Provides for: (1) part D benefits under Medicare+Choice plans under Medicare part C (Medicare+Choice); and (2) Medicare cost-sharing and other assistance for low-income individuals but only as it relates to benefits provided under new part D.
Revises Medicare supplemental insurance policy (Medigap) benefit packages to conform to changes made by this Act, eliminating obsolete policies with no grandfathering.
Directs the Secretary of Health and Human Services to study and report to Congress on the feasibility and advisability of: (1) establishing a uniform format for pharmacy benefit cards provided to beneficiaries; and (2) developing systems to transfer electronically prescriptions under such program from the prescriber to the pharmacist.
Requires the Comptroller General to conduct an ongoing study and analysis of the program established under this Act, especially: (1) the extent to which the competitive bidding process under it fosters maximum competition and efficiency; and (2) the savings to the Medicare program resulting from it, including the reduction in the number or length of hospital visits.
Expands the membership and duties of the Medicare Payment Advisory Commission (MEDPAC).
[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 2625 Introduced in Senate (IS)]
107th CONGRESS
2d Session
S. 2625
To amend title XVIII of the Social Security Act to provide coverage of
outpatient prescription drugs under the medicare program.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
June 14, 2002
Mr. Graham (for himself, Mr. Miller, Mr. Kennedy, Mr. Rockefeller, Mr.
Daschle, Mr. Cleland, Mr. Inouye, Mr. Reid, Ms. Mikulski, Mr. Johnson,
Mr. Leahy, Mrs. Clinton, Mr. Nelson of Florida, Mr. Sarbanes, Mr.
Bingaman, Ms. Stabenow, Mr. Wellstone, Mr. Hollings, Mrs. Murray, Mr.
Schumer, Mr. Akaka, Mrs. Boxer, Mr. Reed, Mr. Dodd, Mr. Levin, Mrs.
Carnahan, Ms. Cantwell, Mr. Durbin, and Mr. Dayton) introduced the
following bill; which was read twice and referred to the Committee on
Finance
_______________________________________________________________________
A BILL
To amend title XVIII of the Social Security Act to provide coverage of
outpatient prescription drugs under the medicare program.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Medicare
Outpatient Prescription Drug Act of 2002''.
(b) Table of Contents.--The table of contents of this Act is as
follows:
Sec. 1. Short title; table of contents.
Sec. 2. Medicare outpatient prescription drug benefit program.
``Part D--Outpatient Prescription Drug Benefit Program
``Sec. 1860. Definitions.
``Sec. 1860A. Establishment of outpatient prescription drug benefit
program.
``Sec. 1860B. Enrollment under program.
``Sec. 1860C. Enrollment in a plan.
``Sec. 1860D. Providing information to beneficiaries.
``Sec. 1860E. Premiums.
``Sec. 1860F. Outpatient prescription drug benefits.
``Sec. 1860G. Entities eligible to provide outpatient drug benefit.
``Sec. 1860H. Minimum standards for eligible entities.
``Sec. 1860I. Payments.
``Sec. 1860J. Employer incentive program for employment-based retiree
drug coverage.
``Sec. 1860K. Prescription Drug Account in the Federal Supplementary
Medical Insurance Trust Fund.
``Sec. 1860L. Medicare Prescription Drug Advisory Committee.''.
Sec. 3. Part D benefits under Medicare+Choice plans.
Sec. 4. Additional assistance for low-income beneficiaries.
Sec. 5. Medigap revisions.
Sec. 6. HHS studies and report on uniform pharmacy benefit cards and
systems for transferring prescriptions
electronically.
Sec. 7. GAO study and biennial reports on competition and savings.
Sec. 8. Expansion of membership and duties of Medicare Payment Advisory
Commission (MedPAC).
SEC. 2. MEDICARE OUTPATIENT PRESCRIPTION DRUG BENEFIT PROGRAM.
(a) Establishment.--Title XVIII of the Social Security Act (42
U.S.C. 1395 et seq.) is amended by redesignating part D as part E and
by inserting after part C the following new part:
``Part D--Outpatient Prescription Drug Benefit Program
``definitions
``Sec. 1860. In this part:
``(1) Covered outpatient drug.--
``(A) In general.--Except as provided in
subparagraph (B), the term `covered outpatient drug'
means any of the following products:
``(i) A drug which may be dispensed only
upon prescription, and--
``(I) which is approved for safety
and effectiveness as a prescription
drug under section 505 of the Federal
Food, Drug, and Cosmetic Act;
``(II)(aa) 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 drug, and (bb)
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)(aa) 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
drug, and (bb) 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 drug under such
section because the Secretary has
determined that the drug is less than
effective for all conditions of use
prescribed, recommended, or suggested
in its labeling.
``(ii) 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.
``(iii) Insulin approved under appropriate
Federal law, including needles, syringes, and
disposable pumps for the administration of such
insulin.
``(iv) A prescribed drug or biological
product that would meet the requirements of
clause (i) or (ii) except that it is available
over-the-counter in addition to being available
upon prescription.
``(B) Exclusion.--The term `covered outpatient
drug' does not include any product--
``(i) except as provided in subparagraph
(A)(iv), which may be distributed to
individuals without a prescription;
``(ii) for which payment is available under
part A or B or would be available under part B
but for the application of a deductible under
such part (unless payment for such product is
not available because benefits under part A or
B have been exhausted), determined, except as
provided in subparagraph (C), without regard to
whether the beneficiary involved is entitled to
benefits under part A or enrolled under part B;
or
``(iii) except for agents used to promote
smoking cessation and agents used for the
treatment of obesity, for which coverage may be
excluded or restricted under section
1927(d)(2).
``(C) Clarification regarding immunosuppressive
drugs.--In the case of a beneficiary who is not
eligible for any coverage under part B of drugs
described in section 1861(s)(2)(J) because of the
requirements under such section (and would not be so
eligible if the individual were enrolled under such
part), the term `covered outpatient drug' shall include
such drugs if the drugs would otherwise be described in
subparagraph (A).
``(2) Eligible beneficiary.--The term `eligible
beneficiary' means an individual that is entitled to benefits
under part A or enrolled under part B.
``(3) Eligible entity.--The term `eligible entity' means
any entity that the Secretary determines to be appropriate to
provide eligible beneficiaries with covered outpatient drugs
under a plan under this part, including--
``(A) a pharmacy benefit management company;
``(B) a retail pharmacy delivery system;
``(C) a health plan or insurer;
``(D) a State (through mechanisms established under
a State plan under title XIX);
``(E) any other entity approved by the Secretary;
or
``(F) any combination of the entities described in
subparagraphs (A) through (E) if the Secretary
determines that such combination--
``(i) increases the scope or efficiency of
the provision of benefits under this part; and
``(ii) is not anticompetitive.
``(4) Medicare+choice organization; medicare+choice plan.--
The terms `Medicare+Choice organization' and `Medicare+Choice
plan' have the meanings given such terms in subsections (a)(1)
and (b)(1), respectively, of section 1859 (relating to
definitions relating to Medicare+Choice organizations).
``(5) Prescription drug account.--The term `Prescription
Drug Account' means the Prescription Drug Account (as
established under section 1860K) in the Federal Supplementary
Medical Insurance Trust Fund under section 1841.
``establishment of outpatient prescription drug benefit program
``Sec. 1860A. (a) Provision of Benefit.--
``(1) In general.--Beginning in 2004, the Secretary shall
provide for and administer an outpatient prescription drug
benefit program under which each eligible beneficiary enrolled
under this part shall be provided with coverage of covered
outpatient drugs as follows:
``(A) Medicare+choice plan.--If the eligible
beneficiary is eligible to enroll in a Medicare+Choice
plan, the beneficiary--
``(i) may enroll in such a plan; and
``(ii) if so enrolled, shall obtain
coverage of covered outpatient drugs through
such plan.
``(B) Medicare prescription drug plan.--If the
eligible beneficiary is not enrolled in a
Medicare+Choice plan, the beneficiary shall obtain
coverage of covered outpatient drugs through enrollment
in a plan offered by an eligible entity with a contract
under this part.
``(2) Voluntary nature of program.--Nothing in this part
shall be construed as requiring an eligible beneficiary to
enroll in the program established under this part.
``(3) Scope of benefits.--The program established under
this part shall provide for coverage of all therapeutic classes
of covered outpatient drugs.
``(b) Access to Alternative Prescription Drug Coverage.--In the
case of an eligible beneficiary who has creditable prescription drug
coverage (as defined in section 1860B(b)(1)(F)), such beneficiary--
``(1) may continue to receive such coverage and not enroll
under this part; and
``(2) pursuant to section 1860B(b)(1)(C), is permitted to
subsequently enroll under this part without any penalty and
obtain coverage of covered outpatient drugs in the manner
described in subsection (a) if the beneficiary involuntarily
loses such coverage.
``(c) Financing.--The costs of providing benefits under this part
shall be payable from the Prescription Drug Account.
``enrollment under program
``Sec. 1860B. (a) Establishment of Process.--
``(1) Process similar to enrollment under part b.--The
Secretary shall establish a process through which an eligible
beneficiary (including an eligible beneficiary enrolled in a
Medicare+Choice plan offered by a Medicare+Choice organization)
may make an election to enroll under this part. Such process
shall be similar to the process for enrollment in part B under
section 1837, including the deeming provisions of such section.
``(2) Requirement of enrollment.--An eligible beneficiary
must enroll under this part in order to be eligible to receive
covered outpatient drugs under this title.
``(b) Special Enrollment Procedures.--
``(1) Late enrollment penalty.--
``(A) Increase in premium.--Subject to the
succeeding provisions of this paragraph, in the case of
an eligible beneficiary whose coverage period under
this part began pursuant to an enrollment after the
beneficiary's initial enrollment period under part B
(determined pursuant to section 1837(d)) and not
pursuant to the open enrollment period described in
paragraph (2), the Secretary shall establish procedures
for increasing the amount of the monthly part D premium
under section 1860E(a) applicable to such beneficiary--
``(i) by an amount that is equal to 10
percent of such premium for each full 12-month
period (in the same continuous period of
eligibility) in which the eligible beneficiary
could have been enrolled under this part but
was not so enrolled; or
``(ii) if determined appropriate by the
Secretary, by an amount that the Secretary
determines is actuarily 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--
``(i) the months which elapsed between the
close of the eligible beneficiary's initial
enrollment period and the close of the
enrollment period in which the beneficiary
enrolled; and
``(ii) in the case of an eligible
beneficiary who reenrolls under this part, the
months which elapsed between the date of
termination of a previous coverage period and
the close of the enrollment period in which the
beneficiary reenrolled.
``(C) Periods not taken into account.--
``(i) In general.--For purposes of
calculating any 12-month period under
subparagraph (A), subject to clause (ii), there
shall not be taken into account months for
which the eligible beneficiary can demonstrate
that the beneficiary had creditable
prescription drug coverage (as defined in
subparagraph (F)).
``(ii) 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--
``(I) in the case of a beneficiary
with coverage described in clause (ii)
of subparagraph (F), the date on which
the plan terminates, ceases to provide,
or reduces the value of the
prescription drug coverage under such
plan to below the actuarial value of
the coverage provided under the program
under this part; or
``(II) in the case of a beneficiary
with coverage described in clause (i),
(iii), or (iv) of subparagraph (F), the
date on which the beneficiary loses
eligibility for such coverage.
``(D) Periods treated separately.--Any increase in
an eligible beneficiary's monthly part D premium under
subparagraph (A) with respect to a particular
continuous period of eligibility shall not be
applicable with respect to any other continuous period
of eligibility which the beneficiary may have.
``(E) Continuous period of eligibility.--
``(i) In general.--Subject to clause (ii),
for purposes of this paragraph, an eligible
beneficiary's `continuous period of
eligibility' is the period that begins with the
first day on which the beneficiary is eligible
to enroll under section 1836 and ends with the
beneficiary's death.
``(ii) Separate period.--Any period during
all of which an eligible beneficiary satisfied
paragraph (1) of section 1836 and which
terminated in or before the month preceding the
month in which the beneficiary attained age 65
shall be a separate `continuous period of
eligibility' with respect to the beneficiary
(and each such period which terminates shall be
deemed not to have existed for purposes of
subsequently applying this paragraph).
``(F) Creditable prescription drug coverage
defined.--For purposes of this part, the term
`creditable prescription drug coverage' means any of
the following:
``(i) 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 and
through a social health maintenance
organization (referred to in section 4104(c) of
the Balanced Budget Act of 1997).
``(ii) Prescription drug coverage under a
group health plan.--Prescription drug coverage
under a group health plan, including a health
benefits plan under the Federal Employees
Health Benefit Program under chapter 89 of
title 5, United States Code, and a qualified
retiree prescription drug plan (as defined in
section 1860J(e)(3)), that provides coverage of
the cost of prescription drugs the actuarial
value of which (as defined by the Secretary) to
the beneficiary equals or exceeds the actuarial
value of the benefits provided to an individual
enrolled in the outpatient prescription drug
benefit program under this part.
``(iii) State pharmaceutical assistance
program.--Coverage of prescription drugs under
a State pharmaceutical assistance program.
``(iv) Veterans' coverage of prescription
drugs.--Coverage of prescription drugs for
veterans, and survivors and dependents of
veterans, under chapter 17 of title 38, United
States Code.
``(2) Open enrollment period for current beneficiaries in
which late enrollment procedures do not apply.--
``(A) In general.--The Secretary shall establish an
applicable period, which shall begin on the date on
which the Secretary first begins to accept elections
for enrollment under this part, during which any
eligible beneficiary may enroll under this part without
the application of the late enrollment procedures
established under paragraph (1)(A).
``(B) Open enrollment period to begin prior to
january 1, 2004.--The Secretary shall ensure that
eligible beneficiaries are permitted to enroll under
this part prior to January 1, 2004, in order to ensure
that coverage under this part is effective as of such
date.
``(3) Special enrollment period for beneficiaries who
involuntarily lose creditable prescription drug coverage.--The
Secretary shall establish a special open enrollment period for
an eligible beneficiary that loses creditable prescription drug
coverage.
``(c) Period of Coverage.--
``(1) In general.--Except as provided in paragraph (2) and
subject to paragraph (3), an eligible beneficiary's coverage
under the program under this part shall be effective for the
period provided in section 1838, as if that section applied to
the program under this part.
``(2) Open and special enrollment.--Subject to paragraph
(3), an eligible beneficiary who enrolls under the program
under this part pursuant to paragraph (2) or (3) of subsection
(b) shall be entitled to the benefits under this part beginning
on the first day of the month following the month in which such
enrollment occurs.
``(3) Limitation.--Coverage under this part shall not begin
prior to January 1, 2004.
``(d) Termination.--
``(1) In general.--The causes of termination specified in
section 1838 shall apply to this part in the same manner as
such causes apply to part B.
``(2) Coverage terminated by termination of coverage under
parts a and b.--
``(A) In general.--In addition to the causes of
termination specified in paragraph (1), the Secretary
shall terminate an individual's coverage under this
part if the individual is no longer enrolled in either
part A or B.
``(B) Effective date.--The termination described in
subparagraph (A) shall be effective on the effective
date of termination of coverage under part A or (if
later) under part B.
``(3) Procedures regarding termination of a beneficiary
under a plan.--The Secretary shall establish procedures for
determining the status of an eligible beneficiary's enrollment
under this part if the beneficiary's enrollment in a plan
offered by an eligible entity under this part is terminated by
the entity for cause (pursuant to procedures established by the
Secretary under section 1860C(a)(1)).
``enrollment in a plan
``Sec. 1860C. (a) Process.--
``(1) Establishment.--
``(A) In general.--The Secretary shall establish a
process through which an eligible beneficiary who is
enrolled under this part but not enrolled in a
Medicare+Choice plan offered by a Medicare+Choice
organization shall make an annual election to enroll in
any plan offered by an eligible entity that has been
awarded a contract under this part and serves the geographic area in
which the beneficiary resides. Such process shall include for the
default enrollment in such a plan in the case of an eligible
beneficiary who is enrolled under this part but who has failed to make
an election of such a plan.
``(B) Rules.--In establishing the process under
subparagraph (A), the Secretary shall--
``(i) use rules similar to the rules for
enrollment, disenrollment, and termination of
enrollment with a Medicare+Choice plan under
section 1851, including--
``(I) the establishment of special
election periods under subsection
(e)(4) of such section; and
``(II) the application of the
guaranteed issue and renewal provisions
of subsection (g) of such section
(other than paragraph (3)(C)(i),
relating to default enrollment); and
``(ii) coordinate enrollments,
disenrollments, and terminations of enrollment
under part C with enrollments, disenrollments,
and terminations of enrollment under this part.
``(2) First enrollment period for plan enrollment.--The
process developed under paragraph (1) shall--
``(A) ensure that eligible beneficiaries who choose
to enroll under this part are permitted to enroll with
an eligible entity prior to January 1, 2004, in order
to ensure that coverage under this part is effective as
of such date; and
``(B) be coordinated with the open enrollment
period under section 1860B(b)(2)(A).
``(b) Medicare+Choice Enrollees.--
``(1) In general.--An eligible beneficiary who is enrolled
under this part and enrolled in a Medicare+Choice plan offered
by a Medicare+Choice organization shall receive coverage of
covered outpatient drugs under this part through such plan.
``(2) Rules.--Enrollment in a Medicare+Choice plan is
subject to the rules for enrollment in such a plan under
section 1851.
``providing information to beneficiaries
``Sec. 1860D. (a) Activities.--
``(1) In general.--The Secretary shall conduct activities
that are designed to broadly disseminate information to
eligible beneficiaries (and prospective eligible beneficiaries)
regarding the coverage provided under this part.
``(2) Special rule for first enrollment under the
program.--To the extent practicable, the activities described
in paragraph (1) shall ensure that eligible beneficiaries are
provided with such information at least 30 days prior to the
open enrollment period described in section 1860B(b)(2)(A).
``(b) Requirements.--
``(1) In general.--The activities described in subsection
(a) shall--
``(A) be similar to the activities performed by the
Secretary under section 1851(d);
``(B) be coordinated with the activities performed
by the Secretary under such section and under section
1804; and
``(C) provide for the dissemination of information
comparing the plans offered by eligible entities under
this part that are available to eligible beneficiaries
residing in an area.
``(2) Comparative information.--The comparative information
described in paragraph (1)(C) shall include a comparison of the
following:
``(A) Benefits.--The benefits provided under the
plan, including the prices beneficiaries will be
charged for covered outpatient drugs, any preferred
pharmacy networks used by the eligible entity under the
plan, and the formularies and appeals processes under
the plan.
``(B) Quality and performance.--To the extent
available, the quality and performance of the eligible
entity offering the plan.
``(C) Beneficiary cost-sharing.--The cost-sharing
required of eligible beneficiaries under the plan.
``(D) Consumer satisfaction surveys.--To the extent
available, the results of consumer satisfaction surveys
regarding the plan and the eligible entity offering
such plan.
``(E) Additional information.--Such additional
information as the Secretary may prescribe.
``(3) Information standards.--The Secretary shall develop
standards to ensure that the information provided to eligible
beneficiaries under this part is complete, accurate, and
uniform.
``(c) Use of Medicare Consumer Coalitions To Provide Information.--
``(1) In general.--The Secretary may contract with Medicare
Consumer Coalitions to conduct the informational activities
under--
``(A) this section;
``(B) section 1851(d); and
``(C) section 1804.
``(2) Selection of coalitions.--If the Secretary determines
the use of Medicare Consumer Coalitions to be appropriate, the
Secretary shall--
``(A) develop and disseminate, in such areas as the
Secretary determines appropriate, a request for
proposals for Medicare Consumer Coalitions to contract
with the Secretary in order to conduct any of the
informational activities described in paragraph (1);
and
``(B) select a proposal of a Medicare Consumer
Coalition to conduct the informational activities in
each such area, with a preference for broad
participation by organizations with experience in
providing information to beneficiaries under this
title.
``(3) Payment to medicare consumer coalitions.--The
Secretary shall make payments to Medicare Consumer Coalitions
contracting under this subsection in such amounts and in such manner as
the Secretary determines appropriate.
``(4) Authorization of appropriations.--There are
authorized to be appropriated to the Secretary such sums as may
be necessary to contract with Medicare Consumer Coalitions
under this section.
``(5) Medicare consumer coalition defined.--In this
subsection, the term `Medicare Consumer Coalition' means an
entity that is a nonprofit organization operated under the
direction of a board of directors that is primarily composed of
beneficiaries under this title.
``premiums
``Sec. 1860E. (a) Annual Establishment of Monthly Part D Premium
Rates.--
``(1) In general.--The Secretary shall, during September of
each year (beginning in 2003), determine and promulgate a
monthly part D premium rate for the succeeding year.
``(2) Amount.--The Secretary shall determine the monthly
part D premium rate for the succeeding year as follows:
``(A) Premium for 2004.--The monthly part D premium
rate for 2004 shall be $25.
``(B) Inflation adjustment of premium for 2005 and
subsequent years.--
``(i) In general.--Subject to clause (ii),
in the case of any calendar year beginning
after 2004, the monthly part D premium rate for
the year shall be the amount described in
subparagraph (A) increased by an amount equal
to--
``(I) such dollar amount,
multiplied by
``(II) the percentage (if any) by
which the amount of the average annual
per capita aggregate expenditures
payable from the Prescription Drug
Account for the year (as estimated
under section 1860J(c)(2)(C)) exceeds
the amount of such expenditures in
2004.
``(ii) Rounding.--If the monthly part D
premium rate determined under clause (i) is not
a multiple of $1, such rate shall be rounded to
the nearest multiple of $1.
``(b) Collection of Part D Premium.--The monthly part D premium
applicable to an eligible beneficiary under this part (after
application of any increase under section 1860B(b)(1)) shall be
collected and credited to the Prescription Drug Account in the same
manner as the monthly premium determined under section 1839 is
collected and credited to the Federal Supplementary Medical Insurance
Trust Fund under section 1840.
``outpatient prescription drug benefits
``Sec. 1860F. (a) Requirement.--A plan offered by an eligible
entity under this part shall provide eligible beneficiaries enrolled in
such plan with--
``(1) coverage of covered outpatient drugs--
``(A) without the application of any deductible;
and
``(B) with the cost-sharing described in subsection
(b); and
``(2) access to negotiated prices for such drugs under
subsection (c).
``(b) Cost-Sharing.--
``(1) Three-tiered copayment structure for drugs included
in the formulary.--
``(A) In general.--Subject to the succeeding
provisions of this subsection, in the case of a covered
outpatient drug that is dispensed in a year to an
eligible beneficiary and that is included in the
formulary established by the eligible entity (pursuant
to section 1860H(c)) for the plan, the beneficiary
shall be responsible for a copayment for the drug in an
amount equal to the following:
``(i) Generic drugs.--In the case of a
generic covered outpatient drug, $10 for each
prescription (as defined by the Secretary in
consultation with the Medicare Prescription
Drug Advisory Committee established under
section 1860L) of such drug.
``(ii) Preferred brand name drugs.--In the
case of a preferred brand name covered
outpatient drug (including a drug treated as a
preferred brand name drug under subparagraph
(C)), $40 for each prescription (as so defined)
of such drug.
``(iii) Nonpreferred brand name drug.--In
the case of a nonpreferred brand name covered
outpatient drug (that is not treated as a
preferred brand name drug under subparagraph
(C)), $60 for each prescription (as so defined)
of such drug.
``(B) Reduction by eligible entity.--An eligible
entity offering a plan under this part may reduce the
applicable copayment amount that an eligible
beneficiary enrolled in the plan is subject to under
subparagraph (A) if the Secretary determines that such
reduction--
``(i) is tied to the performance
requirements described in section
1860I(b)(1)(C); and
``(ii) will not result in an increase in
the expenditures made from the Prescription
Drug Account.
``(C) Treatment of medically necessary nonpreferred
and nonformulary drugs.--The eligible entity shall
treat a nonpreferred brand name drug and a nonformulary
drug as a preferred brand name drug under subparagraph
(A)(ii) if such nonpreferred or nonformulary drug, as
the case may be, is determined (pursuant to
subparagraph (D) or (E) of section 1860H(a)(3)) to be
medically necessary.
``(2) Authority for increased cost-sharing for nonformulary
drugs.--Pursuant to section 1860H(c)(3)(A), an eligible entity
offering a plan under this part may require cost-sharing for a
nonformulary drug that is higher than the copayment amount
described in paragraph (1)(A)(iii).
``(3) Cost-sharing may not exceed negotiated price.--
``(A) In general.--If the amount of cost-sharing
for a covered outpatient drug that would otherwise be
required under this subsection (but for this paragraph)
is greater than the applicable amount, then the amount
of such cost-sharing shall be reduced to an amount
equal to such applicable amount.
``(B) Applicable amount defined.--For purposes of
subparagraph (A), the term `applicable amount' means an
amount equal to--
``(i) in the case of generic drugs and
preferred brand name drugs, the negotiated
price for the drug (as reported to the
Secretary pursuant to section 1860H(a)(5)(A))
less $5; and
``(ii) in the case of nonpreferred brand
name drugs and nonformulary drugs, the
negotiated price for the drug (as so reported).
``(4) No cost-sharing once expenses equal annual out-of-
pocket limit.--
``(A) In general.--An eligible entity offering a
plan under this part shall provide coverage of covered
outpatient drugs without any cost-sharing if the
individual has incurred costs (as described in
subparagraph (C)) for covered outpatient drugs in a
year equal to the annual out-of-pocket limit specified
in subparagraph (B).
``(B) Annual out-of-pocket limit.--Subject to
paragraph (5), for purposes of this part, the `annual
out-of-pocket limit' specified in this subparagraph is
equal to $4,000.
``(C) Application.--In applying subparagraph (A)--
``(i) incurred costs shall only include
costs incurred for the cost-sharing described
in this subsection; but
``(ii) such costs shall be treated as
incurred without regard to whether the
individual or another person, including a State
program or other third-party coverage, has paid
for such costs.
``(5) Inflation adjustment for copayment amounts and annual
out-of-pocket limit.--
``(A) In general.--For any year after 2005--
``(i) the copayment amounts described in
clauses (i), (ii), and (iii) of paragraph
(1)(A) are equal to the copayment amounts
determined under such paragraph (or this
paragraph) for the previous year increased by
the annual percentage increase described in
subparagraph (B); and
``(ii) the annual out-of-pocket limit
specified in paragraph (4)(B) is equal to the
annual out-of-pocket limit determined under
such paragraph (or this paragraph) for the
previous year increased by the annual
percentage increase described in subparagraph
(B).
``(B) Annual percentage increase.--The annual
percentage increase specified in this subparagraph for
a year is equal to the annual percentage increase in
the prices of covered outpatient drugs (including both
price inflation and price changes due to changes in
therapeutic mix), as determined by the Secretary for
the 12-month period ending in July of the previous
year.
``(C) Rounding.--If any amount determined under
subparagraph (A) is not a multiple of $1, such amount
shall be rounded to the nearest multiple of $1.
``(c) Access to Negotiated Prices.--Under a plan offered by an
eligible entity with a contract under this part, the eligible entity
offering such plan shall provide eligible beneficiaries enrolled in
such plan with access to negotiated prices (including applicable
discounts) used for payment for covered outpatient drugs, regardless of
the fact that only partial benefits may be payable under the coverage
with respect to such drugs because of the application of the cost-
sharing under subsection (b).
``entities eligible to provide outpatient drug benefit
``Sec. 1860G. (a) Establishment of Panels of Plans Available in an
Area.--
``(1) In general.--The Secretary shall establish procedures
under which the Secretary--
``(A) accepts bids submitted by eligible entities
for the plans which such entities intend to offer in an
area established under subsection (b); and
``(B) awards contracts to such entities to provide
such plans to eligible beneficiaries in the area.
``(2) 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.
``(b) Area for Contracts.--
``(1) Regional basis.--
``(A) In general.--Except as provided in
subparagraph (B) and subject to paragraph (2), the
contract entered into between the Secretary and an
eligible entity with respect to a plan shall require
the eligible entity to provide coverage of covered
outpatient drugs under the plan in a region determined
by the Secretary under paragraph (2).
``(B) Partial regional basis.--
``(i) In general.--If determined
appropriate by the Secretary, the Secretary may
permit the coverage described in subparagraph
(A) to be provided in a partial region
determined appropriate by the Secretary.
``(ii) Requirements.--If the Secretary
permits coverage pursuant to clause (i), the
Secretary shall ensure that the partial region
in which coverage is provided is--
``(I) at least the size of the
commercial service area of the eligible
entity for that area; and
``(II) not smaller than a State.
``(2) Determination.--
``(A) In general.--In determining regions for
contracts under this part, the Secretary shall--
``(i) take into account the number of
eligible beneficiaries in an area in order to
encourage participation by eligible entities;
and
``(ii) ensure that there are at least 10
different regions in the United States.
``(B) No administrative or judicial review.--The
determination of coverage areas under this part shall
not be subject to administrative or judicial review.
``(c) Submission of Bids.--
``(1) Submission.--
``(A) In general.--Subject to subparagraph (B),
each eligible entity desiring to offer a plan under
this part in an area shall submit a bid with respect to
such plan to the Secretary at such time, in such
manner, and accompanied by such information as the
Secretary may reasonably require.
``(B) Bid that covers multiple areas.--The
Secretary shall permit an eligible entity to submit a
single bid for multiple areas if the bid is applicable
to all such areas.
``(2) Required information.--The bids described in
paragraph (1) shall include--
``(A) a proposal for the estimated prices of
covered outpatient drugs and the projected annual
increases in such prices, including differentials
between formulary and nonformulary prices, if
applicable;
``(B) a statement regarding the amount that the
entity will charge the Secretary for managing,
administering, and delivering the benefits under the
contract;
``(C) a statement regarding whether the entity will
reduce the applicable cost-sharing amount pursuant to
section 1860F(b)(1)(B) and if so, the amount of such
reduction and how such reduction is tied to the performance
requirements described in section 1860I(b)(1)(C);
``(D) a detailed description of the performance
requirements for which the payments to the entity will
be subject to risk pursuant to section 1860I(b)(1)(C);
``(E) a detailed description of access to pharmacy
services provided under the plan, including information
regarding--
``(i) whether the entity will use a
preferred pharmacy network under the plan; and
``(ii) if a preferred pharmacy network is
used, whether the entity will offer access to
pharmacies that are outside such network and if
such access is provided, rules for accessing
such pharmacies;
``(F) with respect to the formulary used by the
entity, a detailed description of the procedures and
standards the entity will use for--
``(i) adding new drugs to a therapeutic
class within the formulary; and
``(ii) determining when and how often the
formulary should be modified;
``(G) a detailed description of any ownership or
shared financial interests with other entities involved
in the delivery of the benefit as proposed under the
plan;
``(H) a detailed description of the entity's
estimated marketing and advertising expenditures
related to enrolling eligible beneficiaries under the
plan and retaining such enrollment; and
``(I) 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.
``(d) Access to Benefits in Certain Areas.--
``(1) Areas not covered by contracts.--The Secretary shall
develop procedures for the provision of covered outpatient
drugs 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.
``(2) 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.
``(e) Awarding of Contracts.--
``(1) Number of contracts.--The Secretary shall, consistent
with the requirements of this part and the goal of containing
costs under this title, award in a competitive manner at least
2 contracts to offer a plan in an area, unless only 1 bidding
entity (and the plan offered by the entity) meets the minimum
standards specified under this part and by the Secretary.
``(2) Determination.--In determining which of the eligible
entities 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 the past performance
of the entity and other relevant factors, with respect to--
``(A) how well the entity (and the plan offered by
the entity) meet such minimum standards;
``(B) the amount that the entity will charge the
Secretary for managing, administering, and delivering
the benefits under the contract;
``(C) the performance requirements for which the
payments to the entity will be subject to risk pursuant
to section 1860I(b)(1)(C);
``(D) the proposed negotiated prices of covered
outpatient drugs and annual increases in such prices;
``(E) the factors described in section 1860D(b)(2);
``(F) prior experience of the entity in managing,
administering, and delivering a prescription drug
benefit program;
``(G) effectiveness of the entity and plan in
containing costs through pricing incentives and
utilization management; and
``(H) such other factors as the Secretary deems
necessary to evaluate the merits of each bid.
``(3) Exception to conflict of interest rules.--In awarding
contracts 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--
``(A) is not inconsistent with the--
``(i) purposes of the programs under this
title; or
``(ii) best interests of beneficiaries
enrolled under this part; and
``(B) 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.
``(4) No administrative or judicial review.--The
determination of the Secretary to award or not award a contract
to an eligible entity with respect to a plan under this part
shall not be subject to administrative or judicial review.
``(f) Approval of Marketing Material and Application Forms.--The
provisions of section 1851(h) shall apply to marketing material and
application forms under this part in the same manner as such provisions
apply to marketing material and application forms under part C.
``(g) Duration of Contracts.--Each contract awarded under this part
shall be for a term of at least 2 years but not more than 5 years, as
determined by the Secretary.
``minimum standards for eligible entities
``Sec. 1860H. (a) In General.--The Secretary shall not award a
contract to an eligible entity under this part unless the Secretary
finds that the eligible entity agrees to comply with such terms and
conditions as the Secretary shall specify, including the following:
``(1) Quality and financial standards.--The eligible entity
meets the quality and financial standards specified by the
Secretary.
``(2) Procedures to ensure proper utilization, compliance,
and avoidance of adverse drug reactions.--
``(A) In general.--The eligible entity has in place
drug utilization review procedures to ensure--
``(i) the appropriate utilization by
eligible beneficiaries enrolled in the plan
covered by the contract of the benefits to be
provided under the plan;
``(ii) the avoidance of adverse drug
reactions among such beneficiaries, including
problems due to therapeutic duplication, drug-
disease contraindications, drug-drug
interactions (including serious
interactions with nonprescription or over-the-counter drugs), incorrect
drug dosage or duration of drug treatment, drug-allergy interactions,
and clinical abuse and misuse; and
``(iii) the reasonable application of peer-
reviewed medical literature pertaining to
improvements in pharmaceutical safety and
appropriate use of drugs.
``(B) Authority to use certain compendia and
literature.--The eligible entity may use the compendia
and literature referred to in clauses (i) and (ii),
respectively, of section 1927(g)(1)(B) as a source for
the utilization review under subparagraph (A).
``(3) Patient protections.--
``(A) Access.--
``(i) In general.--The eligible entity
ensures that the covered outpatient drugs are
accessible and convenient to eligible
beneficiaries enrolled in the plan covered by
the contract, including by offering the
services 24 hours a day and 7 days a week for
emergencies.
``(ii) Agreements with pharmacies.--The
eligible entity shall enter into a
participation agreement with any pharmacy that
meets the requirements of subsection (d) to
furnish covered prescription drugs to eligible
beneficiaries under this part. Such agreements
shall include the payment of a reasonable
dispensing fee for covered outpatient drugs
dispensed to a beneficiary under the agreement.
``(iii) Preferred pharmacy networks.--If
the eligible entity utilizes a preferred
pharmacy network, the network complies with the
standards under subsection (e).
``(B) Ensuring that beneficiaries are not
overcharged.--The eligible entity has procedures in
place to ensure that each pharmacy with a participation
agreement under this part with the entity complies with
the requirements under subsection (d)(1)(C) (relating
to adherence to negotiated prices).
``(C) Continuity of care.--
``(i) In general.--The eligible entity
ensures 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
1860C(a)(1)), the entity will continue to
provide coverage under this part to such
beneficiary until the beneficiary enrolls and
receives such coverage with another eligible
entity under this part or, if eligible, with a
Medicare+Choice organization.
``(ii) Limited period.--In no event shall
an eligible entity be required to provide the
extended coverage required under clause (i)
beyond the date which is 30 days after the
coverage with such entity would have terminated
but for this subparagraph.
``(D) Procedures regarding the determination of
drugs that are medically necessary.--
``(i) In general.--The eligible entity has
in place procedures on a case-by-case basis to
treat a nonpreferred brand name drug as a
preferred brand name drug and a nonformulary
drug as a preferred brand name drug under this
part if the nonpreferred brand name drug or the
nonformulary drug, as the case may be, is
determined--
``(I) to be not as effective for
the enrollee in preventing or slowing
the deterioration of, or improving or
maintaining, the health of the
enrollee; or
``(II) to have a significant
adverse effect on the enrollee.
``(ii) Requirement.--The procedures under
clause (i) shall require that determinations
under such clause are based on professional
medical judgment, the medical condition of the
enrollee, and other medical evidence.
``(E) Procedures regarding appeal rights with
respect to denials of care.--The eligible entity has 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 brand name drugs and
nonformulary drugs as preferred brand name
drugs) 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 (and
are not less favorable to the enrollee than
such requirements under such part as in effect
on the date of enactment of the Medicare
Outpatient Prescription Drug Act of 2002);
``(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 are not less favorable to the
enrollee than such requirements under such part
as in effect on the date of enactment of the
Medicare Outpatient Prescription Drug Act of
2002); and
``(iii) that enrollees are provided with
information regarding the appeals procedures
under this part at the time of enrollment with
the entity and upon request thereafter.
``(F) Procedures regarding patient
confidentiality.--Insofar as an eligible entity
maintains individually identifiable medical records or
other health information regarding eligible
beneficiaries enrolled in the plan that is covered by
the contract, the entity has in place procedures to--
``(i) safeguard the privacy of any
individually identifiable beneficiary
information;
``(ii) maintain such records and
information in a manner that is accurate and
timely;
``(iii) ensure timely access by such
beneficiaries to such records and information;
and
``(iv) otherwise comply with applicable
laws relating to patient confidentiality.
``(G) Procedures regarding transfer of medical
records.--
``(i) In general.--The eligible entity has
in place procedures for the timely transfer of
records and information described in
subparagraph (F) (with respect to a beneficiary
who loses coverage under this part with the
entity and enrolls with another entity
(including a Medicare+Choice organization)
under this part) to such other entity.
``(ii) Patient confidentiality.--The
procedures described in clause (i) shall comply
with the patient confidentiality procedures
described in subparagraph (F).
``(H) Procedures regarding medical errors.--The
eligible entity has in place procedures for--
``(i) working with the Secretary to deter
medical errors related to the provision of
covered outpatient drugs; and
``(ii) ensuring that pharmacies with a
contract with the entity have in place
procedures to deter medical errors related to
the provision of covered outpatient drugs.
``(4) Procedures to control fraud, abuse, and waste.--The
eligible entity has in place procedures to control fraud,
abuse, and waste.
``(5) Reporting requirements.--
``(A) In general.--The eligible entity provides the
Secretary with reports containing information regarding
the following:
``(i) The negotiated prices that the
eligible entity is paying for covered
outpatient drugs.
``(ii) The prices that eligible
beneficiaries enrolled in the plan that is
covered by the contract will be charged for
covered outpatient drugs.
``(iii) The management costs of providing
such benefits.
``(iv) Utilization of such benefits.
``(v) Marketing and advertising
expenditures related to enrolling and retaining
eligible beneficiaries.
``(B) Timeframe for submitting reports.--
``(i) In general.--The eligible entity
shall submit a report described in subparagraph
(A) to the Secretary within 3 months after the
end of each 12-month period in which the
eligible entity has a contract under this part.
Such report shall contain information
concerning the benefits provided during such
12-month period.
``(ii) Last year of contract.--In the case
of the last year of a contract under this part,
the Secretary may require that a report
described in subparagraph (A) be submitted 3
months prior to the end of the contract. Such
report shall contain information concerning the
benefits provided between the period covered by
the most recent report under this subparagraph
and the date that a report is submitted under
this clause.
``(C) Confidentiality of information.--
``(i) In general.--Notwithstanding any
other provision of law and subject to clause
(ii), information disclosed by an eligible
entity pursuant to subparagraph (A) (except for
information described in clause (ii) of such
subparagraph) is confidential and shall only be
used by the Secretary for the purposes of, and
to the extent necessary, to carry out this
part.
``(ii) Utilization data.--Subject to
patient confidentiality laws, the Secretary
shall make information disclosed by an eligible
entity pursuant to subparagraph (A)(iv)
(regarding utilization data) available for
research purposes. The Secretary may charge a
reasonable fee for making such information
available.
``(6) Approval of marketing material and application
forms.--The eligible entity complies with the requirements
described in section 1860G(f).
``(7) Records and audits.--The eligible entity maintains
adequate records related to the administration of the benefits
under this part and affords the Secretary access to such
records for auditing purposes.
``(b) Special Rules Regarding Cost-Effective Provision of
Benefits.--In providing the benefits under a contract under this part,
an eligible entity shall--
``(1) employ mechanisms to provide the benefits
economically, such as through the use of--
``(A) alternative methods of distribution;
``(B) preferred pharmacy networks (pursuant to
subsection (e)); and
``(C) generic drug substitution;
``(2) use mechanisms to encourage eligible beneficiaries to
select cost-effective drugs or less costly means of receiving
drugs, such as through the use of--
``(A) pharmacy incentive programs;
``(B) therapeutic interchange programs; and
``(C) disease management programs;
``(3) encourage pharmacy providers to--
``(A) inform beneficiaries of the differentials in
price between generic and brand name drug equivalents;
and
``(B) provide medication therapy management
programs in order to enhance beneficiaries'
understanding of the appropriate use of medications and
to reduce the risk of potential adverse events
associated with medications; and
``(4) develop and implement a formulary in accordance with
subsection (c).
``(c) Requirements for Formularies.--
``(1) In general.--The formulary developed and implemented
by the eligible entity shall comply with standards established
by the Secretary in consultation with the Medicare Prescription
Drug Advisory Committee established under section 1860L.
``(2) Requirements for standards.--The standards
established under paragraph (1) shall require that the eligible
entity--
``(A) use a pharmacy and therapeutic committee
(that meets the standards for a pharmacy and
therapeutic committee established by the Secretary in
consultation with such Medicare Prescription Drug
Advisory Committee) to develop and implement the
formulary;
``(B) assign all brand name drugs included in the
formulary to either the preferred category or
nonpreferred category of drugs;
``(C) include--
``(i) all generic covered outpatient drugs
in the formulary;
``(ii) at least 1 brand name covered
outpatient drug from each therapeutic class (as
defined by the Secretary in consultation with
such Medicare Prescription Drug Advisory
Committee) as a preferred brand name drug in
the formulary; and
``(iii) if there is more than 1 brand name
covered outpatient drug available in a
therapeutic class, at least 1 such drug as a
preferred brand name drug in the formulary and
at least 1 such drug as a nonpreferred brand
name drug in the formulary;
``(D) develop procedures for the modification of
the formulary, including for the addition of new drugs
to an existing therapeutic class;
``(E) pursuant to section 1860F(b)(1)(C), provide
for coverage of nonpreferred brand name drugs and
nonformulary drugs at the preferred rate when
determined under subparagraph (D) or (E) of subsection
(a)(3) to be medically necessary;
``(F) disclose to current and prospective
beneficiaries and to providers in the service area the
nature of the formulary restrictions, including
information regarding the drugs included in the
formulary and any difference in the cost-sharing for--
``(i) drugs included in the formulary; and
``(ii) for drugs not included in the
formulary; and
``(G) provide a reasonable amount of notice to
beneficiaries enrolled in the plan that is covered by
the contract under this part of any change in the
formulary.
``(3) Construction.--Nothing in this part shall be
construed as precluding an eligible entity from--
``(A) except as provided in section 1860F(b)(1)(C)
(relating to the coverage of medically necessary drugs
at the preferred rate), requiring cost-sharing for
nonformulary drugs that is higher than the copayment
amount established in section 1860F(b)(1)(A)(iii);
``(B) educating prescribing providers, pharmacists,
and beneficiaries about the medical and cost benefits
of drugs included in the formulary (including generic
drugs); or
``(C) requesting prescribing providers to consider
a drug included in the formulary prior to dispensing of
a drug not so included or a preferred brand name drug
prior to dispensing of a nonpreferred brand name drug,
as long as such a request does not unduly delay the
provision of the drug.
``(d) Terms of Participation Agreement With Pharmacies.--
``(1) In general.--A participation agreement between an
eligible entity and a pharmacy under this part (pursuant to
subsection (a)(3)(A)(ii)) 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
the eligible entity) shall establish concerning the
quality of, and enrolled beneficiaries' access to,
pharmacy services under this part. Such standards shall
require the pharmacy--
``(i) not to refuse to dispense covered
outpatient drugs to any eligible beneficiary
enrolled under this part;
``(ii) to keep patient records (including
records on expenses) for all covered outpatient
drugs dispensed to such enrolled beneficiaries;
``(iii) to submit information (in a manner
specified by the Secretary to be necessary to
administer this part) on all purchases of such
drugs dispensed to such enrolled beneficiaries;
and
``(iv) to comply with periodic audits to
assure compliance with the requirements of this
part and the accuracy of information submitted.
``(C) Ensuring that beneficiaries are not
overcharged.--
``(i) Adherence to negotiated prices.--The
total charge for each covered outpatient drug
dispensed by the pharmacy to a beneficiary
enrolled in the plan, without regard to whether
the individual is financially responsible for
any or all of such charge, shall not exceed the
negotiated price for the drug (as reported to
the Secretary pursuant to subsection
(a)(5)(A)).
``(ii) Adherence to beneficiary
obligation.--The pharmacy may not charge (or
collect from) such beneficiary an amount that
exceed's the cost-sharing that the beneficiary
is responsible for under this part (as
determined under section 1860F(b) using the
negotiated price of the drug).
``(D) Additional requirements.--The pharmacy shall
meet such additional contract requirements as the
eligible entity specifies under this section.
``(2) 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.
``(e) Preferred Pharmacy Networks.--
``(1) In general.--If an eligible entity uses a preferred
pharmacy network to deliver benefits under this part, such
network shall meet minimum access standards established by the
Secretary.
``(2) Standards.--In establishing standards under paragraph
(1), the Secretary shall take into account reasonable distances
to pharmacy services in both urban and rural areas.
``payments
``Sec. 1860I. (a) Procedures for Payments to Eligible Entities.--
The Secretary shall establish procedures for making payments to each
eligible entity with a contract under this part for the management,
administration, and delivery of the benefits under this part.
``(b) Requirements for Procedures.--
``(1) In general.--The procedures established under
subsection (a) shall provide for the following:
``(A) Management payment.--Payment for the
management, administration, and delivery of the
benefits under this part.
``(B) Reimbursement for negotiated costs of drugs
provided.--Payments for the negotiated costs of covered
outpatient drugs provided to eligible beneficiaries
enrolled under this part and in a plan offered by the
eligible entity, reduced by any applicable cost-sharing
under section 1860F(b).
``(C) Risk requirement to ensure pursuit of
performance requirements.--An adjustment of a
percentage (as determined under paragraph (2)) of the
payments made to an entity under subparagraph (A) to
ensure that the entity, in managing, administering, and
delivering the benefits under this part, pursues
performance requirements established by the Secretary,
including the following:
``(i) Control of medicare and beneficiary
costs.--The entity contains costs to the
Prescription Drug Account and to eligible
beneficiaries enrolled under this part and in
the plan offered by the entity, as measured by
generic substitution rates, price discounts,
and other factors determined appropriate by the
Secretary that do not reduce the access of such
beneficiaries to medically necessary covered
outpatient drugs.
``(ii) Quality clinical care.--The entity
provides such beneficiaries with quality
clinical care, as measured by such factors as--
``(I) the level of adverse drug
reactions and medical errors among such
beneficiaries; and
``(II) providing specific clinical
suggestions to improve health and
patient and prescriber education as
appropriate.
``(iii) Quality service.--The entity
provides such beneficiaries 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, response time in
mail delivery service, and timely action with
regard to appeals and current beneficiary
service surveys.
``(2) Percentage of payment tied to risk.--
``(A) In general.--Subject to subparagraph (B), the
Secretary shall determine the percentage (which may be
up to 100 percent) of the payments made to an entity
under subparagraph (A) that will be tied to the
performance requirements described in paragraph (1)(C).
``(B) 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 subsection at a level that
jeopardizes the ability of an eligible entity to
administer and deliver the benefits under this part or
administer and deliver such benefits in a quality
manner.
``(3) Risk adjustment of payments based on enrollees in
plan.--To the extent that an eligible entity is at risk under
this subsection, the procedures established under subsection
(a) may include a methodology for risk adjusting the payments
made to such entity based on the differences in actuarial risk
of different enrollees being served if the Secretary determines
such adjustments to be necessary and appropriate.
``(4) Pass-through of rebates and price concessions
obtained by the eligible entity.--The Secretary, if determined
by the Secretary to be in the best interests of the medicare
program or eligible beneficiaries, may establish procedures for
reducing the amount of payments to an eligible entity under
subsection (a) to take into account any rebates or price
concessions obtained by the entity from manufacturers of
covered outpatient drugs.
``(c) Payments to Medicare+Choice Organizations.--For provisions
related to payments to Medicare+Choice organizations for the
administration and delivery of benefits under this part to eligible
beneficiaries enrolled in a Medicare+Choice plan offered by the
organization, see section 1853(c)(8).
``(d) Secondary Payer Provisions.--The provisions of section
1862(b) shall apply to the benefits provided under this part.
``employer incentive program for employment-based retiree drug coverage
``Sec. 1860J. (a) Program Authority.--The Secretary is authorized
to develop and implement a program under this section to be known as
the `Employer Incentive Program' that encourages employers and other
sponsors of employment-based health care coverage to provide adequate
prescription drug benefits to retired individuals by subsidizing, in
part, the sponsor's cost of providing coverage under qualifying plans.
``(b) Sponsor Requirements.--In order to be eligible to receive an
incentive payment under this section with respect to coverage of an
individual under a qualified retiree prescription drug plan (as defined
in subsection (e)(3)), a sponsor shall meet the following requirements:
``(1) Assurances.--The sponsor shall--
``(A) annually attest, and provide such assurances
as the Secretary may require, that the coverage offered
by the sponsor is a qualified retiree prescription drug
plan, and will remain such a plan 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 retirees--
``(i) at least 120 days before terminating
its plan; and
``(ii) immediately upon determining that
the actuarial value of the prescription drug
benefit under the plan falls below the
actuarial value of the outpatient prescription
drug benefit under this part.
``(2) Beneficiary information.--The sponsor shall report to
the Secretary, for each calendar quarter for which it seeks an
incentive payment under this section, the names and social
security numbers of all retirees (and their spouses and
dependents) covered under such plan during such quarter and the
dates (if less than the full quarter) during which each such individual
was covered.
``(3) Audits.--The sponsor and the employment-based retiree
health coverage plan seeking incentive payments 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 drug coverage, the accuracy
of incentive payments made, and such other matters as may be
appropriate.
``(4) Other requirements.--The sponsor shall provide such
other information, and comply with such other requirements, as
the Secretary may find necessary to administer the program
under this section.
``(c) Incentive Payments.--
``(1) In general.--A sponsor that meets the requirements of
subsection (b) with respect to a quarter in a calendar year
shall be entitled to have payment made by the Secretary on a
quarterly basis (to the sponsor or, at the sponsor's direction,
to the appropriate employment-based health plan) of an
incentive payment, in the amount determined in paragraph (2),
for each retired individual (or spouse or dependent) who--
``(A) was covered under the sponsor's qualified
retiree prescription drug plan during such quarter; and
``(B) was eligible for, but was not enrolled in,
the outpatient prescription drug benefit program under
this part.
``(2) Amount of payment.--
``(A) In general.--The amount of the payment for a
quarter shall be, for each individual described in
paragraph (1), \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 amount estimated under
subparagraph (C) for the year involved; exceeds
``(ii) the monthly Part D premium under
section 1860E(a) (determined without regard to
any increase under section 1860B(b)(1)) for the
month involved.
``(C) Estimate of average annual per capita
aggregate expenditures.--
``(i) In general.--The Secretary shall for
each year after 2003 estimate for that year an
amount equal to average annual per capita
aggregate expenditures payable from the
Prescription Drug Account for that year.
``(ii) Timeframe for estimation.--The
Secretary shall make the estimate described in
clause (i) for a year before the beginning of
that year.
``(3) Payment date.--The payment under this section with
respect to a calendar quarter shall be payable as of the end of
the next succeeding calendar quarter.
``(d) Civil Money Penalties.--A sponsor, health plan, or other
entity that the Secretary determines has, directly or through its
agent, provided information in connection with a request for an
incentive payment under this section that the entity knew or should
have known to be false shall be subject to a civil monetary penalty in
an amount up to 3 times the total incentive amounts under subsection
(c) that were paid (or would have been payable) on the basis of such
information.
``(e) Definitions.--In this section:
``(1) Employment-based retiree health coverage.--The term
`employment-based retiree health coverage' means health
insurance or other coverage, whether provided by voluntary
insurance coverage or pursuant to statutory or contractual
obligation, of health care costs for retired individuals (or
for such individuals and their spouses and dependents) based on
their status as former employees or labor union members.
``(2) Employer.--The term `employer' has the meaning given
the term in section 3(5) of the Employee Retirement Income
Security Act of 1974 (except that such term shall include only
employers of 2 or more employees).
``(3) Qualified retiree prescription drug plan.--The term
`qualified retiree prescription drug plan' means health
insurance coverage included in employment-based retiree health
coverage that--
``(A) provides coverage of the cost of prescription
drugs with an actuarial value (as defined by the
Secretary) to each retired beneficiary that equals or
exceeds the actuarial value of the benefits provided to
an individual enrolled in the outpatient prescription
drug benefit program under this part; and
``(B) does not deny, limit, or condition the
coverage or provision of prescription drug benefits for
retired individuals based on age or any health status-
related factor described in section 2702(a)(1) of the
Public Health Service Act.
``(4) Sponsor.--The term `sponsor' has the meaning given
the term `plan sponsor' in section 3(16)(B) of the Employer
Retirement Income Security Act of 1974.
``(f) Authorization of Appropriations.--There are authorized to be
appropriated from time to time, out of any moneys in the Treasury not
otherwise appropriated, such sums as may be necessary to carry out the
program under this section.
``prescription drug account in the federal supplementary medical
insurance trust fund
``Sec. 1860K. (a) Establishment.--
``(1) In general.--There is created within the Federal
Supplementary Medical Insurance Trust Fund established by
section 1841 an account to be known as the `Prescription Drug
Account' (in this section referred to as the `Account').
``(2) Funds.--The Account shall consist of such gifts and
bequests as may be made as provided in section 201(i)(1), and
such amounts as may be deposited in, or appropriated to, the
account as provided in this part.
``(3) Separate from rest of trust fund.--Funds provided
under this part to the Account shall be kept separate from all
other funds within the Federal Supplementary Medical Insurance
Trust Fund.
``(b) Payments From Account.--
``(1) In general.--The Managing Trustee shall pay from time
to time from the Account such amounts as the Secretary
certifies are necessary to make payments to operate the program
under this part, including payments to eligible entities under
section 1860I, payments to Medicare+Choice organizations under
section 1853(c)(8), and payments with respect to administrative
expenses under this part in accordance with section 201(g).
``(2) Treatment in relation to part b premium.--Amounts
payable from the Account shall not be taken into account in
computing actuarial rates or premium amounts under section
1839.
``(c) Appropriations To Cover Benefits and Administrative Costs.--
``(1) In general.--Subject to paragraph (2), there are
appropriated to the Account in a fiscal year, out of any moneys
in the Treasury not otherwise appropriated, an amount equal to
the amount by which the benefits and administrative costs of
providing the benefits under this part in the year exceed the
premiums collected under section 1860E(b) for the year.
``(2) Limitation.--No amounts shall be appropriated, and no
amounts expended, for expenses incurred for providing coverage
of covered outpatient drugs after January 1, 2011. The
Secretary may make payments on or after such date for expenses
incurred to the extent such expenses were incurred for
providing coverage of covered outpatient drugs prior to such
date.
``medicare prescription drug advisory committee
``Sec. 1860L. (a) Establishment of Committee.--There is established
a Medicare Prescription Drug Advisory Committee (in this section
referred to as the `Committee').
``(b) Functions of Committee.--On and after March 1, 2003, the
Committee shall advise the Secretary on policies related to--
``(1) the development of guidelines for the implementation
and administration of the outpatient prescription drug benefit
program under this part; and
``(2) the development of--
``(A) standards for a pharmacy and therapeutics
committee required of eligible entities under section
1860H(c)(2)(A);
``(B) standards required under subparagraphs (D)
and (E) of section 1860H(a)(3) for determining if a
drug is medically necessary;
``(C) standards for--
``(i) establishing therapeutic classes;
``(ii) adding new therapeutic classes to a
formulary; and
``(iii) defining a prescription of covered
outpatient drugs for purposes of applying cost-
sharing under section 1860F(b);
``(D) procedures to evaluate the bids submitted by
eligible entities under this part; and
``(E) procedures to ensure that eligible entities
with a contract under this part are in compliance with
the requirements under this part.
``(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, attainments, and understanding of
pharmaceutical cost control and quality enhancement,
exceptionally qualified to perform the duties of
members of the Committee.
``(B) Specific members.--Of the members appointed
under paragraph (1)--
``(i) five shall be chosen to represent
physicians, 2 of whom shall be geriatricians;
``(ii) two shall be chosen to represent
nurse practitioners;
``(iii) four shall be chosen to represent
pharmacists;
``(iv) one shall be chosen to represent the
Centers for Medicare & Medicaid Services;
``(v) four shall be chosen to represent
actuaries, pharmacoeconomists, researchers, and
other appropriate experts;
``(vi) one shall be chosen to represent
emerging drug technologies;
``(vii) one shall be closed to represent
the Food and Drug Administration; and
``(viii) one 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,
2003.
``(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) Exclusions From Coverage.--
(1) Application to part d.--Section 1862(a) of the Social
Security Act (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 drugs not excluded from coverage if
reasonable and necessary.--Section 1862(a)(1) of the Social
Security Act (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 drugs covered
under part D, which are not reasonable and necessary to
prevent or slow the deterioration of, or improve or
maintain, the health of eligible beneficiaries;''.
(c) Conforming Amendments to Federal Supplementary Medical
Insurance Trust Fund.--Section 1841 of the Social Security Act (42
U.S.C. 1395t) is amended--
(1) in the last sentence of subsection (a)--
(A) by striking ``and'' before ``such amounts'';
and
(B) by inserting before the period the following:
``, and such amounts as may be deposited in, or
appropriated to, the Prescription Drug Account
established by section 1860K'';
(2) in subsection (g), by inserting after ``by this part,''
the following: ``the payments provided for under part D (in
which case the payments shall be made from the Prescription
Drug Account in the Trust Fund),'';
(3) in subsection (h), by inserting after ``1840(d)'' the
following: ``and section 1860E(b) (in which case the payments
shall be made from the Prescription Drug Account in the Trust
Fund)''; and
(4) in subsection (i), by inserting after ``section
1840(b)(1)'' the following: ``, section 1860E(b) (in which case
the payments shall be made from the Prescription Drug Account
in the Trust Fund),''.
(d) Conforming References to Previous Part D.--
(1) In general.--Any reference in law (in effect before the
date of enactment of this Act) to part D of title XVIII of the
Social Security Act is deemed a reference to part E of such
title (as in effect after such date).
(2) Secretarial submission of legislative proposal.--Not
later than 6 months after the date of enactment of this Act,
the Secretary of Health and Human Services shall submit to
Congress a legislative proposal providing for such technical
and conforming amendments in the law as are required by the
provisions of this Act.
SEC. 3. PART D BENEFITS UNDER MEDICARE+CHOICE PLANS.
(a) Eligibility, Election, and Enrollment.--Section 1851 of the
Social Security Act (42 U.S.C. 1395w-21) is amended--
(1) in subsection (a)(1)(A), by striking ``parts A and B''
and inserting ``parts A, B, and D''; and
(2) in subsection (i)(1), by striking ``parts A and B'' and
inserting ``parts A, B, and D''.
(b) Voluntary Beneficiary Enrollment for Drug Coverage.--Section
1852(a)(1)(A) of the Social Security Act (42 U.S.C. 1395w-22(a)(1)(A))
is amended by inserting ``(and under part D to individuals also
enrolled under that part)'' after ``parts A and B''.
(c) Access to Services.--Section 1852(d)(1) of the Social Security
Act (42 U.S.C. 1395w-22(d)(1)) is amended--
(1) in subparagraph (D), by striking ``and'' at the end;
(2) in subparagraph (E), by striking the period at the end
and inserting ``; and''; and
(3) by adding at the end the following new subparagraph:
``(F) in the case of covered outpatient drugs (as
defined in section 1860(1)) provided to individuals
enrolled under part D, the organization complies with
the access requirements applicable under part D.''.
(d) Payments to Organizations for Part D Benefits.--
(1) In general.--Section 1853(a)(1)(A) of the Social
Security Act (42 U.S.C. 1395w-23(a)(1)(A)) is amended--
(A) by inserting ``determined separately for the
benefits under parts A and B and under part D (for
individuals enrolled under that part)'' after ``as
calculated under subsection (c)'';
(B) by striking ``that area, adjusted for such risk
factors'' and inserting ``that area. In the case of
payment for the benefits under parts A and B, such
payment shall be adjusted for such risk factors as'';
and
(C) by inserting before the last sentence the
following: ``In the case of the payments under
subsection (c)(8) for the provision of coverage of
covered outpatient drugs to individuals enrolled under
part D, such payment shall be adjusted for the risk
factors of each enrollee as the Secretary determines to
be feasible and appropriate to ensure actuarial
equivalence.''.
(2) Amount.--Section 1853(c) of the Social Security Act (42
U.S.C. 1395w-23(c)) is amended--
(A) in paragraph (1), in the matter preceding
subparagraph (A), by inserting ``for benefits under
parts A and B'' after ``capitation rate''; and
(B) by adding at the end the following new
paragraph:
``(8) Capitation rate for part d benefits.--
``(A) In general.--In the case of a Medicare+Choice
plan that provides coverage of covered outpatient drugs
to an individual enrolled under part D, the capitation
rate for such coverage shall be the amount described in
subparagraph (B). Such payments shall be made in the
same manner and at the same time as the payments to the
Medicare+Choice organization offering the plan for
benefits under parts A and B are otherwise made, but
such payments shall be payable from the Prescription
Drug Account in the Federal Supplementary Medical
Insurance Trust Fund under section 1841.
``(B) Amount.--The amount described in this
paragraph is an amount equal to \1/12\ of the average
annual per capita aggregate expenditures payable from
the Prescription Drug Account for the year (as
estimated under section 1860J(c)(2)(C)).''.
(e) Limitation on Enrollee Liability.--Section 1854(e) of the
Social Security Act (42 U.S.C. 1395w-24(e)) is amended by adding at the
end the following new paragraph:
``(5) Special rule for part d benefits.--With respect to
outpatient prescription drug benefits under part D, a
Medicare+Choice organization may not require that an enrollee
pay any deductible or pay a cost-sharing amount that exceeds
the amount of cost-sharing applicable for such benefits for an
eligible beneficiary under part D.''.
(f) Requirement for Additional Benefits.--Section 1854(f)(1) of the
Social Security Act (42 U.S.C. 1395w-24(f)(1)) is amended by adding at
the end the following new sentence: ``Such determination shall be made
separately for the benefits under parts A and B and for prescription
drug benefits under part D.''.
(g) Effective Date.--The amendments made by this section shall
apply to items and services provided under a Medicare+Choice plan on or
after January 1, 2004.
SEC. 4. ADDITIONAL ASSISTANCE FOR LOW-INCOME BENEFICIARIES.
(a) Inclusion in Medicare Cost-Sharing.--Section 1905(p)(3) of the
Social Security Act (42 U.S.C. 1396d(p)(3)) is amended--
(1) in subparagraph (A)--
(A) in clause (i), by striking ``and'' at the end;
(B) in clause (ii), by inserting ``and'' at the
end; and
(C) by adding at the end the following new clause:
``(iii) premiums under section 1860E(a).''; and
(2) in subparagraph (B), by inserting ``and cost-sharing
described in section 1860F(b)'' after ``section 1813''.
(b) Expansion of Medical Assistance.--Section 1902(a)(10)(E) of the
Social Security Act (42 U.S.C. 1396a(a)(10)(E)) is amended--
(1) in clause (iii)--
(A) by striking ``section 1905(p)(3)(A)(ii)'' and
inserting ``clauses (ii) and (iii) of section
1905(p)(3)(A) and for medicare cost-sharing described
in section 1905(p)(3)(B) (but only insofar as it
relates to benefits provided under part D of title
XVIII),''; and
(B) by striking ``and'' at the end;
(2) by redesignating clause (iv) as clause (vi); and
(3) by inserting after clause (iii) the following new
clauses:
``(iv) for making medical assistance available for
medicare cost-sharing described in section
1905(p)(3)(A)(iii) and for medicare cost-sharing
described in section 1905(p)(3)(B) (but only insofar as
it relates to benefits provided under part D of title
XVIII) for individuals who would be qualified medicare
beneficiaries described in section 1905(p)(1) but for
the fact that their income exceeds 120 percent but does
not exceed 135 percent of such official poverty line
for a family of the size involved;
``(v) for making medical assistance available for
medicare cost-sharing described in section
1905(p)(3)(A)(iii) on a linear sliding scale based on
the income of such individuals for individuals who
would be qualified medicare beneficiaries described in
section 1905(p)(1) but for the fact that their income
exceeds 135 percent but does not exceed 150 percent of
such official poverty line for a family of the size
involved; and''.
(c) Nonapplicability of Resource Requirements to Medicare Part D
Cost-Sharing.--Section 1905(p)(1) of the Social Security Act (42 U.S.C.
1396d(p)(1)) is amended by adding at the end the following flush
sentence:
``In determining if an individual is a qualified medicare beneficiary
under this paragraph, subparagraph (C) shall not be applied for
purposes of providing the individual with medicare cost-sharing
described in section 1905(p)(3)(A)(iii) or for medicare cost-sharing
described in section 1905(p)(3)(B) (but only insofar as it relates to
benefits provided under part D of title XVIII).''.
(d) Nonapplicability of Payment Differential Requirements to
Medicare Part D Cost-Sharing.--Section 1902(n)(2) of the Social
Security Act (42 U.S.C. 1396a(n)(2)) is amended by adding at the end
the following new sentence: ``The preceding sentence shall not apply to
the cost-sharing described in section 1860F(b).''.
(e) 100 Percent Federal Medical Assistance Percentage.--The first
sentence of section 1905(b) of the Social Security Act (42 U.S.C.
1396d(b)) is amended--
(1) by striking ``and'' before ``(4)''; and
(2) by inserting before the period at the end the
following: ``, and (5) the Federal medical assistance
percentage shall be 100 percent with respect to medical
assistance provided under clauses (iv) and (v) of section
1902(a)(10)(E)''.
(f) Treatment of Territories.--Section 1108(g) of the Social
Security Act (42 U.S.C. 1308(g)) is amended by adding at the end the
following new paragraph:
``(3) Notwithstanding the preceding provisions of this subsection,
with respect to fiscal year 2004 and any fiscal year thereafter, the
amount otherwise determined under this subsection (and subsection (f))
for the fiscal year for a Commonwealth or territory shall be increased
by the ratio (as estimated by the Secretary) of--
``(A) the aggregate amount of payments made to the 50
States and the District of Columbia for the fiscal year under
title XIX that are attributable to making medical assistance
available for individuals described in clauses (i), (iii),
(iv), and (v) of section 1902(a)(10)(E) for payment of medicare
cost-sharing described in section 1905(p)(3)(A)(iii) and for
medicare cost-sharing described in section 1905(p)(3)(B) (but
only insofar as it relates to benefits provided under part D of
title XVIII); to
``(B) the aggregate amount of total payments made to such
States and District for the fiscal year under such title.''.
(g) Conforming Amendments.--Section 1933 of the Social Security Act
(42 U.S.C. 1396u-3) is amended--
(1) in subsection (a), by striking ``section
1902(a)(10)(E)(iv)'' and inserting ``section
1902(a)(10)(E)(vi)'';
(2) in subsection (c)(2)(A)--
(A) in clause (i), by striking ``section
1902(a)(10)(E)(iv)(I)'' and inserting ``section
1902(a)(10)(E)(vi)(I)''; and
(B) in clause (ii), by striking ``section
1902(a)(10)(E)(iv)(II)'' and inserting ``section
1902(a)(10)(E)(vi)(II)'';
(3) in subsection (d), by striking ``section
1902(a)(10)(E)(iv)'' and inserting ``section
1902(a)(10)(E)(vi)''; and
(4) in subsection (e), by striking ``section
1902(a)(10)(E)(iv)'' and inserting ``section
1902(a)(10)(E)(vi)''.
(h) Effective Date.--The amendments made by this section shall
apply for medical assistance provided under section 1902(a)(10)(E) of
the Social Security Act (42 U.S.C. 1396a(a)(10)(E)) on and after
January 1, 2004.
SEC. 5. MEDIGAP REVISIONS.
Section 1882 of the Social Security Act (42 U.S.C. 1395ss) is
amended by adding at the end the following new subsection:
``(v) Modernized Benefit Packages for Medicare Supplemental
Policies.--
``(1) Revision of benefit packages.--
``(A) In general.--Notwithstanding subsection (p),
the benefit packages classified as `H', `I', and `J'
under the standards established by subsection (p)(2)
(including the benefit package classified as `J' with a
high deductible feature, as described in subsection
(p)(11)) shall be revised so that--
``(i) the coverage of outpatient
prescription drugs available under such benefit
packages is replaced with coverage of
outpatient prescription drugs that complements
but does not duplicate the coverage of
outpatient prescription drugs that is otherwise
available under this title;
``(ii) the revised benefit packages provide
a range of coverage options for outpatient
prescription drugs for beneficiaries, but do
not provide coverage for more than 90 percent
of the cost-sharing amount applicable to an
individual under section 1860F(b);
``(iii) uniform language and definitions
are used with respect to such revised benefits;
``(iv) uniform format is used in the policy
with respect to such revised benefits;
``(v) such revised standards meet any
additional requirements imposed by the
amendments made by the Medicare Outpatient
Prescription Drug Act of 2002; and
``(vi) except as revised under the
preceding clauses or as provided under
subsection (p)(1)(E), the benefit packages are
identical to the benefit packages that were
available on the date of enactment of the
Medicare Outpatient Prescription Drug Act of
2002.
``(B) Manner of revision.--The benefit packages
revised under this section shall be revised in the
manner described in subparagraph (E) of subsection
(p)(1), except that for purposes of subparagraph (C) of
such subsection, the standards established under this
subsection shall take effect not later than January 1,
2004.
``(2) Construction of benefits in other medicare
supplemental policies.--Nothing in the benefit packages
classified as `A' through `G' under the standards established
by subsection (p)(2) (including the benefit package classified
as `F' with a high deductible feature, as described in
subsection (p)(11)) shall be construed as providing coverage
for benefits for which payment may be made under part D.
``(3) Guaranteed issuance and renewal of revised
policies.--The provisions of subsections (q) and (s), including
provisions of subsection (s)(3) (relating to special enrollment
periods in cases of termination or disenrollment), shall apply
to medicare supplemental policies revised under this subsection
in the same manner as such provisions apply to medicare
supplemental policies issued under the standards established
under subsection (p).
``(4) Opportunity of current policyholders to purchase
revised policies.--
``(A) In general.--No medicare supplemental policy
of an issuer with a benefit package that is revised
under paragraph (1) shall be deemed to meet the
standards in subsection (c) unless the issuer--
``(i) provides written notice during the
60-day period immediately preceding the period
established for the open enrollment period
established under section 1860B(b)(2)(A), to
each individual who is a policyholder or
certificate holder of a medicare supplemental
policy issued by that issuer (at the most
recent available address of that individual) of the offer described in
clause (ii) and of the fact that such individual will no longer be
covered under such policy as of January 1, 2004; and
``(ii) offers the policyholder or
certificate holder under the terms described in
subparagraph (B), during at least the period
established under section 1860B(b)(2)(A), a
medicare supplemental policy with the benefit
package that the Secretary determines is most
comparable to the policy in which the
individual is enrolled with coverage effective
as of the date on which the individual is first
entitled to benefits under part D.
``(B) Terms of offer described.--The terms
described in this subparagraph are terms which do not--
``(i) deny or condition the issuance or
effectiveness of a medicare supplemental policy
described in subparagraph (A)(ii) that is
offered and is available for issuance to new
enrollees by such issuer;
``(ii) discriminate in the pricing of such
policy because of health status, claims
experience, receipt of health care, or medical
condition; or
``(iii) impose an exclusion of benefits
based on a preexisting condition under such
policy.
``(5) Elimination of obsolete policies with no
grandfathering.--No person may sell, issue, or renew a medicare
supplemental policy with a benefit package that is classified
as `H', `I', or `J' (or with a benefit package classified as
`J' with a high deductible feature) that has not been revised
under this subsection on or after January 1, 2004.
``(6) Penalties.--Each penalty under this section shall
apply with respect to policies revised under this subsection as
if such policies were issued under the standards established
under subsection (p), including the penalties under subsections
(a), (d), (p)(8), (p)(9), (q)(5), (r)(6)(A), (s)(4), and
(t)(2)(D).''.
SEC. 6. HHS STUDIES AND REPORT ON UNIFORM PHARMACY BENEFIT CARDS AND
SYSTEMS FOR TRANSFERRING PRESCRIPTIONS ELECTRONICALLY.
(a) Studies.--The Secretary of Health and Human Services shall
conduct a study to determine the feasibility and advisability of--
(1) establishing a uniform format for pharmacy benefit
cards provided to beneficiaries by eligible entities under the
outpatient prescription drug benefit program under part D of
title XVIII of the Social Security Act (as added by section 2);
and
(2) developing systems to electronically transfer
prescriptions under such program from the prescriber to the
pharmacist.
(b) Report.--Not later than 2 years after the date of enactment of
this Act, the Secretary of Health and Human Services shall submit to
Congress a report on the results of the studies conducted under
subsection (a) together with any recommendations for legislation that
the Secretary determines to be appropriate as a result of such studies.
SEC. 7. GAO STUDY AND BIENNIAL REPORTS ON COMPETITION AND SAVINGS.
(a) Ongoing Study.--The Comptroller General of the United States
shall conduct an ongoing study and analysis of the outpatient
prescription drug benefit program under part D of title XVIII of the
Social Security Act (as added by section 2), including an analysis of--
(1) the extent to which the competitive bidding process
under such program fosters maximum competition and efficiency;
and
(2) the savings to the medicare program resulting from such
outpatient prescription drug benefit program, including the
reduction in the number or length of hospital visits.
(b) Initial Report on Competitive Bidding Process.--Not later than
9 months after the date of enactment of this Act, the Comptroller
General of the United States shall submit to Congress a report on the
results of the portion of the study conducted pursuant to subsection
(a)(1).
(c) Biennial Reports.--Not later than January 1, 2005, and
biennially thereafter, the Comptroller General of the United States
shall submit to Congress a report on the results of the study conducted
under subsection (a) together with such recommendations for legislation
and administrative action as the Comptroller General determines
appropriate.
SEC. 8. EXPANSION OF MEMBERSHIP AND DUTIES OF MEDICARE PAYMENT ADVISORY
COMMISSION (MEDPAC).
(a) Expansion of Membership.--
(1) In general.--Section 1805(c) of the Social Security Act
(42 U.S.C. 1395b-6(c)) is amended--
(A) in paragraph (1), by striking ``17'' and
inserting ``19''; and
(B) in paragraph (2)(B), by inserting ``experts in
the area of pharmacology and prescription drug benefit
programs,'' after ``other health professionals,''.
(2) Initial terms of additional members.--
(A) In general.--For purposes of staggering the
initial terms of members of the Medicare Payment
Advisory Commission under section 1805(c)(3) of the
Social Security Act (42 U.S.C. 1395b-6(c)(3)), the
initial terms of the 2 additional members of the
Commission provided for by the amendment under
paragraph (1)(A) are as follows:
(i) One member shall be appointed for 1
year.
(ii) One member shall be appointed for 2
years.
(B) Commencement of terms.--Such terms shall begin
on January 1, 2003.
(b) Expansion of Duties.--Section 1805(b)(2) of the Social Security
Act (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 outpatient prescription drug benefit program
under part D, the impact of such program on--
``(i) the pharmaceutical market, including
costs and pricing of pharmaceuticals,
beneficiary access to such pharmaceuticals, and
trends in research and development;
``(ii) franchise, independent, and rural
pharmacies; and
``(iii) beneficiary access to outpatient
prescription drugs, including an assessment of
out-of-pocket spending, generic and brand name
drug utilization, and pharmacists' services.''.
<all>
Introduced in Senate
Sponsor introductory remarks on measure. (CR S5584-5587)
Read twice and referred to the Committee on Finance. (text of measure as introduced: CR S5587-5597)
Sponsor introductory remarks on measure. (CR S5792)
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