policymakers are so convinced that a 
purely insurance-based product will work that they are willing to 
follow CBO's instructions and tweak the product one thousand different 
ways--and cut provider payments at the same time--to fit it under some 
magical budget ceiling. If CBO is wrong in its estimate, and this drug 
benefit costs more than $400 billion, our entire health care system 
will be at risk. This is not wise health care policy.
  Where do my colleagues think the extra money is going to come from? 
When CBO realizes that their estimated insurance penetration rate was 
off by 10 percent that money will come out of future physician, 
hospital, nursing home, and home health care reimbursement rates. If 
only 85 percent of seniors sign up for drug coverage and plans' 
subsidies skyrocket, that money will come out of Food and Drug 
Administration modernization efforts, National Institutes of Health 
research, and bioterrorism preparedness. Congress is working with a 
limited pot of money, but we are promising a defined benefit. 
Obviously, the experiences of the private sector have taught us 
nothing.
  If Congress listened to the private sector, we would mirror the 
success of defined contribution plans and individual empowerment by 
offering choice. Seniors could choose between twenty different discount 
drug cards based on the cards' formularies, pharmacy networks, and drug 
discounts. The government would set up accounts and contribute money to 
those accounts based on the seniors' needs. Seniors, their family 
members, friends, and former employers could put money into the 
accounts and receive a tax deduction. And insurance companies would 
offer catastrophic coverage that is subsidized by the federal 
government for low-income seniors. Unfortunately, that plan is not on 
the floor today.
  Mr. Speaker, I wanted to be able to come to the floor today and vote 
for a good Medicare prescription drug benefit because of the bills 
passed by the House in the last 3 years this one has the greatest 
chance of actually becoming law. But not only does this bill contain a 
bad drug benefit, it also contains a cut in the overall hospital market 
basket update, a new home health copayment, multiple reimportation 
provisions that will harm our Nation's drug supply, and a reduction in 
the overall reimbursement rate for physicians such as oncologists and 
rheumatologists who administer Part B drugs. It also constitutes a 
threat to the very future of our health care system.
  I can only compare my feelings today to my experience in 1997, when I 
voted against the Balanced Budget Act. I was one of only 32 Republicans 
who opposed that bill. I came to Congress to balance the federal 
budget, but in the end I could not vote for the legislation because of 
the drastic and thoughtless cuts in Medicare reimbursements. Since 
1997, Congress has done nothing substantive in Medicare except try to 
fix the damage done under the BBA. I cannot support this legislation 
that builds on and magnifies those 6-year-old mistakes.
  I regret that I cannot and will not vote for this legislation.
  Mr. UDALL of Colorado. Mr. Speaker, I want to support a Medicare 
prescription drug bill, but I can't support the one we are considering 
today. It is inadequate, unreliable, will force seniors into HMOs, and 
will endanger drug benefits that many seniors get through their 
retirement plans. In fact, instead of drafting a Medicare drug benefit 
bill, the Republican Majority has used this opportunity to try to end 
Medicare as we know it.
  I have long believed that Congress should act to help seniors with 
their prescription drug expenses. Nearly everyone agrees that Medicare 
should be updated with a drug benefit; it is the right and sensible 
thing to do. How we design that benefit is where the rub is. I had 
hoped that we would vote on a bill similar to the one in the Senate 
because I think it's a good start toward building a workable, 
financially sound prescription drug benefit. But the House bill is not 
the same as the Senate bill.
  First, I think Congress should give seniors greater choice in 
coverage, however, it should provide an equal prescription drug benefit 
to all beneficiaries, regardless of whether they enroll in a private 
health plan or traditional fee-for-service Medicare. We shouldn't force 
seniors into managed care, which I believe this bill will do by opening 
the traditional Medicare program up to competitive bidding against 
private insurers in 2010.
  Second, the House bill does not include an important ``fallback'' 
provision that requires that traditional Medicare would step in as a 
backup if private insurers show no interest in selling drug plans in a 
particular area. Currently, private plans don't exist in many parts of 
the country, including many smaller cities, rural and mountain areas in 
Colorado. I've heard from many seniors in my district who have been 
dropped from their Medicare HMO and are now having trouble finding a 
doctor. In addition, 88 percent of all Medicare beneficiaries are 
enrolled in traditional Medicare. So, without this ``fallback'' safety 
net provision, seniors would have no coverage in regions where insurers 
say it's unprofitable to provide it, especially rural areas.
  Taken together, I think these provisions undermine the traditional 
Medicare program. By opening traditional Medicare to competitive 
bidding and with no fallback mechanism, I fear that our country will 
revert to the time before Medicare was established in 1965 when private 
insurers wouldn't provide affordable coverage to seniors. That's a step 
backward, not a step forward, in fixing Medicare.
  I also have problems with the home health copayment provision in the 
bill, which I believe will discourage seniors from accessing home 
health care, which is more cost effective than accessing treatment an 
emergency room or a skilled nursing facility. And I am concerned that 
opening durable medical equipment to competitive bidding will give 
seniors less choice and put many small businesses out of business.
  On top of everything, this 692-page bill was introduced at midnight 
last night. How can anyone know what's in it, except the people who 
wrote it? Our seniors deserve greater respect.
  Mr. Speaker, it is misguided at best that Medicare will pay for a 
senior's care following a stroke but will not pay for the anti-
hypertension drugs that prevent them. The time is ripe to pass a 
Medicare prescription drug benefit, but not this one. I regret I can't 
support it. I hope that a bill can be worked out in conference that I 
can support. We need to put ideological and partisan politics aside and 
get it done this year.
  Mr. CROWLEY. Mr. Speaker, I rise in support of the Democratic 
substitute because this

[[Page 16445]]

bill meets the 4 basic tenets that any prescription drug plan under 
Medicare should absolutely provide for.
  First, it means lower drug prices. The House Democratic bill allows 
HHS to negotiate lower drug prices. The Republican bill, unfortunately, 
does not.
  Second, this bill guarantees coverage under Medicare.
  Because of this, a senior knows what his premium, cost-sharing level, 
and catastrophic coverage is. The Republican bill has no such 
guarantees.
  Third, this bill provides coverage for all drugs prescribed by a 
doctor. Under the Republican bill, a payer could deny coverage for a 
drug if the payer decides to not include it in its formulary.
  Fourth, this bill has no gaps in coverage. Under the Democratic plan, 
when a senior has spent $2,000 on drugs, the government picks up the 
remaining costs.
  When a senior has spent $2,000 under the Republican plan, they're 
dropped. They get zero coverage until they've spent $4,900.
  The Republican bill does not simply have one big problem. It has 
several huge problems.
  Only the Democratic substitute provides seniors in my district 
guaranteed, quality coverage. I urge an ``aye'' vote.
  Mr. BUYER. Mr. Speaker, I rise in opposition to the bill, H.R. 1, the 
Medicare Prescription Drug and Modernization Act.
  I fully support the effort to provide prescription drug coverage to 
Medicare beneficiaries. The successes in modern medicine that we see 
today can be partly attributed to the advent of safer and more 
effective pharmaceutical drug therapy. Illnesses and serious diseases 
that often required hospitalization 40 years ago, when Medicare was 
created, can now be treated with outpatient care and pharmaceuticals. 
This is a testament to the many scientists in numerous companies that 
toil daily to find compounds to treat and manage disease. The 
pharmaceutical industry is a testament to the free market system of the 
United States that rewards hard work, initiative, and enterprise. As 
the great minds of the world push the bounds of modern science, new 
discoveries in pharmacology lead to the betterment of mankind.
  While H.R. 1 has some positive features, including addressing medical 
doctor and dentist provider reimbursement concerns and regulatory 
impediments, an insurance product built and guaranteed by the 
government is not the approach to provide a drug benefit under 
Medicare.
  And, make no mistake, we MUST get it right. I have serious levels of 
concern.
  First, the legislation before us has the government assuming 73 
percent of the risk of offering the insurance, 43 percent of the 
initial benefit and 30 percent of reinsurance retrospectively. This is 
the floor! We must all understand that the taxpayer's exposure to risk 
can only increase. The bill permits the government to assume more risk, 
up to 99.9 percent if it is necessary to entice an insurance product 
into a region. And this is an unknown factor. We simply do not, nor 
cannot, know what this provision will cost the taxpayers.
  Today, Medicare already consumes nearly 12 percent of the federal 
budget. It is expected to be 30 percent or 35 percent of the federal 
budget in 2030 without the addition of prescription drugs, or any other 
benefit. It is irresponsible of this Congress to simply add a 
prescription drug benefit without also addressing the budgetary impact 
of this benefit. H.R. 1 leaves the federal budget and the taxpayers 
exposed to unknown expenditure levels in the future. I do not believe 
that this drug bill will remain within the proposed budget of $400 
billion over the next 10 years.
  Second, there is no provision in the House bill on how to provide a 
benefit to seniors in areas where two insurance products are not 
available in January 2006. It is simply neither realistic, nor fair, 
for seniors in one region to have products available and seniors in 
another region to not have choice because two plans have not been 
forthcoming.
  Furthermore, I am adamantly opposed to the proposal by some, 
especially in the other body, that the government provide this 
coverage. This will only lead to the government determining what 
prescription drugs a senior can have and ultimately the imposition of 
price controls that will have a chilling effect upon research and 
development of pharmaceutical therapies.
  Third, the premium charged to seniors for the drug-only insurance 
plan is estimated to be $35 per year initially. This premium number is 
not found in the bill--it is an estimate by the Congressional Budget 
Office. What if it is more? Will seniors decide that this premium is 
worth the benefit they will receive under a drug insurance plan? There 
will be a great deal of kitchen table math being done by seniors in 
2005 to decide whether this new benefit meets their drug needs and 
their wallet realities.
  I am also concerned about a number of modifications made under the 
bill to reimbursement for providers and to the last minute inclusion of 
language regarding the Patent Term Restoration Act, the so-called 
Hatch-Waxman legislation. Although some very necessary provider 
reimbursement changes were made in the bill, particurlary regarding 
doctors and rural areas, nonetheless, I am concerned about the changes 
to the market basket update for hospitals, as well as the changes to 
skilled nursing facilities and home health care providers. In addition, 
I share the concern of others regarding the sufficiency of the 
reimbursement to oncologists. It is very true that the Congress needed 
to address the use of the ``average wholesale price,'' which was 
neither average nor wholesale, and left Medicare beneficiaries paying 
20 percent of an inflated drug price, but oncologists need to be 
reasonably compensated for the level of care they provide to Medicare 
patients. I am not convinced that this has been sufficiently addressed.
  I also have grave reservations over the inclusion of provisions 
regarding patent term and generic drugs, the changes to the Hatch-
Waxman law. Initiating more litigation of patent rights is not 
conducive to encouraging innovation in pharmaceuticals. Unfortunately, 
this is exactly what this provision will do.
  The vast majority of seniors have drug coverage today through either 
an existing government program or through the private sector. However, 
27 percent of seniors have nothing. These seniors pay the highest 
prices when they go to the pharmacy because they have no means to 
bargain for lower costs. These seniors also tend to be those between 
100 percent and 175 percent of the federal poverty level (FPL). A 
Medicare drug benefit should not displace existing coverage and should 
address the needs of those seniors who do not have coverage.
  The government should encourage employers, families and others to 
help seniors with the purchase of expensive prescription drugs. It is 
time that we admit that no proposal that comes to the House floor that 
meets the budget requirements will fully address all the prescription 
drug requirements of seniors. Every plan will have a ``so-called donut 
hole.'' There should be a way to tackle this without putting our heads 
in the sand and expecting it to simply ``work out.''
  We live by a system of checks and balances. We run into the 
limitations with everything that we do. How can we then create a system 
that is dependent upon the unknown? The government's assistance to 
beneficiaries should be a defined contribution. This type of benefit 
would be manageable and known.
  I am committed to providing a prescription drug benefit for seniors. 
Seniors should have access to the same mechanisms that are available in 
the private sector to drive down costs and improve health care 
services.
  Along with four of my colleagues on the Energy and Commerce 
Committee, we submitted legislation, that would address these issues 
and provide a prescription drug benefit under Medicare. I testified 
before the Rules Committee to request a vote on our bill. The request 
was denied. This benefit would have been delivered through a 
prescription drug discount, or value, card that would be available to 
all seniors on a voluntary basis for an annual $30 fee. This is an 
approach that has been recommended by the President.
  Any entity qualified by the Centers for Medicare and Medicaid 
Services could offer a drug value card to seniors. Card issuers would 
negotiate with pharmaceutical manufacturers for discounts on drug 
utilizing the same techniques that are found in the marketplace today. 
These discounts would range from 15 percent to 35 percent of current 
retail prices. The competition among these card issuers would result in 
attractive offerings to beneficiaries.
  Recognizing that some beneficiaries need financial assistance to pay 
for prescription drugs, this legislation would tie the drug value card 
to an account to which the federal government would provide assistance 
related to the income of the beneficiary. Others could add 
contributions on a tax preferred basis up to $5,000 for a beneficiary 
and family; and $5,000 for an employer. Non-profit organizations, like 
local churches, and State pharmaceutical assistance programs could add 
contributions to the accounts. Contributions on the accounts would roll 
over from year to year.
  Protection from catastrophic drug expenses would also be offered at 
$10,000 through the private sector, with federal subsidies on the 
premium for those with low incomes.
  In my opinion, this delivery mechanism for a prescription drug 
benefit works best for the

[[Page 16446]]

beneficiary, and best for the taxpayers. Beneficiaries would have 
access to negotiated discounts and some financial assistance to buy 
drugs. The taxpayers would have a defined contribution that could be 
planned from year to year in the federal budget.
  My colleagues, this has been a long road for us all. But, it is 
nothing compared to what could happen if Congress gets this wrong. 
Please be mindful of our obligations to our nation, not just to 
seniors.
  It is my opinion that Congress needs to grasp this opportunity to 
provide a prescription drug benefit with a full appreciation of the 
duty and responsibility this nation has to our seniors, taxpayers, and 
future generations. To do anything less, we break the trust of all 
Americans.
  Because the margin for error is so thin, my hope is that the majority 
is right. However, my intellect and instincts tell me that this bill 
will not fulfill the desired result. I must vote against final passage 
of this measure.
  Mr. PAUL. Mr. Speaker, while there is little debate about the need to 
update and modernize the Medicare system to allow seniors to use 
Medicare funds for prescription drugs, there is much debate about the 
proper means to achieve this end. However, much of that debate is 
phony, since neither H.R. 1 nor the alternative allows seniors the 
ability to control their own health care. Both plans give a large 
bureaucracy the power to determine which prescription drugs senior 
citizens can receive. Under both plans, federal spending and control 
over health care will rise dramatically. The only difference is that 
the alternative puts seniors under the total control of the federal 
bureaucracy, while H.R. 1 shares this power with ``private'' health 
maintenance organizations and insurance companies. No wonder supporters 
of nationalized health care are celebrating the greatest expansion of 
federal control over health care since the Great Society.
  I am pleased that the drafters of H.R. 1 incorporate regulatory 
relief legislation, which I have supported in the past, into the bill. 
This will help relieve some of the tremendous regulatory burden imposed 
on health care providers by the Federal Government. I am also pleased 
that H.R. 1 contains several good provisions addressing the 
congressionally-created crisis in rural health and attempts to ensure 
that physicians are fairly reimbursed by the Medicare system.
  However, Mr. Speaker, at the heart of this legislation is a fatally 
flawed plan that will fail to provide seniors access to the 
pharmaceuticals of their choice. H.R. 1 provides seniors a choice 
between staying in traditionally Medicare or joining an HMO or a 
Preferred Provider Organization (PPO). No matter which option the 
senior selects, choices about which pharmaceuticals are available to 
seniors will be made by a public or private sector bureaucrat. 
Furthermore, the bureaucrats will have poor to determine the aggregate 
prices charged to the plans. Being forced to choose between types of 
bureaucrats is not choice.
  Thus, in order to get any help with their prescription drug costs, 
seniors have to relinquish their ability to choose the type of 
prescriptions that meet their own individual needs! The inevitable 
result of this process will be rationing, as Medicare and/or HMO 
bureaucrats attempt to control costs by reducing the reimbursements 
paid to pharmacists to below-market levels (thus causing pharmacists to 
refuse to participate in Medicare), and restricting the type of 
pharmacies seniors may use in the name of ``cost effectiveness.'' 
Bureaucrats may even go so far as to forbid seniors from using their 
own money to purchase Medicare-covered pharmaceuticals. I remind my 
colleagues that today the federal government prohibits seniors from 
using their own money to obtain health care services that differ from 
those ``approved'' of by the Medicare bureaucracy!
  This bill is even more pernicious when one realizes that this plan 
provides a perverse incentive for private plans to dump seniors into 
the government plans. In what is likely to be a futile effort to 
prevent this from happening, H.R. 1 extends federal subsidies to 
private insurers to bribe them to keep providing private drug coverage 
to senior citizens. However, the Joint Economic Committee has estimated 
that nearly 40 percent of private plans that currently provide 
prescription drug coverage to seniors will stop providing such coverage 
if this plan is enacted. This number is certain to skyrocket once the 
pharmaceutical companies begin passing on any losses caused by Medicare 
price controls to private plans.
  Furthermore, these private plans will be subject to government 
regulations. Thus, even seniors who are able to maintain their private 
coverage will fall under federal control. Thus, H.R. 1 will reduce the 
access of many seniors to the prescription drugs of their choice!
  Setting up a system where by many of those currently receiving 
private coverage are hired into the government program exacerbates one 
of the major problems with this bill: it hastens the bankruptcy of the 
Medicare program and the federal government. According to Medicare 
Trustee, and professor of economics at Texas A&M University, Tom 
Saving, the costs of this bill could eventually amount to two-thirds of 
the current public-held debt of $3.8 trillion! Of course, estimates 
such as this often widely underestimate the costs of government 
programs. For example, in 1965, the government estimate that the 
Medicare Part B hospitalization program would cost $9 billion in 1990, 
but Medicare Part B costs $66 billion in 1990!
  This new spending comes on top of recent increases in spending for 
``homeland security,'' foreign aid, federal education programs, and new 
welfare initiatives, such as those transforming churches into agents of 
the welfare state. In addition we have launched a seemingly endless 
program of global reconstruction to spread ``democratic capitalism.'' 
The need to limit spending is never seriously discussed: it is simply 
assumed that Congress can spend whatever it wants and rely on the 
Federal Reserve to bail us out of trouble. This is a prescription for 
disaster.
  At the least, we should be debating whether to spend on warfare or 
welfare and choosing between corporate welfare and welfare for the poor 
instead of simply increasing spending on every program. While I would 
much rather spend federal monies on prescription drugs then another 
unconstitutional war, increasing spending on any program without 
corresponding spending reductions endangers our nation's economic 
future.
  Congress further exacerbates the fiscal problems created by this bill 
by failing to take any steps to reform the government policies 
responsible for the skyrocketing costs of prescription drugs. Congress 
should help all Americans by reforming federal patent laws and FDA 
policies, which provide certain large pharmaceutical companies a 
government-granted monopoly over pharmaceutical products. Perhaps the 
most important thing Congress can do to reduce pharmaceutical policies 
is liberalize the regulations surrounding the reimportation of FDA-
Approved pharmaceuticals.
  As a representative of an area near the Texas-Mexico border, I often 
hear from angry constituents who cannot purchase inexpensive quality 
imported pharmaceuticals in their local drug store. Some of these 
constituents regularly travel to Mexico on their own to purchase 
pharmaceuticals. It is an outrage that my constituents are being denied 
the opportunity to benefit from a true free market in pharmaceuticals 
by their own government.
  Supporters of H.R. 1 claim that this bill does liberalize the rules 
governing the importation of prescription drugs. However, H.R. 1's 
importation provision allows the Secretary of Health and Human Services 
to arbitrarily restrict the ability of American consumers to import 
prescription drugs--and HHS Secretary Thompson has already gone on 
record as determined to do all he can to block a free trade in 
pharmaceuticals! Thus, the importation language in H.R. 1 is a 
smokescreen designed to fool the gullible into thinking Congress is 
acting to create a free market in pharmaceuticals.
  The alternative suffers from the same flaws, and will have the same 
(if not worse) negative consequences for seniors as will H.R. 1. There 
are only two differences between the two: First, under the alternative, 
seniors will not be able to choose to have a federally subsidized HMO 
bureaucrat deny them their choice of prescription drugs; instead, 
seniors will have to accept the control of bureaucrats at the Center 
for Medicare and Medicaid Services (CMS). Second, the alternative is 
even more fiscally irresponsible than H.R. 1.
  Mr. Speaker, our seniors deserve better than a ``choice'' between 
whether a private or a public sector bureaucrat will control their 
health care. Meaningful prescription drug legislation should be based 
on the principles of maximum choice and flexibility for senior 
citizens. For example, my H.R. 1617 provides seniors the ability to use 
Medicare dollars to cover the costs of prescription drugs in a manner 
that increases seniors' control over their own health care.
  H.R. 1617 removes the numerical limitations and sunset provisions in 
the Medicare Medical Savings Accounts (MSA) program. Medicare MSAs 
consist of a special saving account containing Medicare funds for 
seniors to use for their routine medical expenses, including 
prescription drug costs. Unlike the plans contained in H.R. 4504, and 
the Democratic alternative, Medicare MSAs allow seniors to use Medicare 
funds to obtain the prescription drugs that fit their unique needs. 
Medicare MSAs also allow seniors to use Medicare funds for other 
services not available under traditional Medicare, such as mammograms.
  Medicare MSAs will also ensure that seniors have access to a wide 
variety of health care

[[Page 16447]]

services by minimizing the role of the federal bureaucracy. As many of 
my colleagues know, an increasing number of health care providers have 
withdrawn from the Medicare program because of the paperwork burden and 
constant interference with their practice by bureaucrats from the 
Center for Medicare and Medicaid Services. The MSA program frees 
seniors and providers from this burden, thus making it more likely that 
quality providers will remain in the Medicare program!
  There are claims that this bill provides seniors access to MSAs. It 
is true that this bill lifts the numerical caps on Medicare MSAs; 
however, it also imposes price controls and bureaucratic requirements 
on MSA programs. Thus, the MSAs contained in this bill do nothing to 
free seniors and health care providers from third party control of 
health care decisions!
  Mr. Speaker, seniors should not be treated like children by the 
federal government and told what health care services they can and 
cannot have. We in Congress have a duty to preserve and protect the 
Medicare trust fund. We must keep the promise to America's seniors and 
working Americans, whose taxes finance Medicare, that they will have 
quality health care in their golden years. However, we also have a duty 
to make sure that seniors can get the health care that suits their 
needs, instead of being forced into a cookie cutter program designed by 
Washington, DC-based bureaucrats! Medicare MSAs are a good first step 
toward allowing seniors the freedom to control their own health care.
  Finally, Mr. Speaker, I would like to comment on the procedure under 
which this bill was brought before the House. Last week, the committees 
with jurisdiction passed two separate, but similar Medicare 
prescription drug bills. In the middle of last night, the two bills 
were merged to produce H.R. 1. The bills reported out of Committee were 
each less than 400 pages, yet the bill we are voting on today is 692 
pages. So in the middle of the night, the bill mysteriously doubled in 
size! Once again, members are asked to vote on a significant piece of 
legislation with far reaching effects on the American people without 
having had the chance to read, study, or even see major portions of the 
bill.
  In conclusion, Mr. Speaker, both H.R. 1 and the alternative force 
seniors to cede control over which prescription medicines they may 
receive. The only difference between them is that H.R. 1 gives 
federally funded HMO bureaucrats control over seniors' prescription 
drugs, whereas the alternative gives government functionaries the power 
to tell seniors which prescription drug they can (and can't) have. 
Congress can, and must, do better for our Nation's seniors, by 
rejecting this command-and-control approach. Instead, Congress should 
give seniors the ability to use Medicare funds to pay for the 
prescription drugs of their choice by passing my legislation that gives 
all seniors access to Medicare Medical Savings Accounts.
  Mr. THORNBERRY. Mr. Speaker, health care is an important but complex 
issue for Congress and for America's seniors. Two facts, however, seem 
clear:
  One fact is that Medicare is currently headed toward financial 
collapse. The last report of the Medicare trustees shows that in nine 
years the income of the Medicare trust fund will not be enough to cover 
its expenses. After that, the problem gets much worse with the 
retirement of the baby boom generation.
  A second clear fact is that Medicare was enacted in 1965 and has been 
largely unchanged since then. It does not reflect modern medical 
practices, including our reliance upon prescription drugs. If we were 
designing a new federal health care program for seniors today--rather 
than in 1965 when Medicare was created--we would unquestionably include 
some form of prescription drug coverage.
  Our objective then should be to update and strengthen Medicare so 
that it does a better job of providing health care for seniors and at 
the same time put Medicare on a sound financial footing so that it can 
be sustained through the baby boom generation retirement.
  This bill takes some steps in that direction. It contains some 
reforms that improve Medicare and give beneficiaries more control over 
their health care. It also adds prescription drug coverage, and there 
are too many seniors in my district who are not able to afford the 
prescription medicines they need, forcing them either to do without and 
become sick or to sacrifice other necessities of life.
  I am gravely concerned, however, that the reforms take too long to 
implement and that the new drug benefit will cost far more than 
expected. Without changes, this bill may add a major new benefit to 
Medicare but, at the same time, hasten the day of its financial 
collapse.
  At the same time if we do nothing, we are guaranteeing that Medicare 
will not survive for long. The alternative proposals are far more 
expensive and are fiscally irresponsible.
  I have other concerns with this bill, such as the reductions in 
payments for cancer treatments. Today, however, I will vote to send the 
House bill to conference with the Senate. I strongly urge that 
improvements be made to ensure Medicare solvency and to improve the 
quality of health care for America's seniors. We can do better. If 
improvements are not made, I will not be able to support the final 
conference report.
  Mr. KIND. Mr. Speaker, providing affordable Medicare prescription 
drug coverage for our nation's seniors is one of the most pressing 
issues facing our country today. Even though the elderly use the most 
prescriptions, more than 75 percent of seniors on Medicare lack 
reliable drug coverage. It is time to modernize Medicare to reflect our 
current health care delivery system. The use of prescription 
medications is as important today as the use of hospital beds was in 
1965 when Medicare was created.
  I have heard from a number of seniors in western Wisconsin regarding 
the problems they have paying for prescription drugs. One woman from 
Deer Park, Wisconsin, a small town in my district, wrote to me and 
said:
  My medication is $135.00 per month. Fortunately my husband is not on 
any medication. If we both were not working part-time, I guess that we 
would have to make a choice between food and Medication--does one eat 
to survive or take the medication for a ``long and happy life''?
  What is to happen to this couple if the husband falls ill and has 
high drug costs too?
  The cost of prescription medicines should not place financial strains 
on seniors that would force them to choose between buying drugs and 
buying food. We need to make prescription medicines affordable and 
accessible to all of our seniors.
  I came to Congress to work toward a real solution to this problem. 
Unfortunately, today's debate is a sham. We will not have the 
opportunity to discuss this issue in a fair and open process. There 
were several alternatives presented at the Rules Committee late last 
night and they should be debated on the floor today. The majority, 
however, chose to dedicate only one day to this debate and allowed only 
one alternative and no amendments to be made in order. Our Nation's 
seniors deserve better. They deserve an open process, but the 
Republican leadership has failed to deliver this.
  The Leadership has also failed seniors with their prescription drug 
proposal. The Republican plan is doomed to fail because the plan relies 
on health insurance companies to offer drug only policies which they 
have said they won't offer. Further, there is no fall back option. So, 
if insurance companies won't offer these policies, how will seniors 
actually obtain prescription drug coverage under the leadership plan?
  Providing a drug benefit through private plans could be problematic, 
specifically for folks living in rural and small communities. There are 
no requirements as to what has to be covered and the coverage may vary 
from area to area depending on the plan. Because is there is no 
guaranteed benefit, Wisconsin may end up on the short end of the stick 
like we have in the past under Medicare.
  The biggest problem with the leadership bill is the fact that it will 
fully privatize Medicare in 2010. This is a radical provision that will 
be the demise of the traditional Medicare program on which our seniors 
have depended for nearly 40 years. In 2010, seniors will be given a 
lump sum to purchase health isuruance, including traditional Medicare. 
There is concern that the healthy seniors will leave traditional 
Medicare and the premiums will increase dramatically, up to 47 percent. 
In addition, under the leadership bill, each local area will have a 
different premium for fee-for-service Medicare. For example, seniors in 
Wisconsin might have to pay more to enroll in fee-for-service Medicare 
than seniors in Florida. This is a drastic departure from Medicare's 
fundamental principle that seniors across the country pay the same 
premium for the fee-for-service benefit.
  We must provide a real solution to the problem of prescription drug 
coverage for our seniors. The Republican plan falls woefully short.
  All of the Democratic alternatives offered at the Rules Committee 
would be better than the leadership bill. One proposal, the Medicare Rx 
NOW Act, is a simple straightforward plan that provides assistance to 
the seniors most in need, those with low incomes and seniors with high 
drug costs. This proposal builds on the Medicare program seniors know 
and provides them with a guaranteed benefit for no additional premium.
  Another proposal put forward by the Blue Dogs is based on the 
bipartisan Senate bill.

[[Page 16448]]

Unlike the House bill, this proposal includes a fall back provision to 
ensure that all seniors would have access to a prescription drug plan. 
In addition, this bill does not include the privatization components of 
the leadership plan.
  In addition, both of these alternatives provide substantial 
improvements to Medicare payments for rural providers. Both pieces of 
legislation include equalizing the disproportionate share hospital 
payments for rural hospitals, an increase in the bed limit for critical 
access hospitals, and a geographic adjustment for rural physicians. 
None of these provisions are included in the leadership's bill.
  It is unfortunate that the Republican leadership has squandered an 
excellent opportunity to try and solve the problem of prescription drug 
coverage in a bipartisan fashion. Instead they have steamrolled ahead 
and present our nation's seniors with an unworkable solution to a grave 
problem. I urge my colleagues to reject this flawed proposal.
  Mr. RAMSTAD. Mr. Speaker, I rise in strong support of the Medicare 
Prescription Drug and Modernization Act.
  Today is an historic day. Congress is finally delivering on our 
promise to create a meaningful and long overdue prescription drug 
benefit for Medicare seniors and people with disabilities.
  This bill means seniors will no longer have to choose between 
purchasing life-savings drugs or the basic necessities of food and 
housing.
  In addition to this important new prescription drug benefit, the bill 
modernizes and improves Medicare to give seniors better choices and 
greater access to state-of-the-art health care.
  I am grateful for the many important provisions in this package from 
my Medicare Innovation Responsiveness Act (H.R. 941), which will 
increase seniors' access to lifesaving medical technology.
  As founder and co-chair of the Medical Technology Caucus, I have seen 
first-hand the incredible advances that medical technology and 
prescription drugs have made to treat and cure debilitating conditions. 
The current Medicare system is crying out for reform with its failure 
to incorporate these critical improvements.
  Currently, seniors and people with disabilities face unconscionable 
delays of up to five years before Medicare provides access to 
technology that can literally be a matter of life or death.
  The bill before us incorporates many of the reforms I have proposed 
in Medicare's coverage, coding and payment process that will speed 
access to lifesaving technology.
  Thanks to this legislation, we are finally tearing down barriers that 
discourage innovation and deny America's seniors the medical 
technologies they desperately need. Seniors have waited too long for 
access to the same treatment options as other Americans.
  In addition to the excellent work and leadership of Chairman Thomas 
and Chairman Johnson, I want to thank two unsung staff heroes--John 
McManus and Deb Williams--who have worked so tirelessly on these 
provisions.
  I am also pleased the bill includes H.R. 841, legislation I 
introduced with Mr. Cardin to break down regulatory barriers facing 
specialized Medicare+Choice plans that serve the frail elderly.
  Mr. Speaker, this package of reforms will improve the lives of our 
seniors and generations to come who count on Medicare. I urge my 
colleagues to support this landmark legislation and deliver on our 
promise to modernize and strengthen Medicare.
  Mr. BACA. Mr. Speaker, I rise in opposition to H.R. 1, the Medicare 
Prescription Drug & Modernization Act of 2003.
  This Republican plan is bad for seniors! It's bad for Hispanics! And 
it's simply bad for the American people!
  For millions of Americans, this plan will replace traditional 
Medicare with vouchers that won't guarantee benefits.
  It forces seniors into risky HMO plans and new private fee-for-
service plans that will not cover all of seniors' costs!
  Forty-seven percent of seniors in Medicare will have a $1,900 gap in 
their drug coverage. How are our seniors supposed to make up for that 
gap?
  How are our parents and grandparents going to afford that! Most 
seniors are on fixed incomes with nothing to spare!
  Forty percent of poor and disabled seniors won't get the additional 
help they need to pay deductibles and premiums. 40 percent.
  This plan will not give taxpaying pregnant women and children 
benefits!
  It will not help the twenty million Hispanics without Health 
insurance!
  And it will not help our parents and grandparents pay for their 
medicines!
  We must take care of our seniors! We must not gamble with their 
health and well-being. Seniors deserve to be protected in a safe and 
fair healthcare plan.
  In my district, San Bernardino, California, seniors are boarding 
buses to Tijuana so they can afford to buy prescription drugs.
  Our seniors have to go all the way to Mexico to get the life-saving 
medicine they need. Mexico!
  This is not safe and it is not fair.
  I am angered when I think about all of the people that the 
Republicans are leaving behind in this plan!
  Why are we letting this happen to our abuelos? Our parents and 
grandparents? How can we be so heartless?
  When I think about this plan, I think about all of the seniors who 
can't afford life saving prescription drugs.
  I think about the senior who has glaucoma and prostate cancer and 
makes only $8,000 a year.
  Like 750,000 other Hispanics, he won't get help paying for his 
prescription drugs, because he is lucky enough to have assets and owns 
a car.
  According to Republicans, that is wealthy!
  They will give tax breaks to millionaires, but under their plan, a 
man who makes $8,000 a year and is lucky enough to own a car, is too 
wealthy to get medicines that will ease his pain and save his life!
  This is an outrage!
  Under the Republican plan he would have to sell his car and pass an 
assets test to be poor enough to receive aide for low-income seniors.
  When I think about this plan, I think about the senior who might make 
$10,000 a year.
  That senior will pay one-fifth of his or her income to cover the 
Republican coverage gap.
  One-fifth! This won't get him off the bus to Tijuana!
  Like 63 percent of Americans, seniors in my district want and need 
the security of Medicare.
  Under the Republican plan they may start in Medicare.
  But after a couple of years, Medicare will only be a voucher program 
and where will seniors be?
  In an HMO plan and still in a pharmacy in Tijuana buying medicine.
  My constituents deserve better than the Republican plan!
  They deserve more!
  They deserve the Democratic plan that we have been fighting for for 
years!
  A plan that cares about the health and safety of America's seniors!
  A plan that actually works for America's seniors!
  A plan that offers coverage to all seniors--even Hispanics!
  It's time to take seniors off the bus to Tijuana!
  Mr. MICHAUD. Mr. Speaker, tonight the House of Representatives 
considered a plan that would supposedly create a Medicare prescription 
drug benefit. While some touted the plan as an innovative approach, the 
fact is that when you look past the smoke and mirrors, it turns out to 
be a very bad deal for Maine's seniors. In fact, the House plan could 
make the current situation for seniors a lot worse: it will do nothing 
to control rising prescription costs, it will jeopardize the 
traditional Medicare fee-for-service plan that seniors enjoy right now, 
it has a large gap in coverage that will force seniors to pay thousands 
of dollars out of their pockets, and it may cause employers to drop 
their health coverage.
  We all know that drug prices are spiraling out of control. Maine 
seniors are forced to take bus trips to Canada to buy affordable 
prescription drugs. Our best hope for getting affordable medicines to 
people is to lower prices--that is why Maine passed the innovative 
Maine Rx law, and that's why I introduced a national version of the 
bill called America Rx. Yet, the House legislation does nothing to 
control rising costs. In fact, this plan expressly prohibits the 
Secretary of Health and Human Services from ever negotiating with drug 
companies for better prices. Pharmaceutical companies are reaping huge 
profits while seniors are often forced to choose between medicine and 
food.
  Furthermore, this plan doesn't guarantee a prescription benefit for 
seniors and it actually jeopardizes current Medicare coverage. The 
proposed benefit is entirely run by the private insurance industry and 
has no fallback provision of areas with no private plan. Without a 
fallback provision, there is no guarantee that private plans will be 
established in largely rural areas like Maine--so our seniors will be 
left in the cold. This has happened before with Medicare Plus Choice, 
and it is very likely to happen again, meaning that Maine's seniors 
would get nothing from this bill.
  In addition, this bill also contains a ``premium assistance'' 
provision that aims to phase out traditional fee-for-service Medicare 
and replace it with a voucher program. This is just another step toward 
total privatization of Medicare and the elimination of the only plan 
available to seniors in areas such as Maine--the

[[Page 16449]]

traditional Medicare plan. Forcing seniors into private plans, and 
making them give up Medicare, is not the right approach--but that's 
what this bill would do.
  This bill also has a very large gap in coverage seniors would have to 
continue to pay a monthly premium, but would receive absolute no 
benefit fro drug costs between $2,000-$4,900. Having this kind of a gap 
in coverage is like telling people that their auto insurance doesn't 
cover accidents in June, July and August.
  Finally, and perhaps worst of all, there is a provision in this bill 
that does not allow for retiree coverage to count toward the out-of-
pocket spending cap. It has been estimated that the bill passed by the 
House would result in up to \1/3\ of employers dropping their retiree 
coverage, the seniors who enjoy these plans would be forced into a 
Medicare plan with fewer benefits. The House should not pass a plan 
that forces seniors to lose what benefits they have.
  For all these reasons, groups from AARP to the National Committee to 
Preserve Social Security and Medicare have sharply criticized this 
plan. I supported a number of alternative bills that would address the 
problems with this plan and vastly improve the benefit available to 
seniors. Unfortunately, the leadership of the House was more concerned 
about pushing any bill through as quickly as possible than with 
providing a quality benefit for seniors, and they weren't willing to 
fix the serious flaws in the bill that could hurt seniors. In fact, the 
House leadership refused to allow even one real amendment to the 
legislation.
  I want to pass a real prescription drug benefit--but I would not vote 
for a plan that hurts Maine's seniors. I am disappointed with the 
legislation that was passed by the House, however the fight for a real 
Medicare benefit is not over. It is my hope that this legislation will 
be improved in the upcoming conference with the Senate. I will continue 
to fight to make sure that all Maine seniors receive an affordable and 
real Medicare prescription benefit.
  Mr. LANGEVIN. Mr. Speaker, I rise in opposition to H.R. 1, the 
Medicare Prescription Drug & Modernization Act. Like many of my 
colleagues, I held sincere hope that the 108th Congress would overcome 
the inaction that has plagued this issue, at the expense of America's 
senior citizens, for many years. I am extremely disappointed that the 
bill before the House this week not only fails to offer a structurally 
sound prescription drug benefit for Medicare beneficiaries, but also 
contains provisions that threatens the stability of the program that 
has provided health benefits for millions of elderly people and younger 
adults with disabilities for the past 38 years.
  In particular, I want to call attention to the fact that this bill 
does nothing to address the rapidly rising costs of prescription drugs. 
It not only fails to address this crisis, it contains a 
``noninterference'' clause prohibiting the agents of the Department of 
Health & Human Services from using the bulk purchasing power of 
Medicare beneficiaries to negotiate for lower prices for senior 
citizens. Without taking measures to curb the escalating prices of the 
medications our seniors need to stay alive, the benefit is rendered 
meaningless. Seniors will pay more out of pocket in 2007 with the 
prescription drug benefit than they are paying in 2003 without it.
  I urge my colleagues to pay careful attention to the details of the 
Medicare Prescription Drug & Modernization Act and to think critically 
about the effect--or lack thereof--it will have on the seniors in their 
districts.
  Mr. ISRAEL. Mr. Speaker, I am proud to be a Democratic Member of this 
body. I have always been proud to be a Democrat. And always will be.
  But I came to Congress 2\1/2\ years ago with a promise to my 
constituents that I would work hard to break through partisan gridlock. 
I promised that when I agreed with the Republicans I would vote with 
them; and when I disagreed I would vote against them. But that I would 
always work to develop consensus and move our country forward.
  That is what brings me here today, Mr. Speaker.
  In those 2\1/2\ years, I have focused on a health care crisis for 
seniors on Long Island. We used to have 12 Medicare HMOs in 
my communities. Now we have two left. Eighty-five thousand seniors have 
been tossed out of their Medicare HMOs. One out of five is skipping 
their medication because they can't afford them.
  And in those 2\1/2\ years, I have listened to Republicans blame 
Democrats for this crisis; Democrats blame Republicans; the House blame 
the Senate; the Senate blame the House; Congress blame the White House; 
the White House blame Congress; and everyone blame the insurance 
companies.
  There is plenty of blame to go around. But all the blame in the world 
isn't going to help a single senior citizen get their prescription 
drugs at a more affordable price.
  It's time to stop blaming. It's time to stop finger pointing. It's 
time for conservatives to stop railing against a $400 billion 
prescription drug plan because it's too liberal. It's time for liberals 
to stop railing against a $400 billion prescription drug plan because 
it's too conservative. It's time for everyone to stop rejecting the 
imperfect because we can't get the perfect. It's time to move this 
process forward.
  Mr. Speaker, I believe the Democrats are right. It will take at least 
$800 billion to provide America's seniors with a truly comprehensive, 
voluntary prescription drug plan.
  Is an $800 billion prescription drugs program better than a $400 
billion program that's before us today? Of course. $400 billion is only 
half as good as $800 billion . . . but it is $400 billion better than 
nothing. And nothing is exactly what we will leave our seniors if we 
reject this proposal today.
  To reject the largest expansion of Medicare in its 38-year history 
because it's $400 billion instead of $800 billion just doesn't make 
sense to me.
  Mr. Speaker, only a short time ago, President Bush argued for a $190 
billion prescription drug plan. My side of the aisle proposed an $800 
billion plan. Some say we have ended up at a $400 billion plan.
  I disagree. I think we are beginning with a $400 billion plan. It is 
the largest expansion of Medicare in its 38-year history. It is, in my 
view, a down payment. An investment.
  Is this plan flawed? I believe it is. I believe the Senate plan, 
supported by Ted Kennedy, is much better. But we can't get near that 
plan unless we go to a House-Senate conference. And we can't go to a 
House-Senate conference unless we pass this bill today.
  Yesterday at the White House, I listened carefully to President Bush. 
He said clearly we must move this process forward and pledged to work 
on a bipartisan basis to develop a final bill that represents 
consensus.
  But there's no hope for consensus, no hope for a penny of 
prescription drug spending, if we slam the brakes on the process today 
by killing this bill today.
  Mr. Speaker, of particular importance to me and the constituents I 
represent is that this bill contains the Greenwood-Israel-Fossella 
amendment, which ends the economic discrimination in federal 
reimbursement formulas to suburban Medicare HMOs that have forced 
85,000 of my constituents out of their prescription drug plans.
  Those seniors are watching us today. They are tired of blame, tired 
of gridlock, tired of excuses. They don't care whether it's a 
Democratic solution or a Republican solution, as long as it's a good 
solution.
  This is not a perfect solution. But it is a good start. It is the 
largest expansion of Medicare in its 38-year history. It ends the price 
discrimination on Long Island and other suburbs around the nation.
  Mr. Speaker, let me close by repeating this: $400 billion is only 
half as good as $800 billion . . . but it is $400 billion better than 
nothing. And nothing is exactly what we will leave our seniors if we 
reject this proposal today. In the spirit of advancing the process, I 
will support this bill. I reserve the right, however, to vote against a 
bill that emerges from Conference that does not address the significant 
flaws in the legislation before us tonight.
  Mr. EVANS. Mr. Speaker, this Republican Medicare bill falls well 
short of what our country's retirees deserve. And I believe, that if 
this Congress and this President had not squandered the budget surplus 
we could afford to give our seniors a benefit they deserve.
  It is well past time to assist with our seniors prescription drug 
costs. The Democratic substitute provides a reliable and affordable 
benefit to America's seniors. This voluntary prescription drug coverage 
costs only $25 a month with a $100 deductible and provides a $2000 
stop-loss protection with no gaps in coverage. There are also special 
provisions to help the poorest seniors with either full payment or 
assistance on a sliding fee scale.
  The Democratic substitute I support also allows the Secretary of 
Health and Human Services to wield the collective bargaining power of 
the 40 million Medicare beneficiaries to negotiate lower drug prices. 
And as the ranking member on the Veterans' Affairs Committee, I was 
proud to help craft a similar plan which has helped our nation's 
veterans lower their out of pocket drug costs.
  As a member representing a rural district, I also want to highlight 
the rural health care provisions included in the Democratic substitute. 
These provisions are essential to create equity in the reimbursement 
system between urban and rural hospital. They allow fair payments to 
hospitals that have a disproportionate share of low-income patients, 
increases payments to rural home health providers without requiring a

[[Page 16450]]

co-pay, and adjusts low-volume payments for small hospitals. It also 
takes into account the physician shortage crisis in rural areas by 
finally correcting the huge disparity between urban rural hospitals, 
that drives providers from our small towns.
  All of these reasons make the Democratic alternative to H.R. 1 the 
right answer to the spiraling costs for prescription drugs for seniors. 
Medicare works for America's seniors but, I oppose the GOP's efforts to 
privatize this system and provide a second-rate prescription drug 
benefit. I proudly support the Democratic substitute and I urge my 
colleagues to vote down H.R. 1 and vote Yes on the substitute.
  Mr. CUMMINGS. Mr. Speaker, I rise today to speak against the 
inadequate Medicare prescription drug bill being considered today, H.R. 
2473 and in support of the Rangel/Dingell Substitute.
  With over 40 million elderly and disabled persons covered under the 
38-year-old Medicare entitlement, Congress' chief objective should be 
to ensure that these Americans have access to quality health care 
coverage. However, today we consider legislation that will do more harm 
than good because it is the first step in privatizing the Medicare 
program and as former Speaker Gingrich predicted, causing it to 
``wither on the vine''. Passage of this legislation will cause many of 
our seniors to wither right along with the Medicare program--which will 
no longer be seen as the social compact with our seniors that this 
nation embraces.
  Medicare is the nation's second largest social welfare program. As an 
entitlement program, it is imperative to realize that with the 
implementation of H.R. 2473, fee-for-service Medicare payments would 
naturally increase. This will result in many seniors facing the 
horrible prospect of being unable to afford the increasing payments. I 
think many of my colleagues would agree that this is a very troubling 
proposition and a totally unnecessary result.
  Additionally, with the establishment of the Voluntary Prescription 
Drug Benefit Program, seniors again would lose because of the lack of 
negotiated prices for the prescription drugs. Also, although federal 
subsidies would be provided to encourage participation, the bill would 
increase the annual out-of-pocket threshold for many beneficiaries. 
Once again a pseudo-solution of adding a prescription drug benefit 
while increasing the cost for persons who need the benefit but will not 
be able to afford its costs.
  Furthermore, the use of health maintenance organizations (HMOs) and 
other private organizations to obtain prescription drugs would deter 
many seniors from getting the benefit. As Rep. Charles B. Rangel, 
Ranking Democrat on the Committee on Ways and Means stated, ``to get 
prescription drug coverage, seniors would have to go to an HMO by 
another name. Then, all the choices would belong to the private 
insurance provider--which drugs are covered, which pharmacies you can 
choose, who your doctor is, etc.'' Mr. Speaker, this bill is an empty 
pillbox--it is a paltry solution to the problem of providing adequate 
prescription drug coverage to our seniors; rather, it is creating an 
inadequate system--based on a provider concept that does not currently 
exist and will not likely work in practice.
  A better alternative to H.R. 2473 is The Medicare RX Drug Benefit an 
Discount Act (H.R. 1199) offered by my friend Charlie Rangel of New 
York. This prescription drug plan would guarantee that every Medicare 
beneficiary, no matter where they live, could have a benefit with a $25 
monthly premium, $100 annual deductible, 20 percent co-insurance and 
$2000 out-of-pocket limit. The bill would also:
  Lower prescription drug cost for all Americans, regardless of whether 
they are covered by Medicare;
  Give all Medicare beneficiaries the option of a reasonably priced 
guaranteed prescription benefit under Medicare;
  Ensure that senior citizens and people with disabilities receive 
coverage for the drug that their doctor prescribes; and
  Provide additional assistance for low-income beneficiaries such that 
many seniors would pay nothing for their prescription drugs.
  Unlike the proposal put forth by the Bush Administration and endorsed 
and worsened by the House GOP Leadership, H.R. 1199 would not require 
seniors to join an HMO or similar private plan in order to get a 
prescription drug benefit. In fact, Medicare beneficiaries would be 
guaranteed a prescription drug benefit rather than offered a marginal, 
voluntary plan under H.R. 2473. This plan would ensure that we keep our 
social compact with our seniors. The Republican plan fails to do that.
  Since its inception in 1965, Medicare has provided important 
protection for millions of aged and disabled persons. H.R. 2473 would 
be a detriment to improving and securing this system. I lend my voice 
in opposition and urge my colleagues to vote against H.R. 4273 and to 
support H.R. 1199.
  Ms. WATERS. Mr. Speaker, I rise to oppose this Medicare privatization 
plan, which is masquerading as a prescription drug bill.
  This bill would force seniors who want prescription drug coverage to 
get it from private insurance companies. It provides no guarantee that 
insurance plans will be available, and when they are, premiums and 
benefits will vary widely. The bill also provides no coverage when a 
senior's prescription drug costs are between $2,000 and $4,900 per 
year. This huge coverage gap affects 47 percent of Medicare 
beneficiaries.
  This bill is also a give-away to pharmaceutical companies, as it 
prohibits the Secretary of Health and Human Services from negotiating 
lower drug prices. The primary beneficiaries of this bill are not the 
beneficiaries of Medicare. They are the wealthy special interests in 
the pharmaceutical industry and the insurance industry that give 
campaign contributions to Republicans.
  However, the most outrageous aspect of this bill is what it does to 
traditional Medicare. The bill would increase seniors' cost for visits 
to the doctor's office by raising the Medicare Part B deductible and 
indexing it for inflation. This could cost American seniors an 
estimated $8 billion. While this may seem like a tiny fraction of the 
Republicans' $350 billion tax-cut-for-the-rich, it is a huge expense 
for senior citizens, many of whom live on limited incomes.
  This bill also divides Medicare into 10 or more regional plans in 
2006 and then converts the entire Medicare program into a voucher 
program depending upon private insurance companies in 2010. If the 
Republicans really want to privatize Medicare, they should be honest 
with the American people and call this plan what it is, the Medicare 
Privatization Act.
  The Democrats alternative prescription drug plan on the other hand 
provides prescription drug coverage under Medicare with guaranteed and 
affordable premiums and benefits for all American seniors and no gaps 
in coverage. It is time for Congress to make prescription drugs 
available to all seniors who need them.
  I urge my colleagues to oppose the Republican Medicare Privatization 
Act and support the Democratic alternative.
  Mr. ISTOOK. Mr. Speaker, this bill will hasten the day when Medicare 
will go bankrupt, and it also threatens to unravel our children's 
future.
  Medicare is already on shaky financial legs, and this will add 
enormous extra expenses that will make it worse. Do we expect our 
children to pay a lifetime of higher taxes, and still find there's 
nothing left for them when they retire? That is what we face.
  I would like to add prescription drug benefits, but it's wrong to 
promise something we cannot pay for.
  I want to preserve what's good about Medicare, not destroy it by 
making extravagant promises for political gain.
  The enormous extra spending under this bill will be far more than 
projected. Because today's Medicare is a huge price control system, 
many doctors already refuse to see Medicare patients. In just a few 
years this will make it worse, including price controls that will 
destroy the incentives for companies to create new medicines.
  What should we be doing?
  Since 76 percent of seniors already have drug coverage, we could 
focus on helping those who don't. But this bill undoes the coverage for 
those 76 percent, and puts them in a confusing new medical experiment.
  We should be stabilizing Medicare, so it can keep the promises 
already made, not making new promises that we don't have the money to 
keep.
  We should address the reasons why drug prices and healthcare costs 
are so high. By banning re-imported drugs, we're forcing Americans to 
subsidize far-lower drug prices in other countries. We should change 
our policies so Americans only pay the lower world price, not a higher 
price.
  We should end the 130,000 pages of federal regulations that have 
driven the costs of medicine and healthcare through the roof. On 
average, for every hour they spend with a patient, doctors and nurses 
spend another half-hour to a full hour doing government paperwork.
  We should stress personal responsibility in healthcare, just as we 
did in welfare reform, so government resources are focused on those who 
cannot care for themselves, not on those who can.
  Bit-by-bit, Congress is undoing the principles of welfare reform, and 
undercutting basic American principles in the process. Both political 
parties are making extravagant promises today, trying to outbid each 
other to win votes. Unfortunately, they are bidding with taxpayers' own 
money, and our children's hopes will be crushed by the bills they 
inherit.

[[Page 16451]]


  Mr. PORTMAN. Mr. Speaker, I rise to speak in supper of provisions in 
H.R. 1, The Medicare Prescription Drug and Modernization Act, that are 
designed to address the special pharmacy needs of beneficiaries 
residing in nursing homes.
  Nursing home residents are not in a position to fill prescriptions 
like everyone else. They cannot simply walk into a pharmacy and have 
their prescription filled. Many nursing home residents, because of 
their physical or mental condition, are not able to take their 
prescription drugs on their own, especially if they have to take 
multiple medications throughout the day. Their unique circumstances 
require specialized pharmacy care that retail and mail order pharmacies 
do not provide. Long-term care pharmacies meet these special needs. 
They contract with nursing homes to provide specialized packaging, 24-
hour delivery, infusion therapy services, geriatric-specific 
formularies, clinical consultation and other services that are critical 
to a nursing home. Importantly, long-term pharmacies play a critical 
role in preventing medication errors that add to the cost of care and 
suffering of Medicare patients. In fact, one study estimates $3.6 
billion in medication errors have been avoided as a result of long term 
pharmacy care. I believe it makes sense to preserve specialty 
pharmacies' ability to perform these vital services for nursing home 
residents, and I want to point out how H.R. 1 does this.
  First, the bill requires the Secretary of Health and Human Services 
to review the current standards of practice for pharmacy services 
provide to patients in nursing facilities. Prior to implementation of 
the prescription drug benefit, the Secretary will submit its findings 
to Congress on how long-term pharmacy services will be available to 
nursing home residents, including appropriate reimbursement levels for 
the specialty pharmacies that currently serve these nursing home 
residents. The Secretary's report is to include a detailed description 
of its plans to implement the provisions of this legislation in a 
manner consistent with state and federal laws designed to protect the 
safety and quality of care of nursing facility patients.
  Second, H.R. 1 directs plan sponsors to implement medication therapy 
management programs as a tool to reduce medication errors and improve 
patient outcomes. Long-term care pharmacies currently employ such 
initiatives to meet the complex medication needs of nursing facility 
patients, and the bill appropriately allows plan sponsors' programs to 
distinguish between services provided in ambulatory and institutional 
settings.
  Finally, the bill includes provisions to ensure that beneficiaries 
are guaranteed access to pharmacy services, including emergency 
services. These provisions are vitally important to maintain the high 
standard of care for all beneficiaries, but particularly for patients 
in nursing facilities, who receive specialized pharmacy services 25 
hours-a-day, seven days-a-week, through networks of long-term care 
pharmacies that contract with nursing facilities to meet their 
patients' needs.
  Mr. Speaker, I believe these long-term pharmacy provisions take a 
significant step toward ensuring that our nation's most frail and 
elderly citizens will have affordable, appropriate prescription drugs 
and delivery services.
  Mr. BASS. Mr. Speaker, as a member of the Energy and Commerce 
Committee, I am extremely pleased to have had the opportunity to 
develop a strong Medicare modernization package that will significantly 
improve this critical government program.
  The seniors of New Hampshire have long clamored for a prescription 
drug benefit under Medicare, as is the case in the rest of the nation. 
I am pleased to represent those same seniors today as we pass this bill 
and take one giant step closer toward our goal of creating a new and 
voluntary prescription drug benefit that makes lifesaving medications 
more accessible.
  This benefit is the product of years of research, study, testimony, 
and compromise. I have no doubt whatsoever that each of us might wish 
for a slightly different version of this bill. We represent different 
regions with different demographics.
  And, I am sure we all wish lifesaving drugs were more affordable for 
our families, friends, and constituents. The goal is formulating a 
fiscally responsible plan that will remain solvent in years to come, is 
easily accessible, and increasingly beneficial to seniors of all 
regions and means, was a daunting one.
  Yet, the bill makes a number of Medicare improvements for care 
providers in New Hampshire. This proposal represents one of the most 
generous rural packages ever contemplated by the House. Notably, after 
several years of efforts on the part of the rural medical community, 
uniform standards for Medicare reimbursements will be established for 
rural and small urban facilities.
  Beginning October 1, Medicare reimbursements to rural areas would 
finally mirror those for large urban ones. Having lamented for a number 
of years over the inequity of this provision within the Medicare 
reimbursement system, I am particularly pleased that this is being 
addressed in the bill.
  A drug benefit for seniors and a rejuvenation of the Medicare system 
are essential to seniors and their caretakers. The delivery of medical 
care has changed enormously since this program was first conceived, and 
the program ought to be modernized to reflect the increases in medical 
technology and the utilization of a wide range of care options.
  As I have noted many times, no plan can be as all-encompassing and 
immediately satisfying as we might prefer. However, this bill puts the 
framework in place for a system that can be adjusted and improved upon 
over time and will directly and immediately help the population most in 
need.
  I applaud all Members of the Energy and Commerce Committee and the 
Members of the Ways and Means Committee for the joint work on this 
essential legislation. It is my hope that upon completion of our floor 
vote today, we will see this measure moved forward immediately to 
conference with the Senate.
  Mr. KNOLLENBERG. Mr. Speaker, today we have an opportunity to provide 
our seniors with a new prescription drug benefit and improved access to 
health care. It is a long overdue step in updating and improving 
Medicare.
  Today's legislation will provide help for those who need it most. Our 
6.5 million low-income seniors will receive a fully covered premium and 
a cost sharing benefit when their drug benefit switches from Medicaid 
to Medicare, paying no more than $2 per generic prescription, and no 
more than $5 for name brand drugs. This will also save states about 
$6.8 billion a year in Medicaid costs.
  It is imperative that Medicare advance with technology. Prescription 
drugs are an increasingly important part of modern medicine, helping to 
relieve pain, cure disease, and enhance the lives of millions of 
Americans. Adding a drug benefit and updating how existing benefits are 
provided will be a very significant accomplishment.
  Mr. Speaker, I encourage my colleagues to vote for this legislation 
that helps our seniors by providing a prescription drug benefit that 
they deserve.
  Mr. MOORE. Mr. Speaker, I rise today to express my opposition to this 
legislation and my support for the Blue Dog substitute, offered by Rep. 
Thompson, which we have not been allowed to debate on the House floor 
today, despite support on both sides of the Capitol.
  We in Congress have been talking for years now about the necessity of 
adding a prescription drug benefit to Medicare. We know, as seniors 
know, that this talk has been cheap and it is imperative that a 
compromise be reached this year. The Senate has been proceeding in a 
bipartisan way toward a compromise that adds a substantial, but not 
perfect, benefit to Medicare and protects the long-term integrity of 
this social insurance program.
  Instead of following the Senate's lead and working toward a 
compromise that will improve Medicare, a wildly popular and successful 
program, the House Republican leadership has chosen instead to add 
provisions to this legislation that attack the foundation of the 
Medicare program. The bill does not include a federal fallback if 
private plans choose not to offer a benefit. The experience that my 
constituents have had with Medicare+Choice show that private health 
care plans are at best an unstable partner for Medicare, and financial 
analysts have consistently publicly questioned whether ``drug only'' 
plans will ever be offered. For these reasons, it is absolutely vital 
that Medicare provide a viable and guaranteed fallback for all Medicare 
beneficiaries.
  Additionally, H.R. 1 would transform Medicare, beginning in 2010, 
from a defined-benefit program to a defined-contribution program. This 
provision would gradually shift enormous costs onto people when they 
are sick and most in need of care, and destroy the fabric of this 
program that has served seniors well for nearly 50 years.
  The Senate has crafted legislation that has broad support among 
Senators across the ideological spectrum. This legislation has won the 
support of both President Bush and Senator Ted Kennedy. Together with 
Representative Thompson and the Blue Dog Caucus, I am supporting 
legislation that uses the framework of the Senate compromise and 
improves on it, making it a much stronger bill. The Thompson plan 
includes a provision phasing in employer contributions so they will 
count toward the out-of-pocket limit for catastrophic coverage, thus 
giving employers an incentive to keep offering retiree benefits. The 
substitute guarantees a Medicare fall-back plan for all areas that do 
not have two private plans available. It also

[[Page 16452]]

gives relief to state Medicaid plans by making Medicare the primary 
payer for all individuals eligible for Medicare and Medicaid. Finally, 
the Blue Dog substitute includes language that will reduce the high 
cost of prescription drugs by allowing Americans to reimport drugs from 
Canada and speeding approval of generic drugs.
  The House bill falls short on several other fronts as well. It 
ignores the needs of community and teaching hospitals, meaning that 
hospitals in my district stand to lose over $11 million in denied 
inflation updates. Kansas teaching hospitals, like KU Med, would 
additionally lose out to the tune of $3.9 million in 2003 and $21 
million over five years due to the Federal Government's failure to help 
pay for the excess costs of medical education. The Thompson substitute 
provides an adequate inflation update for all hospitals. Finally, H.R. 
1 would cut $16 billion over 10 years from oncology services. Cancer 
patients all over the country will have to pay for provisions in this 
bill that sharply cut funding for cancer-fighting drugs and allow 
Medicare to continue to underpay for costs associated with providing 
chemotherapy services.
  I cannot support the Democratic substitute because I believe that it 
is simply too expensive. I voted against the most recent tax cut 
because I believe that it is irresponsible for Congress to run up bills 
for our children to pay, and the Democratic substitute, although a much 
more robust benefit for our seniors, is simply more than our country 
can afford at this time. The Senate bill and the Blue Dog substitute 
both hew to the budget agreed to by the House and Senate. Neither bill 
is perfect, but I believe that the Thompson substitute builds a strong 
foundation for a prescription drug benefit on which we can build in 
future years.
  Mr. CAPUANO. Mr. Speaker, today we have the opportunity to provide 
our seniors with a real prescription drug benefit, but instead of 
giving seniors the plan they deserve, we are taking steps to dismantle 
a program that older Americans have known and trusted for 38 years.
  The Republican plan before us today fails to offer the types of 
guarantees that our seniors need and deserve. There is no defined 
benefit and no standard premium. So when my seniors ask how much their 
premiums will be or how much their drugs will cost, I cannot answer 
them. This is unacceptable.
  This bill allows private insurance companies to decide premiums, 
prescription drug coverage benefits and even where coverage will be 
offered. This proposal threatens to dismantle Medicare and replace it 
with private health insurance coverage for all seniors. This is 
precisely the problem many seniors face--they cannot afford private 
insurance, and depend on Medicare.
  This bill also provides additional funding for rural hospitals, but 
not urban teaching hospitals. This is a serious oversight. Urban 
teaching hospitals are facing incredible budget shortfalls. They play a 
critical role in training tomorrow's physicians, and their needs must 
also be addressed. If the Federal Government is going to offer 
additional funding to some hospitals, it must offer additional funding 
to urban teaching hospitals.
  The Federal Government has a responsibility to ensure that Americans 
who contribute to the Medicare program during their working years will 
have access to dependable, equitable, and affordable health coverage. 
The Democratic substitute does just that--it lowers drug prices, 
guarantees coverage and enables seniors to get their medicines at the 
pharmacy of their choice. The Rangel/Dingell substitute addresses my 
concerns more effectively and I will strongly support it.
  Mr. LEACH. Mr. Speaker, seldom has there been a more important bill 
for the State of Iowa.
  On the one hand, this legislation provides for greater equity in 
Medicare reimbursement which will bring millions of additional dollars 
to the State and help prevent an exodus of healthcare providers from 
rural counties.
  In addition, the brunt of the bill is about providing voluntary 
prescription drug coverage to Medicare eligible individuals. There is a 
conservative critique that the program is far too expensive, and a 
liberal critique that it is not generous enough. Both philosophical 
perspectives have a degree of validity, but the big picture is that 
Congress is moving in a direction of providing health security for 
millions of citizens. Low income individuals will, for the most part, 
be provided full comprehensive prescription drug coverage. Higher 
income citizens on a sliding scale will be provided partial coverage 
and all citizens will be provided coverage for catastrophic expenses.
  There will be a cost to society in providing these benefits but the 
benefits far outweigh the costs. There may be better approaches that 
can be envisioned now or developed later, but this is the only 
framework approach that has a chance of receiving majority support in 
both bodies without a Presidential veto. It may not be enough and it 
may be too deferred in implementation but it nevertheless marks an 
important first step to meeting the most challenging need of many 
senior citizens.
  Ms. DeGETTE. Mr. Speaker, I want to highlight a piece of the Dingell/
Rangel substitute that pertains to Disproportionate Share Hospitals.
  This was an amendment I offered in the Energy & Commerce Committee 
and I understand that since our mark-up the DSH allocation has been 
increased and I want to commend this action. I know there is real 
bipartisan support on this issue and I want to just reiterate how 
important it is that we get funding to our DSH hospitals right away.
  The provision in the substitute would give DSH hospitals a large 
portion of the funding that has been cut in the past year. It would 
expend a billion dollars in FY '03 and then adjust payments in future 
years to ensure that our vital DSH hospitals do not go bankrupt.
  The reason it is so important that this money is available next year 
is that our DSH hospitals have already suffered a cut of a billion 
dollars in the past year and now are in such bad shape financially, if 
we help them in dribs and drabs then many of them won't be around ten 
years from now.
  There are public hospitals who are currently planning to make cuts of 
25 percent next year in order to try to stay afloat.
  Mr. Speaker, our public hospitals cannot afford these cuts. We are in 
real danger of losing numerous DSH hospitals over the next few years if 
we do not assist them right now.
  This provision also helps the low-DSH hospitals which are the most 
strapped of all. Eighteen states have low-DSH hospitals due to 
historical expenditures that were basically frozen in place at a 
certain point.
  These low-DSH States have been struggling for years with their 
Medicaid payments and they are currently held to only 1 percent of 
their Medicaid expenditures. My amendment, which accomplishes the same 
thing that a bill Rep. Heather Wilson introduced, would raise this to 3 
percent which would help these States considerably.
  While low-DSH States have been dealing with this situation for years, 
recently it has gotten much worse. The pressure on these hospitals has 
increased due to numerous factors such as increasing numbers of the 
uninsured, increasing numbers of Medicaid patients, the extreme 
situation so many States are in in terms of budget crises.
  The fact of the matter is that DSH hospitals need help and need help 
now. They can't wait and we need to rectify this situation while the 
DSH hospitals are still around to help our most vulnerable citizens.
  Mr. DeLAURO. Mr. Speaker, in my 13 years in Congress, this House has 
sometimes risen to the occasion on matters of great national 
importance. My very first vote on the first Gulf War followed days of 
debate in which Members stated their heartfelt views on the prospect of 
war. After September 11th, we came together--Democrats and 
Republicans--to bind the Nation's wounds and provide for the national 
security of the Nation's victims of that terrorist act.
  I wish I could say that this is one of those occasions--I wish I 
could say that, as we consider the very future of Medicare, we could 
rise above partisan politics and ideological viewpoint and do the right 
thing by our senior citizens. Medicare is one of the most important and 
successful government programs ever enacted, a program that has 
provided quality health care and a measure of economic security to 
hundreds of millions of senior citizens over the past four decades. 
Together, Medicare and Social Security represent the twin pillars of a 
social safety net and constitute what is in effect a social contract 
between the generations--that if you work hard all your life you may 
look forward to a dignified retirement and economic security in your 
old age.
  I understand that we bear the responsibility of meeting the newest 
challenges that face our seniors--of finding new ways to care for our 
aging population and that changes to Medicare need to be made. Central 
to that process is dealing with the cost of prescription drugs and 
helping seniors afford them.
  Unfortunately, the legislation before the House this week fails on 
both counts. It does not deliver an acceptable or adequate prescription 
drug benefit and it will not hold down the cost of drugs.
  What it does do is open the door to privatization of Medicare--in 
other words, a return to the way things were before, when 1 out of 
every 3 seniors lived in poverty, largely due to the cost of medical 
expenses. Today, thanks to Medicare, that rate is closer to 1 in 10.
  This bill sets in motion the privatization of Medicare by converting 
the program into a

[[Page 16453]]

voucher system--essentially turning it over to the HMOs, the very 
organizations that have dropped 52 percent of the Medicare enrollees in 
my State over the last four years.
  And it does nothing to contain costs. It prohibits the Secretary of 
Health and Human Services from even engaging in negotiations with the 
drug companies to lower prices. As a result, many seniors will pay more 
than they do now and their premiums will rise as the cost of drugs 
rises.
  But the most inexplicable aspect of this bill is the huge gap in 
coverage. Once a senior receives drug benefits totaling $2,000, he or 
she is cut off until her bills total $4,900, necessitating that they 
pay $2,900 out of her own pocket--at the same time that they pay 
premiums for this supposed drug benefit.
  It makes no sense. Throughout my time in Congress, the single most 
common concern I have heard from seniors at the local Stop N' Shop 
every weekend is how expensive their prescription drug bills are. 
Seniors know they are being taken advantage of. They know they can get 
drugs cheaper in Canada and overseas.
  And I assure you when they find out we are doing nothing to hold down 
the excessive profiteering of the pharmaceutical companies, they are 
going to be angry. When seniors find out that their coverage 
essentially stops during mid-summer while they still have to pay 
premiums, they are not only going to be confused, they are going to 
feel utterly betrayed.
  Mr. Speaker, we must provide a meaningful drug plan with guaranteed, 
defined benefits--with no gaps and no doughnut holes. We should act to 
contain costs by giving the Secretary of HHS the authority to negotiate 
lower prices so that seniors will not have to pay more than seniors in 
other countries for the same drug.
  And perhaps most importantly we should honor our social contract with 
America's seniors by not privatizing Medicare and subjecting seniors to 
the uncertainties of the private health care market. We should not be 
penalizing seniors who live in rural communities, where pharmacies and 
private plans are scarce at best. We should be giving them a plan fully 
contained within the Medicare system, where seniors will not be forced 
to shop around for a plan only to be unceremoniously dropped soon 
thereafter. Giving them a plan that seniors have come to rely on and 
feel safe with is what we should be doing. That is real economic 
security. Medicare--the same plan my 89-year-old mother relies on 
today.
  This debate is as important and historic as any I have been a part of 
in this body. If we allow this bill to become law, we are essentially 
tearing that social contract up--a contract my friend from Michigan, 
Mr. Dingell, fought to pass 38 years ago. And by doing so, we would be 
saying that guaranteed health care for our seniors is no longer an 
obligation or responsibility of this government.
  I did not come to Congress to preside over the dismantling of 
Medicare. That contract must be honored. I urge my colleagues to 
support a plan that does that.
  Ms. LINDA T. SANCHEZ of California. Mr. Speaker, I rise in strong 
opposition to H.R. 1, the Medicare Prescription Drug and Modernization 
Act. I want to thank Congresswoman Lynn Woolsey for her hard work in 
bringing Democratic women together to speak against the Republicans' 
shameful Prescription Drug bill.
  As a freshman Member of Congress, I came here with a tremendous sense 
of optimism. By nature, I am an eternal optimist. But I am no fool, and 
the American people shouldn't be fooled either. Unfortunately, that is 
exactly what the Republicans are trying to do with their sham 
prescription drug bill.
  If you believe the Republican bill solves the prescription drug 
crisis facing our seniors . . . if you think that seniors will get the 
medications they need, at a price they can afford . . . if you believe 
private insurance companies--the same people who brought you HMOs--will 
provide better coverage for seniors than a reformed Medicare system . . 
. or if you think you can get all the drugs your doctor prescribed, 
including the most expensive, at your local pharmacy. . . . then you 
should be listening to that old country song by George Strait called 
``Ocean Front Property.'' It goes something like this:

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

  Republicans are just like scam artists trying to sell you an ocean 
front property in the desert. But now they are trying to sell you a 
phony prescription drug package. We must not fall for it, especially 
when this is not what seniors want.
  I say to my Republican colleagues, it is time to stop this heinous 
scam on seniors! It is time to show the greatest generation in our 
country the respect they deserve. After all, they are the people who 
served us in times of war, got us through the Great Depression, raised 
their children and made countless contributions to this country.
  Worst of all, the Republican bill ignores the reality of older women, 
the face of Medicare. Women constitute 58 percent of the Medicare 
population at 65 and 71 percent at the age of 85. Since women normally 
outlive their male counterparts and many women spend time out of the 
workforce, caring for their children and sometimes, their own parents, 
Medicare beneficiaries are disproportionately female.
  We need to make sure that every prescription is covered without a 
gap. Seniors, particularly women, must retain their right to see their 
doctor of choice. We must empower seniors to make the right choices, 
not insurance companies. This is exactly what the Democratic plan does 
and exactly what seniors want. In fact, according to a survey conducted 
by AARP: 4 out of 5 seniors don't want the GOP proposal.
  Today, Mr. Speaker, I urge my colleagues not to support H.R. 1. Let's 
tell the Republicans don't try to sell seniors something they don't 
want.
  Mr. JANKLOW. Mr. Speaker, I would like to submit the following letter 
into the Congressional Record.

                             Business for Affordable Medicine,

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

  Mr. ROGERS of Alabama. Mr. Speaker, one of the promises I made when I 
came to Washington was to improve the lives of East Alabama seniors. 
Unlike retirees in our country's metropolitan areas, the seniors of the 
Third District face far greater challenges.

[[Page 16454]]

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


                             General Leave

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


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

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

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

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

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

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

            TITLE I--MEDICARE PRESCRIPTION MEDICINE BENEFIT

Sec. 101. Voluntary medicare outpatient prescription medicine program.

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

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

                       TITLE II--MEDICARE+CHOICE

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

             TITLE III--COMBATTING WASTE, FRAUD, AND ABUSE

Sec. 301. Medicare secondary payor (MSP) provisions.
Sec. 302. Competitive acquisition of certain items and services.
Sec. 303. Reform of payment for drugs and biologicals under the 
              medicare program.
Sec. 304. Demonstration project for use of recovery audit contractors.

                TITLE IV--RURAL HEALTH CARE IMPROVEMENTS

Sec. 401. Fairness in the medicare disproportionate share hospital 
              (DSH) adjustment for rural hospitals.
Sec. 402. Immediate establishment of uniform standardized amount in 
              rural and small urban areas.
Sec. 403. Establishment of essential rural hospital classification.
Sec. 404. More frequent update in weights used in hospital market 
              basket.
Sec. 405. Improvements to critical access hospital program.
Sec. 406. Redistribution of unused resident positions.
Sec. 407. Two-year extension of hold harmless provisions for small 
              rural hospitals and sole community hospitals under 
              prospective payment system for hospital outpatient 
              department services.
Sec. 408. Exclusion of certain rural health clinic and federally 
              qualified health center services from the prospective 
              payment system for skilled nursing facilities.
Sec. 409. Recognition of attending nurse practitioners as attending 
              physicians to serve hospice patients.
Sec. 410. Improvement in payments to retain emergency capacity for 
              ambulance services in rural areas.
Sec. 411. Two-year increase for home health services furnished in a 
              rural area.
Sec. 412. Providing safe harbor for certain collaborative efforts that 
              benefit medically underserved populations.
Sec. 413. GAO study of geographic differences in payments for 
              physicians' services.

[[Page 16455]]

Sec. 414. Treatment of missing cost reporting periods for sole 
              community hospitals.
Sec. 415. Extension of telemedicine demonstration project.
Sec. 416. Adjustment to the medicare inpatient hospital PPS wage index 
              to revise the labor-related share of such index.
Sec. 417. Medicare incentive payment program improvements for physician 
              scarcity.
Sec. 418. Medicare inpatient hospital payment adjustment for low-volume 
              hospitals.
Sec. 419. Treatment of certain clinical diagnostic laboratory tests 
              furnished by a sole community hospital.
Sec. 420. Establishment of floor on geographic adjustments of payments 
              for physicians' services.
Sec. 421. Ambulance payment rates.

                 TITLE V--PROVISIONS RELATING TO PART A

                Subtitle A--Inpatient Hospital Services

Sec. 501. Adjustment for indirect costs of medical education (IME).
Sec. 502. Recognition of new medical technologies under inpatient 
              hospital pps. 
Sec. 503. Increase in Federal rate for hospitals in Puerto Rico.
Sec. 504. Wage index adjustment reclassification reform .
Sec. 505. Clarifications to certain exceptions to medicare limits on 
              physician referrals.

                      Subtitle B--Other Provisions

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

                TITLE VI--PROVISIONS RELATING TO PART B

                    Subtitle A--Physicians' Services

Sec. 601. Revision of updates for physicians' services.
Sec. 602. Studies on access to physicians' services.
Sec. 603. MedPAC report on payment for physicians' services.

                    Subtitle B--Preventive Services

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

                       Subtitle C--Other Services

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

            TITLE VII--PROVISIONS RELATING TO PARTS A AND B

                    Subtitle A--Home Health Services

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

                  Subtitle B--Chronic Care Improvement

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

                      Subtitle C--Other Provisions

Sec. 731. Modifications to Medicare Payment Advisory Commission 
              (MedPAC).
Sec. 732. Demonstration project for medical adult day care services.
Sec. 733. Improvements in national and local coverage determination 
              process to respond to changes in technology.
Sec. 734. Treatment of certain physician pathology services.
Sec. 735. Medicare pancreatic islet cell transplant demonstration 
              project.

                          TITLE VIII--MEDICAID

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

         TITLE IX--REGULATORY REDUCTION AND CONTRACTING REFORM

                     Subtitle A--Regulatory Reform

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

                     Subtitle B--Contracting Reform

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

                   Subtitle C--Education and Outreach

Sec. 921. Provider education and technical assistance.
Sec. 922. Small provider technical assistance demonstration program.
Sec. 923. Medicare provider ombudsman; medicare beneficiary ombudsman.
Sec. 924. Beneficiary outreach demonstration program.
Sec. 925. Inclusion of additional information in notices to 
              beneficiaries about skilled nursing facility benefits.
Sec. 926. Information on medicare-certified skilled nursing facilities 
              in hospital discharge plans.

                    Subtitle D--Appeals and Recovery

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

                  Subtitle V--Miscellaneous Provisions

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

               TITLE X--IMPORTATION OF PRESCRIPTION DRUGS

Sec. 1001. Importation of prescription drugs.

             TITLE XI--ACCESS TO AFFORDABLE PHARMACEUTICALS

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

            TITLE I--MEDICARE PRESCRIPTION MEDICINE BENEFIT

     SEC. 101. VOLUNTARY MEDICARE OUTPATIENT PRESCRIPTION MEDICINE 
                   PROGRAM.

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

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


          ``medicare outpatient prescription medicine benefit

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

[[Page 16456]]

       ``(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;
       ``(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

[[Page 16457]]

     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.
       ``(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:

[[Page 16458]]

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

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


             ``eligibility; voluntary enrollment; coverage

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

     there shall be a special enrollment period of 6 months 
     beginning with the first month that includes the date of the 
     individual's (or individual's spouse's) retirement from or 
     termination of current employment status with the employer 
     that sponsors the plan, or, in the case of continuation 
     coverage, that includes the date of termination of such 
     coverage, or that includes the date the plan substantially 
     terminates outpatient prescription medicine coverage.
       ``(B) Dropping of retiree prescription medicine coverage.--
     In the case of an individual who--
       ``(i) at the time the individual first satisfies subsection 
     (a) is enrolled in a group health plan that provides 
     outpatient prescription medicine coverage other than by 
     reason of the individual's (or the individual's spouse's) 
     current employment; and
       ``(ii) has elected not to enroll (or to be deemed enrolled) 
     under this subsection during the individual's initial 
     enrollment period,

     there shall be a special enrollment period of 6 months 
     beginning with the first month that includes the date that 
     the plan substantially terminates outpatient prescription 
     medicine coverage and ending 6 months later.
       ``(C) Loss of medicare+choice prescription medicine 
     coverage.--In the case of an individual who is enrolled under 
     part C in a Medicare+Choice plan that provides prescription 
     medicine benefits, if such enrollment is terminated because 
     of the termination or reduction in service area of the plan, 
     there shall be a special enrollment period of 6 months 
     beginning with the first month that includes the date that 
     such plan is terminated or such reduction occurs and ending 6 
     months later.
       ``(D) Loss of medicaid prescription medicine coverage.--In 
     the case of an individual who--
       ``(i) satisfies subsection (a);
       ``(ii) loses eligibility for benefits (that include 
     benefits for prescription medicine) under a State plan after 
     having been enrolled (or determined to be eligible) for such 
     benefits under such plan; and
       ``(iii) is not otherwise enrolled under this subsection at 
     the time of such loss of eligibility,
     there shall be a special enrollment period specified by the 
     Secretary of not less than 6 months beginning with the first 
     month that includes the date that the individual loses such 
     eligibility.
       ``(4) Late enrollment with premium penalty.--The Secretary 
     shall permit an individual who satisfies subsection (a) to 
     enroll other than during the initial enrollment period under 
     paragraph (2) or a special enrollment period under paragraph 
     (3). But, in the case of such an enrollment, the amount of 
     the monthly premium of the individual is subject to an 
     increase under section 1859C(e)(1).
       ``(5) Information.--
       ``(A) In general.--The Secretary shall broadly distribute 
     information to individuals who satisfy subsection (a) on the 
     benefits provided under this part. The Secretary shall 
     periodically make available information on

[[Page 16459]]

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


              ``provision of, and entitlement to, benefits

       ``Sec. 1859D. (a) Benefits.--Subject to the succeeding 
     provisions of this section, the benefits provided to an 
     enrollee by the program under this part shall consist of the 
     following:
       ``(1) Covered outpatient prescription medicine benefits.--
     Entitlement to have payment made on the individual's behalf 
     for covered outpatient prescription medicines.
       ``(2) Limitation on cost-sharing for part b outpatient 
     prescription medicines.--
       ``(A) In general.--Once an enrollee has incurred aggregate 
     countable cost-sharing (as defined in subparagraph (B)) equal 
     to the stop-loss limit specified in subsection (c)(4) for 
     expenses in a year, entitlement to the elimination of cost-
     sharing otherwise applicable under part B for additional 
     expenses incurred in the year for outpatient prescription 
     medicines or biologicals for which payment is made under part 
     B.
       ``(B) Countable cost-sharing defined.--For purposes of this 
     part, the term `countable cost-sharing' means--
       ``(i) out-of-pocket expenses for outpatient prescription 
     medicines with respect to which benefits are payable under 
     part B, and
       ``(ii) cost-sharing under subsections (c)(3)(B) and 
     (c)(3)(C)(i).
       ``(b) Covered Outpatient Prescription Medicine Defined.--
       ``(1) In general.--Except as provided in paragraph (2), for 
     purposes of this part the term `covered outpatient 
     prescription medicine' means any of the following products:
       ``(A) A medicine which may be dispensed only upon 
     prescription, and--
       ``(i) which is approved for safety and effectiveness as a 
     prescription medicine under section 505 of the Federal Food, 
     Drug, and Cosmetic Act;
       ``(ii)(I) which was commercially used or sold in the United 
     States before the date of enactment of the Drug Amendments of 
     1962 or which is identical, similar, or related (within the 
     meaning of section 310.6(b)(1) of title 21 of the Code of 
     Federal Regulations) to such a medicine, and (II) which has 
     not been the subject of a final determination by the 
     Secretary that it is a `new drug' (within the meaning of 
     section 201(p) of the Federal Food, Drug, and Cosmetic Act) 
     or an action brought by the Secretary under section 301, 
     302(a), or 304(a) of such Act to enforce section 502(f) or 
     505(a) of such Act; or
       ``(iii)(I) which is described in section 107(c)(3) of the 
     Drug Amendments of 1962 and for which the Secretary has 
     determined there is a compelling justification for its 
     medical need, or is identical, similar, or related (within 
     the meaning of section 310.6(b)(1) of title 21 of the Code of 
     Federal Regulations) to such a medicine, and (II) for which 
     the Secretary has not issued a notice of an opportunity for a 
     hearing under section 505(e) of the Federal Food, Drug, and 
     Cosmetic Act on a proposed order of the Secretary to withdraw 
     approval of an application for such medicine under such 
     section because the Secretary has determined that the 
     medicine is less than effective for all conditions of use 
     prescribed, recommended, or suggested in its labeling.
       ``(B) A biological product which--
       ``(i) may only be dispensed upon prescription;
       ``(ii) is licensed under section 351 of the Public Health 
     Service Act; and
       ``(iii) is produced at an establishment licensed under such 
     section to produce such product.
       ``(C) Insulin approved under appropriate Federal law, and 
     needles, syringes, and disposable pumps for the 
     administration of such insulin.
       ``(D) A prescribed medicine or biological product that 
     would meet the requirements of subparagraph (A) or (B) but 
     that is available over-the-counter in addition to being 
     available upon prescription, but only if the particular 
     dosage form or strength prescribed and required for the 
     individual is not available over-the-counter.
       ``(E) Smoking cessation agents (as specified by the 
     Secretary).
       ``(2) Exclusion.--The term `covered outpatient prescription 
     medicine' does not include--
       ``(A) medicines or classes of medicines, or their medical 
     uses, which may be excluded from coverage or otherwise 
     restricted under section 1927(d)(2), other than subparagraph 
     (E) thereof (relating to smoking cessation agents), as the 
     Secretary may specify and does not include such other 
     medicines, classes, and uses as the Secretary may specify 
     consistent with the goals of providing quality care and 
     containing costs under this part;
       ``(B) except as provided in paragraphs (1)(D) and (1)(E), 
     any product which may be distributed to individuals without a 
     prescription;
       ``(C) any product when furnished as part of, or as incident 
     to, a diagnostic service or any other item or service for 
     which payment may be made under this title; or
       ``(D) any product that is covered under part B of this 
     title.
       ``(c) Payment of Benefits.--
       ``(1) Covered outpatient prescription medicines.--There 
     shall be paid from the Federal Medicare Prescription Medicine 
     Trust Fund, in the case of each enrollee who incurs expenses 
     for medicines with respect to which benefits are payable 
     under this part under subsection (a)(1), amounts equal to the 
     sum of--
       ``(A) the price for which the medicine is made available 
     under this part (consistent with sections 1859A and 1859B), 
     reduced by any applicable cost-sharing under paragraphs (2) 
     and (3); and
       ``(B) a reasonable dispensing fee.
     The price under subparagraph (A) shall in no case exceed the 
     retail price for the medicine involved.
       ``(2) Deductible.--The amount of payment under paragraph 
     (1) for expenses incurred in a year, beginning with 2006, 
     shall be reduced by an annual deductible equal to the amount

[[Page 16460]]

     specified in section 1859(2) (subject to adjustment under 
     paragraph (8)). Only expenses for countable cost-sharing (as 
     defined in subsection (a)(2)(B)) shall be taken into account 
     in applying this paragraph.
       ``(3) Coinsurance.--
       ``(A) In general.--The amount of payment under paragraph 
     (1) for expenses incurred in a year shall be further reduced 
     (subject to the stop-loss limit under paragraph (4)) by 
     coinsurance as provided under this paragraph.
       ``(B) Preferred medicines.--The coinsurance under this 
     paragraph in the case of a preferred medicine (including a 
     medicine treated as a preferred medicine under paragraph 
     (5)), is equal to 20 percent of the price applicable under 
     paragraph (1)(A) (or such lower percentage as may be provided 
     for under section 1859E(a)(1)(A)(ii)). In this part, the term 
     `preferred medicine' means, with respect to medicines 
     classified within a therapeutic class, those medicines which 
     have been designated as a preferred medicine by the Secretary 
     or the pharmacy contractor involved with respect to that 
     class and (in the case of a nongeneric medicine) with respect 
     to which a contract has been negotiated under this part.
       ``(C) Nonpreferred medicines.--The coinsurance under this 
     paragraph in the case of a nonpreferred medicine that is not 
     treated as a preferred medicine under paragraph (5) is equal 
     to the sum of--
       ``(i) 20 percent of the price for lowest price preferred 
     medicine that is within the same therapeutic class; and
       ``(ii) the amount by which--

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

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

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


                  ``administration; quality assurance

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

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

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

[[Page 16461]]

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


          ``federal medicare prescription medicine trust fund

       ``Sec. 1859F. (a) Establishment.--There is hereby created 
     on the books of the Treasury of the United States a trust 
     fund to be known as the `Federal Medicare Prescription 
     Medicine Trust Fund' (in this section referred to as the 
     `Trust Fund'). The Trust Fund shall consist of such gifts and 
     bequests as may be made as provided in section 201(i)(1), and 
     such amounts as may be deposited in, or appropriated to, such 
     fund as provided in this part.
       ``(b) Application of SMI Trust Fund Provisions.--The 
     provisions of subsections (b) through (i) of section 1841 
     shall apply to this part and the Trust Fund in the same 
     manner as they apply to part B and the Federal Supplementary 
     Medical Insurance Trust Fund, respectively.


      ``compensation for employers covering retiree medicine costs

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


          ``medicare prescription medicine advisory committee

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


[[Page 16462]]


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

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

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

[[Page 16463]]

     U.S.C. 1395w-24) is amended by adding at the end the 
     following:
       ``(i) Application to Prescription Medicine Coverage.--The 
     Secretary shall apply the previous provisions of this section 
     (including the computation of the adjusted community rate) 
     separately with respect to prescription medicine benefits 
     described in section 1851(j)(1).''.
       (f) Conforming Amendments.--
       (1) Section 1851 (42 U.S.C. 1395w-21) is amended--
       (A) in subsection (a)(1)(A), by striking ``parts A and B'' 
     and inserting ``parts A, B, and D''; and
       (B) in subsection (i) by inserting ``(and, if applicable, 
     part D)'' after ``parts A and B''.
       (2) Section 1852(a)(1)(A) (42 U.S.C. 1395w-22(a)(1)(A)) is 
     amended by inserting ``(and under part D to individuals also 
     enrolled under such part)'' after ``parts A and B''.
       (3) Section 1852(d)(1) (42 U.S.C. 1395w-22(d)(1)) is 
     amended--
       (A) by striking ``and'' at the end of subparagraph (D);
       (B) by striking the period at the end of subparagraph (E) 
     and inserting ``; and''; and
       (C) by adding at the end the following:
       ``(F) the plan for part D benefits guarantees coverage of 
     any specifically named prescription medicine for an enrollee 
     to the extent that it would be required to be covered under 
     part D.

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

     SEC. 103. MEDIGAP REVISIONS.

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

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

     SEC. 104. TRANSITIONAL ASSISTANCE FOR LOW INCOME 
                   BENEFICIARIES.

       (a) QMB Coverage of Premiums and Cost-Sharing.--Section 
     1905(p)(3) (42 U.S.C. 1396d(p)(3)) is amended--
       (1) in subparagraph (A)--
       (A) by striking ``and'' at the end of clause (i),
       (B) by adding ``and'' at the end of clause (ii), and
       (C) by adding at the end the following new clause:
       ``(iii) premiums under section 1859D(d).'';
       (2) in subparagraph (B), by inserting ``and section 
     1859D(c)(3)(B) and 1859D(c)(3)(C)(i)'' after ``1813''; and
       (3) in subparagraph (C), by striking ``and section 
     1833(b)'' and inserting ``, section 1833(b), and section 
     1859D(c)(2)''.
       (b) Expanded SLMB Eligibility.--Section 1902(a)(10)(E) (42 
     U.S.C. 1396a(a)(10)(E)) is amended--
       (1) by striking ``and'' at the end of clause (iii);
       (2) by adding ``and'' at the end of clause (iv); and
       (3) by adding at the end the following new clause:
       ``(v)(I) for making medical assistance available for 
     medicare cost-sharing described in section 1905(p)(3)(A)(iii) 
     and medicare cost-sharing described in section 1905(p)(3)(B) 
     and section 1905(p)(3)(C) but only insofar as it relates to 
     benefits provided under part D of title XVIII, subject to 
     section 1905(p)(4), for individuals (other than qualified 
     medicare beneficiaries) who are enrolled under part D of 
     title XVIII and are described in section 1905(p)(1)(B) or 
     would be so described but for the fact that their income 
     exceeds 100 percent, but is less than 150 percent, of the 
     official poverty line (referred to in such section) for a 
     family of the size involved;
       ``(II) subject to section 1905(p)(4), for individuals 
     (other than qualified medicare beneficiaries and individuals 
     described in subclause (I)) who are enrolled under part D of 
     title XVIII and would be described in section 1905(p)(1)(B) 
     but for the fact that their income exceeds 150 percent, but 
     is less than 175 percent, of the official poverty line 
     (referred to in such section) for a family of the size 
     involved, for making medical assistance available for 
     medicare cost-sharing described in section 1905(p)(3)(A)(iii) 
     and medicare cost-sharing described in section 1905(p)(3)(B) 
     and section 1905(p)(3)(C) but only insofar as it relates to 
     benefits provided under part D of title XVIII, and the 
     assistance for medicare cost-sharing described in section 
     1905(p)(3)(A)(iii) is reduced (on a sliding scale based on 
     income) from 100 percent to 0 percent as the income increases 
     from 150 percent to 175 percent of such poverty line;''.
       (c) Federal Financing.--The third sentence of section 
     1905(b) (42 U.S.C. 1396d(b)) is amended by inserting before 
     the period at the end the following: ``and with respect to 
     amounts expended that are attributable to section 
     1902(a)(10)(E)(v) (other than for individuals described in 
     section 1905(p)(1)(B))''.
       (d) Treatment of Territories.--
       (1) In general.--Section 1905(p) (42 U.S.C. 1396d(p)) is 
     amended--
       (A) by redesignating paragraphs (5) and (6) as paragraphs 
     (6) and (7), respectively; and
       (B) by inserting after paragraph (4) the following new 
     paragraph:
       ``(5)(A) In the case of a State, other than the 50 States 
     and the District of Columbia--
       ``(i) the provisions of paragraph (3) insofar as they 
     relate to section 1859D and the provisions of section 
     1902(a)(10)(E)(v) shall not apply to residents of such State; 
     and
       ``(ii) if the State establishes a plan described in 
     subparagraph (B) (for providing medical assistance with 
     respect to the provision of prescription medicines to 
     medicare beneficiaries), the amount otherwise determined 
     under section 1108(f) (as increased under section 1108(g)) 
     for the State shall be increased by the amount specified in 
     subparagraph (C).
       ``(B) The plan described in this subparagraph is a plan 
     that--
       ``(i) provides medical assistance with respect to the 
     provision of covered outpatient medicines (as defined in 
     section 1859D(b)) to low-income medicare beneficiaries; and
       ``(ii) assures that additional amounts received by the 
     State that are attributable to the operation of this 
     paragraph are used only for such assistance.
       ``(C)(i) The amount specified in this subparagraph for a 
     State for a year is equal to the product of--
       ``(I) the aggregate amount specified in clause (ii); and
       ``(II) the amount specified in section 1108(g)(1) for that 
     State, divided by the sum of the amounts specified in such 
     section for all such States.

[[Page 16464]]

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

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

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

     SEC. 106. STATE PHARMACEUTICAL ASSISTANCE TRANSITION 
                   COMMISSION.

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

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

                       TITLE II--MEDICARE+CHOICE

     SEC. 201. MEDICARE+CHOICE IMPROVEMENTS.

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

       ``(I) 102 percent of the annual Medicare+Choice capitation 
     rate under this paragraph for the area for the previous year; 
     or
       ``(II) the annual Medicare+Choice capitation rate under 
     this paragraph for the area for the previous year increased 
     by the national per capita Medicare+Choice growth percentage, 
     described in paragraph (6) for

[[Page 16465]]

     that succeeding year, but not taking into account any 
     adjustment under paragraph (6)(C) for a year before 2004.''.

       (2) Conforming amendment.--Section 1853(c)(6)(C) (42 U.S.C. 
     1395w-23(c)(6)(C)) is amended by inserting before the period 
     at the end the following: ``, except that for purposes of 
     paragraph (1)(C)(v)(II), no such adjustment shall be made for 
     a year before 2004''.
       (d) Inclusion of Costs of DOD and VA Military Facility 
     Services to Medicare- eligible Beneficiaries in Calculation 
     of Medicare+Choice Payment Rates.--Section 1853(c)(3) (42 
     U.S.C. 1395w-23(c)(3)) is amended--
       (1) in subparagraph (A), by striking ``subparagraph (B)'' 
     and inserting ``subparagraphs (B) and (E)'', and
       (2) by adding at the end the following new subparagraph:
       ``(E) Inclusion of costs of dod and va military facility 
     services to medicare-eligible beneficiaries.--In determining 
     the area-specific Medicare+Choice capitation rate under 
     subparagraph (A) for a year (beginning with 2004), the annual 
     per capita rate of payment for 1997 determined under section 
     1876(a)(1)(C) shall be adjusted to include in the rate the 
     Secretary's estimate, on a per capita basis, of the amount of 
     additional payments that would have been made in the area 
     involved under this title if individuals entitled to benefits 
     under this title had not received services from facilities of 
     the Department of Defense or the Department of Veterans 
     Affairs.''.
       (e) Extending Special Rule for Certain Inpatient Hospital 
     Stays to Rehabilitation Hospitals.--
       (1) In general.--Section 1853(g) (42 U.S.C. 1395w-23(g)) is 
     amended--
       (A) by inserting ``or from a rehabilitation facility (as 
     defined in section 1886(j)(1)(A))'' after ``1886(d)(1)(B))''; 
     and
       (B) in paragraph (2)(B), by inserting ``or section 1886(j), 
     as the case may be,'' after ``1886(d)''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply to contract years beginning on or after January 
     1, 2004.
       (f) MedPAC Study of AAPCC.--
       (1) Study.--The Medicare Payment Advisory Commission shall 
     conduct a study that assesses the method used for determining 
     the adjusted average per capita cost (AAPCC) under section 
     1876(a)(4) of the Social Security Act (42 U.S.C. 
     1395mm(a)(4)) as applied under section 1853(c)(1)(A) of such 
     Act (as amended by subsection (a)). Such study shall include 
     an examination of--
       (A) the bases for variation in such costs between different 
     areas, including differences in input prices, utilization, 
     and practice patterns;
       (B) the appropriate geographic area for payment under the 
     Medicare+Choice program under part C of title XVIII of such 
     Act; and
       (C) the accuracy of risk adjustment methods in reflecting 
     differences in costs of providing care to different groups of 
     beneficiaries served under such program.
       (2) Report.--Not later than 18 months after the date of the 
     enactment of this Act, the Commission shall submit to 
     Congress a report on the study conducted under paragraph (1).
       (g) Report on Impact of Increased Financial Assistance to 
     Medicare+Choice Plans.--Not later than July 1, 2006, the 
     Medicare Benefits Administrator shall submit to Congress a 
     report that describes the impact of additional financing 
     provided under this Act and other Acts (including the 
     Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act 
     of 1999 and BIPA) on the availability of Medicare+Choice 
     plans in different areas and its impact on lowering premiums 
     and increasing benefits under such plans.
       (h) Limitation on Application to 2004 and 2005.--
     Notwithstanding any other provision of law, the amendments 
     made by this section shall only apply to payment rates for 
     2004 and 2005 and for subsequent years the payment shall be 
     made on the basis of law as in effect before the date of the 
     enactment of this Act.

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

       (a) Change in Reporting Deadline.--Section 1854(a)(1) (42 
     U.S.C. 1395w-24(a)(1)), as amended by section 532(b)(1) of 
     the Public Health Security and Bioterrorism Preparedness and 
     Response Act of 2002, is amended by striking ``2002, 2003, 
     and 2004 (or July 1 of each other year)'' and inserting 
     ``2002 and each subsequent year''.
       (b) Delay in Annual, Coordinated Election Period.--Section 
     1851(e)(3)(B) (42 U.S.C. 1395w-21(e)(3)(B)), as amended by 
     section 532(c)(1)(A) of the Public Health Security and 
     Bioterrorism Preparedness and Response Act of 2002, is 
     amended--
       (1) by striking ``and after 2005''; and
       (2) by striking ``, 2004, and 2005'' and inserting ``and 
     any subsequent year''.
       (c) Annual Announcement of Payment Rates.--Section 
     1853(b)(1) (42 U.S.C. 1395w-23(b)(1)), as amended by section 
     532(d)(1) of the Public Health Security and Bioterrorism 
     Preparedness and Response Act of 2002, is amended--
       (1) by striking ``and after 2005''; and
       (2) by striking ``and 2005'' and inserting ``and each 
     subsequent year''.

     SEC. 203. SPECIALIZED MEDICARE+CHOICE PLANS FOR SPECIAL NEEDS 
                   BENEFICIARIES.

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

     SEC. 204. MEDICARE MSAS.

       Section 1852(k)(1) (42 U.S.C. 1395w-22(k)(1)) is amended by 
     inserting ``or with an organization offering a MSA plan'' 
     after ``section 1851(a)(2)(A)''.

     SEC. 205. EXTENSION OF REASONABLE COST CONTRACTS.

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

     SEC. 206. EXTENSION OF MUNICIPAL HEALTH SERVICE DEMONSTRATION 
                   PROJECTS.

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

[[Page 16466]]



             TITLE III--COMBATTING WASTE, FRAUD, AND ABUSE

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

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

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

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


        ``competitive acquisition of certain items and services

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

       ``(I) at least \1/3\ of such areas in 2009; and
       ``(II) at least \2/3\ of such areas in 2010; and

       ``(ii) among items and services in a manner such that the 
     programs apply to the highest cost and highest volume items 
     and services first.
       ``(C) Waiver of certain provisions.--In carrying out the 
     programs, the Secretary may waive such provisions of the 
     Federal Acquisition Regulation as are necessary for the 
     efficient implementation of this section, other than 
     provisions relating to confidentiality of information and 
     such other provisions as the Secretary determines 
     appropriate.
       ``(2) Items and services described.--The items and services 
     referred to in paragraph (1) are the following:
       ``(A) Durable medical equipment and medical supplies.--
     Covered items (as defined in section 1834(a)(13)) for which 
     payment is otherwise made under section 1834(a), including 
     items used in infusion and drugs and supplies used in 
     conjunction with durable medical equipment, but excluding 
     class III devices under the Federal Food, Drug, and Cosmetic 
     Act.
       ``(B) Other equipment and supplies.--Items, equipment, and 
     supplies (as described in section 1842(s)(2)(D) other than 
     enteral nutrients).
       ``(C) Off-the-shelf orthotics.--Orthotics (described in 
     section 1861(s)(9)) for which payment is otherwise made under 
     section 1834(h) which require minimal self-adjustment for 
     appropriate use and does not require expertise in trimming, 
     bending, molding, assembling, or customizing to fit to the 
     patient.
       ``(3) Exception authority.--In carrying out the programs 
     under this section, the Secretary may exempt--
       ``(A) rural areas and areas with low population density 
     within urban areas that are not competitive, unless there is 
     a significant national market through mail order for a 
     particular item or service; and
       ``(B) items and services for which the application of 
     competitive acquisition is not likely to result in 
     significant savings.
       ``(4) Special rule for certain rented items of durable 
     medical equipment.--In the case of a covered item for which 
     payment is made on a rental basis under section 1834(a), the 
     Secretary shall establish a process by which rental 
     agreements for the covered items entered into before the 
     application of the competitive acquisition program under this 
     section for the item may be continued notwithstanding this 
     section. In the case of any such continuation, the supplier 
     involved shall provide for appropriate servicing and 
     replacement, as required under section 1834(a).
       ``(5) Physician authorization.--The Secretary may establish 
     a process under which a physician may prescribe a particular 
     brand or mode of delivery of an item or service if the item 
     or service involved is clinically more appropriate than other 
     similar items or services.
       ``(6) Application.--For each competitive acquisition area 
     in which the program is implemented under this subsection 
     with respect to items and services, the payment basis 
     determined under the competition conducted under subsection 
     (b) shall be substituted for the payment basis otherwise 
     applied under section 1834(a).
       ``(b) Program Requirements.--
       ``(1) In general.--The Secretary shall conduct a 
     competition among entities supplying items and services 
     described in subsection (a)(2) for each competitive 
     acquisition area in which the program is implemented under 
     subsection (a) with respect to such items and services.
       ``(2) Conditions for awarding contract.--
       ``(A) In general.--The Secretary may not award a contract 
     to any entity under the competition conducted in an 
     competitive acquisition area pursuant to paragraph (1) to 
     furnish such items or services unless the Secretary finds all 
     of the following:
       ``(i) The entity meets quality and financial standards 
     specified by the Secretary or developed by the Program 
     Advisory and Oversight Committee established under subsection 
     (c).
       ``(ii) The total amounts to be paid under the contract 
     (including costs associated with the administration of the 
     contract) are expected to be less than the total amounts that 
     would otherwise be paid.
       ``(iii) Beneficiary access to a choice of multiple 
     suppliers in the area is maintained.
       ``(iv) Beneficiary liability is limited to 20 percent of 
     the applicable contract award price, except in such cases 
     where a supplier has furnished an upgraded item and has 
     executed an advanced beneficiary notice.
       ``(B) Development of quality standards for dme products.--
       ``(i) In general.--The quality standards specified under 
     subparagraph (A)(i) shall not be less than the quality 
     standards that would otherwise apply if this section did not 
     apply and shall include consumer services standards. Not 
     later than July 1, 2007, the Secretary shall establish new 
     quality standards for products subject to competitive 
     acquisition under this section. Such standards shall

[[Page 16467]]

     be applied prospectively and shall be published on the 
     website of the Department of Health and Human Services.
       ``(ii) Consultation with program advisory and oversight 
     committee.--The Secretary shall consult with the Program 
     Advisory and Oversight Committee (established under 
     subsection (c)) to review (and advise the Secretary 
     concerning) the quality standards referred to in clause (i).
       ``(3) Contents of contract.--
       ``(A) In general.--A contract entered into with an entity 
     under the competition conducted pursuant to paragraph (1) is 
     subject to terms and conditions that the Secretary may 
     specify.
       ``(B) Term of contracts.--The Secretary shall recompete 
     contracts under this section not less often than once every 3 
     years.
       ``(4) Limit on number of contractors.--
       ``(A) In general.--The Secretary may limit the number of 
     contractors in a competitive acquisition area to the number 
     needed to meet projected demand for items and services 
     covered under the contracts. In awarding contracts, the 
     Secretary shall take into account the ability of bidding 
     entities to furnish items or services in sufficient 
     quantities to meet the anticipated needs of beneficiaries for 
     such items or services in the geographic area covered under 
     the contract on a timely basis.
       ``(B) Multiple winners.--The Secretary shall award 
     contracts to multiple entities submitting bids in each area 
     for an item or service.
       ``(5) Payment.--Payment under this part for competitively 
     priced items and services described in subsection (a)(2) 
     shall be based on the bids submitted and accepted under this 
     section for such items and services.
       ``(6) Participating contractors.--Payment shall not be made 
     for items and services described in subsection (a)(2) 
     furnished by a contractor and for which competition is 
     conducted under this section unless--
       ``(A) the contractor has submitted a bid for such items and 
     services under this section; and
       ``(B) the Secretary has awarded a contract to the 
     contractor for such items and services under this section.

     In this section, the term `bid' means a request for a 
     proposal for an item or service that includes the cost of the 
     item or service, and where appropriate, any services that are 
     attendant to the provision of the item or service.
       ``(7) Consideration in determining categories for bids.--
     The Secretary shall consider the similarity of the clinical 
     efficiency and value of specific codes and products, 
     including products that may provide a therapeutic advantage 
     to beneficiaries, before delineating the categories and 
     products that will be subject to bidding.
       ``(8) Authority to contract for education, monitoring, 
     outreach and complaint services.--The Secretary may enter 
     into a contract with an appropriate entity to address 
     complaints from beneficiaries who receive items and services 
     from an entity with a contract under this section and to 
     conduct appropriate education of and outreach to such 
     beneficiaries and monitoring quality of services with respect 
     to the program.
       ``(c) Program Advisory and Oversight Committee.--
       ``(1) Establishment.--There is established a Program 
     Advisory and Oversight Committee (hereinafter in this section 
     referred to as the `Committee').
       ``(2) Membership; terms.--The Committee shall consist of 
     such members as the Secretary may appoint who shall serve for 
     such term as the Secretary may specify.
       ``(3) Duties.--
       ``(A) Technical assistance.--The Committee shall provide 
     advice and technical assistance to the Secretary with respect 
     to the following functions:
       ``(i) The implementation of the program under this section.
       ``(ii) The establishment of requirements for collection of 
     data.
       ``(iii) The development of proposals for efficient 
     interaction among manufacturers and distributors of the items 
     and services and providers and beneficiaries.
       ``(B) Additional duties.--The Committee shall perform such 
     additional functions to assist the Secretary in carrying out 
     this section as the Secretary may specify.
       ``(4) Inapplicability of faca.--The provisions of the 
     Federal Advisory Committee Act (5 U.S.C. App.) shall not 
     apply.
       ``(d) Annual Reports.--The Secretary shall submit to 
     Congress an annual management report on the programs under 
     this section. Each such report shall include information on 
     savings, reductions in beneficiary cost-sharing, access to 
     and quality of items and services, and beneficiary 
     satisfaction.
       ``(e) Demonstration Project for Clinical Laboratory 
     Services.--
       ``(1) In general.--The Secretary shall conduct a 
     demonstration project on the application of competitive 
     acquisition under this section to clinical diagnostic 
     laboratory tests--
       ``(A) for which payment is otherwise made under section 
     1833(h) or 1834(d)(1) (relating to colorectal cancer 
     screening tests); and
       ``(B) which are furnished by entities that did not have a 
     face-to-face encounter with the individual.
       ``(2) Terms and conditions.--Such project shall be under 
     the same conditions as are applicable to items and services 
     described in subsection (a)(2).
       ``(3) Report.--The Secretary shall submit to Congress--
       ``(A) an initial report on the project not later than 
     December 31, 2008; and
       ``(B) such progress and final reports on the project after 
     such date as the Secretary determines appropriate.''.
       (b) Conforming Amendments.--
       (1) Durable medical equipment; elimination of inherent 
     reasonableness authority.--Section 1834(a) (42 U.S.C. 
     1395m(a)) is amended--
       (A) in paragraph (1)(B), by striking ``The payment basis'' 
     and inserting ``Subject to subparagraph (E)(i), the payment 
     basis'';
       (B) in paragraph (1)(C), by striking ``This subsection'' 
     and inserting ``Subject to subparagraph (E)(ii), this 
     subsection'';
       (C) by adding at the end of paragraph (1) the following new 
     subparagraph:
       ``(E) Application of competitive acquisition; elimination 
     of inherent reasonableness authority.--In the case of covered 
     items and services that are included in a competitive 
     acquisition program in a competitive acquisition area under 
     section 1847(a)--
       ``(i) the payment basis under this subsection for such 
     items and services furnished in such area shall be the 
     payment basis determined under such competitive acquisition 
     program; and
       ``(ii) the Secretary may use information on the payment 
     determined under such competitive acquisition programs to 
     adjust the payment amount otherwise recognized under 
     subparagraph (B)(ii) for an area that is not a competitive 
     acquisition area under section 1847 and in the case of such 
     adjustment, paragraph (10)(B) shall not be applied.''; and
       (D) in paragraph (10)(B), by inserting ``in an area and 
     with respect to covered items and services for which the 
     Secretary does not make a payment amount adjustment under 
     paragraph (1)(E)'' after ``under this subsection''.
       (2) Off-the-shelf orthotics; elimination of inherent 
     reasonableness authority.--Section 1834(h) (42 U.S.C. 
     1395m(h)) is amended--
       (A) in paragraph (1)(B), by striking ``and (E)'' and 
     inserting ``, (E) , and (H)(i)'';
       (B) in paragraph (1)(D), by striking ``This subsection'' 
     and inserting ``Subject to subparagraph (H)(ii), this 
     subsection'';
       (C) by adding at the end of paragraph (1) the following new 
     subparagraph:
       ``(H) Application of competitive acquisition to orthotics; 
     elimination of inherent reasonableness authority.--In the 
     case of orthotics described in paragraph (2)(B) of section 
     1847(a) that are included in a competitive acquisition 
     program in a competitive acquisition area under such 
     section--
       ``(i) the payment basis under this subsection for such 
     orthotics furnished in such area shall be the payment basis 
     determined under such competitive acquisition program; and
       ``(ii) the Secretary may use information on the payment 
     determined under such competitive acquisition programs to 
     adjust the payment amount otherwise recognized under 
     subparagraph (B)(ii) for an area that is not a competitive 
     acquisition area under section 1847, and in the case of such 
     adjustment, paragraphs (8) and (9) of section 1842(b) shall 
     not be applied.''.
       (c) Report on Activities of Suppliers.--The Secretary shall 
     conduct a study to determine the extent to which (if any) 
     suppliers of covered items of durable medical equipment that 
     are subject to the competitive acquisition program under 
     section 1847 of the Social Security Act, as amended by 
     subsection (a), are soliciting physicians to prescribe 
     certain brands or modes of delivery of covered items based on 
     profitability.

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

       (a) Payment Reform.--
       (1) In general.--Section 1842(o) (42 U.S.C. 1395u(o)) is 
     amended to read as follows:
       ``(o) Payment for Drugs and Biologicals.--
       ``(1) General rule.--If a physician's, supplier's, or any 
     other person's bill or request for payment for services 
     includes a charge for a drug or biological for which payment 
     may be made under this part and the drug or biological is not 
     paid on a cost or prospective payment basis as otherwise 
     provided in this part, the amount payable for the drug or 
     biological shall be based on the following:
       ``(A) Multi-source (generic) drugs.--In the case of a drug 
     or biological that meets the requirements for a multi-source 
     drug under subclauses (I) and (II) of section 
     1927(k)(7)(A)(i), 105 percent of the volume-weighted median 
     average acquisition price for any drug or biological covered 
     under the same medicare HCPCS code.
       ``(B) Single source (brand) drugs and biologicals.--In the 
     case of a drug or biological that meets the requirements for 
     a single source drug under section 1927(k)(7)(A)(iv), 105 
     percent of the average acquisition price for the drug or 
     biological.
       ``(C) Access exception.--The Secretary may modify the rate 
     otherwise applicable in

[[Page 16468]]

     order to assure access to necessary drugs and biologicals in 
     the case of sole community providers in rural and other areas 
     where the providers are not reasonably able to obtain the 
     drugs and biologicals at the payment rates otherwise 
     applicable. Such modification shall not result in a change of 
     more than 15 percent of the rate otherwise applicable.
       ``(D) Data-related exception.--If the Secretary determines 
     that there is insufficient data available with respect to 
     compute an average acquisition price for a drug or biological 
     for a quarter or that, because of a significant change in 
     price from quarter-to-quarter, the available data on the 
     average acquisition price does not accurately reflect the 
     actual, current acquisition cost for the drug or biological, 
     the Secretary may substitute for the quarters involved an 
     appropriate payment for the drug or biological for such 
     average acquisition price.
       ``(E) Application of ndc codes.--If the Secretary 
     determines that it is appropriate to provide for payment 
     under this subsection using national drug code (NDC) instead 
     of HCPCS codes, in applying subparagraph (A) the reference to 
     the same HCPCS code shall be deemed a reference to the 
     appropriate national drug codes for those drugs or 
     biologicals that are therapeutically and pharmaceutically 
     equivalent and bioequivalent (as defined for purposes of 
     section 1927(k)(7)(A)).
       ``(2) Definition of average acquisition price.--
       ``(A) In general.--For purposes of this subsection, the 
     term `average acquisition price' means, with respect to a 
     drug or biological and with respect to each dosage form and 
     strength of the drug or biological product (without regard to 
     any special packaging, labeling, or identifiers on the dosage 
     form or product or package), the average of all final sales 
     prices charged by the manufacturer of the drug or biological 
     product in the United States, excluding sales exempt from 
     inclusion in the calculation of best price under section 
     1927(c)(1)(C) (other than under clause (ii)(III) of such 
     section) and excluding sales subject to a rebate under 
     section 1927, as reported under paragraph (3).
       ``(B) Net price.--Such average acquisition price shall be 
     calculated net of all of the following (as estimated by the 
     Secretary):
       ``(i) Volume discounts.
       ``(ii) Prompt pay discounts and cash discounts.
       ``(iii) Charge-backs.
       ``(iv) Short-dated product discounts (for spoilage and 
     other factors).
       ``(v) Free goods and services.
       ``(vi) Rebates.
       ``(vii) All other price concessions provided by the drug 
     manufacturer.

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

[[Page 16469]]

     each additional drug administered by push technique during 
     the same encounter, except to the extent that the Secretary 
     finds that the cost of administering additional drugs is less 
     than the cost of administering the first drug.
       (c) Payments for Chemotherapy Support Services.--
       (1) General.--Beginning in 2005, the Secretary shall 
     recognize and make payments under section 1848 of the Social 
     Security Act (42 U.S.C. 1395w-4) for chemotherapy support 
     services furnished incident to physicians' services. For the 
     purposes of this section, the term ``chemotherapy support 
     services'' are services furnished by the staff of physicians 
     to patients undergoing treatment for cancer that were not 
     included in the computation of clinical staff costs under 
     subsection b(2). Such services include social worker 
     services, nutrition counseling, psychosocial services, and 
     similar services.
       (2) Direct costs.--The Secretary shall estimate the cost of 
     the salary and benefits of staff furnishing chemotherapy 
     support services as they are provided in oncology practices 
     that furnish these services to cancer patients in a manner 
     that is considered to be high quality care. The estimate 
     shall be based on the weekly cost of such services per 
     patient receiving chemotherapy.
       (3) Total costs.--The Secretary shall estimate the total 
     practice expenses of chemotherapy support services by 
     assuming that the direct costs for the service determined 
     under paragraph (2) are 33.2 percent of such total practice 
     expenses.
       (4) Conversion to relative value units.--The Secretary 
     shall convert the total practice expenses determined under 
     paragraph (3) to practice expense relative value units for 
     chemotherapy support services by dividing such expenses by 
     the conversion factor that will be in effect for the 
     physician fee schedule for 2005. The relative value units as 
     so determined shall be used in determining the fee schedule 
     amounts paid for chemotherapy support services under such 
     section 1848.
       (5) Updates.--For years after 2005, the relative values 
     determined under paragraph (4) shall continue in effect 
     except that the Secretary shall revise them as necessary to 
     maintain their accuracy, provided that such revisions are 
     consistent with the methodology set forth in this subsection.
       (d) Cancer Therapy Management Services.--Beginning in 2005, 
     the Secretary shall recognize and establish a payment amount 
     for the service of cancer therapy management to account for 
     the greater pre-service and post-service work associated with 
     visits and consultations conducted by physicians treating 
     cancer patients compared to typical visits and consultations. 
     The payment amount may vary by the level and type of the 
     related visit or consultation.
       (e) Other Services Without Physician Work Relative Value 
     Units.--Beginning in 2005, the Secretary shall develop a 
     revised methodology for determining the payment amounts for 
     services that are paid under the fee schedule established by 
     section 1848 of the Social Security Act (42 U.S.C. 1395w-4) 
     and that do not have physician work relative value units, 
     including radiation oncology services. Such methodology shall 
     result in payment amounts that fully cover the costs of 
     furnishing such services. Until such time as the methodology 
     for such services is revised and implemented, all such 
     services shall be protected from further payment cuts due to 
     factors such as shifts in utilization or removal of any one 
     specialty's services that are paid under the fee schedule 
     established by such section 1848 and that do not have 
     physician work relative value units.
       (f) Report to Congress.--Not later than April 1, 2004, the 
     Secretary shall submit to Congress a report on the payment 
     amounts that are projected to be adopted under subsections 
     (b), (c), (d), and (e) of this section.
       (g) Institute of Medicine Study.--
       (1) General.--The Secretary shall request the Institute of 
     Medicine to conduct the study described in this subsection.
       (2) Baseline study.--The first phase of the study shall 
     include the following objectives:
       (A) An assessment of the extent to which the current 
     medicare payment system, prior to implementation of the 
     amendments made by this section, facilitates appropriate 
     access to care by cancer patients in the various treatment 
     settings.
       (B) The identification of the comprehensive range of 
     services furnished to cancer patients in the outpatient 
     setting, including support services such as psychosocial 
     services and counseling, and recommendations regarding the 
     types of services that ought to be furnished to medicare 
     patients with cancer.
       (C) A discussion of the practice standards necessary to 
     assure the safe provision of services to cancer patients.
       (D) An analysis of the extent to which the current medicare 
     payment system supports the role of nurses in the provision 
     of oncology services and recommendations for any necessary 
     improvements in the payment system in that respect.
       (E) The development of a framework for assessing how the 
     amendments made by this act affect the provision of care to 
     medicare patients with cancer in the various treatment 
     settings.
       (3) Second phase of study.--After the implementation of the 
     amendments made by this section, the study shall determine 
     whether and how those amendments affected the provision of 
     care to medicare patients with cancer.
       (4) Consultation.--The Institute of Medicine shall consult 
     with the National Cancer Policy Board and organizations 
     representing cancer patients and survivors, oncologists, 
     oncology nurses, social workers, cancer centers, and other 
     healthcare professionals who treat cancer patients in 
     planning and carrying out this study.
       (5) Due dates.--
       (A) The study required by paragraph (2) shall be submitted 
     to the Congress and the Secretary of Health and Human 
     Services no later than June 30, 2004.
       (B) The study required by paragraph (3) shall be submitted 
     to the Congress and the Secretary of Health and Human 
     Services no later than December 31, 2006.
       (i) Study of Payments for Blood Clotting Factors and Other 
     Biologicals.--
       (1) In general.--The Secretary of Health and Human Services 
     shall provide for a study of the appropriateness of the 
     medicare payment methodology for blood clotting factors and 
     other biologicals under part B of title XVIII of the Social 
     Security Act. Not later than 9 months after the date of the 
     enactment of this Act, the Secretary shall submit to Congress 
     a report on such study and shall include in such report 
     recommendations regarding whether to apply the payment 
     methodology provided under the amendment made by subsection 
     (a)(1) and alternative recommendations for appropriate 
     dispensing fees.
       (2) Delay in effective date.--The amendment made by 
     subsection (a)(1) shall not apply to blood clotting factors 
     furnished before the first day of the first calendar year 
     that begins at least 6 months after the date the report under 
     paragraph (1) has been submitted to the Congress.

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

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

[[Page 16470]]

     report on the project not later than 6 months after the date 
     of its completion. Such reports shall include information on 
     the impact of the project on savings to the medicare program 
     and recommendations on the cost-effectiveness of extending or 
     expanding the project.

                TITLE IV--RURAL HEALTH CARE IMPROVEMENTS

     SEC. 401. FAIRNESS IN THE MEDICARE DISPROPORTIONATE SHARE 
                   HOSPITAL (DSH) ADJUSTMENT FOR RURAL HOSPITALS.

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

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

       (ii) in subclause (III)--

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

       (iii) in subclause (IV)--

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

       (iv) in subclause (V)--

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

       (v) in subclause (VI)--

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

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

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

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

     SEC. 403. ESTABLISHMENT OF ESSENTIAL RURAL HOSPITAL 
                   CLASSIFICATION.

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

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

[[Page 16471]]

       ``(B) Special rule for essential rural hospitals.--In the 
     case of a hospital classified as an essential rural hospital 
     under section 1861(mm)(4) for a cost reporting period, the 
     payment under this subsection for covered OPD services during 
     the period shall be based on 102 percent of the reasonable 
     costs for such services. Nothing in this subparagraph shall 
     be construed as affecting the application or amount of 
     deductibles or copayments otherwise applicable to such 
     services under this part or as waiving any requirement for 
     billing for such services.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to cost reporting periods beginning on or after 
     October 1, 2004.

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

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

     SEC. 405. IMPROVEMENTS TO CRITICAL ACCESS HOSPITAL PROGRAM.

       (a) Increase in Payment Amounts.--
       (1) In general.--Sections 1814(l), 1834(g)(1), and 
     1883(a)(3) (42 U.S.C. 1395f(l); 1395m(g)(1); 42 U.S.C. 
     1395tt(a)(3)) are each amended by inserting ``equal to 102 
     percent of'' before ``the reasonable costs''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply to payments for services furnished during cost 
     reporting periods beginning on or after October 1, 2003.
       (b) Coverage of Costs for Certain Emergency Room On-Call 
     Providers.--
       (1) In general.--Section 1834(g)(5) (42 U.S.C. 1395m(g)(5)) 
     is amended--
       (A) in the heading--
       (i) by inserting ``certain'' before ``emergency''; and
       (ii) by striking ``physicians'' and inserting 
     ``providers'';
       (B) by striking ``emergency room physicians who are on-call 
     (as defined by the Secretary)'' and inserting ``physicians, 
     physician assistants, nurse practitioners, and clinical nurse 
     specialists who are on-call (as defined by the Secretary) to 
     provide emergency services''; and
       (C) by striking ``physicians' services'' and inserting 
     ``services covered under this title''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply with respect to costs incurred for services 
     provided on or after January 1, 2004.
       (c) Permitting CAHs To Allocate Swing Beds and Acute Care 
     Inpatient Beds Subject to a Total Limit of 25 Beds.--
       (1) In general.--Section 1820(c)(2)(B)(iii) (42 U.S.C. 
     1395i-4(c)(2)(B)(iii)) is amended to read as follows:
       ``(iii) provides not more than a total of 25 extended care 
     service beds (pursuant to an agreement under subsection (f)) 
     and acute care inpatient beds (meeting such standards as the 
     Secretary may establish) for providing inpatient care for a 
     period that does not exceed, as determined on an annual, 
     average basis, 96 hours per patient;''.
       (2) Conforming amendment.--Section 1820(f) (42 U.S.C. 
     1395i-4(f)) is amended by striking ``and the number of beds 
     used at any time for acute care inpatient services does not 
     exceed 15 beds''.
       (3) Effective date.--The amendments made by this subsection 
     shall with respect to designations made on or after October 
     1, 2004.
       (d) Elimination of the Isolation Test for Cost-Based CAH 
     Ambulance Services.--
       (1) Elimination.--
       (A) In general.--Section 1834(l)(8) (42 U.S.C. 
     1395m(l)(8)), as added by section 205(a) of BIPA (114 Stat. 
     2763A-482), is amended by striking the comma at the end of 
     subparagraph (B) and all that follows and inserting a period.
       (B) Effective date.--The amendment made by subparagraph (A) 
     shall apply to services furnished on or after January 1, 
     2005.
       (2) Technical correction.--Section 1834(l) (42 U.S.C. 
     1395m(l)) is amended by redesignating paragraph (8), as added 
     by section 221(a) of BIPA (114 Stat. 2763A-486), as paragraph 
     (9).
       (e) Reinstatement of Periodic Interim Payment (PIP).--
       (1) In general.--Section 1815(e)(2) (42 U.S.C. 1395g(e)(2)) 
     is amended--
       (A) in the matter before subparagraph (A), by inserting ``, 
     in the cases described in subparagraphs (A) through (D)'' 
     after ``1986''; and
       (B) by striking ``and'' at the end of subparagraph (C);
       (C) by adding ``and'' at the end of subparagraph (D); and
       (D) by inserting after subparagraph (D) the following new 
     subparagraph:
       ``(E) inpatient critical access hospital services;''.
       (2) Development of alternative methods of periodic interim 
     payments.--With respect to periodic interim payments to 
     critical access hospitals for inpatient critical access 
     hospital services under section 1815(e)(2)(E) of the Social 
     Security Act, as added by paragraph (1), the Secretary shall 
     develop alternative methods for such payments that are based 
     on expenditures of the hospital.
       (3) Reinstatement of pip.--The amendments made by paragraph 
     (1) shall apply to payments made on or after January 1, 2004.
       (f) Condition for Application of Special Physician Payment 
     Adjustment.--
       (1) In general.--Section 1834(g)(2) (42 U.S.C. 1395m(g)(2)) 
     is amended by adding after and below subparagraph (B) the 
     following:

     ``The Secretary may not require, as a condition for applying 
     subparagraph (B) with respect to a critical access hospital, 
     that each physician providing professional services in the 
     hospital must assign billing rights with respect to such 
     services, except that such subparagraph shall not apply to 
     those physicians who have not assigned such billing 
     rights.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall be effective as if included in the enactment of section 
     403(d) of the Medicare, Medicaid, and SCHIP Balanced Budget 
     Refinement Act of 1999 (113 Stat. 1501A-371).
       (g) Additional 5-Year Period of Funding for Grant 
     Program.--
       (1) In general.--Section 1820(g) (42 U.S.C. 1395i-4(g)) is 
     amended by adding at the end the following new paragraph:
       ``(4) Funding.--
       ``(A) In general.--Subject to subparagraph (B), payment for 
     grants made under this subsection during fiscal years 2004 
     through 2008 shall be made from the Federal Hospital 
     Insurance Trust Fund.
       ``(B) Annual aggregate limitation.--In no case may the 
     amount of payment provided for under subparagraph (A) for a 
     fiscal year exceed $25,000,000.''.
       (2) Conforming amendment.--Section 1820 (42 U.S.C. 1395i-4) 
     is amended by striking subsection (j).

     SEC. 406. REDISTRIBUTION OF UNUSED RESIDENT POSITIONS.

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

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

       ``(ii) Redistribution.--

       ``(I) In general.--The Secretary is authorized to increase 
     the otherwise applicable resident limits for hospitals by an 
     aggregate number estimated by the Secretary that does not 
     exceed the aggregate reduction in such limits attributable to 
     clause (i) (without taking into account any adjustment under 
     subclause (IV) of such clause).
       ``(II) Effective date.--No increase under subclause (I) 
     shall be permitted or taken into account for a hospital for 
     any portion of a cost reporting period that occurs before 
     July 1, 2004, or before the date of the hospital's 
     application for an increase under this clause. No such 
     increase shall be permitted for a hospital unless the 
     hospital has applied to the Secretary for such increase by 
     December 31, 2005.

[[Page 16472]]

       ``(III) Considerations in redistribution.--In determining 
     for which hospitals the increase in the otherwise applicable 
     resident limit is provided under subclause (I), the Secretary 
     shall take into account the need for such an increase by 
     specialty and location involved, consistent with subclause 
     (IV).
       ``(IV) Priority for rural and small urban areas.--In 
     determining for which hospitals and residency training 
     programs an increase in the otherwise applicable resident 
     limit is provided under subclause (I), the Secretary shall 
     first distribute the increase to programs of hospitals 
     located in rural areas or in urban areas that are not large 
     urban areas (as defined for purposes of subsection (d)) on a 
     first-come-first-served basis (as determined by the 
     Secretary) based on a demonstration that the hospital will 
     fill the positions made available under this clause and not 
     to exceed an increase of 25 full-time equivalent positions 
     with respect to any hospital.
       ``(V) Application of locality adjusted national average per 
     resident amount.--With respect to additional residency 
     positions in a hospital attributable to the increase provided 
     under this clause, notwithstanding any other provision of 
     this subsection, the approved FTE resident amount is deemed 
     to be equal to the locality adjusted national average per 
     resident amount computed under subparagraph (E) for that 
     hospital.
       ``(VI) Construction.--Nothing in this clause shall be 
     construed as permitting the redistribution of reductions in 
     residency positions attributable to voluntary reduction 
     programs under paragraph (6) or as affecting the ability of a 
     hospital to establish new medical residency training programs 
     under subparagraph (H).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

       (a) In General.--In the case of home health services 
     furnished in a rural area (as defined in section 
     1886(d)(2)(D) of the Social Security Act (42 U.S.C. 
     1395ww(d)(2)(D)) during 2004 and 2005, the Secretary shall 
     increase the payment amount otherwise made under section 1895 
     of such Act (42 U.S.C. 1395fff) for such services by 10 
     percent.
       (b) Waiving Budget Neutrality.--The Secretary shall not 
     reduce the standard prospective payment amount (or amounts) 
     under section 1895 of the Social Security Act (42 U.S.C. 
     1395fff) applicable to home health services furnished during 
     a period to offset the increase in payments resulting from 
     the application of subsection (a).

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

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

[[Page 16473]]

       (i) Whether the arrangement between the health center 
     entity and the other party results in savings of Federal 
     grant funds or increased revenues to the health center 
     entity.
       (ii) Whether the arrangement between the health center 
     entity and the other party restricts or limits a patient's 
     freedom of choice.
       (iii) Whether the arrangement between the health center 
     entity and the other party protects a health care 
     professional's independent medical judgment regarding 
     medically appropriate treatment.

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

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

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

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

       (a) In General.--Section 1886(b)(3)(I) (42 U.S.C. 
     1395ww(b)(3)(I)) is amended by adding at the end the 
     following new clause:
       ``(iii) In no case shall a hospital be denied treatment as 
     a sole community hospital or payment (on the basis of a 
     target rate as such as a hospital) because data are 
     unavailable for any cost reporting period due to changes in 
     ownership, changes in fiscal intermediaries, or other 
     extraordinary circumstances, so long as data for at least one 
     applicable base cost reporting period is available.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to cost reporting periods beginning on or after 
     January 1, 2004.

     SEC. 415. EXTENSION OF TELEMEDICINE DEMONSTRATION PROJECT.

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

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

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

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

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

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

     There is no administrative or judicial review respecting the 
     identification of a county or area or the assignment of a 
     specialty of any physician under this paragraph.
       ``(5) Rural census tracks.--To the extent feasible, the 
     Secretary shall treat a rural census tract of a metropolitan 
     statistical area (as determined under the most recent 
     modification of the Goldsmith Modification, originally 
     published in the Federal Register on February 27, 1992 (57 
     Fed. Reg. 6725) as an equivalent area for purposes of 
     qualifying as a primary care scarcity county or specialist 
     care scarcity county under this subsection.
       ``(6) Physician defined.--For purposes of this paragraph, 
     the term `physician' means a physician described in section 
     1861(r)(1) and the term `primary care physician' means a 
     physician who is identified in the available data as a 
     general practitioner, family practice practitioner, general 
     internist, or obstetrician or gynecologist.
       ``(7) Publication of list of counties.--In carrying out 
     this subsection for a year, the Secretary shall include, as 
     part of the proposed and final rule to implement the 
     physician fee schedule under section 1848 for the year, a 
     list of all areas which will qualify as a primary care 
     scarcity county or specialist care scarcity county under this 
     subsection for the year involved.''.
       (2) Effective date.--The amendments made by subsection (a) 
     shall apply to physicians' services furnished on or after 
     January 1, 2004.
       (b) Improvement to Medicare Incentive Payment Program.--
       (1) In general.--Section 1833(m) (42 U.S.C. 1395l(m)) is 
     amended--
       (A) by inserting ``(1)'' after ``(m)''; and
       (B) by adding at the end the following new paragraphs:

[[Page 16474]]

       ``(2) The Secretary shall establish procedures under which 
     the Secretary, and not the physician furnishing the service, 
     is responsible for determining when a payment is required to 
     be made under paragraph (1).
       ``(3) In carrying out paragraph (1) for a year, the 
     Secretary shall include, as part of the proposed and final 
     rule to implement the physician fee schedule under section 
     1848 for the year, a list of all areas which will qualify as 
     a health professional shortage area under paragraph (1) for 
     the year involved.''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply to physicians' services furnished on or after 
     January 1, 2004.

     SEC. 418. MEDICARE INPATIENT HOSPITAL PAYMENT ADJUSTMENT FOR 
                   LOW-VOLUME HOSPITALS.

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

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

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

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

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

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

       Notwithstanding subsections (a), (b), and (h) of section 
     1833 of the Social Security Act (42 U.S.C. 1395l) and section 
     1834(d)(1) of such Act (42 U.S.C. 1395m(d)(1)), in the case 
     of a clinical diagnostic laboratory test covered under part B 
     of title XVIII of such Act that is furnished in 2004 or 2005 
     by a sole community hospital (as defined in section 
     1886(d)(5)(D)(iii) of such Act (42 U.S.C. 
     1395ww(d)(5)(D)(iii))) as part of services furnished to 
     patients of the hospital, the following rules shall apply:
       (1) Payment based on reasonable costs.--The amount of 
     payment for such test shall be 100 percent of the reasonable 
     costs of the hospital in furnishing such test.
       (2) No beneficiary cost-sharing.--Notwithstanding section 
     432, no coinsurance, deductible, copayment, or other cost-
     sharing otherwise applicable under such part B shall apply 
     with respect to such test.

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

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

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

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

     SEC. 421. AMBULANCE PAYMENT RATES.

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

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

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

                 TITLE V--PROVISIONS RELATING TO PART A

                Subtitle A--Inpatient Hospital Services

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

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

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

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

[[Page 16475]]

     related group classification) under this subsection until the 
     fiscal year that begins after such date.''.
       (b) Eligibility Standard for Technology Outliers.--
       (1) Minimum period for recognition of new technologies.--
     Section 1886(d)(5)(K)(vi) (42 U.S.C. 1395ww(d)(5)(K)(vi)) is 
     amended--
       (A) by inserting ``(I)'' after ``(vi)''; and
       (B) by adding at the end the following new subclause:
       ``(II) Under such criteria, a service or technology shall 
     not be denied treatment as a new service or technology on the 
     basis of the period of time in which the service or 
     technology has been in use if such period ends before the end 
     of the 2-to-3-year period that begins on the effective date 
     of implementation of a code under ICD-9-CM (or a successor 
     coding methodology) that enables the identification of 
     specific discharges in which the service or technology has 
     been used.''.
       (2) Adjustment of threshold.--
     Section 1886(d)(5)(K)(ii)(I) (42 U.S.C. 
     1395ww(d)(5)(K)(ii)(I)) is amended by inserting ``(applying a 
     threshold specified by the Secretary that is 75 percent of 
     one standard deviation for the diagnosis-related group 
     involved)'' after ``is inadequate''.
       (3) Criterion for substantial improvement.--Section 
     1886(d)(5)(K)(vi) (42 U.S.C. 1395ww(d)(5)(K)(vi)), as amended 
     by paragraph (1), is further amended by adding at the end the 
     following subclause:
       ``(III) The Secretary shall by regulation provide for 
     further clarification of the criteria applied to determine 
     whether a new service or technology represents an advance in 
     medical technology that substantially improves the diagnosis 
     or treatment of beneficiaries. Under such criteria, in 
     determining whether a new service or technology represents an 
     advance in medical technology that substantially improves the 
     diagnosis or treatment of beneficiaries, the Secretary shall 
     deem a service or technology as meeting such requirement if 
     the service or technology is a drug or biological that is 
     designated under section 506 of the Federal Food, Drug, and 
     Cosmetic Act, approved under section 314.510 or 601.41 of 
     title 21, Code of Federal Regulations, or designated for 
     priority review when the marketing application for such drug 
     or biological was filed or is a medical device for which an 
     exemption has been granted under section 520(m) of such Act, 
     or for which priority review has been provided under section 
     515(d)(5) of such Act. Nothing in this subclause shall be 
     construed as effecting the authority of the Secretary to 
     determine whether items and services are medically necessary 
     and appropriate under section 1862(a)(1).''.
       (4) Process for public input.--Section 1886(d)(5)(K) (42 
     U.S.C. 1395ww(d)(5)(K)), as amended by paragraph (1), is 
     amended--
       (A) in clause (i), by adding at the end the following: 
     ``Such mechanism shall be modified to meet the requirements 
     of clause (viii).''; and
       (B) by adding at the end the following new clause:
       ``(viii) The mechanism established pursuant to clause (i) 
     shall be adjusted to provide, before publication of a 
     proposed rule, for public input regarding whether a new 
     service or technology not described in the second sentence of 
     clause (vi)(III) represents an advance in medical technology 
     that substantially improves the diagnosis or treatment of 
     beneficiaries as follows:
       ``(I) The Secretary shall make public and periodically 
     update a list of all the services and technologies for which 
     an application for additional payment under this subparagraph 
     is pending.
       ``(II) The Secretary shall accept comments, 
     recommendations, and data from the public regarding whether 
     the service or technology represents a substantial 
     improvement.
       ``(III) The Secretary shall provide for a meeting at which 
     organizations representing hospitals, physicians, medicare 
     beneficiaries, manufacturers, and any other interested party 
     may present comments, recommendations, and data to the 
     clinical staff of the Centers for Medicare & Medicaid 
     Services before publication of a notice of proposed 
     rulemaking regarding whether service or technology represents 
     a substantial improvement.''.
       (c) Preference for Use of DRG Adjustment.--Section 
     1886(d)(5)(K) (42 U.S.C. 1395ww(d)(5)(K)) is further amended 
     by adding at the end the following new clause:
       ``(ix) Before establishing any add-on payment under this 
     subparagraph with respect to a new technology, the Secretary 
     shall seek to identify one or more diagnosis-related groups 
     associated with such technology, based on similar clinical or 
     anatomical characteristics and the cost of the technology. 
     Within such groups the Secretary shall assign an eligible new 
     technology into a diagnosis-related group where the average 
     costs of care most closely approximate the costs of care of 
     using the new technology. In such case, the new technology 
     would no longer meet the threshold of exceeding 75 percent of 
     the standard deviation for the diagnosis-related group 
     involved under clause (ii)(I). No add-on payment under this 
     subparagraph shall be made with respect to such new 
     technology and this clause shall not affect the application 
     of paragraph (4)(C)(iii).''.
       (d) Improvement in Payment for New Technology.--Section 
     1886(d)(5)(K)(ii)(III) (42 U.S.C. 1395ww(d)(5)(K)(ii)(III)) 
     is amended by inserting after ``the estimated average cost of 
     such service or technology'' the following: ``(based on the 
     marginal rate applied to costs under subparagraph (A))''.
       (e) Establishment of New Funding 
     for Hospital Inpatient Technology.--
     Section 1886(d)(5)(K)(ii)(III) (42 U.S.C. 
     1395ww(d)(5)(K)(ii)(III)) is amended by striking ``subject to 
     paragraph (4)(C)(iii),''.
       (f) Effective Date.--
       (1) In general.--The Secretary shall implement the 
     amendments made by this section so that they apply to 
     classification for fiscal years beginning with fiscal year 
     2005.
       (2) Reconsiderations of applications for fiscal year 2003 
     that are denied.--In the case of an application for a 
     classification of a medical service or technology as a new 
     medical service or technology under section 1886(d)(5)(K) of 
     the Social Security Act (42 U.S.C. 1395ww(d)(5)(K)) that was 
     filed for fiscal year 2004 and that is denied--
       (A) the Secretary shall automatically reconsider the 
     application as an application for fiscal year 2005 under the 
     amendments made by this section; and
       (B) the maximum time period otherwise permitted for such 
     classification of the service or technology shall be extended 
     by 12 months.

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

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

     SEC. 504. WAGE INDEX ADJUSTMENT RECLASSIFICATION REFORM .

       (a) In General.--Section 1886(d) (42 U.S.C. 1395ww(d)) is 
     amended by adding at the end the following:
       ``(11)(A) In order to recognize commuting patterns among 
     Metropolitan Statistical Areas and between such Areas and 
     rural areas, the Secretary shall establish a process, upon 
     application of a subsection (d) hospital that establishes 
     that it is a qualifying hospital described in subparagraph 
     (B), for an increase of the wage index applied under 
     paragraph (3)(E) for the hospital in the amount computed 
     under subparagraph (D).
       ``(B) A qualifying hospital described in this subparagraph 
     is a subsection (d) hospital--
       ``(i) the average wages of which exceed the average wages 
     for the area in which the hospital is located; and
       ``(ii) which has at least 10 percent of its employees who 
     reside in one or more higher wage index areas.
       ``(C) For purposes of this paragraph, the term `higher wage 
     index area' means, with respect to a hospital, an area with a 
     wage index that exceeds that of the area in which the 
     hospital is located.
       ``(D) The increase in the wage index under subparagraph (A) 
     for a hospital shall be equal to the percentage of the 
     employees of the hospital that resides in any higher wage 
     index area multiplied by the sum of the products, for each 
     higher wage index area of--
       ``(i) the difference between (I) the wage index for such 
     area, and (II) the wage index of the area in which the 
     hospital is located (before the application of this 
     paragraph); and
       ``(ii) the number of employees of the hospital that reside 
     in such higher wage index area divided by the total number of 
     such employees that reside in all high wage index areas.
       ``(E) The process under this paragraph shall be based upon 
     the process used by the Medicare Geographic Classification 
     Review Board under paragraph (10) with respect to data 
     submitted by hospitals to the Board on the location of 
     residence of hospital employees and wages under the 
     applicable schedule established for geographic 
     reclassification.

[[Page 16476]]

       ``(F) A reclassification under this paragraph shall be 
     effective for a period of 3 fiscal years, except that the 
     Secretary shall establish procedures under which a subsection 
     (d) hospital may elect to terminate such reclassification 
     before the end of such period.
       ``(G) A hospital that is reclassified under this paragraph 
     for a period is not eligible for reclassification under 
     paragraphs (8) or (10) during that period.
       ``(H) Any increase in a wage index under this paragraph for 
     a hospital shall not be taken into account for purposes of--
       ``(i) computing the wage index for the area in which the 
     hospital is located or any other area; or
       ``(ii) applying any budget neutrality adjustment with 
     respect to such index under paragraph (8)(D).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall first apply to the wage index for cost reporting period 
     beginning on or after October 1, 2004.

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

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

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

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

                      Subtitle B--Other Provisions

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

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

     SEC. 512. COVERAGE OF HOSPICE CONSULTATION SERVICES.

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

                TITLE VI--PROVISIONS RELATING TO PART B

                    Subtitle A--Physicians' Services

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

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

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

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

[[Page 16477]]

     in paragraph (1), including any recommendations for 
     legislation.
       (c) GAO Study of Medicare Payment for Inhalation Therapy.--
       (1) Study.--The Comptroller General of the United States 
     shall conduct a study to examine the adequacy of current 
     reimbursements for inhalation therapy under the medicare 
     program.
       (2) Report.--Not later than May 1, 2004, the Comptroller 
     General shall submit to Congress a report on the study 
     conducted under paragraph (1).

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

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

                    Subtitle B--Preventive Services

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

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

               ``Initial Preventive Physical Examination

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

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

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

           ``Cholesterol and Other Blood Lipid Screening Test

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

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

       (a) In General.--The first sentence of section 1833(b) (42 
     U.S.C. 1395l(b)), as amended by section 611(c)(1), is 
     amended--
       (1) by striking ``and'' before ``(7)''; and
       (2) by inserting before the period at the end the 
     following: ``, and (8) such deductible shall not apply with 
     respect to colorectal cancer screening tests (as described in 
     section 1861(pp)(1))''.
       (b) Conforming Amendments.--Paragraphs (2)(C)(ii) and 
     (3)(C)(ii) of section 1834(d) (42 U.S.C. 1395m(d)) are each 
     amended--
       (1) by striking ``deductible and'' in the heading; and
       (2) in subclause (I), by striking ``deductible or'' each 
     place it appears.
       (c) Effective Date.--The amendment made by this section 
     shall apply to items and services furnished on or after 
     Janaury 1, 2004.

     SEC. 614. IMPROVED PAYMENT FOR CERTAIN MAMMOGRAPHY SERVICES.

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

                       Subtitle C--Other Services

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

       (a) Payment for Drugs.--
       (1) Modification of ambulatory payment classification (apc) 
     groups.--Section 1833(t) (42 U.S.C. 1395l(t)) is amended--

[[Page 16478]]

       (A) by redesignating paragraph (13) as paragraph (14); and
       (B) by inserting after paragraph (12) the following new 
     paragraph:
       ``(13) Drug apc payment rates.--
       ``(A) In general.--With respect to payment for covered OPD 
     services that includes a specified covered outpatient drug 
     (defined in subparagraph (B)), the amount provided for 
     payment for such drug under the payment system under this 
     subsection for services furnished in--
       ``(i) 2004, 2005, or 2006, shall in no case--

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

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

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

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

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

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

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

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

     SEC. 622. PAYMENT FOR AMBULANCE SERVICES.

       (a) Phase-In Providing Floor Using Blend of Fee Schedule 
     and Regional Fee Schedules.--Section 1834(l) (42 U.S.C. 
     1395m(l)), as amended by section 410(a), is amended--
       (1) in paragraph (2)(E), by inserting ``consistent with 
     paragraph (11)'' after ``in an efficient and fair manner''; 
     and
       (2) by adding at the end the following new paragraph:

[[Page 16479]]

       ``(11) Phase-in providing floor using blend of fee schedule 
     and regional fee schedules.--In carrying out the phase-in 
     under paragraph (2)(E) for each level of service furnished in 
     a year, the portion of the payment amount that is based on 
     the fee schedule shall not be less than the following blended 
     rate of the fee schedule under paragraph (1) and of a 
     regional fee schedule for the region involved:
       ``(A) For 2004, the blended rate shall be based 20 percent 
     on the fee schedule under paragraph (1) and 80 percent on the 
     regional fee schedule.
       ``(B) For 2005, the blended rate shall be based 40 percent 
     on the fee schedule under paragraph (1) and 60 percent on the 
     regional fee schedule.
       ``(C) For 2006, the blended rate shall be based 60 percent 
     on the fee schedule under paragraph (1) and 40 percent on the 
     regional fee schedule.
       ``(D) For 2007, 2008, and 2009, the blended rate shall be 
     based 80 percent on the fee schedule under paragraph (1) and 
     20 percent on the regional fee schedule.
       ``(E) For 2010 and each succeeding year, the blended rate 
     shall be based 100 percent on the fee schedule under 
     paragraph (1).

     For purposes of this paragraph, the Secretary shall establish 
     a regional fee schedule for each of the 9 Census divisions 
     using the methodology (used in establishing the fee schedule 
     under paragraph (1)) to calculate a regional conversion 
     factor and a regional mileage payment rate and using the same 
     payment adjustments and the same relative value units as used 
     in the fee schedule under such paragraph.''.
       (b) Adjustment in Payment for Certain Long Trips.--Section 
     1834(l), as amended by subsection (a), is further amended by 
     adding at the end the following new paragraph:
       ``(12) Adjustment in payment for certain long trips.--In 
     the case of ground ambulance services furnished on or after 
     January 1, 2004, and before January 1, 2009, regardless of 
     where the transportation originates, the fee schedule 
     established under this subsection shall provide that, with 
     respect to the payment rate for mileage for a trip above 50 
     miles the per mile rate otherwise established shall be 
     increased by \1/4\ of the payment per mile otherwise 
     applicable to such miles.''.
       (c) GAO Report on Costs and Access.--Not later than 
     December 31, 2005, the Comptroller General of the United 
     States shall submit to Congress an initial report on how 
     costs differ among the types of ambulance providers and on 
     access, supply, and quality of ambulance services in those 
     regions and States that have a reduction in payment under the 
     medicare ambulance fee schedule (under section 1834(l) of the 
     Social Security Act, as amended by this section). Not later 
     than December 31, 2007, the Comptroller General shall submit 
     to Congress a final report on such access and supply.
       (d) Effective Date.--The amendments made by this section 
     shall apply to ambulance services furnished on or after 
     January 1, 2004.

     SEC. 623. RENAL DIALYSIS SERVICES.

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

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

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

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

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

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

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

[[Page 16480]]

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

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

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

     SEC. 628. EXTENSION OF COVERAGE OF INTRAVENOUS IMMUNE 
                   GLOBULIN (IVIG) FOR THE TREATMENT OF PRIMARY 
                   IMMUNE DEFICIENCY DISEASES IN THE HOME.

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

                     ``Intravenous Immune Globulin

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

     SEC. 629. MEDICARE COVERAGE OF DIABETES LABORATORY DIAGNOSTIC 
                   TESTS.

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

                ``Diabetes Screening Tests and Services

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

            TITLE VII--PROVISIONS RELATING TO PARTS A AND B

                    Subtitle A--Home Health Services

     SEC. 701. UPDATE IN HOME HEALTH SERVICES.

       (a) Change to Calender Year Update.--
       (1) In general.--Section 1895(b) (42 U.S.C. 1395fff(b)(3)) 
     is amended--
       (A) in paragraph (3)(B)(i)--
       (i) by striking ``each fiscal year (beginning with fiscal 
     year 2002)'' and inserting ``fiscal year 2002 and for fiscal 
     year 2003 and for each subsequent year (beginning with 
     2004)''; and
       (ii) by inserting ``or year'' after ``the fiscal year'';
       (B) in paragraph (3)(B)(ii)(II), by striking ``any 
     subsequent fiscal year'' and inserting ``2004 and any 
     subsequent year'';
       (C) in paragraph (3)(B)(iii), by inserting ``or year'' 
     after ``fiscal year'' each place it appears;
       (D) in paragraph (3)(B)(iv)--
       (i) by inserting ``or year'' after ``fiscal year'' each 
     place it appears; and
       (ii) by inserting ``or years'' after ``fiscal years''; and
       (E) in paragraph (5), by inserting ``or year'' after 
     ``fiscal year''.
       (2) Transition rule.--The standard prospective payment 
     amount (or amounts) under section 1895(b)(3) of the Social 
     Security Act for the calendar quarter beginning on October 1, 
     2003, shall be such amount (or amounts) for the previous 
     calendar quarter.
       (b) Changes in Updates for 2004, 2005, and 2006.--Section 
     1895(b)(3)(B)(ii) (42 U.S.C. 1395fff(b)(3)(B)(ii)), as 
     amended by subsection (a)(1)(B), is amended--
       (1) by striking ``or'' at the end of subclause (I);
       (2) by redesignating subclause (II) as subclause (III);
       (3) in subclause (III), as so redesignated, by striking 
     ``2004'' and inserting ``2007''; and
       (4) by inserting after subclause (I) the following new 
     subclause:

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

     SEC. 702. MEDPAC STUDY ON MEDICARE MARGINS OF HOME HEALTH 
                   AGENCIES.

       (a) Study.--The Medicare Payment Advisory Commission shall 
     conduct a study of

[[Page 16481]]

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

     SEC. 703. DEMONSTRATION PROJECT TO CLARIFY THE DEFINITION OF 
                   HOMEBOUND.

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

                  Subtitle B--Chronic Care Improvement

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

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


                       ``chronic care improvement

       ``Sec. 1807. (a) In General.--
       ``(1) In general.--The Secretary shall establish a process 
     for providing chronic care improvement programs in each CCIA 
     region for medicare beneficiaries who are not enrolled under 
     part C and who have certain chronic conditions, such as 
     congestive heart failure, diabetes, chronic obstructive 
     pulmonary disease (COPD), stroke, prostate and colon cancer, 
     hypertension, or other disease as identified by the Secretary 
     as appropriate for chronic care improvement. Such a process 
     shall begin to be implemented no later than 1 year after the 
     date of the enactment of this section.
       ``(2) Terminology.--For purposes of this section:
       ``(A) CCIA region.--The term `CCIA region' means a chronic 
     care improvement administrative region delineated under 
     subsection (b)(2).
       ``(B) Chronic care improvement program.--The terms `chronic 
     care improvement program' and `program' means such a program 
     provided by a contractor under this section.
       ``(C) Contractor.--The term `contractor' means an entity 
     with a contract to provide a chronic care improvement program 
     in a CCIA region under this section.
       ``(D) Individual plan.--The term `individual plan' means a 
     chronic care improvement plan established under subsection 
     (c)(5) for an individual.
       ``(3) Construction.--Nothing in this section shall be 
     construed as expanding the amount, duration, or scope of 
     benefits under this title.
       ``(b) Competitive Bidding Process.--
       ``(1) In general.--Under this section the Secretary shall 
     award contracts to qualified entities for chronic care 
     improvement programs for each CCIA region under this section 
     through a competitive bidding process.
       ``(2) Process.--Under such process--
       ``(A) the Secretary shall delineate the United States into 
     multiple chronic care improvement administrative regions; and
       ``(B) the Secretary shall select at least 2 winning bidders 
     in each CCIA region on the basis of the ability of each 
     bidder to carry out a chronic care improvement program in 
     accordance with this section, in order to achieve improved 
     health and financial outcomes.
       ``(3) Eligible contractor.--A contractor may be a disease 
     improvement organization, health insurer, provider 
     organization, a group of physicians, or any other legal 
     entity that the Secretary determines appropriate.
       ``(c) Chronic Care Improvement Programs.--
       ``(1) In general.--Each contract under this section shall 
     provide for the operation of a chronic care improvement 
     program by a contractor in a CCIA region consistent with this 
     subsection.
       ``(2) Identification of prospective program participants.--
     Each contractor shall have a method for identifying medicare 
     beneficiaries in the region to whom it will offer services 
     under its program. The contractor shall identify such 
     beneficiaries through claims or other data and other means 
     permitted consistent with applicable disclosure provisions.
       ``(3) Initial contact by secretary.--The Secretary shall 
     communicate with each beneficiary identified under paragraph 
     (2) as a prospective participant in one or more programs 
     concerning participation in a program. Such communication may 
     be made by the Secretary (or on behalf of the Secretary) and 
     shall include information on the following:
       ``(A) A description of the advantages to the beneficiary in 
     participating in a program.
       ``(B) Notification that the contractor offering a program 
     may contact the beneficiary directly concerning such 
     participation.
       ``(C) Notification that participation in a program is 
     voluntary.
       ``(D) A description of the method for the beneficiary to 
     select the single program in which the beneficiary wishes to 
     participate and for declining to participate and a method for 
     obtaining additional information concerning such 
     participation.
       ``(4) Participation.--A medicare beneficiary may 
     participate in only one program under this section and may 
     terminate participation at any time in a manner specified by 
     the Secretary.
       ``(5) Individual chronic care improvement plans.--
       ``(A) In general.--For each beneficiary participating in a 
     program of a contractor under this section, the contractor 
     shall develop with the beneficiary an individualized, goal-
     oriented chronic care improvement plan.

[[Page 16482]]

       ``(B) Elements of individual plan.--Each individual plan 
     developed under subparagraph (A) shall include a single point 
     of contact to coordinate care and the following, as 
     appropriate:
       ``(i) Self-improvement education for the beneficiary (such 
     as education for disease management through medical nutrition 
     therapy) and support education for health care providers, 
     primary caregivers, and family members.
       ``(ii) Coordination of health care services, such as 
     application of a prescription drug regimen and home health 
     services.
       ``(iii) Collaboration with physicians and other providers 
     to enhance communication of relevant clinical information.
       ``(iv) The use of monitoring technologies that enable 
     patient guidance through the exchange of pertinent clinical 
     information, such as vital signs, symptomatic information, 
     and health self-assessment.
       ``(v) The provision of information about hospice care, pain 
     and palliative care, and end-of-life care.
       ``(C) Contractor responsibilities.--In establishing and 
     carrying out individual plans under a program, a contractor 
     shall, directly or through subcontractors--
       ``(i) guide participants in managing their health, 
     including all their co-morbidities, and in performing 
     activities as specified under the elements of the plan;
       ``(ii) use decision support tools such as evidence-based 
     practice guidelines or other criteria as determined by the 
     Secretary; and
       ``(iii) develop a clinical information database to track 
     and monitor each participant across settings and to evaluate 
     outcomes.
       ``(6) Additional requirements.--The Secretary may establish 
     additional requirements for programs and contractors under 
     this section.
       ``(7) Accreditation.--The Secretary may provide that 
     programs that are accredited by qualified organizations may 
     be deemed to meet such requirements under this section as the 
     Secretary may specify.
       ``(c) Contract Terms.--
       ``(1) In general.--A contract under this section shall 
     contain such terms and conditions as the Secretary may 
     specify consistent with this section. The Secretary may not 
     enter into a contract with an entity under this section 
     unless the entity meets such clinical, quality improvement, 
     financial, and other requirements as the Secretary deems to 
     be appropriate for the population to be served.
       ``(2) Use of subcontractors permitted.--A contractor may 
     carry out a program directly or through contracts with 
     subcontractors.
       ``(3) Budget neutral payment condition.--In entering into a 
     contract with an entity under this subsection, the Secretary 
     shall establish payment rates that assure that there will be 
     no net aggregate increase in payments under this title over 
     any period of 3 years or longer, as agreed to by the 
     Secretary. Under this section, the Secretary shall assure 
     that medicare program outlays plus administrative expenses 
     (that would not have been paid under this title without 
     implementation of this section), including contractor fees, 
     shall not exceed the expenditures that would have been 
     incurred under this title for a comparable population in the 
     absence of the program under this section for the 3-year 
     contract period.
       ``(4) At risk relationship.--For purposes of section 
     1128B(b)(3)(F), a contract under this section shall be 
     treated as a risk-sharing arrangement referred to in such 
     section.
       ``(5) Performance standards.--Payment to contractors under 
     this section shall be subject to the contractor's meeting of 
     clinical and financial performance standards set by the 
     Secretary.
       ``(6) Contractor outcomes report.--Each contractor offering 
     a program shall monitor and report to the Secretary, in a 
     manner specified by the Secretary, the quality of care and 
     efficacy of such program in terms of--
       ``(A) process measures, such as reductions in errors of 
     treatment and rehospitalization rates;
       ``(B) beneficiary and provider satisfaction;
       ``(C) health outcomes; and
       ``(D) financial outcomes.
       ``(7) Phased in implementation.--Nothing in this section 
     shall be construed as preventing the Secretary from phasing 
     in the implementation of programs.
       ``(d) Biannual Outcomes Reports.--The Secretary shall 
     submit to the Congress biannual reports on the implementation 
     of this section. Each such report shall include information 
     on--
       ``(1) the scope of implementation (in terms of both regions 
     and chronic conditions);
       ``(2) program design; and
       ``(3) improvements in health outcomes and financial 
     efficiencies that result from such implementation.
       ``(e) Clinical Trials.--The Secretary shall conduct 
     randomized clinical trials, that compare program participants 
     with medicare beneficiaries who are offered, but decline, to 
     participate, in order to assess the potential of programs 
     to--
       ``(1) reduce costs under this title; and
       ``(2) improve health outcomes under this title.
       ``(f) Authorization of Appropriations.--There are 
     authorized to be appropriated to the Secretary, in 
     appropriate part from the Hospital Insurance Trust Fund and 
     the Supplementary Medical Insurance Trust Fund, such sums as 
     may be necessary to provide for contracts with chronic care 
     improvement programs under this section.
       ``(g) Limitation on Funding.--In no case shall the funding 
     under this section exceed $100,000,000 over a period of 3 
     years.''.

     SEC. 722. CHRONIC CARE IMPROVEMENT UNDER MEDICARE+CHOICE 
                   PLANS.

       (a) In General.--Section 1852 (42 U.S.C. 1395w-22) is 
     amended--
       (1) by amending subsection (e) to read as follows:
       ``(e) Implementation of Chronic Care Improvement Programs 
     for Beneficiaries With Multiple or Sufficiently Severe 
     Chronic Conditions.--
       ``(1) In general.--Each Medicare+Choice organization with 
     respect to each Medicare+Choice plan it offers shall have in 
     effect, for enrollees with multiple or sufficiently severe 
     chronic conditions, a chronic care improvement program that 
     is designed to manage the needs of such enrollees and that 
     meets the requirements of this subsection.
       ``(2) Enrollee with multiple or sufficiently severe chronic 
     conditions.--For purposes of this subsection, the term 
     `enrollee with multiple or sufficiently severe chronic 
     conditions' means, with respect to an enrollee in a 
     Medicare+Choice plan of a Medicare+Choice organization, an 
     enrollee in the plan who has one or more chronic conditions, 
     such as congestive heart failure, diabetes, COPD, stroke, 
     prostate and colon cancer, hypertension, or other disease as 
     identified by the organization as appropriate for chronic 
     care improvement.
       ``(3) General requirements.--
       ``(A) In general.--Each chronic care improvement program 
     under this subsection shall be conducted consistent with this 
     subsection.
       ``(B) Identification of enrollees.--Each such program shall 
     have a method for monitoring and identifying enrollees with 
     multiple or sufficiently severe chronic conditions that meet 
     the organization's criteria for participation under the 
     program.
       ``(C) Development of plans.--For an enrollee identified 
     under subparagraph (B) for participation in a program, the 
     program shall develop, with the enrollee's consent, an 
     individualized, goal-oriented chronic care improvement plan 
     for chronic care improvement.
       ``(D) Elements of plans.--Each chronic care improvement 
     plan developed under subparagraph (C) shall include a single 
     point of contact to coordinate care and the following, as 
     appropriate:
       ``(i) Self-improvement education for the enrollee (such as 
     education for disease management through medical nutrition 
     therapy) and support education for health care providers, 
     primary caregivers, and family members.
       ``(ii) Coordination of health care services, such as 
     application of a prescription drug regimen and home health 
     services.
       ``(iii) Collaboration with physicians and other providers 
     to enhance communication of relevant clinical information.
       ``(iv) The use of monitoring technologies that enable 
     patient guidance through the exchange of pertinent clinical 
     information, such as vital signs, symptomatic information, 
     and health self-assessment.
       ``(v) The provision of information about hospice care, pain 
     and palliative care, and end-of-life care.
       ``(E) Organization responsibilities.--In establishing and 
     carrying out chronic care improvement plans for participants 
     under this paragraph, a Medicare+Choice organization shall, 
     directly or through subcontractors--
       ``(i) guide participants in managing their health, 
     including all their co-morbidities, and in performing the 
     activities as specified under the elements of the plan;
       ``(ii) use decision support tools such as evidence-based 
     practice guidelines or other criteria as determined by the 
     Secretary; and
       ``(iii) develop a clinical information database to track 
     and monitor each participant across settings and to evaluate 
     outcomes.
       ``(3) Additional requirements.--The Secretary may establish 
     additional requirements for chronic care improvement programs 
     under this section.
       ``(4) Accreditation.--The Secretary may provide that 
     chronic care improvement programs that are accredited by 
     qualified organizations may be deemed to meet such 
     requirements under this subsection as the Secretary may 
     specify.
       ``(5) Outcomes report.--Each Medicare+ Choice organization 
     with respect to its chronic care improvement program under 
     this subsection shall monitor and report to the Secretary 
     information on the quality of care and efficacy of such 
     program as the Secretary may require.''; and
       (2) by amending subparagraph (I) of subsection (c)(1) to 
     read as follows:
       ``(I) Chronic care improvement program.--A description of 
     the organization's chronic care improvement program under 
     subsection (e).''.
       (b) Effective Date.--The amendments made by this section 
     shall apply for contract

[[Page 16483]]

     years beginning on or after 1 year after the date of the 
     enactment of this Act.

     SEC. 723. INSTITUTE OF MEDICINE REPORT.

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

     SEC. 724. MEDPAC REPORT.

       (a) Evaluation.--shall conduct an evaluation that includes 
     a description of the status of the implementation of chronic 
     care improvement programs under section 1807 of the Social 
     Security Act, the quality of health care services provided to 
     individuals in such program, the health status of the 
     participants of such program, and the cost savings attributed 
     to implementation of such program.
       (b) Report.--Not later than 2 years after the date of 
     implementation of such chronic care improvement programs, the 
     Commission shall submit a report on such evaluation.

                      Subtitle C--Other Provisions

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

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

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

       (a) Establishment.--Subject to the succeeding provisions of 
     this section, the Secretary of Health and Human Services 
     shall establish a demonstration project (in this section 
     referred to as the ``demonstration project'') under which the 
     Secretary shall, as part of a plan of an episode of care for 
     home health services established for a medicare beneficiary, 
     permit a home health agency, directly or under arrangements 
     with a medical adult day care facility, to provide medical 
     adult day care services as a substitute for a portion of home 
     health services that would otherwise be provided in the 
     beneficiary's home.
       (b) Payment.--
       (1) In general.--The amount of payment for an episode of 
     care for home health services, a portion of which consists of 
     substitute medical adult day care services, under the 
     demonstration project shall be made at a rate equal to 95 
     percent of the amount that would otherwise apply for such 
     home health services under section 1895 of the Social 
     Security Act (42 U.S.C. 1395fff). In no case may a home 
     health agency, or a medical adult day care facility under 
     arrangements with a home health agency, separately charge a 
     beneficiary for medical adult day care services furnished 
     under the plan of care.
       (2) Budget neutrality for demonstration project.--
     Notwithstanding any other provision of law, the Secretary 
     shall provide for an appropriate reduction in the aggregate 
     amount of additional payments made under section 1895 of the 
     Social Security Act (42 U.S.C. 1395fff) to reflect any 
     increase in amounts expended from the Trust Funds as a result 
     of the demonstration project conducted under this section.
       (c) Demonstration Project Sites.--The project established 
     under this section shall be conducted in not more than 5 
     States selected by the Secretary that license or certify 
     providers of services that furnish medical adult day care 
     services.
       (d) Duration.--The Secretary shall conduct the 
     demonstration project for a period of 3 years.
       (e) Voluntary Participation.--Participation of medicare 
     beneficiaries in the demonstration project shall be 
     voluntary. The total number of such beneficiaries that may 
     participate in the project at any given time may not exceed 
     15,000.
       (f) Preference in Selecting Agencies.--In selecting home 
     health agencies to participate under the demonstration 
     project, the Secretary shall give preference to those 
     agencies that are currently licensed or certified through 
     common ownership and control to furnish medical adult day 
     care services.
       (g) Waiver Authority.--The Secretary may waive such 
     requirements of title XVIII of the Social Security Act as may 
     be necessary for the purposes of carrying out the 
     demonstration project, other than waiving the requirement 
     that an individual be homebound in order to be eligible for 
     benefits for home health services.
       (h) Evaluation and Report.--The Secretary shall conduct an 
     evaluation of the clinical and cost effectiveness of the 
     demonstration project. Not later 30 months after the 
     commencement of the project, the Secretary shall submit to 
     Congress a report on the evaluation, and shall include in the 
     report the following:
       (1) An analysis of the patient outcomes and costs of 
     furnishing care to the medicare beneficiaries participating 
     in the project as compared to such outcomes and costs to 
     beneficiaries receiving only home health services for the 
     same health conditions.
       (2) Such recommendations regarding the extension, 
     expansion, or termination of the 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.

[[Page 16484]]



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

       (a) National and Local Coverage Determination Process.--
       (1) In general.--Section 1862 (42 U.S.C. 1395y) is 
     amended--
       (A) in the third sentence of subsection (a) by inserting 
     ``consistent with subsection (k)'' after ``the Secretary 
     shall ensure''; and
       (B) by adding at the end the following new subsection:
       ``(k) National and Local Coverage Determination Process.--
       ``(1) Criteria and evidence used in making national 
     coverage determinations.--The Secretary shall make available 
     to the public the criteria the Secretary uses in making 
     national coverage determinations, including how evidence to 
     demonstrate that a procedure or device is reasonable and 
     necessary is considered.
       ``(2) Timeframe for decisions on requests for national 
     coverage determinations.--In the case of a request for a 
     national coverage determination that--
       ``(A) does not require a technology assessment from an 
     outside entity or deliberation from the Medicare Coverage 
     Advisory Committee, the decision on the request shall be made 
     not later than 6 months after the date of the request; or
       ``(B) requires such an assessment or deliberation and in 
     which a clinical trial is not requested, the decision on the 
     request shall be made not later than 12 months after the date 
     of the request.
       ``(3) Process for public comment in national coverage 
     determinations.--At the end of the 6-month period that begins 
     on the date a request for a national coverage determination 
     is made, the Secretary shall--
       ``(A) make a draft of proposed decision on the request 
     available to the public through the Medicare Internet site of 
     the Department of Health and Human Services or other 
     appropriate means;
       ``(B) provide a 30-day period for public comment on such 
     draft;
       ``(C) make a final decision on the request within 60 days 
     of the conclusion of the 30-day period referred to under 
     subparagraph (B);
       ``(D) include in such final decision summaries of the 
     public comments received and responses thereto;
       ``(E) make available to the public the clinical evidence 
     and other data used in making such a decision when the 
     decision differs from the recommendations of the Medicare 
     Coverage Advisory Committee; and.
       ``(F) in the case of a decision to grant the coverage 
     determination, assign or temporary or permanent code during 
     the 60-day period referred to in subparagraph (C).
       ``(4) Consultation with outside experts in certain national 
     coverage determinations.--With respect to a request for a 
     national coverage determination for which there is not a 
     review by the Medicare Coverage Advisory Committee, the 
     Secretary shall consult with appropriate outside clinical 
     experts.
       ``(5) Local coverage determination process.--With respect 
     to local coverage determinations made on or after January 1, 
     2004--
       ``(A) Plan to promote consistency of coverage 
     determinations.--The Secretary shall develop a plan to 
     evaluate new local coverage determinations to determine which 
     determinations should be adopted nationally and to what 
     extent greater consistency can be achieved among local 
     coverage determinations.
       ``(B) Consultation.--The Secretary shall require the fiscal 
     intermediaries or carriers providing services within the same 
     area to consult on all new local coverage determinations 
     within the area.
       ``(C) Dissemination of information.--The Secretary should 
     serve as a center to disseminate information on local 
     coverage determinations among fiscal intermediaries and 
     carriers to reduce duplication of effort.
       ``(6) National and local coverage determination defined.--
     For purposes of this subsection, the terms `national coverage 
     determination' and `local coverage determination' have the 
     meaning given such terms in paragraphs (1)(B) and (2)(B), 
     respectively, of section 1869(f).''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply to national and local coverage determinations as 
     of January 1, 2004.
       (b) Medicare Coverage of Routine Costs Associated With 
     Certain Clinical Trials.--
       (1) In general.--With respect to the coverage of routine 
     costs of care for beneficiaries participating in a qualifying 
     clinical trial, as set forth on the date of the enactment of 
     this Act in National Coverage Determination 30-1 of the 
     Medicare Coverage Issues Manual, the Secretary shall deem 
     clinical trials conducted in accordance with an 
     investigational device exemption approved under section 
     520(g) of the Federal Food, Drug, and Cosmetic Act (42 U.S.C. 
     360j(g)) to be automatically qualified for such coverage.
       (2) Rule of construction.--Nothing in this subsection shall 
     be construed as authorizing or requiring the Secretary to 
     modify the regulations set forth on the date of the enactment 
     of this Act at subpart B of part 405 of title 42, Code of 
     Federal Regulations, or subpart A of part 411 of such title, 
     relating to coverage of, and payment for, a medical device 
     that is the subject of an investigational device exemption by 
     the Food and Drug Administration (except as may be necessary 
     to implement paragraph (1)).
       (3) Effective date.--This subsection shall apply to 
     clinical trials begun before, on, or after the date of the 
     enactment of this Act and to items and services furnished on 
     or after such date.
       (c) Issuance of Temporary National Codes.--Not later than 
     January 1, 2004, the Secretary shall implement revised 
     procedures for the issuance of temporary national HCPCS codes 
     under part B of title XVIII of the Social Security Act.

     SEC. 734. TREATMENT OF CERTAIN PHYSICIAN PATHOLOGY SERVICES.

       (a) In General.--Section 1848(i) (42 U.S.C. 1395w-4(i)) is 
     amended by adding at the end the following new paragraph:
       ``(4) Treatment of certain inpatient physician pathology 
     services.--
       ``(A) In general.--With respect to services furnished on or 
     after January 1, 2001, and before January 1, 2006, if an 
     independent laboratory furnishes the technical component of a 
     physician pathology service to a fee-for-service medicare 
     beneficiary who is an inpatient or outpatient of a covered 
     hospital, the Secretary shall treat such component as a 
     service for which payment shall be made to the laboratory 
     under this section and not as an inpatient hospital service 
     for which payment is made to the hospital under section 
     1886(d) or as a hospital outpatient service for which payment 
     is made to the hospital under section 1833(t).
       ``(B) Definitions.--In this paragraph:
       ``(i) Covered hospital.--

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

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

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

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

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

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

[[Page 16485]]

       (e) Waiver Authority.--The Secretary may waive compliance 
     with the requirements of title XVIII of the Social Security 
     Act to such extent and for such period as the Secretary 
     determines is necessary to conduct the demonstration project.

                          TITLE VIII--MEDICAID

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

       (a) In General.--Section 1923(f) of the Social Security Act 
     (42 U.S.C. 1396r-4(f))--
       (1) in paragraph (2)--
       (A) in the heading, by striking ``through 2002'' and 
     inserting ``through 2000'';
       (B) by striking ``ending with fiscal year 2002'' and 
     inserting ``ending with fiscal year 2000''; and
       (C) in the table in such paragraph, by striking the columns 
     labeled ``FY 01'' and ``FY02'';
       (2) in paragraph (3)(A), by striking ``paragraph (2)'' and 
     inserting ``paragraph (4)''; and
       (3) in paragraph (4), as added by section 701(a)(1) of the 
     Medicare, Medicaid, and SCHIP Benefits Improvement and 
     Protection Act of 2000 (as enacted into law by section 
     1(a)(6) of Public Law 106-554)--
       (A) by striking ``for fiscal years 2001 and 2002'' in the 
     heading;
       (B) in subparagraph (A), by striking ``Notwithstanding 
     paragraph (2), the'' and inserting ``The'';
       (C) in subparagraph (C)--
       (i) by striking ``No application'' and inserting 
     ``Application''; and
       (ii) by striking ``without regard to'' and inserting 
     ``taking into account''.
       (b) Increase in Medicaid DSH Allotment for the District of 
     Columbia.--
       (1) In general.--Effective for DSH allotments beginning 
     with fiscal year 2003, the item in the table contained in 
     section 1923(f)(2) of the Social Security Act (42 U.S.C. 
     1396r-4(f)(2)) for the District of Columbia for the DSH 
     allotment for FY 00 (fiscal year 2000) is amended by striking 
     ``32'' and inserting ``49''.
       (2) Construction.--Nothing in paragraph (1) shall be 
     construed as preventing the application of section 1923(f)(4) 
     of the Social Security Act (as amended by subsection (a)) to 
     the District of Columbia for fiscal year 2003 and subsequent 
     fiscal years.
       (c) Effective Date.--The amendments made by this section 
     shall apply to DSH allotments for fiscal years beginning with 
     fiscal year 2003.

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

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

     SEC. 803. CLARIFICATION OF INCLUSION OF INPATIENT DRUG PRICES 
                   CHARGED TO CERTAIN PUBLIC HOSPITALS IN THE BEST 
                   PRICE EXEMPTIONS FOR THE MEDICAID DRUG REBATE 
                   PROGRAM.

       (a) In General.--Section 1927(c)(1)(C)(i)(I) (42 U.S.C. 
     1396r-8(c)(1)(C)(i)(I)) is amended by inserting before the 
     semicolon the following: ``(including inpatient prices 
     charged to hospitals described in section 340B(a)(4)(L) of 
     the Public Health Service Act)''.

         TITLE IX--REGULATORY REDUCTION AND CONTRACTING REFORM

                     Subtitle A--Regulatory Reform

     SEC. 901. CONSTRUCTION; DEFINITION OF SUPPLIER.

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

                               ``Supplier

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

     SEC. 902. ISSUANCE OF REGULATIONS.

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

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

       (a) No Retroactive Application of Substantive Changes.--
       (1) In general.--Section 1871 (42 U.S.C. 1395hh), as 
     amended by section 902(a), is amended by adding at the end 
     the following new subsection:
       ``(e)(1)(A) A substantive change in regulations, manual 
     instructions, interpretative rules, statements of policy, or 
     guidelines of general applicability under this title shall 
     not be applied (by extrapolation or otherwise) retroactively 
     to items and services furnished before the effective date of 
     the change, unless the Secretary determines that--
       ``(i) such retroactive application is necessary to comply 
     with statutory requirements; or
       ``(ii) failure to apply the change retroactively would be 
     contrary to the public interest.''.
       (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

[[Page 16486]]

     substantive change a finding described in the first sentence, 
     and a brief statement of the reasons for such finding.
       ``(C) No action shall be taken against a provider of 
     services or supplier with respect to noncompliance with such 
     a substantive change for items and services furnished before 
     the effective date of such a change.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to compliance actions undertaken on or after the 
     date of the enactment of this Act.
       (c) Reliance on Guidance.--
       (1) In general.--Section 1871(e), as added by subsection 
     (a), is further amended by adding at the end the following 
     new paragraph:
       ``(2)(A) If--
       ``(i) a provider of services or supplier follows the 
     written guidance (which may be transmitted electronically) 
     provided by the Secretary or by a medicare contractor (as 
     defined in section 1889(g)) acting within the scope of the 
     contractor's contract authority, with respect to the 
     furnishing of items or services and submission of a claim for 
     benefits for such items or services with respect to such 
     provider or supplier;
       ``(ii) the Secretary determines that the provider of 
     services or supplier has accurately presented the 
     circumstances relating to such items, services, and claim to 
     the contractor in writing; and
       ``(iii) the guidance was in error;
     the provider of services or supplier shall not be subject to 
     any sanction (including any penalty or requirement for 
     repayment of any amount) if the provider of services or 
     supplier reasonably relied on such guidance.
       ``(B) Subparagraph (A) shall not be construed as preventing 
     the recoupment or repayment (without any additional penalty) 
     relating to an overpayment insofar as the overpayment was 
     solely the result of a clerical or technical operational 
     error.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on the date of the enactment of this Act 
     but shall not apply to any sanction for which notice was 
     provided on or before the date of the enactment of this Act.

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

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

                     Subtitle B--Contracting Reform

     SEC. 911. INCREASED FLEXIBILITY IN MEDICARE ADMINISTRATION.

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


          ``contracts with medicare administrative contractors

       ``Sec. 1874A. (a) Authority.--
       ``(1) Authority to enter into contracts.--The Secretary may 
     enter into contracts with any eligible entity to serve as a 
     medicare administrative contractor with respect to the 
     performance of any or all of the functions described in 
     paragraph (4) or parts of those functions (or, to the extent 
     provided in a contract, to secure performance thereof by 
     other entities).
       ``(2) Eligibility of entities.--An entity is eligible to 
     enter into a contract with respect to the performance of a 
     particular function described in paragraph (4) only if--
       ``(A) the entity has demonstrated capability to carry out 
     such function;
       ``(B) the entity complies with such conflict of interest 
     standards as are generally applicable to Federal acquisition 
     and procurement;
       ``(C) the entity has sufficient assets to financially 
     support the performance of such function; and
       ``(D) the entity meets such other requirements as the 
     Secretary may impose.
       ``(3) Medicare administrative contractor defined.--For 
     purposes of this title and title XI--
       ``(A) In general.--The term `medicare administrative 
     contractor' means an agency, organization, or other person 
     with a contract under this section.
       ``(B) Appropriate medicare administrative contractor.--With 
     respect to the performance of a particular function in 
     relation to an individual entitled to benefits under part A 
     or enrolled under part B, or both, a specific provider of 
     services or supplier (or class of such providers of services 
     or suppliers), the `appropriate' medicare administrative 
     contractor is the medicare administrative contractor that has 
     a contract under this section with respect to the performance 
     of that function in relation to that individual, provider of 
     services or supplier or class of provider of services or 
     supplier.
       ``(4) Functions described.--The functions referred to in 
     paragraphs (1) and (2) are payment functions, provider 
     services functions, and functions relating to services 
     furnished to individuals entitled to benefits under part A or 
     enrolled under part B, or both, as follows:
       ``(A) Determination of payment amounts.--Determining 
     (subject to the provisions of section 1878 and to such review 
     by the Secretary as may be provided for by the contracts) the 
     amount of the payments required pursuant to this title to be 
     made to providers of services, suppliers and individuals.
       ``(B) Making payments.--Making payments described in 
     subparagraph (A) (including receipt, disbursement, and 
     accounting for funds in making such payments).
       ``(C) Beneficiary education and assistance.--Providing 
     education and outreach to individuals entitled to benefits 
     under part A or enrolled under part B, or both, and providing 
     assistance to those individuals with specific issues, 
     concerns or problems.
       ``(D) Provider consultative services.--Providing 
     consultative services to institutions, agencies, and other 
     persons to enable them to establish and maintain fiscal 
     records necessary for purposes of this title and otherwise to 
     qualify as providers of services or suppliers.
       ``(E) Communication with providers.--Communicating to 
     providers of services and suppliers any information or 
     instructions furnished to the medicare administrative 
     contractor by the Secretary, and facilitating communication 
     between such providers and suppliers and the Secretary.
       ``(F) Provider education and technical assistance.--
     Performing the functions relating to provider education, 
     training, and technical assistance.
       ``(G) Additional functions.--Performing such other 
     functions as are necessary to carry out the purposes of this 
     title.
       ``(5) Relationship to mip contracts.--
       ``(A) Nonduplication of duties.--In entering into contracts 
     under this section, the Secretary shall assure that functions 
     of medicare administrative contractors in carrying out 
     activities under parts A and B do not duplicate activities 
     carried out under the Medicare Integrity Program under 
     section 1893. The previous sentence shall not apply with 
     respect to the activity described in section 1893(b)(5) 
     (relating to prior authorization of certain items of durable 
     medical equipment under section 1834(a)(15)).
       ``(B) Construction.--An entity shall not be treated as a 
     medicare administrative contractor merely by reason of having 
     entered into a contract with the Secretary under section 
     1893.
       ``(6) Application of federal acquisition regulation.--
     Except to the extent inconsistent with a specific requirement 
     of this title, the Federal Acquisition Regulation applies to 
     contracts under this title.
       ``(b) Contracting Requirements.--
       ``(1) Use of competitive procedures.--
       ``(A) In general.--Except as provided in laws with general 
     applicability to Federal acquisition and procurement or in 
     subparagraph (B), the Secretary shall use competitive 
     procedures when entering into contracts with medicare 
     administrative contractors 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.

[[Page 16487]]

       ``(C) Transfer of functions.--The Secretary may transfer 
     functions among medicare administrative contractors 
     consistent with the provisions of this paragraph. The 
     Secretary shall ensure that performance quality is considered 
     in such transfers. The Secretary shall provide public notice 
     (whether in the Federal Register or otherwise) of any such 
     transfer (including a description of the functions so 
     transferred, a description of the providers of services and 
     suppliers affected by such transfer, and contact information 
     for the contractors involved).
       ``(D) Incentives for quality.--The Secretary shall provide 
     incentives for medicare administrative contractors to provide 
     quality service and to promote efficiency.
       ``(2) Compliance with requirements.--No contract under this 
     section shall be entered into with any medicare 
     administrative contractor unless the Secretary finds that 
     such medicare administrative contractor will perform its 
     obligations under the contract efficiently and effectively 
     and will meet such requirements as to financial 
     responsibility, legal authority, quality of services 
     provided, and other matters as the Secretary finds pertinent.
       ``(3) Performance requirements.--
       ``(A) Development of specific performance requirements.--In 
     developing contract performance requirements, the Secretary 
     shall develop performance requirements applicable to 
     functions described in subsection (a)(4).
       ``(B) Consultation.-- In developing such requirements, the 
     Secretary may consult with providers of services and 
     suppliers, organizations representing individuals entitled to 
     benefits under part A or enrolled under part B, or both, and 
     organizations and agencies performing functions necessary to 
     carry out the purposes of this section with respect to such 
     performance requirements.
       ``(C) Inclusion in contracts.--All contractor performance 
     requirements shall be set forth in the contract between the 
     Secretary and the appropriate medicare administrative 
     contractor. Such performance requirements--
       ``(i) shall reflect the performance requirements developed 
     under subparagraph (A), but may include additional 
     performance requirements;
       ``(ii) shall be used for evaluating contractor performance 
     under the contract; and
       ``(iii) shall be consistent with the written statement of 
     work provided under the contract.
       ``(4) Information requirements.--The Secretary shall not 
     enter into a contract with a medicare administrative 
     contractor under this section unless the contractor agrees--
       ``(A) to furnish to the Secretary such timely information 
     and reports as the Secretary may find necessary in performing 
     his functions under this title; and
       ``(B) to maintain such records and afford such access 
     thereto as the Secretary finds necessary to assure the 
     correctness and verification of the information and reports 
     under subparagraph (A) and otherwise to carry out the 
     purposes of this title.
       ``(5) Surety bond.--A contract with a medicare 
     administrative contractor under this section may require the 
     medicare administrative contractor, and any of its officers 
     or employees certifying payments or disbursing funds pursuant 
     to the contract, or otherwise participating in carrying out 
     the contract, to give surety bond to the United States in 
     such amount as the Secretary may deem appropriate.
       ``(c) Terms and Conditions.--
       ``(1) In general.--A contract with any medicare 
     administrative contractor under this section may contain such 
     terms and conditions as the Secretary finds necessary or 
     appropriate and may provide for advances of funds to the 
     medicare administrative contractor for the making of payments 
     by it under subsection (a)(4)(B).
       ``(2) Prohibition on mandates for certain data 
     collection.--The Secretary may not require, as a condition of 
     entering into, or renewing, a contract under this section, 
     that the medicare administrative contractor match data 
     obtained other than in its activities under this title with 
     data used in the administration of this title for purposes of 
     identifying situations in which the provisions of section 
     1862(b) may apply.
       ``(d) Limitation on Liability of Medicare Administrative 
     Contractors and Certain Officers.--
       ``(1) Certifying officer.--No individual designated 
     pursuant to a contract under this section as a certifying 
     officer shall, in the absence of the reckless disregard of 
     the individual's obligations or the intent by that individual 
     to defraud the United States, be liable with respect to any 
     payments certified by the individual under this section.
       ``(2) Disbursing officer.--No disbursing officer shall, in 
     the absence of the reckless disregard of the officer's 
     obligations or the intent by that officer to defraud the 
     United States, be liable with respect to any payment by such 
     officer under this section if it was based upon an 
     authorization (which meets the applicable requirements for 
     such internal controls established by the Comptroller 
     General) of a certifying officer designated as provided in 
     paragraph (1) of this subsection.
       ``(3) Liability of medicare administrative contractor.--
       ``(A) In general.--No medicare administrative contractor 
     shall be liable to the United States for a payment by a 
     certifying or disbursing officer unless, in connection with 
     such payment, the medicare administrative contractor acted 
     with reckless disregard of its obligations under its medicare 
     administrative contract or with intent to defraud the United 
     States.
       ``(B) Relationship to false claims act.--Nothing in this 
     subsection shall be construed to limit liability for conduct 
     that would constitute a violation of sections 3729 through 
     3731 of title 31, United States Code (commonly known as the 
     `False Claims Act').
       ``(4) Indemnification by secretary.--
       ``(A) In general.--Subject to subparagraphs (B) and (D), in 
     the case of a medicare administrative contractor (or a person 
     who is a director, officer, or employee of such a contractor 
     or who is engaged by the contractor to participate directly 
     in the claims administration process) who is made a party to 
     any judicial or administrative proceeding arising from or 
     relating directly to the claims administration process under 
     this title, the Secretary may, to the extent the Secretary 
     determines to be appropriate and as specified in the contract 
     with the contractor, indemnify the contractor and such 
     persons.
       ``(B) Conditions.--The Secretary may not provide 
     indemnification under subparagraph (A) insofar as the 
     liability for such costs arises directly from conduct that is 
     determined by the judicial proceeding or by the Secretary to 
     be criminal in nature, fraudulent, or grossly negligent. If 
     indemnification is provided by the Secretary with respect to 
     a contractor before a determination that such costs arose 
     directly from such conduct, the contractor shall reimburse 
     the Secretary for costs of indemnification.
       ``(C) Scope of indemnification.--Indemnification by the 
     Secretary under subparagraph (A) may include payment of 
     judgments, settlements (subject to subparagraph (D)), awards, 
     and costs (including reasonable legal expenses).
       ``(D) Written approval for settlements.--A contractor or 
     other person described in subparagraph (A) may not propose to 
     negotiate a settlement or compromise of a proceeding 
     described in such subparagraph without the prior written 
     approval of the Secretary to negotiate such settlement or 
     compromise. Any indemnification under subparagraph (A) with 
     respect to amounts paid under a settlement or compromise of a 
     proceeding described in such subparagraph are conditioned 
     upon prior written approval by the Secretary of the final 
     settlement or compromise.
       ``(E) Construction.--Nothing in this paragraph shall be 
     construed--
       ``(i) to change any common law immunity that may be 
     available to a medicare administrative contractor or person 
     described in subparagraph (A); or
       ``(ii) to permit the payment of costs not otherwise 
     allowable, reasonable, or allocable under the Federal 
     Acquisition Regulations.''.
       (2) Consideration of incorporation of current law 
     standards.--In developing contract performance requirements 
     under section 1874A(b) of the Social Security Act, as 
     inserted by paragraph (1), the Secretary shall consider 
     inclusion of the performance standards described in sections 
     1816(f)(2) of such Act (relating to timely processing of 
     reconsiderations and applications for exemptions) and section 
     1842(b)(2)(B) of such Act (relating to timely review of 
     determinations and fair hearing requests), as such sections 
     were in effect before the date of the enactment of this Act.
       (b) Conforming Amendments to Section 1816 (Relating to 
     Fiscal Intermediaries).--Section 1816 (42 U.S.C. 1395h) is 
     amended as follows:
       (1) The heading is amended to read as follows:


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

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

[[Page 16488]]




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

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

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

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

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

       (a) In General.--Section 1874A, as added by section 
     911(a)(1), is amended by adding at the end the following new 
     subsection:
       ``(e) Requirements for Information Security.--
       ``(1) Development of information security program.--A 
     medicare administrative contractor that performs the 
     functions referred to in subparagraphs (A) and (B) of 
     subsection (a)(4) (relating to determining and making 
     payments) shall implement a contractor-wide information 
     security program to provide information security for the 
     operation and assets of the contractor with respect to such 
     functions under this title. An information security program 
     under this paragraph shall meet the requirements for 
     information security programs imposed on Federal agencies 
     under paragraphs (1) through (8) of section 3544(b) of title 
     44, United States Code (other than the requirements under 
     paragraphs (2)(D)(i), (5)(A), and (5)(B) of such section).
       ``(2) Independent audits.--
       ``(A) Performance of annual evaluations.--Each year a 
     medicare administrative contractor that performs the 
     functions referred to in subparagraphs (A) and (B) of 
     subsection (a)(4) (relating to determining and making 
     payments) shall undergo an evaluation of the information 
     security of the contractor with respect to such functions 
     under this title. The evaluation shall--
       ``(i) be performed by an entity that meets such 
     requirements for independence as the Inspector General of the 
     Department of

[[Page 16489]]

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

                   Subtitle C--Education and Outreach

     SEC. 921. PROVIDER EDUCATION AND TECHNICAL ASSISTANCE.

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


             ``provider education and technical assistance

       ``Sec. 1889. (a) Coordination of Education Funding.--The 
     Secretary shall coordinate the educational activities 
     provided through medicare contractors (as defined in 
     subsection (g), including under section 1893) in order to 
     maximize the effectiveness of Federal education efforts for 
     providers of services and suppliers.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on the date of the enactment of this Act.
       (3) Report.--Not later than October 1, 2004, the Secretary 
     shall submit to Congress a report that includes a description 
     and evaluation of the steps taken to coordinate the funding 
     of provider education under section 1889(a) of the Social 
     Security Act, as added by paragraph (1).
       (b) Incentives To Improve Contractor Performance.--
       (1) In general.--Section 1874A, as added by section 
     911(a)(1) and as amended by section 912(a), is amended by 
     adding at the end the following new subsection:
       ``(f) Incentives To Improve Contractor Performance in 
     Provider Education and Outreach.--The Secretary shall use 
     specific claims payment error rates or similar methodology of 
     medicare administrative contractors in the processing or 
     reviewing of medicare claims in order to give such 
     contractors an incentive to implement effective education and 
     outreach programs for providers of services and suppliers.''.
       (2) Application to fiscal intermediaries and carriers.--The 
     provisions of section 1874A(f) of the Social Security Act, as 
     added by paragraph (1), shall apply to each fiscal 
     intermediary under section 1816 of the Social Security Act 
     (42 U.S.C. 1395h) and each carrier under section 1842 of such 
     Act (42 U.S.C. 1395u) in the same manner as they apply to 
     medicare administrative contractors under such provisions.
       (3) GAO report on adequacy of methodology.--Not later than 
     October 1, 2004, the Comptroller General of the United States 
     shall submit to Congress and to the Secretary a report on the 
     adequacy of the methodology under section 1874A(f) of the 
     Social Security Act, as added by paragraph (1), and shall 
     include in the report such recommendations as the Comptroller 
     General determines appropriate with respect to the 
     methodology.
       (4) Report on use of methodology in assessing contractor 
     performance.--Not later than October 1, 2004, the Secretary 
     shall submit to Congress a report that describes how the 
     Secretary intends to use such methodology in assessing 
     medicare contractor performance in implementing effective 
     education and outreach programs, including whether to use 
     such methodology as a basis for performance bonuses. The 
     report shall include an analysis of the sources of identified 
     errors and potential changes in systems of contractors and 
     rules of the Secretary that could reduce claims error rates.
       (c) Provision of Access to and Prompt Responses From 
     Medicare Administrative Contractors.--
       (1) In general.--Section 1874A, as added by section 
     911(a)(1) and as amended by section 912(a) and subsection 
     (b), is further amended by adding at the end the following 
     new subsection:
       ``(g) Communications with Beneficiaries, Providers of 
     Services and Suppliers.--
       ``(1) Communication strategy.--The Secretary shall develop 
     a strategy for communications with individuals entitled to 
     benefits under part A or enrolled under part B, or both, and 
     with providers of services and suppliers under this title.
       ``(2) Response to written inquiries.--Each medicare 
     administrative contractor shall, for those providers of 
     services and suppliers which submit claims to the contractor 
     for claims processing and for those individuals entitled to 
     benefits under part A or enrolled under part B, or both, with 
     respect to whom claims are submitted for claims processing, 
     provide general written responses (which may be through 
     electronic transmission) in a clear, concise, and accurate 
     manner to inquiries of providers of services, suppliers and 
     individuals entitled to benefits under part A or enrolled 
     under part B, or both, concerning the programs under this 
     title within 45 business days of the date of receipt of such 
     inquiries.
       ``(3) Response to toll-free lines.--The Secretary shall 
     ensure that each medicare administrative contractor shall 
     provide, for those providers of services and suppliers which 
     submit claims to the contractor for claims processing and for 
     those individuals entitled to benefits under part A or 
     enrolled under part B, or both, with respect to whom claims 
     are submitted for claims processing, a toll-free telephone 
     number at which such individuals, providers of services and 
     suppliers may obtain information regarding billing, coding, 
     claims, coverage, and other appropriate information under 
     this title.
       ``(4) Monitoring of contractor responses.--
       ``(A) In general.--Each medicare administrative contractor 
     shall, consistent with standards developed by the Secretary 
     under subparagraph (B)--
       ``(i) maintain a system for identifying who provides the 
     information referred to in paragraphs (2) and (3); and
       ``(ii) monitor the accuracy, consistency, and timeliness of 
     the information so provided.
       ``(B) Development of standards.--
       ``(i) In general.--The Secretary shall establish and make 
     public standards to monitor the accuracy, consistency, and 
     timeliness of the information provided in response to written 
     and telephone inquiries under this subsection. Such standards 
     shall be consistent with the performance requirements 
     established under subsection (b)(3).
       ``(ii) Evaluation.--In conducting evaluations of individual 
     medicare administrative contractors, the Secretary shall take 
     into account the results of the monitoring conducted under 
     subparagraph (A) taking into account as performance 
     requirements the standards established under clause (i). The 
     Secretary shall, in consultation with organizations 
     representing providers of services, suppliers, and 
     individuals entitled to benefits under part A or enrolled 
     under part B, or both, establish standards relating to the 
     accuracy, consistency, and timeliness of the information so 
     provided.
       ``(C) Direct monitoring.--Nothing in this paragraph shall 
     be construed as preventing the Secretary from directly 
     monitoring the accuracy, consistency, and timeliness of the 
     information so provided.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect October 1, 2004.
       (3) Application to fiscal intermediaries and carriers.--The 
     provisions of section 1874A(g) of the Social Security Act, as 
     added by paragraph (1), shall apply to each fiscal 
     intermediary under section 1816 of the Social Security Act 
     (42 U.S.C. 1395h) and each carrier under section 1842 of such 
     Act (42 U.S.C.

[[Page 16490]]

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

     SEC. 922. SMALL PROVIDER TECHNICAL ASSISTANCE DEMONSTRATION 
                   PROGRAM.

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

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

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

[[Page 16491]]

     with respect to complaints, grievances, and requests for 
     information concerning the programs under this title 
     (including provisions of title XI insofar as they relate to 
     this title and are not administered by the Office of the 
     Inspector General of the Department of Health and Human 
     Services) and in the resolution of unclear or conflicting 
     guidance given by the Secretary and medicare contractors to 
     such providers of services and suppliers regarding such 
     programs and provisions and requirements under this title and 
     such provisions; and
       ``(2) submit recommendations to the Secretary for 
     improvement in the administration of this title and such 
     provisions, including--
       ``(A) recommendations to respond to recurring patterns of 
     confusion in this title and such provisions (including 
     recommendations regarding suspending imposition of sanctions 
     where there is widespread confusion in program 
     administration), and
       ``(B) recommendations to provide for an appropriate and 
     consistent response (including not providing for audits) in 
     cases of self-identified overpayments by providers of 
     services and suppliers.

     The Ombudsman shall not serve as an advocate for any 
     increases in payments or new coverage of services, but may 
     identify issues and problems in payment or coverage 
     policies.''.
       (b) Medicare Beneficiary Ombudsman.--Title XVIII, as 
     previously amended, is amended by inserting after section 
     1809 the following new section:


                    ``medicare beneficiary ombudsman

       ``Sec. 1810. (a) In General.--The Secretary shall appoint 
     within the Department of Health and Human Services a Medicare 
     Beneficiary Ombudsman who shall have expertise and experience 
     in the fields of health care and education of (and assistance 
     to) individuals entitled to benefits under this title.
       ``(b) Duties.--The Medicare Beneficiary Ombudsman shall--
       ``(1) receive complaints, grievances, and requests for 
     information submitted by individuals entitled to benefits 
     under part A or enrolled under part B, or both, with respect 
     to any aspect of the medicare program;
       ``(2) provide assistance with respect to complaints, 
     grievances, and requests referred to in paragraph (1), 
     including--
       ``(A) assistance in collecting relevant information for 
     such individuals, to seek an appeal of a decision or 
     determination made by a fiscal intermediary, carrier, 
     Medicare+Choice organization, or the Secretary;
       ``(B) assistance to such individuals with any problems 
     arising from disenrollment from a Medicare+Choice plan under 
     part C; and
       ``(C) assistance to such individuals in presenting 
     information under section 1860D-2(b)(4)(D)(v); and
       ``(3) submit annual reports to Congress and the Secretary 
     that describe the activities of the Office and that include 
     such recommendations for improvement in the administration of 
     this title as the Ombudsman determines appropriate.

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

     SEC. 924. BENEFICIARY OUTREACH DEMONSTRATION PROGRAM.

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

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

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

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

       (a) Availability of Data.--The Secretary shall publicly 
     provide information that enables hospital discharge planners, 
     medicare beneficiaries, and the public to identify skilled 
     nursing facilities that are participating in the medicare 
     program.
       (b) Inclusion of Information in Certain Hospital Discharge 
     Plans.--
       (1) In general.--Section 1861(ee)(2)(D) (42 U.S.C. 
     1395x(ee)(2)(D)) is amended--
       (A) by striking ``hospice services'' and inserting 
     ``hospice care and post-hospital extended care services''; 
     and
       (B) by inserting before the period at the end the 
     following: ``and, in the case of individuals who are likely 
     to need post-hospital extended care services, the 
     availability of such services through facilities that 
     participate in the program under this title and that serve 
     the area in which the patient resides''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply to discharge plans made on or after such date as 
     the Secretary shall specify, but not later than 6 months 
     after the date the Secretary provides for availability of 
     information under subsection (a).

[[Page 16492]]



                    Subtitle D--Appeals and Recovery

     SEC. 931. TRANSFER OF RESPONSIBILITY FOR MEDICARE APPEALS.

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

     SEC. 932. PROCESS FOR EXPEDITED ACCESS TO REVIEW.

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

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

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

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

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

[[Page 16493]]

       (1) Termination and certain other immediate remedies.--The 
     Secretary shall develop and implement a process to expedite 
     proceedings under sections 1866(h) of the Social Security Act 
     (42 U.S.C. 1395cc(h)) in which the remedy of termination of 
     participation, or a remedy described in clause (i) or (iii) 
     of section 1819(h)(2)(B) of such Act (42 U.S.C. 1395i-
     3(h)(2)(B)) which is applied on an immediate basis, has been 
     imposed. Under such process priority shall be provided in 
     cases of termination.
       (2) Increased financial support.--In addition to any 
     amounts otherwise appropriated, to reduce by 50 percent the 
     average time for administrative determinations on appeals 
     under section 1866(h) of the Social Security Act (42 U.S.C. 
     1395cc(h)), there are authorized to be appropriated (in 
     appropriate part from the Federal Hospital Insurance Trust 
     Fund and the Federal Supplementary Medical Insurance Trust 
     Fund) to the Secretary such additional sums for fiscal year 
     2005 and each subsequent fiscal year as may be necessary. The 
     purposes for which such amounts are available include 
     increasing the number of administrative law judges (and their 
     staffs) and the appellate level staff at the Departmental 
     Appeals Board of the Department of Health and Human Services 
     and educating such judges and staffs on long-term care 
     issues.

     SEC. 933. REVISIONS TO MEDICARE APPEALS PROCESS.

       (a) Requiring Full and Early Presentation of Evidence.--
       (1) In general.--Section 1869(b) (42 U.S.C. 1395ff(b)), as 
     amended by BIPA and as amended by section 932(a), is further 
     amended by adding at the end the following new paragraph:
       ``(3) Requiring full and early presentation of evidence by 
     providers.--A provider of services or supplier may not 
     introduce evidence in any appeal under this section that was 
     not presented at the reconsideration conducted by the 
     qualified independent contractor under subsection (c), unless 
     there is good cause which precluded the introduction of such 
     evidence at or before that reconsideration.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on October 1, 2004.
       (b) Use of Patients' Medical Records.--Section 
     1869(c)(3)(B)(i) (42 U.S.C. 1395ff(c)(3)(B)(i)), as amended 
     by BIPA, is amended by inserting ``(including the medical 
     records of the individual involved)'' after ``clinical 
     experience''.
       (c) Notice Requirements for Medicare Appeals.--
       (1) Initial determinations and redeterminations.--Section 
     1869(a) (42 U.S.C. 1395ff(a)), as amended by BIPA, is amended 
     by adding at the end the following new paragraphs:
       ``(4) Requirements of notice of determinations.--With 
     respect to an initial determination insofar as it results in 
     a denial of a claim for benefits--
       ``(A) the written notice on the determination shall 
     include--
       ``(i) the reasons for the determination, including whether 
     a local medical review policy or a local coverage 
     determination was used;
       ``(ii) the procedures for obtaining additional information 
     concerning the determination, including the information 
     described in subparagraph (B); and
       ``(iii) notification of the right to seek a redetermination 
     or otherwise appeal the determination and instructions on how 
     to initiate such a redetermination under this section; and
       ``(B) the person provided such notice may obtain, upon 
     request, the specific provision of the policy, manual, or 
     regulation used in making the determination.
       ``(5) Requirements of notice of redeterminations.--With 
     respect to a redetermination insofar as it results in a 
     denial of a claim for benefits--
       ``(A) the written notice on the redetermination shall 
     include--
       ``(i) the specific reasons for the redetermination;
       ``(ii) as appropriate, a summary of the clinical or 
     scientific evidence used in making the redetermination;
       ``(iii) a description of the procedures for obtaining 
     additional information concerning the redetermination; and
       ``(iv) notification of the right to appeal the 
     redetermination and instructions on how to initiate such an 
     appeal under this section;
       ``(B) such written notice shall be provided in printed form 
     and written in a manner calculated to be understood by the 
     individual entitled to benefits under part A or enrolled 
     under part B, or both; and
       ``(C) the person provided such notice may obtain, upon 
     request, information on the specific provision of the policy, 
     manual, or regulation used in making the redetermination.''.
       (2)Reconsiderations.--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'), a reviewing professional meets the 
     qualifications described in paragraph (4) and, where a claim 
     is regarding the furnishing of treatment by a physician 
     (allopathic or osteopathic) or the provision of items or 
     services by a physician (allopathic or osteopathic), each 
     reviewing professional shall be a physician (allopathic or 
     osteopathic).
       ``(2) Independence.--
       ``(A) In general.--Subject to subparagraph (B), each 
     individual conducting a review in a case shall--
       ``(i) not be a related party (as defined in paragraph (5));
       ``(ii) not have a material familial, financial, or 
     professional relationship with such a party in the case under 
     review; and
       ``(iii) not otherwise have a conflict of interest with such 
     a party.
       ``(B) Exception.--Nothing in subparagraph (A) shall be 
     construed to--
       ``(i) prohibit an individual, solely on the basis of a 
     participation agreement with a fiscal intermediary, carrier, 
     or other contractor, from serving as a reviewing professional 
     if--

       ``(I) the individual is not involved in the provision of 
     items or services in the case under review;

[[Page 16494]]

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

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

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

     SEC. 934. PREPAYMENT REVIEW.

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

     SEC. 935. RECOVERY OF OVERPAYMENTS.

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

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

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

[[Page 16495]]

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

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

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

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

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

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

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

[[Page 16496]]

       ``(2) Hearing rights in cases of denial or non-renewal.--A 
     provider of services or supplier whose application to enroll 
     (or, if applicable, to renew enrollment) under this title is 
     denied may have a hearing and judicial review of such denial 
     under the procedures that apply under subsection (h)(1)(A) to 
     a provider of services that is dissatisfied with a 
     determination by the Secretary.''.
       (b) Effective Dates.--
       (1) Enrollment process.--The Secretary shall provide for 
     the establishment of the enrollment process under section 
     1866(j)(1) of the Social Security Act, as added by subsection 
     (a)(2), within 6 months after the date of the enactment of 
     this Act.
       (2) Consultation.--Section 1866(j)(1)(C) of the Social 
     Security Act, as added by subsection (a)(2), shall apply with 
     respect to changes in provider enrollment forms made on or 
     after January 1, 2004.
       (3) Hearing rights.--Section 1866(j)(2) of the Social 
     Security Act, as added by subsection (a)(2), shall apply to 
     denials occurring on or after such date (not later than 1 
     year after the date of the enactment of this Act) as the 
     Secretary specifies.

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

       (a) Claims.--The Secretary shall develop, in consultation 
     with appropriate Medicare contractors (as defined in section 
     1889(g) of the Social Security Act, as inserted by section 
     301(a)(1)) and representatives of providers of services and 
     suppliers, a process whereby, in the case of minor errors or 
     omissions (as defined by the Secretary) that are detected in 
     the submission of claims under the programs under title XVIII 
     of such Act, a provider of services or supplier is given an 
     opportunity to correct such an error or omission without the 
     need to initiate an appeal. Such process shall include the 
     ability to resubmit corrected claims.
       (b) Permitting Use of Corrected and Supplementary Data.--
       (1) In general.--Section 1886(d)(10)(D)(vi) (42 U.S.C. 
     1395ww(d)(10)(D)(vi)) is amended by adding after subclause 
     (II) at the end the following:

     ``Notwithstanding subclause (I), a hospital may submit, and 
     the Secretary may accept upon verification, data that 
     corrects or supplements the data described in such subclause 
     without regard to whether the corrected or supplementary data 
     relate to a cost report that has been settled.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to fiscal years beginning with fiscal year 2004.
       (3) Submittal and resubmittal of applications permitted for 
     fiscal year 2004.--
       (A) In general.--Notwithstanding any other provision of 
     law, a hospital may submit (or resubmit) an application for a 
     change described in section 1886(d)(10)(C)(i)(II) of the 
     Social Security Act for fiscal year 2004 if the hospital 
     demonstrates on a timely basis to the satisfaction of the 
     Secretary that the use of corrected or supplementary data 
     under the amendment made by paragraph (1) would materially 
     affect the approval of such an application.
       (B) Application of budget neutrality.--If one or more 
     hospital's applications are approved as a result of paragraph 
     (1) and subparagraph (A) for fiscal year 2004, the Secretary 
     shall make a proportional adjustment in the standardized 
     amounts determined under section 1886(d)(3) of the Social 
     Security Act (42 U.S.C. 1395ww(d)(3)) for fiscal year 2004 to 
     assure that approval of such applications does not result in 
     aggregate payments under section 1886(d) of such Act that are 
     greater or less than those that would otherwise be made if 
     paragraph (1) and subparagraph (A) did not apply.

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

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

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

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

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

     from receiving (and submitting a claim for) such items 
     services and from obtaining administrative or judicial review 
     respecting such claim under the other applicable provisions 
     of this section. Failure to seek a prior

[[Page 16497]]

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

                  Subtitle V--Miscellaneous Provisions

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

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

     The Secretary shall make changes to the manner in which 
     existing evaluation and management documentation guidelines 
     are implemented to reduce paperwork burdens on physicians.
       (b) Pilot Projects to Test Evaluation and Management 
     Documentation Guidelines.--
       (1) In general.--The Secretary shall conduct under this 
     subsection appropriate and representative pilot projects to 
     test new evaluation and management documentation guidelines 
     referred to in subsection (a).
       (2) Length and consultation.--Each pilot project under this 
     subsection shall--
       (A) be voluntary;
       (B) be of sufficient length as determined by the Secretary 
     to allow for preparatory physician and medicare contractor 
     education, analysis, and use and assessment of potential 
     evaluation and management guidelines; and
       (C) be conducted, in development and throughout the 
     planning and operational stages of the project, in 
     consultation with practicing physicians (including both 
     generalists and specialists).
       (3) Range of pilot projects.--Of the pilot projects 
     conducted under this subsection--
       (A) at least one shall focus on a peer review method by 
     physicians (not employed by a medicare contractor) which 
     evaluates medical record information for claims submitted by 
     physicians identified as statistical outliers relative to 
     definitions published in the Current Procedures Terminology 
     (CPT) code book of the American Medical Association;
       (B) at least one shall focus on an alternative method to 
     detailed guidelines based on physician documentation of face 
     to face encounter time with a patient;
       (C) at least one shall be conducted for services furnished 
     in a rural area and at least one for services furnished 
     outside such an area; and
       (D) at least one shall be conducted in a setting where 
     physicians bill under physicians' services in teaching 
     settings and at least one shall be conducted in a setting 
     other than a teaching setting.
       (4) Banning of targeting of pilot project participants.--
     Data collected under this subsection shall not be used as the 
     basis for overpayment demands or post-payment audits. Such 
     limitation applies only to claims filed as part of the pilot 
     project and lasts only for the duration of the pilot project 
     and only as long as the provider is a participant in the 
     pilot project.
       (5) Study of impact.--Each pilot project shall examine the 
     effect of the new evaluation and management documentation 
     guidelines on--
       (A) different types of physician practices, including those 
     with fewer than 10 full-time-equivalent employees (including 
     physicians); and
       (B) the costs of physician compliance, including education, 
     implementation, auditing, and monitoring.
       (6) Periodic reports.--The Secretary shall submit to 
     Congress periodic reports on the pilot projects under this 
     subsection.
       (c) Objectives for Evaluation and Management Guidelines.--
     The objectives for modified evaluation and management 
     documentation guidelines developed by the Secretary shall be 
     to--
       (1) identify clinically relevant documentation needed to 
     code accurately and assess coding levels accurately;
       (2) decrease the level of non-clinically pertinent and 
     burdensome documentation time and content in the physician's 
     medical record;
       (3) increase accuracy by reviewers; and
       (4) educate both physicians and reviewers.
       (d) Study of Simpler, Alternative Systems of Documentation 
     for Physician Claims.--
       (1) Study.--The Secretary shall carry out a study of the 
     matters described in paragraph (2).
       (2) Matters described.--The matters referred to in 
     paragraph (1) are--
       (A) the development of a simpler, alternative system of 
     requirements for documentation accompanying claims for 
     evaluation and management physician services for which 
     payment is made under title XVIII of the Social Security Act; 
     and
       (B) consideration of systems other than current coding and 
     documentation requirements for payment for such physician 
     services.
       (3) Consultation with practicing physicians.--In designing 
     and carrying out the study under paragraph (1), the Secretary 
     shall consult with practicing physicians, including 
     physicians who are part of group practices and including both 
     generalists and specialists.
       (4) Application of hipaa uniform coding requirements.--In 
     developing an alternative system under paragraph (2), the 
     Secretary shall consider requirements of administrative 
     simplification under part C of title XI of the Social 
     Security Act.
       (5) Report to congress.--(A) Not later than October 1, 
     2005, the Secretary shall submit to Congress a report on the 
     results of the study conducted under paragraph (1).

[[Page 16498]]

       (B) The Medicare Payment Advisory Commission shall conduct 
     an analysis of the results of the study included in the 
     report under subparagraph (A) and shall submit a report on 
     such analysis to Congress.
       (e) Study on Appropriate Coding of Certain Extended Office 
     Visits.--The Secretary shall conduct a study of the 
     appropriateness of coding in cases of extended office visits 
     in which there is no diagnosis made. Not later than October 
     1, 2005, the Secretary shall submit a report to Congress on 
     such study and shall include recommendations on how to code 
     appropriately for such visits in a manner that takes into 
     account the amount of time the physician spent with the 
     patient.
       (f) Definitions.--In this section--
       (1) the term ``rural area'' has the meaning given that term 
     in section 1886(d)(2)(D) of the Social Security Act, 42 
     U.S.C. 1395ww(d)(2)(D); and
       (2) the term ``teaching settings'' are those settings 
     described in section 415.150 of title 42, Code of Federal 
     Regulations.

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

       (a) Council for Technology and Innovation.--Section 1868 
     (42 U.S.C. 1395ee), as amended by section 921(a), is amended 
     by adding at the end the following new subsection:
       ``(c) Council for Technology and Innovation.--
       ``(1) Establishment.--The Secretary shall establish a 
     Council for Technology and Innovation within the Centers for 
     Medicare & Medicaid Services (in this section referred to as 
     `CMS').
       ``(2) Composition.--The Council shall be composed of senior 
     CMS staff and clinicians and shall be chaired by the 
     Executive Coordinator for Technology and Innovation 
     (appointed or designated under paragraph (4)).
       ``(3) Duties.--The Council shall coordinate the activities 
     of coverage, coding, and payment processes under this title 
     with respect to new technologies and procedures, including 
     new drug therapies, and shall coordinate the exchange of 
     information on new technologies between CMS and other 
     entities that make similar decisions.
       ``(4) Executive coordinator for technology and 
     innovation.--The Secretary shall appoint (or designate) a 
     noncareer appointee (as defined in section 3132(a)(7) of 
     title 5, United States Code) who shall serve as the Executive 
     Coordinator for Technology and Innovation. Such executive 
     coordinator shall report to the Administrator of CMS, shall 
     chair the Council, shall oversee the execution of its duties, 
     and shall serve as a single point of contact for outside 
     groups and entities regarding the coverage, coding, and 
     payment processes under this title.''.
       (b) Methods for Determining Payment Basis for New Lab 
     Tests.--Section 1833(h) (42 U.S.C. 1395l(h)) is amended by 
     adding at the end the following:
       ``(8)(A) The Secretary shall establish by regulation 
     procedures for determining the basis for, and amount of, 
     payment under this subsection for any clinical diagnostic 
     laboratory test with respect to which a new or substantially 
     revised HCPCS code is assigned on or after January 1, 2005 
     (in this paragraph referred to as `new tests').
       ``(B) Determinations under subparagraph (A) shall be made 
     only after the Secretary--
       ``(i) makes available to the public (through an Internet 
     site and other appropriate mechanisms) a list that includes 
     any such test for which establishment of a payment amount 
     under this subsection is being considered for a year;
       ``(ii) on the same day such list is made available, causes 
     to have published in the Federal Register notice of a meeting 
     to receive comments and recommendations (and data on which 
     recommendations are based) from the public on the appropriate 
     basis under this subsection for establishing payment amounts 
     for the tests on such list;
       ``(iii) not less than 30 days after publication of such 
     notice convenes a meeting, that includes representatives of 
     officials of the Centers for Medicare & Medicaid Services 
     involved in determining payment amounts, to receive such 
     comments and recommendations (and data on which the 
     recommendations are based);
       ``(iv) taking into account the comments and recommendations 
     (and accompanying data) received at such meeting, develops 
     and makes available to the public (through an Internet site 
     and other appropriate mechanisms) a list of proposed 
     determinations with respect to the appropriate basis for 
     establishing a payment amount under this subsection for each 
     such code, together with an explanation of the reasons for 
     each such determination, the data on which the determinations 
     are based, and a request for public written comments on the 
     proposed determination; and
       ``(v) taking into account the comments received during the 
     public comment period, develops and makes available to the 
     public (through an Internet site and other appropriate 
     mechanisms) a list of final determinations of the payment 
     amounts for such tests under this subsection, together with 
     the rationale for each such determination, the data on which 
     the determinations are based, and responses to comments and 
     suggestions received from the public.
       ``(C) Under the procedures established pursuant to 
     subparagraph (A), the Secretary shall--
       ``(i) set forth the criteria for making determinations 
     under subparagraph (A); and
       ``(ii) make available to the public the data (other than 
     proprietary data) considered in making such determinations.
       ``(D) The Secretary may convene such further public 
     meetings to receive public comments on payment amounts for 
     new tests under this subsection as the Secretary deems 
     appropriate.
       ``(E) For purposes of this paragraph:
       ``(i) The term `HCPCS' refers to the Health Care Procedure 
     Coding System.
       ``(ii) A code shall be considered to be `substantially 
     revised' if there is a substantive change to the definition 
     of the test or procedure to which the code applies (such as a 
     new analyte or a new methodology for measuring an existing 
     analyte-specific test).''.
       (c) GAO Study on Improvements in External Data Collection 
     for Use in the Medicare Inpatient Payment System.--
       (1) Study.--The Comptroller General of the United States 
     shall conduct a study that analyzes which external data can 
     be collected in a shorter time frame by the Centers for 
     Medicare & Medicaid Services for use in computing payments 
     for inpatient hospital services. The study may include an 
     evaluation of the feasibility and appropriateness of using of 
     quarterly samples or special surveys or any other methods. 
     The study shall include an analysis of whether other 
     executive agencies, such as the Bureau of Labor Statistics in 
     the Department of Commerce, are best suited to collect this 
     information.
       (2) Report.--By not later than October 1, 2004, the 
     Comptroller General shall submit a report to Congress on the 
     study under paragraph (1).
       (d) Process for Adoption of ICD Codes as Data Standard.--
     Section 1172(f) (42 U.S.C. 1320d-1(f)) is amended by 
     inserting after the first sentence the following: 
     ``Notwithstanding the preceding sentence, if the National 
     Committee on Vital and Health Statistics has not made a 
     recommendation to the Secretary before the date of the 
     enactment of this sentence, with respect to the adoption of 
     the International Classification of Diseases, 10th Revision, 
     Procedure Coding System (`ICD-10-PCS') and the International 
     Classification of Diseases, 10th Revision, Clinical 
     Modification (`ICD-10-CM') as a standard under this part for 
     the reporting of diagnoses, the Secretary may implement ICD-
     10-PCS only with respect to inpatient services as such a 
     standard.''.

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

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

     SEC. 944. EMTALA IMPROVEMENTS.

       (a) Payment for EMTALA-Mandated Screening and Stabilization 
     Services.--
       (1) In general.--Section 1862 (42 U.S.C. 1395y) is amended 
     by inserting after subsection (c) the following new 
     subsection:
       ``(d) For purposes of subsection (a)(1)(A), in the case of 
     any item or service that is required to be provided pursuant 
     to section 1867 to an individual who is entitled to benefits 
     under this title, determinations as to whether the item or 
     service is reasonable and necessary shall be made on the 
     basis of the information available to the treating physician 
     or practitioner (including the patient's presenting symptoms 
     or complaint) at the time the item or service was ordered or 
     furnished by the physician or practitioner (and not on the 
     patient's principal diagnosis). When making such 
     determinations with respect to such an item or service, the 
     Secretary shall not consider the frequency with which the 
     item or service was provided to the patient before or after 
     the time of the admission or visit.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to items and services furnished on or after 
     January 1, 2004.
       (b) Notification of Providers When EMTALA Investigation 
     Closed.--Section 1867(d) (42 U.S.C. 42 U.S.C. 1395dd(d)) is 
     amended by adding at the end the following new paragraph:
       ``(4) Notice upon closing an investigation.--The Secretary 
     shall establish a procedure to notify hospitals and 
     physicians when an investigation under this section is 
     closed.''.
       (c) Prior Review by Peer Review Organizations in EMTALA 
     Cases Involving Termination of Participation.--

[[Page 16499]]

       (1) In general.--Section 1867(d)(3) (42 U.S.C. 
     1395dd(d)(3)) is amended--
       (A) in the first sentence, by inserting ``or in terminating 
     a hospital's participation under this title'' after ``in 
     imposing sanctions under paragraph (1)''; and
       (B) by adding at the end the following new sentences: 
     ``Except in the case in which a delay would jeopardize the 
     health or safety of individuals, the Secretary shall also 
     request such a review before making a compliance 
     determination as part of the process of terminating a 
     hospital's participation under this title for violations 
     related to the appropriateness of a medical screening 
     examination, stabilizing treatment, or an appropriate 
     transfer as required by this section, and shall provide a 
     period of 5 days for such review. The Secretary shall provide 
     a copy of the organization's report to the hospital or 
     physician consistent with confidentiality requirements 
     imposed on the organization under such part B.''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall apply to terminations of participation initiated on or 
     after the date of the enactment of this Act.

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

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

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

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

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

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

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

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

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

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

       The first sentence of section 1128(c)(3)(B) (42 U.S.C. 
     1320a-7(c)(3)(B)) is amended to read as follows: ``Subject to 
     subparagraph (G), in

[[Page 16500]]

     the case of an exclusion under subsection (a), the minimum 
     period of exclusion shall be not less than five years, except 
     that, upon the request of the administrator of a Federal 
     health care program (as defined in section 1128B(f)) who 
     determines that the exclusion would impose a hardship on 
     individuals entitled to benefits under part A of title XVIII 
     or enrolled under part B of such title, or both, the 
     Secretary may waive the exclusion under subsection (a)(1), 
     (a)(3), or (a)(4) with respect to that program in the case of 
     an individual or entity that is the sole community physician 
     or sole source of essential specialized services in a 
     community.''.

     SEC. 950. TREATMENT OF CERTAIN DENTAL CLAIMS.

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

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

       Beginning not later than 1 year after the date of the 
     enactment of this Act, the Secretary shall furnish to 
     subsection (d) hospitals (as defined in section 1886(d)(1)(B) 
     of the Social Security Act, 42 U.S.C. 1395ww(d)(1)(B)) the 
     data necessary for such hospitals to compute the number of 
     patient days described in subclause (II) of section 
     1886(d)(5)(F)(vi) of the Social Security Act (42 U.S.C. 
     1395ww(d)(5)(F)(vi)) used in computing the disproportionate 
     patient percentage under such section for that hospital. Such 
     data shall also be furnished to other hospitals which would 
     qualify for additional payments under part A of title XVIII 
     of the Social Security Act on the basis of such data.

     SEC. 952. REVISIONS TO REASSIGNMENT PROVISIONS.

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

     SEC. 953. OTHER PROVISIONS.

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

               TITLE X--IMPORTATION OF PRESCRIPTION DRUGS

     SEC. 1001. IMPORTATION OF PRESCRIPTION DRUGS.

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

     ``SEC. 804. IMPORTATION OF PRESCRIPTION DRUGS.

       ``(a) Definitions.--In this section:
       ``(1) Importer.--The term `importer' means a pharmacist or 
     wholesaler.
       ``(2) Pharmacist.--The term `pharmacist' means a person 
     licensed by a State to practice pharmacy, including the 
     dispensing and selling of prescription drugs.
       ``(3) Prescription drug.--The term `prescription drug' 
     means a drug subject to section 503(b), other than--
       ``(A) a controlled substance (as defined in section 102 of 
     the Controlled Substances Act (21 U.S.C. 802));
       ``(B) a biological product (as defined in section 351 of 
     the Public Health Service Act (42 U.S.C. 262));
       ``(C) an infused drug (including a peritoneal dialysis 
     solution);
       ``(D) an intravenously injected drug; or
       ``(E) a drug that is inhaled during surgery.
       ``(4) Qualifying laboratory.--The term `qualifying 
     laboratory' means a laboratory in the United States that has 
     been approved by the Secretary for the purposes of this 
     section.
       ``(5) Wholesaler.--
       ``(A) In general.--The term `wholesaler' means a person 
     licensed as a wholesaler or distributor of prescription drugs 
     in the United States under section 503(e)(2)(A).
       ``(B) Exclusion.--The term `wholesaler' does not include a 
     person authorized to import drugs under section 801(d)(1).
       ``(b) Regulations.--The Secretary, after consultation with 
     the United States Trade Representative and the Commissioner 
     of Customs, shall promulgate regulations permitting 
     pharmacists and wholesalers to import prescription drugs from 
     Canada into the United States.
       ``(c) Limitation.--The regulations under subsection (b) 
     shall--
       ``(1) require that safeguards be in place to ensure that 
     each prescription drug imported under the regulations 
     complies with section 505 (including with respect to being 
     safe and effective for the intended use of the prescription 
     drug), with sections 501 and 502, and with other applicable 
     requirements of this Act;
       ``(2) require that an importer of a prescription drug under 
     the regulations comply with subsections (d)(1) and (e); and
       ``(3) contain any additional provisions determined by the 
     Secretary to be appropriate as a safeguard to protect the 
     public health or as a means to facilitate the importation of 
     prescription drugs.
       ``(d) Information and Records.--
       ``(1) In general.--The regulations under subsection (b) 
     shall require an importer of a prescription drug under 
     subsection (b) to submit to the Secretary the following 
     information and documentation:
       ``(A) The name and quantity of the active ingredient of the 
     prescription drug.
       ``(B) A description of the dosage form of the prescription 
     drug.
       ``(C) The date on which the prescription drug is shipped.
       ``(D) The quantity of the prescription drug that is 
     shipped.
       ``(E) The point of origin and destination of the 
     prescription drug.

[[Page 16501]]

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

     be supplied by the manufacturer of the prescription drug to 
     the pharmacist or wholesaler; and
       ``(B) that the information supplied under subparagraph (A) 
     be kept in strict confidence and used only for purposes of 
     testing or otherwise complying with this Act; and
       ``(3) may include such additional provisions as the 
     Secretary determines to be appropriate to provide for the 
     protection of trade secrets and commercial or financial 
     information that is privileged or confidential.
       ``(f) Registration of Foreign Sellers.--Any establishment 
     within Canada engaged in the distribution of a prescription 
     drug that is imported or offered for importation into the 
     United States shall register with the Secretary the name and 
     place of business of the establishment.
       ``(g) Suspension of Importation.--The Secretary shall 
     require that importations of a specific prescription drug or 
     importations by a specific importer under subsection (b) be 
     immediately suspended on discovery of a pattern of 
     importation of that specific prescription drug or by that 
     specific importer of drugs that are counterfeit or in 
     violation of any requirement under this section, until an 
     investigation is completed and the Secretary determines that 
     the public is adequately protected from counterfeit and 
     violative prescription drugs being imported under subsection 
     (b).
       ``(h) Approved Labeling.--The manufacturer of a 
     prescription drug shall provide an importer written 
     authorization for the importer to use, at no cost, the 
     approved labeling for the prescription drug.
       ``(i) Prohibition of Discrimination.--
       ``(1) In general.--It shall be unlawful for a manufacturer 
     of a prescription drug to discriminate against, or cause any 
     other person to discriminate against, a pharmacist or 
     wholesaler that purchases or offers to purchase a 
     prescription drug from the manufacturer or from any person 
     that distributes a prescription drug manufactured by the drug 
     manufacturer.
       ``(2) Discrimination.--For the purposes of paragraph (1), a 
     manufacturer of a prescription drug shall be considered to 
     discriminate against a pharmacist or wholesaler if the 
     manufacturer enters into a contract for sale of a 
     prescription drug, places a limit on supply, or employs any 
     other measure, that has the effect of--
       ``(A) providing pharmacists or wholesalers access to 
     prescription drugs on terms or conditions that are less 
     favorable than the terms or conditions provided to a foreign 
     purchaser (other than a charitable or humanitarian 
     organization) of the prescription drug; or
       ``(B) restricting the access of pharmacists or wholesalers 
     to a prescription drug that is permitted to be imported into 
     the United States under this section.
       ``(j) Charitable Contributions.--Notwithstanding any other 
     provision of this section, section 801(d)(1) continues to 
     apply to a prescription drug that is donated or otherwise 
     supplied at no charge by the manufacturer of the drug to a 
     charitable or humanitarian organization (including the United 
     Nations and affiliates) or to a government of a foreign 
     country.
       ``(k) Waiver Authority for Importation by Individuals.--
       ``(1) Declarations.--Congress declares that in the 
     enforcement against individuals of the prohibition of 
     importation of prescription drugs and devices, the Secretary 
     should--
       ``(A) focus enforcement on cases in which the importation 
     by an individual poses a significant threat to public health; 
     and
       ``(B) exercise discretion to permit individuals to make 
     such importations in circumstances in which--
       ``(i) the importation is clearly for personal use; and
       ``(ii) the prescription drug or device imported does not 
     appear to present an unreasonable risk to the individual.
       ``(2) Waiver authority.--
       ``(A) In general.--The Secretary may grant to individuals, 
     by regulation or on a case-by-case basis, a waiver of the 
     prohibition of importation of a prescription drug or device 
     or class of prescription drugs or devices, under such 
     conditions as the Secretary determines to be appropriate.
       ``(B) Guidance on case-by-case waivers.--The Secretary 
     shall publish, and update as necessary, guidance that 
     accurately describes circumstances in which the Secretary 
     will consistently grant waivers on a case-by-case basis under 
     subparagraph (A), so that individuals may know with the 
     greatest practicable degree of certainty whether a particular 
     importation for personal use will be permitted.
       ``(3) Drugs imported from canada.--In particular, the 
     Secretary shall by regulation grant individuals a waiver to 
     permit individuals to import into the United States a 
     prescription drug that--
       ``(A) is imported from a licensed pharmacy for personal use 
     by an individual, not for resale, in quantities that do not 
     exceed a 90-day supply;
       ``(B) is accompanied by a copy of a valid prescription;
       ``(C) is imported from Canada, from a seller registered 
     with the Secretary;
       ``(D) is a prescription drug approved by the Secretary 
     under chapter V;
       ``(E) is in the form of a final finished dosage that was 
     manufactured in an establishment registered under section 
     510; and
       ``(F) is imported under such other conditions as the 
     Secretary determines to be necessary to ensure public safety.
       ``(l) Studies; Reports.--
       ``(1) By the institute of medicine of the national academy 
     of sciences.--
       ``(A) Study.--
       ``(i) In general.--The Secretary shall request that the 
     Institute of Medicine of the National Academy of Sciences 
     conduct a study of--

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

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

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

[[Page 16502]]

       ``(B) Report.--Not later than 2 years after the effective 
     date of the regulations under subsection (b), the Institute 
     of Medicine shall submit to Congress a report describing the 
     findings of the study under subparagraph (A).
       ``(2) By the comptroller general.--
       ``(A) Study.--The Comptroller General of the United States 
     shall conduct a study to determine the effect of this section 
     on the price of prescription drugs sold to consumers at 
     retail.
       ``(B) Report.--Not later than 18 months after the effective 
     date of the regulations under subsection (b), the Comptroller 
     General of the United States shall submit to Congress a 
     report describing the findings of the study under 
     subparagraph (A).
       ``(m) Construction.--Nothing in this section limits the 
     authority of the Secretary relating to the importation of 
     prescription drugs, other than with respect to section 
     801(d)(1) as provided in this section.
       ``(n) Effectiveness of Section.--
       ``(1) In general.--If, after the date that is 1 year after 
     the effective date of the regulations under subsection (b) 
     and before the date that is 18 months after the effective 
     date, the Secretary submits to Congress a certification that, 
     in the opinion of the Secretary, based on substantial 
     evidence obtained after the effective date, the benefits of 
     implementation of this section do not outweigh any detriment 
     of implementation of this section, this section shall cease 
     to be effective as of the date that is 30 days after the date 
     on which the Secretary submits the certification.
       ``(2) Procedure.--The Secretary shall not submit a 
     certification under paragraph (1) unless, after a hearing on 
     the record under sections 556 and 557 of title 5, United 
     States Code, the Secretary--
       ``(A)(i) determines that it is more likely than not that 
     implementation of this section would result in an increase in 
     the risk to the public health and safety;
       ``(ii) identifies specifically, in qualitative and 
     quantitative terms, the nature of the increased risk;
       ``(iii) identifies specifically the causes of the increased 
     risk; and
       ``(iv)(I) considers whether any measures can be taken to 
     avoid, reduce, or mitigate the increased risk; and
       ``(II) if the Secretary determines that any measures 
     described in subclause (I) would require additional statutory 
     authority, submits to Congress a report describing the 
     legislation that would be required;
       ``(B) identifies specifically, in qualitative and 
     quantitative terms, the benefits that would result from 
     implementation of this section (including the benefit of 
     reductions in the cost of covered products to consumers in 
     the United States, allowing consumers to procure needed 
     medication that consumers might not otherwise be able to 
     procure without foregoing other necessities of life); and
       ``(C)(i) compares in specific terms the detriment 
     identified under subparagraph (A) with the benefits 
     identified under subparagraph (B); and
       ``(ii) determines that the benefits do not outweigh the 
     detriment.
       ``(o) Authorization of Appropriations.--There are 
     authorized to be appropriated such sums as are necessary to 
     carry out this section.
       ``(p) Conditions.--This section shall become effective only 
     if the Secretary certifies to the Congress that 
     implementation of this section will--
       ``(1) pose no additional risk to the public's health and 
     safety; and
       ``(2) result in a significant reduction in the cost of 
     covered products to the American consumer.''.
       (b) Conforming Amendments.--The Federal Food, Drug, and 
     Cosmetic Act is amended--
       (1) in section 301(aa) (21 U.S.C. 331(aa)), by striking 
     ``covered product in violation of section 804'' and inserting 
     ``prescription drug in violation of section 804''; and
       (2) in section 303(a)(6) (21 U.S.C. 333(a)(6), by striking 
     ``covered product pursuant to section 804(a)'' and inserting 
     ``prescription drug under section 804(b)''.

             TITLE XI--ACCESS TO AFFORDABLE PHARMACEUTICALS

     SEC. 1101. SHORT TITLE.

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

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

       (a) Abbreviated New Drug Applications.--Section 505(j) of 
     the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)) 
     is amended--
       (1) in paragraph (2), by striking subparagraph (B) and 
     inserting the following:
       ``(B) Notice of opinion that patent is invalid or will not 
     be infringed.--
       ``(i) Agreement to give notice.--An applicant that makes a 
     certification described in subparagraph (A)(vii)(IV) shall 
     include in the application a statement that the applicant 
     will give notice as required by this subparagraph.
       ``(ii) Timing of notice.--An applicant that makes a 
     certification described in subparagraph (A)(vii)(IV) shall 
     give notice as required under this subparagraph--
       ``(I) if the certification is in the application, not later 
     than 20 days after the date of the postmark on the notice 
     with which the Secretary informs the applicant that the 
     application has been filed; or
       ``(II) if the certification is in an amendment or 
     supplement to the application, at the time at which the 
     applicant submits the amendment or supplement, regardless of 
     whether the applicant has already given notice with respect 
     to another such certification contained in the application or 
     in an amendment or supplement to the application.
       ``(iii) Recipients of notice.--An applicant required under 
     this subparagraph to give notice shall give notice to--
       ``(I) each owner of the patent that is the subject of the 
     certification (or a representative of the owner designated to 
     receive such a notice); and
       ``(II) the holder of the approved application under 
     subsection (b) for the drug that is claimed by the patent or 
     a use of which is claimed by the patent (or a representative 
     of the holder designated to receive such a notice).
       ``(iv) Contents of notice.--A notice required under this 
     subparagraph shall--
       ``(I) state that an application that contains data from 
     bioavailability or bioequivalence studies has been submitted 
     under this subsection for the drug with respect to which the 
     certification is made to obtain approval to engage in the 
     commercial manufacture, use, or sale of the drug before the 
     expiration of the patent referred to in the certification; 
     and
       ``(II) include a detailed statement of the factual and 
     legal basis of the opinion of the applicant that the patent 
     is invalid or will not be infringed.''; and
       (2) in paragraph (5)--
       (A) in subparagraph (B)--
       (i) by striking ``under the following'' and inserting ``by 
     applying the following to each certification made under 
     paragraph (2)(A)(vii)''; and
       (ii) in clause (iii)--

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

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

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

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

[[Page 16503]]

     claimed by the patent does not bring a civil action against 
     the applicant for infringement of the patent on or before the 
     date that is 45 days after the date on which the notice given 
     under paragraph (2)(B) was received, the applicant may bring 
     a civil action against the owner or holder (but not against 
     any owner or holder that has brought such a civil action 
     against that applicant, unless that civil action was 
     dismissed without prejudice) for a declaratory judgment under 
     section 2201 of title 28, United States Code, that the patent 
     is invalid or will not be infringed by the drug for which the 
     applicant seeks approval.
       ``(ii) Counterclaim to infringement action.--

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

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

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

       ``(iii) No damages.--An applicant shall not be entitled to 
     damages in a civil action under subparagraph (i) or a 
     counterclaim under subparagraph (ii).''.
       (b) Applications Generally.--Section 505 of the Federal 
     Food, Drug, and Cosmetic Act (21 U.S.C. 355) is amended--
       (1) in subsection (b), by striking paragraph (3) and 
     inserting the following:
       ``(3) Notice of opinion that patent is invalid or will not 
     be infringed.--
       ``(A) Agreement to give notice.--An applicant that makes a 
     certification described in paragraph (2)(A)(iv) shall include 
     in the application a statement that the applicant will give 
     notice as required by this paragraph.
       ``(B) Timing of notice.--An applicant that makes a 
     certification described in paragraph (2)(A)(iv) shall give 
     notice as required under this paragraph--
       ``(i) if the certification is in the application, not later 
     than 20 days after the date of the postmark on the notice 
     with which the Secretary informs the applicant that the 
     application has been filed; or
       ``(ii) if the certification is in an amendment or 
     supplement to the application, at the time at which the 
     applicant submits the amendment or supplement, regardless of 
     whether the applicant has already given notice with respect 
     to another such certification contained in the application or 
     in an amendment or supplement to the application.
       ``(C) Recipients of notice.--An applicant required under 
     this paragraph to give notice shall give notice to--
       ``(i) each owner of the patent that is the subject of the 
     certification (or a representative of the owner designated to 
     receive such a notice); and
       ``(ii) the holder of the approved application under this 
     subsection for the drug that is claimed by the patent or a 
     use of which is claimed by the patent (or a representative of 
     the holder designated to receive such a notice).
       ``(D) Contents of notice.--A notice required under this 
     paragraph shall--
       ``(i) state that an application that contains data from 
     bioavailability or bioequivalence studies has been submitted 
     under this subsection for the drug with respect to which the 
     certification is made to obtain approval to engage in the 
     commercial manufacture, use, or sale of the drug before the 
     expiration of the patent referred to in the certification; 
     and
       ``(ii) include a detailed statement of the factual and 
     legal basis of the opinion of the applicant that the patent 
     is invalid or will not be infringed.''; and
       (2) in subsection (c)(3)--
       (A) in the first sentence, by striking ``under the 
     following'' and inserting ``by applying the following to each 
     certification made under subsection (b)(2)(A)(iv)'';
       (B) in subparagraph (C)--
       (i) in the first sentence, by striking ``unless'' and all 
     that follows and inserting ``unless, before the expiration of 
     45 days after the date on which the notice described in 
     subsection (b)(3) is received, an action is brought for 
     infringement of the patent that is the subject of the 
     certification and for which information was submitted to the 
     Secretary under paragraph (2) or subsection (b)(1) before the 
     date on which the application (excluding an amendment or 
     supplement to the application) was submitted.'';
       (ii) in the second sentence--

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

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

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

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

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

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

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

       ``(iv) if before the expiration of such period the court 
     grants a preliminary injunction prohibiting the applicant 
     from engaging in the commercial manufacture or sale of the 
     drug until the court decides the issues of patent validity 
     and infringement and if the court decides that such patent 
     has been infringed, the approval shall be made effective as 
     provided in clause (ii).''; and
       (iii) in the third sentence, by striking ``paragraph 
     (3)(B)'' and inserting ``subsection (b)(3)'';
       (C) by redesignating subparagraph (D) as subparagraph (E); 
     and
       (D) by inserting after subparagraph (C) the following:
       ``(D) Civil action to obtain patent certainty.--
       ``(i) Declaratory judgment absent infringement action.--If 
     an owner of the patent or the holder of the approved 
     application under subsection (b) for the drug that is claimed 
     by the patent or a use of which is claimed by the patent does 
     not bring a civil action against the applicant for 
     infringement of the patent on or before the date that is 45 
     days after the date on which the notice given under 
     subsection (b)(3) was received, the applicant may bring a 
     civil action against the owner or holder (but not against any 
     owner or holder that has brought such a civil action against 
     that applicant, unless that civil action was dismissed 
     without prejudice) for a declaratory judgment under section 
     2201 of title 28, United States Code, that the patent is 
     invalid or will not be infringed by the drug for which the 
     applicant seeks approval.
       ``(ii) Counterclaim to infringement action.--

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

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

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

       ``(iii) No damages.--An applicant shall not be entitled to 
     damages in a civil action under clause (i) or a counterclaim 
     under clause (ii).''.
       (c) Infringement Actions.--Section 271(e) of title 35, 
     United States Code, is amended by adding at the end the 
     following:
       ``(5) The filing of an application described in paragraph 
     (2) that includes a certification under subsection 
     (b)(2)(A)(iv) or (j)(2)(A)(vii)(IV) of section 505 of the 
     Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355), and the 
     failure of the owner of the patent to bring an action for 
     infringement of a patent that is the subject of the 
     certification before the expiration of 45 days after the date 
     on which the notice given under subsection (b)(3) or 
     (j)(2)(B) of that section is received, shall establish an 
     actual controversy between the applicant and the patent owner 
     sufficient to confer subject matter jurisdiction in the 
     courts of the United States in any action brought by the 
     applicant under section 2201 of title 28 for a declaratory 
     judgment that any patent that is the subject of the 
     certification is invalid or not infringed.''.

[[Page 16504]]

       (d) Applicability.--
       (1) In general.--Except as provided in paragraphs (2) and 
     (3), the amendments made by subsections (a), (b), and (c) 
     apply to any proceeding under section 505 of the Federal 
     Food, Drug, and Cosmetic Act (21 U.S.C. 355) that is pending 
     on or after the date of enactment of this Act regardless of 
     the date on which the proceeding was commenced or is 
     commenced.
       (2) Notice of opinion that patent is invalid or will not be 
     infringed.--The amendments made by subsections (a)(1) and 
     (b)(1) apply with respect to any certification under 
     subsection (b)(2)(A)(iv) or (j)(2)(A)(vii)(IV) of section 505 
     of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355) 
     after the date of enactment of this Act in an application 
     filed under subsection (b)(2) or (j) of that section or in an 
     amendment or supplement to an application filed under 
     subsection (b)(2) or (j) of that section.
       (3) Effective date of approval.--The amendments made by 
     subsections (a)(2)(A)(ii)(I) and (b)(2)(B)(i) apply with 
     respect to any patent information submitted under subsection 
     (b)(1) or (c)(2) of section 505 of the Federal Food, Drug, 
     and Cosmetic Act (21 U.S.C. 355) made after the date of 
     enactment of this Act.

     SEC. 1103. FORFEITURE OF 180-DAY EXCLUSIVITY PERIOD.

       (a) In General.--Section 505(j)(5) of the Federal Food, 
     Drug, and Cosmetic Act (21 U.S.C. 355(j)(5)) (as amended by 
     section 1102) is amended--
       (1) in subparagraph (B), by striking clause (iv) and 
     inserting the following:
       ``(iv) 180-day exclusivity period.--
       ``(I) Definitions.--In this paragraph:
       ``(aa) 180-day exclusivity period.--The term `180-day 
     exclusivity period' means the 180-day period ending on the 
     day before the date on which an application submitted by an 
     applicant other than a first applicant could become effective 
     under this clause.
       ``(bb) First applicant.--The term `first applicant' means 
     an applicant that, on the first day on which a substantially 
     complete application containing a certification described in 
     paragraph (2)(A)(vii)(IV) is submitted for approval of a 
     drug, submits a substantially complete application containing 
     a certification described in paragraph (2)(A)(vii)(IV) for 
     the drug.
       ``(cc) Substantially complete application.--The term 
     `substantially complete application' means an application 
     under this subsection that on its face is sufficiently 
     complete to permit a substantive review and contains all the 
     information required by paragraph (2)(A).
       ``(dd) Tentative approval.--

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

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

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

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

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

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

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

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

     SEC. 1104. BIOAVAILABILITY AND BIOEQUIVALENCE.

       (a) In General.--Section 505(j)(8) of the Federal Food, 
     Drug, and Cosmetic Act (21 U.S.C. 355(j)(8)) is amended--
       (1) by striking subparagraph (A) and inserting the 
     following:
       ``(A)(i) The term `bioavailability' means the rate and 
     extent to which the active ingredient or therapeutic 
     ingredient is absorbed from a drug and becomes available at 
     the site of drug action.
       ``(ii) For a drug that is not intended to be absorbed into 
     the bloodstream, the Secretary

[[Page 16505]]

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

     SEC. 1105. REMEDIES FOR INFRINGEMENT.

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

     SEC. 1106. CONFORMING AMENDMENTS.

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

  The SPEAKER pro tempore. Pursuant to House Resolution 299, the 
gentleman from New York (Mr. Rangel) and the gentleman from Louisiana 
(Mr. Tauzin) each will control 30 minutes.
  Mr. TAUZIN. Mr. Speaker, I yield 15 minutes to the gentleman from 
California (Mr. Thomas) or his designee, and ask unanimous consent that 
he may control that time.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Louisiana?
  There was no objection.
  Mr. RANGEL. Mr. Speaker, I yield 15 minutes to the gentleman from 
Michigan (Mr. Dingell) and ask unanimous consent that he be permitted 
to further allocate that time.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from New York?
  There was no objection.
  The SPEAKER pro tempore. The gentleman from New York (Mr. Rangel) is 
recognized for 15 minutes.
  Mr. RANGEL. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I appreciate the statement made by the gentleman from 
Louisiana (Mr. Tauzin) that we all are concerned about our older 
citizens and those that are to follow, and certainly we all have to 
appreciate the fact that we are all here because we stand on someone 
else's shoulders, someone else who made the sacrifice, and I am very 
proud to share the responsibility of this bill with the gentleman from 
Michigan (Mr. Dingell), who has dedicated his entire life, and his dad 
before him, in making certain that he and those of us who support him 
and what he believes in improves the quality of life of not only the 
seniors today.
  It took us a long time to get where we are where people feel some 
degree of comfort that the Federal Government will be there for them, 
whether it is Social Security, whether it is Medicaid, whether it is 
Medicare. It has been government, yes, this government, this wonderful 
government, this government who gave me the GI bill, this government 
which allowed older citizens to have some degree of pride in having 
Social Security to cushion themselves from poverty, and this government 
that provided health care for the very poor, and under Medicare we had 
hoped that we would have provided prescription drugs for them.
  I do not know when this animosity came against government, why we 
felt we had to starve these programs which some of us have been so 
proud of. Somebody asked how do you pay for your bill? This is a 
strange thing to ask, especially when the chairman of the Committee on 
the Budget is on the floor. He has been able to do magic with numbers 
over there. He started out with a $5.6 trillion surplus, and with magic 
converted it to a $3.4 trillion deficit. He can take $9 trillion and 
find some way to spend it in tax cuts. Even tonight, some $173 billion, 
$100 billion just found last night, and we will get $400 billion from 
what they have allocated, but we think that it takes twice that much.
  Is that asking to do, is that something that we have to go to the 
Committee on the Budget for and ask? Can you sprinkle your magic powder 
on us and make it possible for the older people not to have gaps in 
services? Is it asking too much to treat them, not that they are 
wealthy in dollars and cents, but they are wealthy in terms of the 
investment they made in this country to make it possible for the 
multinationals and the wealthy people to get the tax breaks that they 
are getting, and it seems to me since compassion is not there, that 
maybe we can look at it as a cost savings vehicle.
  How many senior citizens will not have to go to the hospitals which 
are so expensive, how much of a part of our health expenses is a part 
of the institutions which our seniors are forced to go into? If you 
have to make a decision and you are in doubt, why not make the doubt in 
favor of the senior citizens? Everything that is missing in the 
Republican bill that is good, we put in our bill to make certain that 
it is better.
  One thing that we are saying is this, do not hate the government 
until you do not have any need for it. And seniors when they read the 
difference of the bills, and you bet your life they can read, they may 
be old but they are not stupid. They can pick up the daily newspapers, 
and if they do not go to the pharmaceutical corporations but rather go 
to the local drugstore, they will find out in short order who is their 
best friend.
  Do not knock the government. It is not as bad as some Members think. 
Give the people an opportunity so that we can say citizens, we 
appreciate all that you have done for us, and we in the Congress 
believe that the least we can do for you as you grow older is to ease 
your pain and, more important, the fear you have that once you go to 
the doctor that at least you will be able to get the drugs that are 
prescribed for your illness.
  Mr. Speaker, we do not have to challenge each other's integrity, but 
I tell Members this, that there are Members on the other side of the 
aisle that hold Social Security in utter contempt. There are Members 
who talk about Medicare as though the communists created the package, 
and they resented it when it started, and they think it is worse than 
ever today.
  What I am saying is let us do what they tell doctors to do, and do no 
harm. Let us leave here saying that at least on this day there was a 
substitute, they did not have to do it the way the majority would want.
  Mr. Speaker, I yield the balance of my time to the gentleman from 
California (Mr. Stark), the ranking member of the Subcommittee on 
Health, and I ask unanimous consent that he may further allocate that 
time.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from New York?
  There was no objection.
  (Mr. WILSON of South Carolina asked and was given permission to speak 
out of order and to revise and extend his remarks.)


                     South Carolina Loses a Legend

  Mr. WILSON of South Carolina. Mr. Speaker, it is with great sadness 
tonight that I announce that Senator Strom Thurmond passed away at 
9:45. I was a former staff member of Senator Thurmond, my wife was a 
staff person for Senator Thurmond, and our three sons have been pages 
with his office.
  With the death of Strom Thurmond, South Carolina has lost its 
greatest statesman of the 20th century, just as John Calhoun was the 
most revered South Carolinian of the 19th century. Strom Thurmond will 
never be replaced in the countless hearts of those who loved and 
respected him.
  The entire Wilson family mourns this profound loss and we extend our 
sympathy to the Thurmond family.

[[Page 16506]]

  Senator Strom Thurmond will endure as the leading example of a public 
servant due to his love and devotion to all the people of South 
Carolina regardless of status, race, politics or region.
  He was our living legend. Strom's life was dedicated to achieving 
peace through strength, as shown by his military service in liberating 
Europe from Nazi fascists, his tireless work in fighting for a strong 
national defense in Congress which ultimately led to the defeat of 
Soviet communism.

                              {time}  2300

  He pioneered the development of the South Carolina Republican Party 
from effective nonexistence in the 1960s to majority status by the end 
of the century. He has been a role model of service to South Carolina's 
young people and our family has had three generations on his staff: my 
wife's two uncles were staff attorneys, my wife and I were interns, and 
our three oldest sons were pages. A distinguished highlight for our 
family was to host Senator Thurmond on the last Sunday before his last 
election in 1996 at the First Presbyterian Church in Columbia.
  The legacy of Strom Thurmond will always be felt in South Carolina 
because of his steadfast integrity and the meaningful results of his 
thoughtful constituent service. He was my personal hero, and I will 
miss him dearly.
  Mr. TAUZIN. Mr. Speaker, I yield myself such time as I may consume.
  Let me join in expressing the sorrow of the folks in Louisiana for 
your loss in South Carolina. We will pray for his soul.
  Mr. Speaker, the Democratic substitute in this debate can be summed 
up rather easily. According to CBO, it will spend over a trillion 
dollars. It busts the budget. Therefore, it is on the floor with a 
budget waiver. It at the same time excludes and does not contain any of 
the reforms that the base bill includes, that are designed to save 
Medicare from failure, from insolvency. I am not predicting Medicare's 
failure or insolvency. CBO is. CRS is. Everyone who has estimated the 
strength of our Medicare system predicts very soon, in our lifetimes, 
it will go insolvent. None of the reforms that are designed to save 
Medicare from insolvency are here. In fact, the Democratic substitute 
piles on a trillion dollars' worth of expenses to the Medicare system 
with no reforms to make sure the system is saved.
  When I mentioned earlier that you ought to test the credibility of 
arguments on this floor by what is said and what is fact and what is of 
record, let me take you back to the statements of the distinguished 
gentlewoman from California who criticized the base bill because CBO 
said it might mean that as much as 30 percent or so of employers might 
drop their retiree coverage under the base bill in favor of the plans 
we offer. CBO estimated the Democratic substitute, too, on that point.
  How credible is an argument against the base bill that complains 
about a potential 30 percent loss of employer coverage when CBO 
estimates that 100 percent of employers will drop retiree coverage 
under the Democratic substitute? That all taxpayer dollars will be used 
to substitute private dollars? And the Medicare system, already crushed 
and about to go into insolvency, will have to assume all that 
responsibility, too? If you really believe in Medicare, why would you 
burden it so? Why would you eliminate private coverage in America, as 
CBO estimates would happen under the Democratic substitute?
  This substitute busts our budget. It purports to provide more drug 
coverage than the base bill but no reforms, it does not save Medicare; 
and on top of that it virtually eliminates private retiree coverage in 
America. Why would we want to go that direction? We rejected that 
direction during the Clinton years when Mrs. Clinton presented us with 
one-size-fits-all health care for all Americans. We recognized then 
that if you do not have the competitive choices in America in health 
care, just as we do with so many other services, that things go bad in 
this country and that sooner or later the crushing weight of benefits 
added upon benefits added upon benefits means the working people of 
America have to pay more and more and more taxes. In fact, it is 
estimated that within 70 years, if we do not begin today making 
decisions like we ask the House to make, entitlements in America will 
eat up every tax dollar paid into the Treasury by every citizen in 
America, and we will have no money for any other function in this 
country. That is where this substitute takes us, and that is why we 
need to reject it.
  Mr. Speaker, I reserve the balance of my time.
  Mr. DINGELL. Mr. Speaker, I yield myself 3 minutes.
  My dear friends and colleagues, I lay before you the Republican plan. 
I ask you to look at it with a straight face, because it is 
inexplicable, and I cannot explain it to you with a straight face. The 
amendment which was offered by my dear friend, the gentleman from New 
York (Mr. Rangel), on behalf of him and me, does the following things: 
it gives and sets forth a very clear set of benefits. Senior citizens 
pay $25 a month; they get 80 percent of drug costs from government 
after a $100 deductible. This is what you get if you get the Republican 
plan. But that is not the worst you get. If you are a senior citizen, 
you fall into a doughnut hole. After you get $2,000 in drugs that you 
get under the plan, all of a sudden your payments by the government 
stop; you have to keep on paying premiums, but you get no benefit until 
you have got $5,100. They are going to privatize your Medicare in the 
year 2010. That is pretty bad.
  But it is followed by other things: massive subsidies to the 
insurance companies which commence in 2 years, in 2006. But that is not 
all. No guarantee as to what it costs you in terms of what you have to 
pay in the way of premiums, no assurance that you will get any 
particular level of benefits. The only person who is going to cut a fat 
hog out of this deal are those goodhearted, flinty-hearted, cold-
hearted folk in the insurance business who are going to all of a sudden 
get a key to the United States Treasury, the right to collect any 
amount of money they want and to sucker the Secretary of HHS any old 
way they are minded and to walk home and to pay the money perhaps to 
the senior citizens but possibly to their shareholders or in dividends 
or perhaps to pay it in salaries or in bonuses to their corporate 
officers. That is what you get under the Republican plan. And 
privatization of Social Security as you know it today.
  The Republicans have said that they intend to do away with Social 
Security. Well, this is what is happening here. The Democratic plan 
compels the drug houses to negotiate with the Federal Government and 
the Secretary. The Republicans preclude him by absolutely prohibiting 
him from negotiating. We do not tolerate under the Democratic plan the 
Republican opportunity to privatize Medicare. And just wait till your 
senior citizens find out what you are doing to them with privatization 
and doing away with fee-for-service and substituting in lieu of this 
the kind of plan that you talk about where there is no assurance of 
protection for the senior citizens.
  The Republicans say the bill costs too much. Well, it pays some $800 
billion to 40 million senior citizens. Just last week, without a gasp 
of shame, my Republican friends set it up so that 200,000 families got 
the same amount of money. I think it is time we looked after the senior 
citizens and not the fat cats that my Republican colleagues and friends 
look after.
  Vote for the Democratic plan. Vote down the Republican plan. Let us 
take care of the senior citizens. It is the right thing to do.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I yield myself such time as 
I may consume.
  Mr. Speaker, let us look at the facts behind the rhetoric here. What 
is going to be the impact of this Democratic substitute on seniors? My 
colleague from Louisiana just reminded us that 100 percent of employers 
are going to drop their plans. If there is one thing my senior citizens 
say to me when I go into senior centers it is, look, help those who 
need it, but do not destroy my employer-provided retiree plan. Do not 
touch it. This amendment destroys

[[Page 16507]]

it, wipes it out. That is not in the interest of your seniors.
  But let us look at what it will do to premiums. You were concerned 
that we did not sock a premium into law. Look what you do in your bill. 
You sock the premium into law and then you have it rise according to 
drug inflation. Drug inflation is double-digit. Do you not get it? 
Those premiums are going to rise steeply. Why would you do that to our 
seniors?
  And let us look at the effect on prices. There is one thing seniors 
say to you over and over again, the prices are too high. Yet according 
to Dr. Holtz-Eakin's testimony of April 9, 2003, he says, ``If you 
subsidize 90 percent of any insurance product versus 70 percent of the 
product, the larger subsidy will lead to a lower incentive to control 
costs and will lead to higher prices and higher spending.'' Yours is a 
giveaway to the pharmaceutical industry. It will drive prices up 
because there is no incentive for the PBM or the plan to negotiate 
prices down and they can just pass it on to the government, because we 
are going to pay it all. Yours is going to drive prices up, premiums up 
and employer plans out of the market. I do not know why you think you 
are doing the seniors a good service.
  And look at the impact on their kids, because they care about their 
kids and their grandkids. We have heard testimony over and over again 
that if you have a 10-year-old child, in 20 years when that kid is 30 
and trying to pay back college loans, trying to buy a house, trying to 
get established, having to buy a car, that child will live in a Nation 
in which three-quarters of all the Federal revenues will go to Social 
Security, Medicare and Medicaid.
  What is that child to do about education for their children? What is 
that young person to do to make a living? You shoulder so much debt on 
the next generation that they will not have public education the way we 
know it today. They will not have the roads and bridges that a strong 
economy depends on. They will not be able to defend this Nation in a 
world that is going to be far more dangerous than the one we have 
known. This is utterly irresponsible. It is so irresponsible that when 
the other body proposed this plan in the Senate the last session of 
Congress, they could not write a budget resolution because they did not 
know how to handle the extraordinary debt that this creates in the 
decades ahead.
  I urge my colleagues to think that something that looks pretty for 
your seniors, in fact, will be terrible for their health.
  Mr. Speaker, I reserve the balance of my time.
  Mr. STARK. Mr. Speaker, I yield myself such time as I may consume. I 
know earlier I moved the distinguished gentleman from Louisiana, the 
chairman of the Committee on Energy and Commerce, to talk about his 
poverty and I wanted to join him in that. I too was raised poor. I was 
raised so poor that I never slept alone until I was married. I want to 
go on and suggest that I am not going to let you have that field all to 
yourself.
  We have introduced a substitute. Unlike your bill, ours has specific 
benefits. Your bill, I would remind the gentlewoman from Connecticut, 
has no benefit in it. It is all estimates. It is all examples. There is 
no benefit in your bill, and indeed in our substitute there is. You 
have heard it. It is simple. It is $25 a month, 20 percent coinsurance, 
no gaps; and we pay out of pocket after $2,000.
  Yes, you will say it costs a lot of money. The gentlewoman from 
Connecticut forgets about the $5.6 trillion surplus that Bush had when 
he came into office and which he squandered on tax cuts in the 
meantime. But we do have an income transfer as we have been accused of. 
It is very simple. You can look at it this way. You have given $800 
billion to 10,000 of the richest families each year when you did away 
with the inheritance tax. No question about it. That is what it costs. 
Those are the beneficiaries. We would take that money as an alternative 
and give it to what will be in a short 10 years 100 million seniors. 
What you have given away to the richest seniors in this country would 
more than pay for a drug benefit of the magnitude that we offer, a 
standard Medicare drug benefit, and I suggest that that is a transfer 
worth making and that that defines the difference between us.

                              {time}  2315

  You give $800 billion to 10,000 families a year, the richest in 
America. We would give that $800 billion to 100 million seniors who 
needed a drug benefit that they can define, depend on and understand, 
and that is why the Members should support the Democratic substitute. 
It is defined. It is real. It solves the problem for seniors, and it 
is, I think, one of the highest priorities that this House has.
  Mr. Speaker, I reserve the balance of my time.
  Mr. TAUZIN. Mr. Speaker, I yield 3 minutes to the gentleman from 
Pennsylvania (Mr. Greenwood), the chairman of the Oversight and 
Investigations Subcommittee of the Committee on Energy and Commerce.
  Mr. GREENWOOD. Mr. Speaker, I thank the chairman of the committee for 
yielding me this time.
  The gentleman from Michigan (Mr. Dingell) and others have presented a 
chart earlier that purported to show that somehow our plan was too 
complicated. It is a complicated issue to provide prescription drug 
benefits to millions of Americans who have never had them.
  Let me show another chart that describes our plan and it is not 
complicated at all. Today a senior citizen walks into a drugstore and 
wants to buy Lopressor, 100 milligrams. She has to pay, for 30 tabs, 
$45.99 right out of her pocket. Under our bill the price first comes 
down because of the group purchasing power to $36.79 and then what does 
she pay? She pays $7.36 and if she is low income she pays $5. That is a 
big difference from $46.
  Let us look at Lipitor. An awful lot of Americans take Lipitor every 
day to keep their cholesterol down. I do. It costs $108.65 today 
because for 40 years the Democrats did not do anything about 
prescription drugs and for 8 years President Clinton did not do 
anything about prescription drugs, but under our plan Lipitor goes down 
to $86.92 because of our purchasing power, but the beneficiary pays, 
his/her share, $17.38. Pretty straightforward. Pretty simple. Nothing 
complicated about that.
  Celebrex, an important antiinflam-
matory drug for arthritis that so many seniors suffer from, a very 
popular drug, $86.28 today to get 30 tablets of that for 1 month. We 
bring it down to $69.02 because of our power of purchasing, but the 
beneficiary pays $13.80 for a month's supply and if they are a poor 
senior citizen, $5. $5, down from $86.28.
  Zoloft, 100 milligrams, 30 tabs for a month, it is an antidepressant. 
A lot of elderly suffer from depression, unfortunately, at their age in 
part because they do not have good health care. We bring the price down 
to $63.17. The beneficiary pays $12.63 a month and, if she is poor, $5 
a month.
  This chart is pretty straightforward and pretty simple. This 
demonstrates what happens when good-minded people do very hard work 
with very smart staff, employing very good ideas. We get the job done 
for the elderly, a job that I am sorry to the gentleman from California 
(Mr. Stark), I am sorry to the gentleman from Michigan (Mr. Dingell). 
They have been here for a long time and they have done nothing. A lot 
of talk tonight. A lot of good talk, a lot of bogeyman talk, a lot of 
scare-the-seniors talk tonight, but we will get this done. It will be 
very simple. It will be very straightforward. The senior citizens will 
love it, and as a measure of that you are all going to be voting for it 
next month.
  Mr. DINGELL. Mr. Speaker, I yield myself 15 seconds.
  I hope my colleagues look at that chart because it has the same 
factual value as Alice in Wonderland. There is no requirement that any 
of those drugs be made available. There is no requirement that they be 
made available at any particular price or that they have to be made 
available under the plan at any particular cost because of cost sharing 
with the insurance.

[[Page 16508]]

  Mr. Speaker, I yield 2\1/2\ minutes to the distinguished gentleman 
from California (Mr. Waxman).
  Mr. WAXMAN. Mr. Speaker, today the House should be considering a 
Medicare prescription drug benefit for all America's seniors and 
disabled citizens that would be a benefit that is certain, a benefit 
that is affordable, and a benefit that helps Medicare beneficiaries 
with all of their drugs. It should not have large gaps in coverage as 
the Republican bill does. It should not let private insurance companies 
charge whatever premium they want and cover whatever drugs they want as 
the Republican bill does. It should be available in every part of the 
country, not only in areas where private insurers decide they can make 
a profit, and it should not cost seniors more if they live in Iowa 
instead of Virginia or California instead of Rhode Island. Most 
importantly, it should be a part of the Medicare program, just as 
dependable as the rest of the Medicare is for seniors and disabled 
people today.
  The Republican bill fails all of these tests. It makes promises on 
the one hand and then takes them away when we read the fine print. It 
claims to give special help to America's low-income seniors so that 
they can afford to pay for the prescription drug program, but then it 
makes seniors subject to a detailed and invasive assets test before 
they can get help.
  If they have over $6,000 in the bank, they do not get any help. When 
we figure out what they have got if they count the value of their car 
and it is worth more than $4,500, and what car is not? They do not get 
any help. They count the value of the clothes and furniture and 
appliances if they are worth more than $2,000. They can even count the 
value of their burial plot if it exceeds $1,500. So instead of making 
sure people of very modest income who need help to get in, they get the 
fine print eliminating a lot of these people who should be helped, and 
it makes all of them go through a demeaning and complex process to 
prove they have few assets.
  All this to get help with their drug expenses. This is just wrong. 
Instead of spending the public's money to get the best possible drug 
benefit, this Republican bill spends our dollars to bribe insurance 
companies to sell a drug plan. It pays for profits for the insurance 
companies instead of the bills for our seniors.
  What we should be doing is using the purchasing power of America's 
seniors, 40 million of them, to get good prices on their drugs as they 
do in Canada and get good coverage. That is what the Democratic 
substitute does. I urge my colleagues to vote for the Democratic 
substitute and against the Republican bill.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I yield 2 minutes to the 
gentleman from Iowa (Mr. Nussle), a member of the Committee on Ways and 
Means and esteemed chairman of the Committee on the Budget.
  Mr. NUSSLE. Mr. Speaker, I thank the gentlewoman for yielding me this 
time.
  I would like to know where the new Democrat budget hawks are tonight, 
those new birds who seem to have flown the coop, who have spent the 
last many months here on the floor talking about the debt tax, 
something that does not exist but they have sure gotten a lot of ink 
about it. All sorts of national debt charts have been coming across the 
floor. In fact, they even one day used the pages, these young high 
school students, to demonstrate the national debt. But where are they 
tonight? Where are they when we read the letter from the Congressional 
Budget Office that says that their so-called substitute would add $1 
trillion to the deficit? Where are they? They have flown the coop. We 
are not hearing about the deficit all of a sudden. In fact, what we 
heard about is that tax cuts have caused all of the problems.
  In fact, one gentleman even had the audacity to stand up and act as 
though Washington hands money out to people. Tax relief, my friends, is 
money left in the pockets of people that they earned. We do not hand 
money out. Money comes from them. And if you are going to waste it on a 
$1 trillion program, that not only does not fit within the budget that 
controls tonight but did not even fit within your substitute budget of 
just 4 months ago.
  In fact, if we add the Democrat budget together with the budget that 
controls today, you bust not only the Republican budget, you bust the 
Democrat budget, but you bust both budgets combined. That takes a lot 
of work, to be able to bust both budgets and add $1 trillion to the 
deficit and have all of these new deficit Democrat hawks whom we cannot 
find tonight.
  It is interesting. Boy, we heard a lot from them all year long, 
nickeling and diming and worrying about all of that. But when you come 
to the floor with $1 trillion that says in the same letter that all the 
employers are going to drop their coverage for retirees, 100 percent 
are going to drop their coverage, and you have the audacity to present 
that kind of substitute that busts both budgets, do not come here any 
more this year and talk about the deficit.
  Mr. STARK. Mr. Speaker, I yield myself 30 seconds.
  I have the same letter, and it says nothing about employers dropping 
coverage.
  Mr. Speaker, I yield 2 minutes to the gentleman from Washington (Mr. 
McDermott), a member of the Committee on Ways and Means, who 
understands that spending money to provide a decent drug benefit for 
seniors is not wasting money.
  Mr. McDERMOTT. Mr. Speaker, Members of the House and those listening 
to this, I think you ought to take a piece of paper right now and write 
this down. The premium is $25. The deductible is $100 a year. The 
coinsurance means you pay 20 percent, the government pays 80 percent 
for your drugs, and there is a cap on how much you can spend out of 
pocket, $2,000. That is written into our bill.
  In contrast, we have this magic pill that has been given to us where 
the other side says trust us. Remember, these are the people who told 
us that there were weapons of mass destruction in Iraq. They were right 
there. They were going to be delivered in 45 minutes. And, in fact, the 
President of the United States stood right here and said, Mr. Speaker, 
that he believed that they had tried to buy uranium from Niger. It was 
known that that was a lie. It was known. So now they come out here with 
this drug bill and they say listen, we think it will be about $35 and 
maybe you will get this and maybe you will get that, but nothing is 
written down. I want the people to remember those four things.


                Announcement by the Speaker Pro Tempore

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


                         Parliamentary Inquiry

  Mr. McDERMOTT. Mr. Speaker, Parliamentary inquiry.
  The SPEAKER pro tempore. The gentleman from Louisiana has the floor. 
Does the gentleman yield?
  Mr. TAUZIN. Mr. Speaker, I do not yield.
  Mr. McDERMOTT. Point of personal privilege, Mr. Speaker. Were you 
making some reference about Baghdad whom? Is that appropriate for the 
Speaker of the House?
  The SPEAKER pro tempore. The gentleman from Washington (Mr. 
McDermott) is not in order since the gentleman from Louisiana (Mr. 
Tauzin) has the time and such a point may not challenge debate.
  Mr. TAUZIN. Mr. Speaker, I want to illustrate one of the real 
inadequacies of the Democratic substitute. In the main bill we reformed 
something called average wholesale price. I hope everyone knows what 
that is. I am going to illustrate it for you tonight. Under average 
wholesale price systems built into Medicare by the Democratic Party all 
these years, this is what happens. A person goes in for cancer therapy, 
a senior citizen, and the doctor needs a drug that costs $10; so the 
doctor buys a chemotherapy drug for $10. The patient ought to have to 
pay $2 under

[[Page 16509]]

that, 20 percent co-pay under law. But that is not what happens. Under 
the average wholesale price system devised by Democratic 
administrations in the past under Medicare, this is what happens. The 
government has a phony average wholesale price posted. It might be $200 
for that drug that only costs the doctor $10, and the poor patient has 
to put up 20 percent, not of the $10 but 20 percent of the $200. The 
patient puts up $40 for a drug that only costs the doctor $10 when the 
patient should have put up $2. That is called the average wholesale 
price system. It is rotten. It stinks. Our bill gets rid of it. And we 
replace it by reimbursing oncologists in America for not one time what 
their practice expense really ought to be reimbursed under the law, but 
we double it.

                              {time}  2330

  We give them $430 million, twice what CMS estimates they ought to 
get.
  So we get rid of this stinky system that is charging American seniors 
20 percent of phony prices and costing the government Medicare system 
tens of times what the drugs are really costing the doctors, and we 
replace it with a rational, a rational reimbursement system.
  Now, the Democrats try to settle that system too. Let me tell my 
colleagues what they do in their substitute. They substitute this 
average wholesale price system with a system of reimbursement that, 
according to CBO estimates, is going to cost $14 billion over 10 years; 
and it is going to cost seniors another $3 billion of copays. We ought 
to reject that solution.
  Mr. DINGELL. Mr. Speaker, I yield 2\1/2\ minutes to the distinguished 
gentleman from New Jersey (Mr. Pallone).
  Mr. PALLONE. Mr. Speaker, the only thing that stinks here is the 
Republican bill, and it stinks for a lot of reasons.
  First of all, because it is not going to give the seniors any 
benefit. They are not going to have really any drug benefit whatsoever. 
It is going to force them into an HMO. They will not have any choice of 
doctors. And fundamentally, in the end what the Republican bill does is 
kill Medicare by setting up a voucher system so we do not even have 
traditional Medicare.
  I am sick and tired of hearing my Republican colleagues on the other 
side criticize traditional Medicare. Medicare is not insolvent. 
Medicare is a good program. Do not tell me that Medicare is broke or 
Medicare needs to be fixed. And I say to the gentlewoman from 
Connecticut, do not insult me and say the Democrats are irresponsible, 
the Democrats are putting us in debt. The Republicans are the ones that 
are putting us in debt, because you are borrowing from the trust fund 
so there is no money left in it because you want to kill Medicare. That 
is what you are all about.
  These gentlemen over here, these Democrats who have been here for a 
long time, they are here tonight because they want to save Medicare. 
They understand that Medicare can be helped by putting on a 
prescription drug benefit, so they look at the tried and true system, 
they look at what we do in part B for our doctor bills, and they say, 
yes, let us just add a benefit like part B. We will have a low premium. 
We will have a low deductible. We will pay 80 percent of the cost on 
the Federal Government. We will have a catastrophic at 2,000. Just add 
the tried and true program, like we have in part B, and add a drug 
benefit. We do not need HMOs. We do not need all of these other 
gimmicks that the Republicans come up with.
  And then these gentlemen, my colleagues, the gentleman from Michigan 
(Mr. Dingell) and the gentleman from New York (Mr. Rangel), they say, 
well, we can pay for this very easily by negotiating the price and 
giving the Secretary the power to lower the prices. That would cut the 
program in half. That is what our Democratic leader said. That would 
cut the cost of the program in half so we would not have to go into 
debt. We would not have to borrow from the trust fund and make it 
insolvent, which is what my Republican colleagues have been doing here 
and what they are proposing.
  Mr. Speaker, do not sell out to the HMOs and the insurance companies. 
That is what you are doing. You are selling out by saying everybody has 
got to go into an HMO because you are in bed with the insurance 
companies. You are selling out to the pharmaceutical industry because 
you want no price reductions, because you are going to get some benefit 
from the pharmaceutical industry.
  And then you come up with: this is complicated. The gentleman from 
Pennsylvania (Mr. Greenwood) said, oh this is complicated. There is 
nothing complicated here. It is simple. We have had the program for 
years. We just add the prescription drug benefit, and we have a 
negotiated price. It is very simple.
  Do not give me this chart. I mean, look at this garbage. How could 
anyone possibly understand it? I cannot even understand it myself, and 
you expect my mother or somebody's grandmother to understand this 
thing? You are making it complicated. You are destroying Medicare. Do 
not insult us as Democrats. We have been out there protecting it for 
years.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, it is my pleasure to yield 
2 minutes to the gentleman from Wisconsin (Mr. Ryan), a member of the 
Committee on Ways and Means.
  Mr. RYAN of Wisconsin. Mr. Speaker, I thank the gentlewoman for 
yielding me this time.
  I want to calm down a little bit. There has been a lot of shouting 
around here, a lot of heated rhetoric, a lot of hyperbole. Let us just 
look at a couple of facts.
  It is a fact that the Medicare actuaries are telling us that Medicare 
is going insolvent in 13 years. The entire trust fund goes bankrupt in 
2036. It is a fact that if we add more money on top of Medicare without 
doing any reforms, you are going to accelerate the insolvency of 
Medicare. We can try and speak those facts away, but the fact remains 
that those are facts.
  Now, what this Democrat substitute does is it costs over $1 trillion. 
It accelerates the bankruptcy of Medicare. The basic assumption in this 
CBO estimate is that every employer providing private drug coverage for 
the retirees is going to drop it. And why would they not? Why would 
they not drop it if the Federal Government is going to pay for it all?
  What the facts are is that this plan is going to accelerate the 
bankruptcy of Medicare.
  Now, what are we trying to achieve with the Republican bill? Mr. 
Speaker, there are parts of this bill that none of us all like. I have 
my own criticisms. But what we are trying to achieve is not only 
modernizing this program so it works for today's seniors by giving them 
cheaper drugs and coverage of drugs, but we are also trying to 
modernize this program and save it for the baby boom generation.
  We have 77 million retirees coming in this country starting in 15 
years; and if we accelerate the bankruptcy of this program as the 
Democrats are proposing to do, it is not going to be there for them.
  So what we are doing with these market-based reforms and giving 
seniors more choices? We are giving them the chance that this program 
will be solvent for the boomers when they retire. That is the 
responsible thing to do here. The responsible thing is to make it work 
for today's seniors, make it modern, make it comprehensive, work on 
prescription drug prices, work on prescription drug coverage, but give 
seniors more choices, use competition, use the things that have worked 
in the past so we can save this program for the baby boomers. That is 
what the Republican bill does.
  Mr. STARK. Mr. Speaker, I yield myself 30 seconds for a couple of 
housekeeping things.
  In 13 years, the revenues start to decline, but it does not go 
insolvent for 24 years. And I say to the gentleman from Ohio (Mr. 
Nussle), if he has indeed the same letter that we are informed we have 
from CBO dated June 26, it says nothing in there about employers 
turning back Medicare, so he either

[[Page 16510]]

misspoke or made it up, which, in my State, we call telling a lie. 
Unless he has a different letter, which I am assured by CBO he does 
not, then he made that up.
  Mr. Speaker, I yield 1 minute to the gentleman from New Jersey (Mr. 
Menendez).
  Mr. MENENDEZ. Mr. Speaker, I rise on behalf of my 84-year-old mother 
and millions like her across this country. She worked her entire life 
in the factories of New Jersey. Today she has Alzheimer's and spends 
over half of her social security check on prescription drugs. If it was 
not for my sister and me, she would not be able to live with the 
dignity she deserves.
  Now, this Republican package is wrapped in a label that says, ``I 
care,'' but when you open it up, it contains nothing more than an empty 
promise.
  Under this Republican plan, which lacks the compassion promised by 
the President and expected from our doctors, millions of seniors who 
want to stay in traditional Medicare with their own doctor would 
essentially be forced into HMOs and left without the choices they 
deserve. This bill is the road towards privatizing Medicare.
  Republicans just cannot help themselves. Once again, they have chosen 
corporate interests over human interests. America's seniors deserve our 
respect. They have worked too hard, sacrificed too much to be forced to 
choose between paying their rent, putting food on the table, and having 
access to life-enhancing drugs.
  Support the Democratic substitute that has a real prescription drug 
provision under Medicare.
  Mr. TAUZIN. Mr. Speaker, I am pleased to yield 2 minutes to the 
gentleman from California (Mr. Cunningham), our fighter pilot commander 
extraordinaire.
  Mr. CUNNINGHAM. Mr. Speaker, I had pneumonia about 5 years ago, and I 
went to pick up the prescription drug and I looked at it. It was 120 
bucks. As I picked it up, I sat there and I thought, how does a family 
with three or four children afford 120 bucks per bottle of Augmentin to 
help them with the flu or with other antibiotics? It is a real fact. It 
is hard.
  But Mr. Speaker, I say to the gentleman from Michigan (Mr. Dingell), 
does he know the cost of my prescription drug? It cost me $17. Because 
my wife worked with the Encinitas school district and she had 
insurance. That is what we want, is a private-public partnership for 
those people that cannot afford prescription drugs to help them. Over 
1.4 million people in California will have no copay, no cost 
whatsoever. But it will help them in our bill.
  I think that your bill, with its costs, is devastating in the long 
run. It will not help.
  If Democrats can demonize pharmaceutical companies, then what is 
left? The government. If you can demonize insurance companies, what is 
left for health care? Government-controlled health care. We rejected 
that in 1993 when the then First Lady offered it. I oppose government-
controlled health care, and maybe that is the difference in us, because 
it will drive this country in debt.
  I talked to some people from Canada. Do my colleagues know where they 
go to get their health care? They come clear down to Buffalo, New York 
to get it, because it is so bad with their government-controlled health 
care.
  Let us defeat the Democratic substitute and support the primary bill.
  Mr. DINGELL. Mr. Speaker, I yield 2\1/2\ minutes to the distinguished 
gentleman from Michigan (Mr. Stupak).
  Mr. STUPAK. Mr. Speaker, the Republican prescription drug plan is bad 
for America and even worse for rural America.
  Today I sent around a letter to Members explaining exactly why this 
GOP bill shortchanges rural areas like Northern Michigan, which I 
represent.
  The Rangel-Dingell substitute ensures that rural areas are treated 
fairly. The Republican plan continues to put citizens in these areas at 
a huge disadvantage. The Rangel-Dingell bill goes far beyond the meager 
provisions for rural health care providers included in the GOP bill. 
Our bill, the Democratic bill, provides over $10 billion in additional 
relief for rural areas and removing the harmful Medicare privatization 
provisions that just have not worked in rural America.
  Instead of helping seniors with their prescription drug plan, the 
Republican plan subsidizes private insurance companies. This plan tends 
to bribe private insurance companies to provide service in rural 
districts like mine. These insurance companies have come before our 
Committee on Energy and Commerce and have testified that they will not 
be providing the service, and the Republican plan just will not work.
  If insurance companies do change their minds, there is nothing in 
this bill that will prevent them from shifting the added costs to our 
seniors. I had an amendment in the Committee on Energy and Commerce 
that would have prevented increases in the monthly premiums for 
seniors, no matter where they live. But unfortunately, it was voted 
down on a party line vote.
  The GOP plan has a huge gap in coverage and does nothing to reduce 
the inflated prices big drug companies are charging for prescription 
drugs. In fact, the Republican plan has a noninterference clause that 
says the Health and Human Services Secretary will not, will not be 
allowed to negotiate lower prices for Americans.
  The Rangel-Dingell bill will ensure that every senior, regardless of 
where they live, will be able to obtain the prescription drugs and the 
quality of health care they require to live a healthy life. This 
coverage will be provided through Medicare. Democrats are working to 
strengthen this program, not to do away with it, as the gentleman from 
California (Mr. Thomas) called for when he said, and I quote him, ``To 
those who say the GOP bill will end Medicare as we know it, our answer 
is: We certainly hope so.'' Thus, the real motive behind the GOP plan 
is to do away with Medicare. Democrats proudly stand behind Medicare. 
Support the Rangel-Dingell substitute.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I yield 2 minutes to the 
gentleman from Arizona (Mr. Hayworth), a member of the Committee on 
Ways and Means.
  Mr. HAYWORTH. Mr. Speaker, I thank my friend from Connecticut, and 
she has visited Arizona, and I know that the hour grows late and the 
debate grows heated and sometimes well-intentioned efforts from some 
are thrown in the confusion.
  Mr. Speaker, I rise to urge this House to reject the Democratic 
substitute and to vote ``yes'' for H.R. 1, for reasonable, rational, 
clear-cut reform of Medicare that will bring Medicare into the 21st 
century with prescription drug coverage.

                              {time}  2345

  Mr. Speaker, we have read even tonight in Europe the development of a 
cardiac drug that is estimated to cut heart attacks by 80 percent. We 
have made great gains in pharmacology; but we do not continue those 
gains, Mr. Speaker, if we opt for a trillion dollar travesty. And make 
no mistake, that is what the minority substitute is offering to us this 
evening.
  It was interesting, my friend from Iowa, who pointed out that the 
deficit hawks on the other sides had flown the coop. It is interesting, 
so many on the left who are so quick to indict folks higher on the 
economic scale tonight are strangely silent when we offer a plan where 
we give the priorities to those who need the help first.
  The irony is, my friends on the left in the trillion dollars travesty 
section say, do not worry. Let us break the bank. Let the good times 
roll. Take command and control, put it together with a trillion bucks. 
No worries. But we know what would happen under that plan. It is a 
prescription for bankruptcy. And it is a prescription to mortgage the 
future of the working families that my friends purport to support.
  People of good will can have different opinions, and we certainly 
have them here in the House tonight. The question often comes down to 
this, when is enough enough? With the left it is never enough.
  Reject insanity. Vote for rationality, ``yes'' to H.R. 1; ``no'' to 
the Democratic substitute.

[[Page 16511]]

  The SPEAKER pro tempore (Mr. Hastings of Washington). The Chair would 
remind Members of the time remaining. The gentleman from Louisiana (Mr. 
Tauzin) has 4\1/2\ minutes remaining and the right to close. The 
gentleman from California (Mr. Stark) has 3\1/2\ minutes remaining and 
would be next in line to close. The gentlewoman from Connecticut (Mrs. 
Johnson) has 5\1/2\ minutes remaining and would be the second to close. 
The gentleman from Michigan (Mr. Dingell) has 4\1/4\ minutes remaining 
and would be the first to close.
  The Chair recognizes the gentleman from California.
  Mr. STARK. Mr. Speaker, I yield 1 minute to the gentleman from Ohio 
(Mr. Kucinich).
  Mr. KUCINICH. Mr. Speaker, everyone in America knows the price of 
drugs is too high. Seniors know it best. Proponents of H.R. 1 are not 
representing the seniors of America. They represent the biggest 
campaign contributors in America, the private health insurance industry 
led by drug makers.
  The Rangel-Dingell substitute will bring down the cost of the drugs. 
It allows Medicare to buy drugs in bulk and negotiate for lower prices, 
which the VA already does. Skyrocketing drug costs are not only driving 
up health care expenses but are causing seniors to make cruel choices 
between prescriptions and food, prescriptions and clothing. Some 
seniors are even splitting pills to make prescriptions last.
  Seniors are crying out for help, but their pleas are drowned out by 
the cash registers humming away at the majority party headquarters, 
while insurance and pharmaceutical company lobbyists rush to the great 
Medicare sell-out event.
  Yes, some of our friends are indeed trying to take care of people in 
their old age. Themselves.
  Mr. TAUZIN. Mr. Speaker, I yield myself 30 seconds.
  Mr. Speaker, I want to point out that despite what you may have heard 
on the floor tonight, our basic package contains $27.2 billion of 
assistance to rural health care. That is the largest package of rural 
health care we have ever voted on all the times we have voted on 
Medicare prescription drugs.
  Mr. Speaker, I yield 2 minutes to the gentleman from Michigan (Mr. 
Upton), the chairman of the Subcommittee on Telecommunications and the 
Internet of the Committee on Energy and Commerce.
  Mr. UPTON. Mr. Speaker, I have heard a lot of criticism tonight about 
this drug bill; and I want to remind all of us as we go back to our 
districts, as we have heard for so many years at our town meetings and 
so many events, America wants and needs a prescription drug program for 
our seniors. I remind all of our colleagues here tonight that this 
program is voluntary. You do not have to participate if you do not want 
to, but for many Americans they will want to participate. They are 
going to participate.
  Mr. Speaker, I want to relate a little story that happened to me in 
my district last summer. I was at my son's little league game. A woman 
ran up to me as I was getting in my car and packing up the gear. She 
said, My mom just had a stroke. It will cost her $600 a month to 
survive. We never had that in our budget. We cannot afford it. Is the 
plan that you passed last week, this was last year, is that going to 
help my mom? I put my hands on her shoulders and I said, Yes, I believe 
that it will. She will be able to benefit from this plan. You will be 
able to use the assets that you have and to have her survive in a 
meaningful way.
  Yet, the other body never came back. The other body never came back 
with a plan and, in fact, that woman and her family were very 
distraught.
  This is a plan tonight that can pass with bipartisan support, not 
only in this Chamber but the other Chamber on the other side of the 
Capitol. The President will sign this bill. It is within the budget. 
No, it is not perfect. But we can take a step to help the woman that I 
had talked to last year as well as the thousands of people that have 
come to our town meetings over the course of the last number of years.
  Mr. Speaker, I urge my colleagues to defeat the Democratic substitute 
and, yes, support this plan that we take up a little bit later this 
morning.
  Mr. DINGELL. Mr. Speaker, I yield 2\1/4\ minutes to the distinguished 
gentlewoman from Illinois (Ms. Schakowsky).
  Ms. SCHAKOWSKY. Mr. Speaker, once upon a time in 1989, a group of 
very angry seniors chased their Congressman, the powerful chairman of 
the House Committee on Ways and Means, into his car because they wanted 
him to know that they did not like the catastrophic health care bill.
  This happens to be the picture that appeared on the front page of the 
Chicago Tribune in August of 1989. This was a bill that passed this 
body with overwhelming bipartisan support and all of the national 
senior citizens organizations supported the bill. There was only one 
problem. No one had checked in with rank-and-file seniors around the 
country who sat down with their calculators and they figured out what 
the benefit would be that they would get and how much it would cost 
them, and they did not like the answer.
  Now, I show you this photo not to revive the debate on catastrophic 
because within a couple of months the bill was repealed, something very 
unusual and usually very difficult. I show you this photo as a friendly 
warning. If you pass H.R. 1 tonight, you better also go out and buy 
some running shoes because senior citizens are too smart to be fooled 
by Republican speeches or anybody else's speeches. They will figure out 
on their own what this bill does, which is, as the current chairman of 
the powerful House Committee on Ways and Means hopes, destroy Medicare 
as we know it.
  Seniors will get out their calculators and figure it out.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, I yield 1\1/2\ minutes to 
the gentleman from Ohio (Mr. Portman).
  Mr. PORTMAN. Mr. Speaker, it has been a very interesting debate, too, 
as you listen to this debate tonight. We had 3 hours of good debate on 
the Republican legislation, the underlying bill which provides historic 
prescription drug coverage and does so within the budget. Now is the 
opportunity for the Democrats to talk about their substitute. So what 
is your idea? And you know what we are having? More discussion of the 
underlying legislation. Again, historic legislation to add prescription 
drug coverage that is within the budget.
  The Democrats are not talking about their bill. It adds $1 trillion 
to the deficit. That busts our budget. It busts their budget. In fact, 
it busts both budgets combined.
  The Democrat legislation does so by loading up the bill, not by 
helping those seniors who need it the most. The underlying legislation 
provides for about 30 percent of the seniors that need it most, those 
under 150 percent of poverty, no deduction, no deductible, no cost 
sharing, a simple copay when you go to the pharmacy, total subsidy for 
the prescription drug coverage. Instead, the Democrat plan by going to 
a trillion dollars would provide coverage for those who do not even 
need it. It sounds like what they accuse Republicans of.
  I was really interested to see, when you look at page 12 of the 
Democrat bill, there is also something else interesting. They say we do 
not provide guaranteed access. We do provide guaranteed access. The 
government actually steps in when there are not plans available, 
negotiates down the risk which assures coverage.
  If you look at page 12, what does the Democrat plan do? It says, 
``The Secretary shall develop procedures to ensure coverage.''
  That will give you some comfort. I can see why they are not talking 
about their legislation. I would not either. Vote for the underlying 
bill. Vote down this substitute that they will not talk about.
  Mr. STARK. Mr. Speaker, I yield myself 1\1/2\ minutes.
  Mr. Speaker, just to straighten out some of the figures, the 
Republicans do indeed add $26.7 billion for rural providers. We add 
$39.1 billion for rural providers. That is $2.5 billion more, and I 
would hope that the Republicans are not lying to the seniors.

[[Page 16512]]

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

                              {time}  0000

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

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