MEDICARE MODERNIZATION AND PRESCRIPTION DRUG ACT OF 2002
(House of Representatives - June 27, 2002)

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[Pages H4166-H4320]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




        MEDICARE MODERNIZATION AND PRESCRIPTION DRUG ACT OF 2002

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

                              H. Res. 465

       Resolved, That upon the adoption of this resolution it 
     shall be in order without intervention of any point of order 
     (except those arising under section 302(f) of the 
     Congressional Budget Act of 1974) to consider in the House 
     the bill (H.R. 4954) to amend title XVIII of the Social 
     Security Act to provide for a voluntary program for 
     prescription drug coverage under the Medicare Program, to 
     modernize and reform payments and the

[[Page H4167]]

     regulatory structure of the Medicare Program, and for other 
     purposes. The bill shall be considered as read for amendment. 
     In lieu of the amendment recommended by the Committee on Ways 
     and Means, the amendment in the nature of a substitute 
     printed in the report of the Committee on Rules accompanying 
     this resolution shall be considered as adopted. All points of 
     order against the bill, as amended, are waived. The previous 
     question shall be considered as ordered on the bill, as 
     amended, to final passage without intervening motion except: 
     (1) two hours of debate on the bill, as amended, with one 
     hour equally divided and controlled by the chairman and 
     ranking minority member of the Committee on Ways and Means 
     and one hour equally divided and controlled by the chairman 
     and ranking minority member of the Committee on Energy and 
     Commerce; and (2) one motion to recommit with or without 
     instructions.

  The SPEAKER pro tempore (Mr. Simpson). The gentleman from Georgia 
(Mr. Linder) is recognized for 1 hour.
  Mr. LINDER. Mr. Speaker, for the purpose of debate only, I yield the 
customary 30 minutes to the gentlewoman from New York (Mrs. Slaughter), 
pending which I yield myself such time as I may consume.
  Mr. Speaker, H. Res. 465 is a closed rule that provides 2 hours of 
debate in the House, with 1 hour equally divide and controlled by the 
chairman and ranking minority member of the Committee on Ways and Means 
and 1 hour equally divided and controlled by the chairman and ranking 
minority member of the Committee on Energy and Commerce.
  H. Res. 465 waives all points of order against consideration of the 
bill, except those arising under section 302(f)of the Congressional 
Budget Act of 1974. H. Res. 465 provides that in lieu of the amendment 
recommended by the Committee on Ways and Means, the amendment in the 
nature of a substitute printed in the report of the Committee on Rules 
accompanying this resolution shall be considered as adopted.
  The rule waives all points of order against the bill as amended and 
provides one motion to recommit, with or without instructions.
  Mr. Speaker, I urge my colleagues to join me in approving this rule 
so that the full House can proceed to consider this important Medicare 
reform legislation. The underlying bill is critically important 
legislation that is designed to provide much-needed financial 
assistance to seniors to ease the burden of the rising costs of 
prescription drugs.
  H.R. 4954 seeks to improve the Medicare program by introducing free 
market forces in order to bring down drug prices and medical costs 
overall by introducing competition to a program that currently has 
none.
  In addition to unleashing market forces on prescription drug prices, 
the bill seeks to move the Medicare+Choice program into a more 
competitive structure, the durable medical equipment and off-the-shelf 
orthotics are subject to competitive bidding and, finally, Medicare 
contractors will bid competitively for business. All of these reform 
elements will help move Medicare in the right direction, and our 
seniors will surely reap the benefits of a more consumer-friendly and 
patient-sensitive Medicare.
  The House voted on similar legislation in the 106th Congress but was 
unable to reach agreement with the other body and the Clinton White 
House in order to enact a law to help our seniors. Well, with our new 
administration under President Bush now in office, I believe the House 
of Representatives needs to seize the historic opportunity to move a 
Medicare prescription drug benefit proposal through the 107th Congress 
in order to give our President a chance to sign such important 
legislation into law.
  I applaud the hard work and leadership of my friends and colleagues, 
the gentleman from California (Mr. Thomas), the chairman of the 
Committee on Ways and Means, and the gentleman from Louisiana (Mr. 
Tauzin), the chairman of the Committee on Energy and Commerce, and 
their respective ranking members in bringing this legislation to the 
House floor today.
  I urge my colleagues on both sides of the aisle to support H. Res. 
465, a rule that will allow the House to consider and pass legislation 
that will improve the lives of millions of seniors across the country 
by providing them affordable prescription drugs.
  Mr. Speaker, I neglected to say earlier that all time yielded in the 
pursuit of passage of the rule is yielded for the purpose of debate 
only.
  Mr. Speaker, I reserve the balance of my time.
  Ms. SLAUGHTER. Mr. Speaker, I thank the gentleman from Georgia for 
yielding me the customary 30 minutes, and I yield myself such time as I 
may consume.
  (Ms. SLAUGHTER asked and was given permission to revise and extend 
her remarks.)
  Ms. SLAUGHTER. Mr. Speaker, with the rule before us today, this body 
is being asked to hand over one of the most popular government programs 
in history to private insurance companies. Medicare is a critical 
program, a program that benefits a wide spectrum of our constituents 
and one that American families have come to depend on for their loved 
ones in need. But today, in a cynical nod to the pharmaceutical 
industry, the leadership has shut out any meaningful debate. No 
Democrat substitute will be allowed, no amendments to guarantee 
affordable prescription drugs for our seniors will be permitted, and 
anyone voicing dissent has been silenced.

                              {time}  2100

  Indeed, in the wee hours of this morning in the Committee on Rules, 
one of my colleagues made it clear that he wanted the free market to 
determine drug prices, and declared that Medicare was, attention, a 
Soviet-style program, echoing the sentiment made by his former leader, 
Newt Gingrich, that Medicare should be allowed ``to wither on the 
vine.''
  Make no mistake: the contempt for Medicare runs deep within this 
leadership, as it does for other vital social programs. By calling 
Medicare Soviet-style, we can be certain that this is not a mandate to 
ensure the future of the program, but rather, the opposite.
  Mr. LINDER. Mr. Speaker, will the gentlewoman yield? She is 
misquoting something I said, and I would like to respond to it.
  The SPEAKER pro tempore (Mr. LaTourette). The gentleman has not been 
yielded to.
  Mr. LINDER. Will the gentlewoman yield?
  Ms. SLAUGHTER. No, I want to finish my statement.
  Mr. LINDER. She referred directly.
  The SPEAKER pro tempore. The time is controlled by the gentlewoman 
from New York.
  Ms. SLAUGHTER. But rather the opposite, a call to leave seniors to 
the mercies of the private sector and the free market, rather than 
guarantee them livable, affordable health care.
  My constituents and others around the Nation are reeling from public 
programs that have been turned over to the so-called free market. 
Utility rates, cable rates, you name it, the free market has ensured 
exorbitant prices with diminished service. Pensions and retirement 
security have taken a similar beating.
  Moreover, the timing of this proposal could not be worse. The 
proposal places the program in the private sector at a time when 
private insurers have dropped Medicare+Choice beneficiaries by the 
thousands.
  Private insurers will inevitably alter plans and move in and out of 
markets, leading to unpredictability for our seniors. A given drug 
might be covered one month, but not the next. Premiums could double 
from year to year without warning.
  The rule before us is one of the most heavy-handed procedures to come 
out of the Committee on Rules, and given the last few weeks, that is 
saying something. Amendment after amendment was blocked from floor 
consideration.
  My colleague, the gentlewoman from Florida (Mrs. Thurman), and the 
gentleman from Maine (Mr. Allen) had a remarkably sensible idea of 
requiring that prescription drug plans negotiate with pharmaceuticals 
for lower prescription drug prices, a necessity before we put a Federal 
program on top of them. Canada does it, and France does it, Germany, 
Italy, Japan, Britain.
  Virtually every developed country in the world has committed itself 
to negotiating lower drug prices for its citizens. Even the United 
States demonstrated remarkable success when negotiating Cipro prices 
during the anthrax attacks last fall.
  But under this rule, this very sensible amendment will not be 
permitted.

[[Page H4168]]

This is even more remarkable when we consider that the underlying bill 
prohibits the Federal Government from pushing for lower prescription 
prices.
  My colleagues, the gentleman from New Jersey (Mr. Pallone) and the 
gentlewoman from California (Mrs. Capps), attempted to ensure that all 
seniors have the option of prescription drug coverage, especially in 
those geographic areas where insurance companies choose not to offer a 
plan. Under the current bill, there is no guarantee that seniors will 
have access to coverage at all if insurers should decide not to cover 
their area.
  The amendment will never see the light of day, however, under this 
rule. Instead, we are left with a fundamentally flawed document that 
fails our constituents on every level. The proposed plan would be 
administered through either HMOs or drug-only insurance plans.
  The fact that drug-only insurance plans do not exist in the private 
market does not deter proponents from their privatization agenda. In 
fact, they are so bent on privatizing the drug benefit that they are 
prepared to bribe private plans with a subsidy as large as 99.99 
percent in order to get them to offer drug coverage to seniors, 
regardless of the quality of the service or extent of the benefit.
  Mr. Speaker, a little more history may be in order. The Medicare 
program was originally created because the private sector did not offer 
affordable and reliable health insurance to the elderly and the 
disabled. Health care has certainly changed in the past 30 years, but 
what has not changed is the fact that the private market does not want 
to ensure people who are old, disabled, and likely to need care.
  Mr. Speaker, the inadequacies in this bill continue, and I will 
highlight them briefly. The measure penalizes seniors who receive aid 
with prescription drug costs from charitable, church, or State programs 
by not counting the costs paid by those parties toward the individual's 
Medicare deductible.
  Seniors may actually have to drop out of programs like New York's 
Elderly Prescription Insurance Coverage, the EPIC program, in an 
attempt to obtain their Medicare benefits.
  The proposal has numerous gaps that leave seniors without coverage 
while requiring them to pay premiums. For example, earlier this month I 
received a letter from a 71-year-old constituent who must take 
medication to prevent a recurrence of a potentially dangerous, deadly 
fungal lung infection. The drug costs her nearly $1,000 a month. Under 
the majority plan, this woman would still pay well over $3,000 a year 
for this medication, and in addition, she would have to drop out of New 
York's program, which is currently helping her with these expenses.
  The proposal includes copayments, premiums, and deductibles that will 
be unaffordable for many low- and middle-income seniors. The $35-per-
month premium is a suggested amount and certainly not a guarantee. 
Insurers could choose to charge double or triple that amount if they 
chose to.
  The bill is opposed by numerous respected organizations, including 
the National Council on Aging, AARP, Families U.S.A., and the National 
Committee to Preserve Social Security and Medicare.
  Mr. Speaker, the majority has taken the proverbial sow's ear and is 
trying to convince America it is a silk purse. My constituents are not 
fooled, and I hope my colleagues will not be, either.
  Mr. Speaker, I yield such time as she may consume to the gentlewoman 
from California (Ms. Woolsey).
  (Ms. WOOLSEY asked and was given permission to revise and extend her 
remarks.)
  Ms. WOOLSEY. Mr. Speaker, I express my opposition to this sham bill 
that is harmful to senior women.
   Mr. Speaker, studies show that older women live an average of six 
years longer than men. Often widowed and living alone, the average 
woman age 65 and older struggles to survive on an annual income of 
$15,615.
  During her lifetime she probably spent 17 years out of the workforce 
caring for children, and perhaps 18 years caring for elderly parents. 
Her retirement income is also smaller because she probably did not 
receive a pension, and was paid less than most men.
  As a result, she receives lower Social Security benefits. She spends 
a larger percentage of her income on housing costs--leaving less money 
for necessary expenses like utilities, food, and health care. This is a 
particularly difficult problem because the average older woman spends 
20 percent of her income each year on out-of-pocket health care costs.
  Even though Medicare is not typically thought of as a woman's 
program, it's central to a woman's well-being. Because women live 
longer than their male counterparts, they also rely on Medicare and its 
benefits longer.
  While Medicare provides women with critical access to health care, 
gaps in the program leave women vulnerable to unaffordable out-of-
pocket-costs. According to the Kaiser Family Foundation, women account 
for nearly 7 in 10 Medicare beneficiaries with incomes below the 
poverty level.
  Similarly, access to affordable prescription drugs is a woman's 
issue. Why? Because women make up a large portion of consumers 
purchasing prescription drugs.
  Women have a greater rate of health problems since they live longer. 
They have lower incomes, which make access to affordable prescription 
drugs more difficult. In addition, because of age, women report more 
chronic conditions that require ongoing treatment, accompanied by a 
regimen of costly drugs.
  As the costs of prescription drugs continue to rise these out-of-
pocket expenses will continue to take a higher percentage of older 
women's limited monthly income. Where do we draw the line? When will we 
enact a drug benefit that will allow all seniors to live out their 
lives without being forced to choose between food or medicine?
  It's time we start considering women's needs when we debate 
prescription drug proposals.
  Sadly, the GOP's Medicare modernization plan will only perpetuate 
persistent health care disparities among women because it creates new 
gaps in coverage.
  If the GOP plan prevails, seniors won't feel any more certain about 
their benefits--in fact, the GOP proposal allows plans to vary their 
benefits and premiums from one region to another; from one plan to 
another and, the GOP plan provides no guarantees. Their plan would 
privatize prescription drug plans like an HMO . . . not put the plan 
under Medicare. Our seniors need more stability and certainty than 
that--especially older women who are counting on Congress to provide a 
real solution to the high cost of prescription drugs.
  Women are major stakeholders in the debate over Medicare's future and 
a prescription drug benefit. Policies that expand access to outpatient 
prescription drugs and long-term care would help fill coverage gaps 
that drive up out-of-pocket spending for women.
  Conversely, policies that erode coverage or that shift costs to 
beneficiaries could affect women, especially those with low incomes.
  Older women are one of the nation's most at-risk gropus, and a 
prescription drug benefit must meet their needs. Understanding the full 
implications of proposed reforms for aging women must be an essential 
component of efforts to preserve and protect medicare for generations 
to come.
  Under the GOP plan, there will be no real winners--only struggling 
survivors, seniors who manage to make ends meet.
  For my constituents and the older women in this country, merely 
getting by is not good enough, so instead, let's make everyone a winner 
by enacting a prescription drug benefit that guarantees seniors and 
women real assistance.
  After a lifetime of taking care of their families, older women 
deserve better than what the Republican leadership is proposing. That's 
why I strongly urge my colleagues to stop further debate on this sham 
of a proposal and get serious about providing genuine relief to 
Medicare recipients.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from Ohio (Mrs. Jones).
  (Mrs. JONES of Ohio asked and was given permission to revise and 
extend her remarks.)
  Mrs. JONES of Ohio. Mr. Speaker, I express my opposition to this bill 
that is particularly harmful to senior women, like my mother.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from California (Ms. Lee).
  (Ms. LEE asked and was given permission to revise and extend her 
remarks.)
  Ms. LEE. Mr. Speaker, I express my opposition to this sham bill that 
is particularly harmful to senior women. This is a shame.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from Indiana (Ms. Carson).
  (Ms. CARSON of Indiana asked and was given permission to revise and 
extend her remarks.)

[[Page H4169]]

  Ms. CARSON of Indiana. Mr. Speaker, I express my opposition to this 
bill that does not allow senior women to be able to afford to live, 
particularly those senior women who suffer from cardiovascular disease.
  Mr. Speaker, I rise in support of the American people. The same 
American people who have been paying too much for prescription drugs 
and have been waiting for years for Congress to pass a fair Medicare 
prescription drug benefit. This plan that the Republican leadership has 
brought to the floor is a sham.
  Where is the benefit for our seniors who are living on a fixed income 
and cannot afford such a high co-payment? Where is the benefit for the 
women who, because they were stay at home mothers and did not earn a 
pension, cannot afford the prescription drugs that are needed for a 
better quality of life.
  The costs of prescription drugs for seniors are rising at a rate 
greater than that of inflation.
  Senior women must be accounted for and given a platform regarding 
prescription drug benefits because they make up almost 60% of the 
Medicare population. Without affordable benefits, women will be forced 
to pay extremely high costs for prescription drugs that they already 
struggle to afford.
  We need a plan that makes prescription drugs more affordable for the 
people who cannot live without these products. What the Republicans are 
proposing is not help for seniors, but more heartache.
  The ``plan'' the Republicans have drawn up would not be a benefit to 
anyone except the insurance companies.
  Forcing Medicare recipients into private plans which cover less than 
half of the costs of prescription drugs is not a benefit?
  A plan that forces Medicare recipients to pay for a gap in coverage 
of at least $1,800 a year is not a benefit!
  A plan that does not guarantee the same coverage for the entire 
country, that seniors in Indiana could pay a higher premium than those 
in a different part of the country, is not a benefit!
  There are over 844,835 people on Medicare in my state of Indiana. 
That is 14% of the population. 44% of these people are under 200% of 
the federal poverty level. I will not go home and tell them that I gave 
away their security to a private company trying to make money off of 
their health.
  Prescription drug benefits are particularly crucial for women because 
they tend to live an average of 6 years longer than men and are more 
likely to suffer from prolonged chronic illness. Senior women have a 
longer period of time to incur out of pocket cost to pay for 
prescription drugs and deserve to be provided with considerable 
benefits.
  Not only do women tend to live longer than men, but they are also at 
an unfair disadvantage where their income is concerned. The average 
annual income for women age 65 and older is $15,615, which is only half 
of the annual income of men. Recent surveys indicate that eight out of 
ten women on Medicare, approximately 17 million women, use prescription 
drugs regularly and most pay for these medications themselves. Senior 
women have a limited income and must receive affordable prescription 
drug benefits that they can rely on.
  How dare the Republicans try to give to the seniors of this country a 
plan that is not equal to what they receive as Members of Congress! 
They have stated over and over that seniors deserve the same coverage 
as Members of Congress.
  When the non-partisan Congressional Research Service did a comparison 
of the drug benefit under the Blue Cross-Blue Shield Standard option 
available to Federal Employees to the Democrat and Republican 
prescription drug plans, they found that the Republican plan would give 
about 40% of the coverage Members of Congress receive, but the 
Democratic plan would give comparable coverage.
  In addition, when given the opportunity to rectify this gap in 
coverage, the Republicans on the Committee voted against giving this 
same coverage.
  Whay type of thinking is this?
  Give the minority a voice! Let there be a vote on the Democratic 
Medicare Prescription Drug benefit, a plan that actually helps seniors 
and does not hurt them!
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from California (Mrs. Napolitano).
  (Mrs. NAPOLITANO asked and was given permission to revise and extend 
her remarks.)
  Mrs. NAPOLITANO. Mr. Speaker, I express my opposition to this 
shameful bill that is particularly harmful to our senior women who live 
longer and have the largest consumption of purchases of drugs.


                         Parliamentary Inquiry

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

[[Page H4170]]

premium is locked in at $25, the annual deductible is only $100, 
Medicare pays 80% of seniors' drug costs up to $2,000, and there is a 
$2,000 out-of-pocket limit per beneficiary per year.
  The Democratic proposal fully integrates prescription drug benefits 
into the Medicare program. It allows the elderly to rely on their 
governmental prescription drug benefit, rather than depending on the 
generosity of profit driven insurance companies.
  This House has an opportunity to pass legislation to help disabled 
and elderly women obtain affordable prescription drugs. I urge my 
colleagues to support the Democratic plan to create a simple 
prescription drug plan that helps all seniors pay for the skyrocketing 
cost of prescription drugs. I urge my colleagues to vote against the 
Republican bill because it fails to do this.


                Announcement by the Speaker pro Tempore

  The SPEAKER pro tempore. The Chair would advise the gentlewoman from 
New York that one came close to debate.
  Ms. SLAUGHTER. Mr. Speaker, we will watch it.
  Mr. Speaker, I yield such time as she may consume to the gentlewoman 
from California (Ms. Roybal-Allard).
  (Ms. ROYBAL-ALLARD asked and was given permission to revise and 
extend her remarks.)
  Ms. ROYBAL-ALLARD. Mr. Speaker, I rise to express my strong 
opposition to this irresponsible bill that is particularly harmful to 
women.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from Florida (Mrs. Thurman).
  (Mrs. THURMAN asked and was given permission to revise and extend her 
remarks.)
  Mrs. THURMAN. Mr. Speaker, I express my opposition to this rule and 
to this sham bill that is particularly harmful to senior women.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from New York (Mrs. McCarthy).
  (Mrs. McCARTHY of New York asked and was given permission to revise 
and extend her remarks.)
  Mrs. McCARTHY of New York. Mr. Speaker, I express my opposition to 
this sham bill that is particularly harmful to senior women.
  I have seen much in my lifetime, but nothing like the blatant 
disregard for America's seniors by House Republican Leadership. 
Prescription Drugs is a life and death issue affecting millions of 
seniors.
  This body should not be forced to debate a bill severaly lacking in 
substance and without even the opportunity for a discussion on an 
alternative.
  Unfortunately, there is no room for discussion.
  There is no room for options.
  There is no chance for an open, constructive and spirited debate on 
what America's seniors need most--a Prescription Drug Benefit under 
Medicare.
  The bill before us today is nothing but a SHAM proposal, which does 
nothing to provide a real, guaranteed prescription drug benefit to our 
nation's seniors.
  I was a nurse before I came to Congress. Let me tell you what this 
bill does not do for America's seniors.
  This bill does not bring down the cost of prescription drugs.
  This bill does not guarantee a prescription drug benefit for seniors; 
and This bill does not guarantee coverage for any drug prescribed by 
their doctor.
  What the bill does do, however, is to provide benefits to insurance 
companies.
  As a nurse, the worst aspect of this bill to me is that the higher 
your drug bills get, the less help you get with paying those bills.
  Our seniors deserve a plan that is guaranteed and affordable. They 
should not have to worry about coverage gaps, or which pharmacy they 
can go to for their prescription drugs.
  And they certainly shouldn't be limited to which drugs their doctor 
can prescribe.
  We owe our seniors more than vague promises. We owe them a 
prescription drug benefit that will be there whenever they need it, and 
for whatever drug their doctor prescribes.
  We owe it to the American people not to support this sham 
Prescription Drug Bill.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from California (Mrs. Tauscher).
  (Mrs. TAUSCHER asked and was given permission to revise and extend 
her remarks.)
  Mrs. TAUSCHER. Mr. Speaker, I express my opposition to this sham bill 
that is particularly harmful to senior women, my sisters, and my 
mother.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from Michigan (Ms. Kilpatrick).
  (Ms. KILPATRICK asked and was given permission to revise and extend 
her remarks.)
  Ms. KILPATRICK. Mr. Speaker, I express my opposition to this sham 
Republican bill that is harmful to women all over America.
   Mr. Speaker, I rise today to stress the importance of providing a 
meaningful prescription drug benefit for seniors in our nation. We have 
paid lip service for too long and now is the time for Members of 
Congress to deliver good on our word.
  However, while we need to enact a prescription drug coverage under 
Medicare, we cannot afford to enact a benefit that is anything less 
than what seniors deserve--a meaningful benefit that is voluntary and 
universal and will provide seniors with affordable prescription drugs. 
The plan that Republicans plan to offer does not meet these important 
goals.
  Most importantly, the proposed Republican plan does not provide 
seniors with the promise of guaranteed universal coverage. What does 
this mean? The Republican plan relies on private insurance plans or 
Medicare HMOs to offer prescription drug coverage to seniors and offers 
no concrete or strict guidelines for benefits. Simply put, Republicans 
have put the industry's interests above those of seniors. Seniors will 
be given no guarantee of meaningful drug coverage and will be at the 
mercy of the private industry. Seniors have worked too hard and 
contributed too much to this nation for us to give them anything but 
the best we can. And, Mr. Speaker, the Republican plan is definitely 
not the best we can do--it is far from it.
  Democrats are committed to providing a universal, comprehensive drug 
benefit through Medicare for all seniors. We also are committed to 
addressing the high cost of prescription drugs that have skyrocketed 
out of control. It is time for Congress to deliver on our promise and 
provide seniors with a true prescription drug benefit. Anything less is 
unsatisfactory.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from Minnesota (Ms. McCollum).
  (Ms. McCOLLUM asked and was given permission to revise and extend her 
remarks.)
  Ms. McCOLLUM. Mr. Speaker, I express my opposition to this sham bill 
that is particularly harmful to senior women.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from Florida (Ms. Brown).
  Ms. BROWN of Florida. Mr. Speaker, I ask unanimous consent to revise 
and extend my remarks, and I rise against this shameful GOP 
prescription drug so-called benefit that is very much against my 
grandmother and all of the grandmothers in this country.
  Mr. CUNNINGHAM. Mr. Speaker, I object. I object to the last one.
  The SPEAKER pro tempore. There was objection to the statement of the 
gentlewoman from Florida.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from Florida (Mrs. Meek).
  (Mrs. MEEK of Florida asked and was given permission to revise and 
extend her remarks.)
  Mrs. MEEK of Florida. Mr. Speaker, this is a sham bill. I represent 
senior women very seriously.
  Mr. Speaker, I rise in strong opposition to both the ``sham'' 
prescription drug bill that the Republican leadership has brought to 
the floor today, and to the unconscionable Rule that the Republican 
Leadership has proposed, a Rule that denies the Democrats an 
opportunity to offer a Substitute bill providing real prescription drug 
coverage through Medicare.
  Mr. Speaker, no one in America should have to choose between buying 
medicine or food, between paying their utility bills or their drug 
store account, between taking their medicine or living in pain and 
discomfort. Yet this is the problem that many of our people face every 
day and we all know it. ``Miracle drugs,'' no matter how innovative or 
effective, are worthless to those who cannot afford them. Yet today 
there are huge numbers of seniors who are unable to follow their 
doctor's orders because they cannot afford the medications their 
doctors prescribe.
  The problem is obvious and so is the solution. Unfortunately, it 
involves the one thing

[[Page H4171]]

that our people want and that the Republican Leadership steadfastly 
refuses to provide: a real prescription drug benefit through Medicare.
  The Republican Leadership knows that American people want a real 
prescription drug benefit through Medicare. The Republican Leadership's 
efforts to pass this bill are attempt to create an illusion for the 
voters this fall. They want to give their candidates a talking point 
with the voters so they can say that they support prescription drug 
coverage without actually having to provide it. This is a sham. Our 
seniors deserve much better.
  Mr. Speaker, America's seniors, particularly older women, need 
comprehensive prescription drug coverage through Medicare and fair drug 
pricing. The Republican bill on the floor provides neither. The 
Republican bill is unworkable, unreliable and grossly inadequate.
  Mr. Speaker, America's seniors do not want to be left to their own 
devices and sent on a wild goose chase shopping for private drug plans 
with no guaranteed benefits, plans that private health insurers do not 
even want to offer. They should not have to join an HMO that tells them 
where they are able to fill their prescriptions in order to get drug 
coverage. They deserve the reductions in drug prices that can only be 
obtained if we pass a real prescription drug bill that takes advantage 
of the purchasing power of Medicare's 40 million beneficiaries.
  While I am outraged by the Republican Leadership's refusal to allow 
the Democrats an opportunity to offer a Substitute, I certainly 
understand the reason for it and so do the American people. The 
Republican Leadership will not allow the Democrats to offer a 
Substitute because they know their bill cannot withstand a ``side by 
side'' comparison with the Democratic Substitute.

  The Democratic Substitute that the Republican Leadership will not 
allow to be debated and voted on has a yearly out of pocket limit on 
drug costs of $2000. Why would the Republican Leadership want to 
highlight the fact that under their bill, seniors will have to pay 
$100% of their drug costs between $2000 and $3700 when nearly one half 
of all seniors have drug costs over $2000 and would be subject to this 
gap in coverage?
  Why would the Republican Leadership want a comparison between a 
Republican bill that will force seniors into private HMO's and restrict 
patients' choice of drugs and pharmacies and a Democratic Substitute 
that guarantees affordable, dependable, comprehensive drug coverage at 
a uniform price while preserving freedom of choice for seniors?
  Why should seniors in different states pay different premiums for the 
exact same benefits as the Republican bill will permit?
  Now some will in this body will contend that a real comprehensive 
prescription drug benefit through Medicare is simply not affordable. I 
say that anybody that can find the funds to grant the bloated tax 
relief for the rich that this House has provided, including $1.2 
trillion in estate tax relief for the millionaires in this country, 
surely can find a way to pay for a real prescription drug benefit. It's 
simply a matter of our priorities.
  Mr. Speaker, the affordability of providing a real prescription drug 
benefit is a fair subject for debate and should be debated. But this 
surely is a reason why the Democratic Substitute needs to be debated 
and voted upon. It is not a reason to keep the Democratic Substitute 
from the floor. If a Member of this body believes that we can not 
afford the real prescription drug benefit that the Democratic 
Substitute provides, then I say: vote against it.
  So the reasons for the Republican Leadership's approach to this issue 
are clear as they are deplorable. They want a press release for the 
fall elections, not a real drug benefit and they don't want to take the 
heat that would come from a side by side comparison of the Republican 
``pretend'' bill and the Democratic Substitute.
  I urge all my Colleagues. Reject this unfair, one-sided process. 
Let's have a full and fair debate and produce a real prescription drug 
benefit. Defeat the proposed rule; pass a fair rule that allows a 
Democratic Substitute; Vote for the Democratic Substitute and reject 
the Republican Leadership's bill.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from Texas (Ms. Eddie Bernice Johnson).
  (Ms. EDDIE BERNICE JOHNSON of Texas asked and was given permission to 
revise and extend her remarks.)
  Ms. EDDIE BERNICE JOHNSON of Texas. Mr. Speaker, I express my 
opposition to this bill because it does hurt senior women, in 
particular, and is another big windfall for the corporate industry.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from California (Ms. Lofgren).
  Ms. LOFGREN. Mr. Speaker, I rise to express my opposition to this 
bogus bill that will hurt older women.
  Mr. Speaker, today, prescription drugs play a larger role in modern 
medicine than ever before. Prescription drugs are used as complements 
to surgical procedures, as substitutes for surgery, and to help reduce 
future health risks and treat many chronic health conditions. Yet those 
who need them the most, older adults, and we know that the majority of 
seniors are women, often find themselves without either affordable 
prescription drugs coverage or the means to pay for their prescription 
drugs needs.
  Women on average live longer and are more likely to suffer from 
prolonged chronic illness. In fact, women on Medicare spend nearly 20% 
more for prescription drugs than men. And--with women's poverty rates 
twice that of men, prescription drug costs take a bigger bite out of 
women's limited income.
  It is a shame that we are not considering a real prescription drug 
benefit today, one that would benefit all seniors. Under the Republican 
bill, the more a senior woman spends for prescription drugs, the less 
coverage she gets. For some reason, the Republican bill forces seniors, 
your mother, your grandmother, to pay a higher percentage of costs as 
their needs increase. Mr. Speaker, does this makes any sense?
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from California (Ms. Millender-McDonald).
  (Ms. MILLENDER-McDONALD asked and was given permission to revise and 
extend her remarks.)
  Ms. MILLENDER-McDONALD. Mr. Speaker, I express my opposition to this 
bill that is particularly harmful to senior women.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from Nevada (Ms. Berkley).
  (Ms. BERKLEY asked and was given permission to revise and extend her 
remarks.)
  Ms. BERKLEY. Mr. Speaker, I express my opposition to this shameful 
bill that is particularly harmful to the senior women in my district.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from California (Ms. Solis).
  (Ms. SOLIS asked and was given permission to revise and extend her 
remarks.)
  Ms. SOLIS. Mr. Speaker, I express my opposition to this bill.
  (The following sentence was delivered in Spanish.)
  Mr. Speaker, for all of the old women who can hear me loud and clear, 
this is another tactic for the Republicans to take away your 
medication.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from Ohio (Ms. Kaptur).
  Ms. KAPTUR. Mr. Speaker, I ask unanimous consent to revise and extend 
my remarks.
  Mr. Speaker, I express my strong opposition to this pitiful bill that 
denies senior women across America access to affordable prescription 
drugs because the Republicans gave all the money away to companies like 
Enron in tax cuts, and they were not deserved.
  Mr. CUNNINGHAM. Mr. Speaker, I object.
  The SPEAKER pro tempore. An objection is heard to the last request to 
revise and extend.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from Oregon (Ms. Hooley).
  (Ms. HOOLEY of Oregon asked and was given permission to revise and 
extend her remarks.)
  Ms. HOOLEY of Oregon. Mr. Speaker, I rise against the Republican no-
benefit prescription drug proposal that is harmful to seniors in my 
State.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from California (Mrs. Davis).
  (Mrs. DAVIS of California asked and was given permission to revise 
and extend her remarks.)
  Mrs. DAVIS of California. Mr. Speaker, I express my opposition to 
this unacceptable bill that is particularly harmful to senior women in 
my district.
   Mr. Speaker, I rise today to talk about H.R. 4954, the Medicare 
Modernization and Prescription Drug Act and its implications for our 
seniors. In particular, I would like to discuss how women fare under 
this proposal before us.
  Women are literally the face of Medicare. They comprise 58 percent of 
the Medicare

[[Page H4172]]

population at age 65 and represent 71 percent of beneficiaries at age 
85. Any potential prescription drug plan must be evaluated with regard 
to its impact on women--if it works for women, it works for everyone.
  When Medicare was established in the 1960s, the biggest need was 
insurance coverage for hospital stays and doctor visits, not 
prescription drugs. The focus then was on providing relief for acute 
conditions, not chronic.
  Today more than 88 percent of Medicare's 42 million beneficiaries use 
prescription drugs. The average senior takes four prescriptions daily 
and fills an average of 18 prescriptions a year.
  The use of prescription drugs is more pronounced among women. 
Beginning at midlife, women have a higher incidence of chronic illness 
than men. The average woman age 65 and over lives nearly seven years 
longer than the average man and relies on Medicare for her health 
insurance coverage for more years.
  While most women on Medicare use prescription drugs regularly, over 
\1/4\ of these beneficiaries--nearly six million women--lack any 
prescription drug coverage.
  Out-of-pocket spending for prescription drugs place a 
disproportionate burden on older women who have retirement incomes that 
are roughly half than those of men. In 2000, the average income for 
women over 65 was $15,638, compared to $29,329 for men.
  Even though women have significantly smaller incomes than men, they 
spend a larger proportion of their income on out-of-pocket health 
costs. Women over 65 spend 20 percent in comparison to the 17 percent 
spent by men. These expenses increase to 27 percent for women 85 and 
older.
  Older women are one of our nation's most vulnerable groups and 
providing affordable prescription drug coverage is critical to 
improving their quality of life.
  Unfortunately, the proposal before us today does not achieve this 
objective. This legislation does not guarantee any specific benefit. 
Instead, the bill provides subsidies to insurance companies to provide 
private insurance to seniors. The coverage and $33 premium mentioned 
today would only be available to beneficiaries who can find a private 
plan that offers it. All these figures depend on what HMOs and private 
drug insurance plans want to charge.
  H.R. 4954 provides less than one-quarter of the amount seniors are 
estimated to pay for prescription drugs over 10 years. In fact, it 
leaves seniors wholly responsible for costs between $2000 and $3700. 
Nearly half of all seniors' annual drug costs are above $2000. I cannot 
support a plan that subjects seniors to a gap in coverage. These 
seniors will not receive any help with their drug bills for at least 
part of the year, even though they continue to pay premiums.
  I am committed to passing a fair prescription drug plan under 
Medicare that does not stifle innovation or eliminate choice in 
coverage. Seniors need assistance in order to obtain prescription drugs 
to treat or prevent illness.
  In addition, I am disappointed that today's activities will not 
include a discussion of an alternative bill. As our senior population 
continues to grow, we must take a comprehensive look at all of our 
options in order to provide seniors with real benefits.
  Instead of H.R. 4954, I support a meaningful prescription drug 
benefit that does not handicap our seniors at a time when they most 
need assistance. The plan I support builds on the existing Medicare 
system and provides seniors with guaranteed benefits, premiums, and 
cost sharing for all beneficiaries. Not estimates. The federal 
government would use the collective bargaining clout of all Medicare 
beneficiaries to negotiate fair drug prices and these savings would be 
passed on to our seniors.
  American seniors want, need, and deserve real prescription drug 
coverage. The Medicare Modernization and Prescription Drug Act 
establishes a complex program that offers modest benefits at most.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from New York (Ms. Velazquez).
  (Ms. VELAZQUEZ asked and was given permission to revise and extend 
her remarks.)
  Ms. VELAZQUEZ. Mr. Speaker, I express my opposition to this sham bill 
that is a giveaway to the pharmaceutical industry at the expense of 
seniors and especially women in our country.
  Mr. Speaker, I rise today in opposition to this legislation. While we 
all agree that today's elderly need and deserve a prescription drug 
benefit, I am afraid this proposal is not the answer.
  If we are lucky enough, our parents are still with us. And we know 
how they can live longer and more active lives with the new medical 
treatments that exist today. Some of our parents already face--and some 
of us in the not so distant future may face--the issue of drug 
affordability--drugs that help us to live life to the fullest.
  We are in the middle of a health care crisis in this Nation. Drug 
prices rose 17 percent last year alone--after five years of double-
digit spikes. The prices of popular and heavily-marketed drugs 
increased even more--an incredible 34 percent.
  No one doubts that something must be done--and fast. But passing 
legislation that makes two wrongs does not make a right. As Ranking 
member of the Small Business Committee, I want to point out how this 
plan fails in two critical ways.
  First, it fails our seniors. It does nothing to provide a 
comprehensive, affordable drug benefit with Medicare. Second, it fails 
small community pharmacists. These pharmacists serve a vital purpose in 
our communities. The corner drug stores anchor our neighborhoods and 
the local pharmacist counsels our seniors about their medications.
  Once again, through the lens of this proposal, we see who the 
Republicans care about most--big business--the pharmaceuticals, the 
health care companies. Not the little people--seniors citizens that 
give so much back to our communities and the corner drug stores they 
visit and depend on each and every day.
  Mr. Speaker, this is a bad plan. It enriches a handful of 
corporations at the expense of seniors and the small businesses across 
the country that serve them--without even delivering on the promise of 
comprehensive, affordable prescription drug coverage.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from Michigan (Ms. Rivers).
  (Ms. RIVERS asked and was given permission to revise and extend her 
remarks.)
  Ms. RIVERS. Mr. Speaker, I express my opposition to this terrible 
bill that is particularly harmful to senior women.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from California (Ms. Watson).
  (Ms. WATSON of California asked and was given permission to revise 
and extend her remarks.)
  Ms. WATSON of California. Mr. Speaker, I rise to express my 
opposition to this most deceptive bill that is particularly harmful to 
my 92-year-old mother and other senior women.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from North Carolina (Mrs. Clayton).
  (Mrs. CLAYTON asked and was given permission to revise and extend her 
remarks.)
  Mrs. CLAYTON. Mr. Speaker, I express my opposition to this sham bill 
that is particularly harmful to older women who live longer, have more 
diseases, have less money, and need prescription drugs that they can 
afford.
  Women live longer, suffer from more diseases, have less money when 
they retire and must pay more for their prescriptions. 65 percent of 
Social Security recipients are women--75 percent of the low income 
retired persons are women. The majority of those need real prescription 
help, not this bill which does nothing to help sick older women.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from Wisconsin (Ms. Baldwin).
  (Ms. BALDWIN asked and was given permission to revise and extend her 
remarks.)
  Ms. BALDWIN. Mr. Speaker, I rise to express my opposition to this 
bill, which I deem to be a betrayal of the women of the Greatest 
Generation.
  Mr. Speaker, I urge my colleagues to vote against this sham of a 
bill. It lays the groundwork to privatize Medicare and does not provide 
a real, guaranteed, defined benefit that our seniors desperately need.
  The Republican bill that is on the floor today forces seniors to shop 
around for prescription drug coverage through Medicare HMOs and private 
insurance plans. The prices and benefits under this private coverage 
would vary from region to region, so that a senior in Wisconsin would 
have to pay a different premium than a senior in Florida for the exact 
same benefit. These geographic disparities are simply unacceptable.
  There are no assurances in this bill that prescription drugs will be 
affordable. In fact, this bill would cover less than one-fifth of the 
estimated drug costs of Medicare beneficiaries over the next ten years. 
In addition, there is a huge gap in coverage. Seniors who need more 
than 2,000 worth of drugs a year must pay 100% out-of-pocket, and keep 
paying premiums, until they reach the $3,700 out-of-pocket cap. 
Millions of seniors will fall into this gaping hole. I believe all 
seniors deserve affordable prescription drug coverage, and we

[[Page H4173]]

should not help some seniors cover their drug costs while leaving 
others out in the cold.
  Seniors will not be guaranteed access to the drugs they need or to 
their local pharmacies. The bill would allow private insurance plans to 
limit access to covered drugs, even if the drugs are on an approved 
list. Seniors would be restricted to certain pharmacy providers or 
would be forced to pay higher costs to use the pharmacy of their 
choice, even a pharmacy they have been using for years. I know many 
seniors in my district who have developed relationships with their 
pharmacists over the years and would hate to have to go to another 
provider or pay extra to keep going to their same trusted pharmacist.
  I hear from seniors in my district who cannot afford their 
prescriptions. They send me receipts for their drug bills and ask me 
how they are supposed to afford their rising drug costs on a fixed 
budget. They take less than the required dosage to save money, which 
puts their health at even greater risk.
  I support the Democratic proposal that adds a new Part D in Medicare 
to provide voluntary prescription drug coverage for all Medicare 
beneficiaries. This proposal would provide the same benefits, premiums 
and cost sharing for all beneficiaries no matter where they live. It 
guarantees fair drug prices by giving the Secretary of the Department 
of Health and Human Services the authority to use the collective 
bargaining clout of all 40 million Medicare beneficiaries to negotiate 
drug prices. Savings will then be passed on to seniors. Unlike the 
Republican bill, there are no gaps in coverage in the Democratic 
proposal. Coverage is provided for any drug a senior's doctor 
prescribes. Seniors will be able to choose where to fill their 
prescriptions and will not have to join an HMO or a private insurance 
plan to get drug coverage. This is the proposal seniors have been 
waiting for. Unfortunately, it is not the proposal that was brought to 
the floor today.
  Today we are voting on a bill that is a sad mockery of what the 
seniors in our country deserve. Instead of providing a comprehensive 
Medicare prescription drug benefit for America's seniors, the 
Republicans have decided to make sure this bill suits big drug 
companies. Close ties to the pharmaceutical industry have influenced 
this bill at the expense of our seniors. That is just plain wrong for 
the retirees of the greatest generation who worked hard, lived through 
the depression won a war, and raised their families.
  Seniors need a comprehensive prescription drug benefit that is 
affordable and dependable for all--with no gaps or gimmicks in 
coverage. The Republican proposal fails on all these counts. I urge my 
colleagues to vote against H.R. 4954.

                              {time}  2115

  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from Illinois (Ms. Schakowsky).
  (Ms. SCHAKOWSKY asked and was given permission to revise and extend 
her remarks.)
  Ms. SCHAKOWSKY. Mr. Speaker, I rise in opposition to this pathetic 
excuse for a bill that is particularly harmful to senior women and to 
persons with disabilities.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from California (Ms. Sanchez).
  (Ms. SANCHEZ asked and was given permission to revise and extend her 
remarks.)
  Ms. SANCHEZ. Mr. Speaker, I rise in opposition to this sham bill that 
is particularly harmful to senior women, the heart and the soul of our 
families.
   Mr. Speaker, I rise today to express my strong opposition to the 
Republican prescription drug bill, H.R. 4954. This bill, while unfair 
to millions of seniors, is particularly harmful to women.
  Women make up a large portion of consumers purchasing prescription 
drugs. For this reason alone, women's health care needs must be 
considered as we debate prescription drug proposals. And unfortunately, 
I am hard-pressed to find many of my women colleagues who were 
consulted as this bill was drafted. It is no surprise, therefore, that 
this GOP bill ignores health problems unique to women.
  At least one-third of Medicare beneficiaries, many of them women, do 
not have coverage for drugs--and others are forced to create a 
patchwork of coverage that simply doesn't get the job done. Too often, 
women and seniors are left choosing between food and medicine.
  Thanks to Medicare, millions of women have dignity and security in 
their retirement years. Millions of women have avoided poverty and 
lived better lives. But today, with all of the incredible medical 
advances coupled with the rising cost of prescription drugs, it's vital 
that the country pull together to pass a meaningful Medicare 
prescription drug plan for all women--and all senior citizens.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from Texas (Ms. Jackson-Lee).
  (Ms. JACKSON-LEE of Texas asked and was given permission to revise 
and extend her remarks.)
  Ms. JACKSON-LEE of Texas. Mr. Speaker, I rise in opposition to this 
destructive insurance protection act that hurts the grandmothers, 
mothers, aunts and sisters and all of seniors and those disabled and 
provides zero benefits to Americans.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from New York (Mrs. Maloney).
  (Mrs. MALONEY of New York asked and was given permission to revise 
and extend her remarks.)
  Mrs. MALONEY of New York. Mr. Speaker, I rise in opposition to this 
rule that would not allow a Democratic substitute and to the underlying 
bill.
  I rise against the rule and the Republican bill. I regret for 
America's seniors that a Democratic alternative was not allowed. 
Medicare provides health care coverage to forty million retired and 
disabled Americans.
  For decades, Medicare has worked to provide needed, lifesaving health 
care to millions, but it is missing a fundamental component: a 
prescription drug benefit.
  If we have courage, this Congress can make history and give our 
nation's seniors what they desperately need: a real, and meaningful 
prescription drug plan.
  I am proud to join my Democratic colleagues, led by Mr. Dingell, Mr. 
Rangel, Mr. Stark, and Mr. Brown, as an original cosponsor of H.R. 
5019, the ``Medicare Prescription Drug Benefit and Discount Act.''
  I come to the floor to discuss two points:
  Number 1: unlike the Republican drug plan, the Democratic plan is 
simple because it builds upon a proven model--Medicare.
  Just like seniors pay a Part B premium today for doctor visits, under 
our plan, seniors would pay a voluntary Part D premium of $25 per month 
for drug coverage. For that, Medicare or the government will pay 80 
percent of drug costs after a $100 deductible. And no senior will have 
to pay more than $2,000 in costs per year.
  There is an urgent need for this plan. The most recent data indicates 
that almost 40 percent of seniors--an estimated 11 milion--have no drug 
coverage. Problems are particularly acute for low income seniors and 
seniors over the age of 85 (the majority whom are women). Additionally, 
those older Americans who do have coverage find that their coverage is 
often inadequate for their needs.
  The Democratic plan is a real plan with real numbers, not estimates.
  Point 2: the Republican plan does nothing to bring down the cost of 
prescription drugs. The Democratic plan is the only plan that provides 
real Medicare prescription drug coverage for our seniors by stopping 
soaring drug costs.
  Under the buying power of Medicare, through competition and 
bargaining we can rein in drug costs. Prescription drug costs are too 
high for our older Americans. They need help now!
  For instance, let's look at the cost of Prevacid. Prevacid is an 
ulcer medication, and the second most widely used drug by American 
seniors. The cost for this prescription is on average $137.54 per month 
in New York City--but only $45.02 in the United Kingdom, a price 
differential of 206 percent.
  Or look at Celebrex, a popular arthritis medication and a drug needed 
by many older women, especially, since older women are stricken more 
often than men by arthritis. According to a Government Reform Committee 
report released by Mr. Weiner and myself, a monthly supply of this drug 
costs $86.26 in New York City. In France, a monthly supply of Celebrex 
costs only $30.60. This is a price differential of 182 percent. Seniors 
in New York City without drug coverage must pay almost three times as 
much as purchasers in France.
  Prices for prescriptions have risen 10 percent per year for the last 
several years, leading to over $37 billion in profits last year for the 
giant drug companies. While these corporations wallow in their spoils, 
seniors suffer without coverage.
  Mr. Speaker, we must pass the Democratic prescription drug plan 
without delay. It is built on a proven model, Medicare. The Republican 
plan only offers gap-ridden coverage. The Republican bill is about 
privatization. The Republican plan is all about election year politics.
  For the sake of our seniors, we must pass the Democratic plan, and we 
must pass it now.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from California (Ms. Harman).
  (Ms. HARMAN asked and was given permission to revise and extend her 
remarks.)

[[Page H4174]]

  Ms. HARMAN. Mr. Speaker, on behalf of seniors in my district, 
particularly women, and in particular veterans, I express my strong 
opposition to this bill.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from Colorado (Ms. DeGette).
  (Ms. DeGETTE asked and was given permission to revise and extend her 
remarks.)
  Ms. DeGETTE. Mr. Speaker, I rise in opposition to this rule on behalf 
of the senior women in my district and around this country who live 
longer than men and pay far more money for prescription drugs.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from California (Ms. Waters).
  (Ms. WATERS asked and was given permission to revise and extend her 
remarks.)
  Ms. WATERS. Mr. Speaker, I enter my objection and opposition to this 
irresponsible bill that will do nothing to help the senior women of 
this country.
  Every day, millions of American seniors are forced to choose between 
buying prescription drugs and buying food. The Republican leadership in 
Congress has responded to this crisis with H.R. 4954, a prescription 
drug bill that does nothing to help them.
  The Republican bill would force seniors who want prescription drug 
coverage to get it from private insurance companies, but the bill 
provides no guarantee that insurance companies will offer prescription 
drug policies. Even the Health Insurance Association of America has 
admitted that insurance companies will not offer drug-only policies. So 
the Republican plan is guaranteed to fail.
  Furthermore, even if prescription drug policies do become available, 
the premiums, deductibles and co-payments will vary widely. Low-income 
seniors could be denied the drugs they need if they cannot afford the 
co-payments. For many middle-income seniors, the benefits would be so 
limited that it would not be worthwhile for them to enroll. H.R. 4954 
is a poor excuse for a prescription drug plan for our nation's senior 
citizens.
  The Democrats have proposed a prescription drug plan that would 
provide a guaranteed prescription drug benefit under Medicare to all 
seniors who want one.
  This bill would ensure that all seniors who choose to participate 
would pay the same low premiums and receive the same benefits.
  Beneficiaries could choose to obtain their prescriptions from any 
willing pharmacy and would be guaranteed coverage for any drug their 
doctor prescribes.
  Premiums and co-payments would be waived for seniors who are living 
under 150% of the poverty level.
  The bill would use the collective bargaining clout of all 40 million 
Medicare beneficiaries to negotiate fair and reasonable drug prices.
  Finally, no senior would have to pay more than $2 thousand per year 
in out-of-pocket expenses for the prescriptions they need.
  It is time that Congress make prescription drugs available to all 
seniors who need them. I urge my colleagues to oppose H.R. 4954 and 
support the Democratic plan to provide guaranteed prescription drug 
coverage to all seniors who desire it.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from Georgia (Ms. McKinney).
  (Ms. McKINNEY asked and was given permission to revise and extend her 
remarks.)
  Ms. McKINNEY. Mr. Speaker, I rise in opposition to this bill which is 
a sham and does nothing for seniors in my district, in my State and in 
my country.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from California (Ms. Eshoo).
  (Ms. ESHOO asked and was given permission to revise and extend her 
remarks.)
  Ms. ESHOO. Mr. Speaker, I rise to express my opposition to the bill 
that will be considered this evening on behalf of my constituents, 
especially the senior women that I represent. They deserve a great deal 
more and much better and all the women of the country do.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from California (Ms. Pelosi).
  (Ms. PELOSI asked and was given permission to revise and extend her 
remarks.)
  Ms. PELOSI. Mr. Speaker, I rise in opposition to this sham bill which 
is a cruel hoax on the American people, especially cruel to America's 
senior women who raised our families and deserve better.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as she may consume to 
the gentlewoman from Connecticut (Ms. DeLauro).
  (Ms. DeLAURO asked and was given permission to revise and extend her 
remarks.)
  Ms. DeLAURO. Mr. Speaker, I rise in opposition to this insurance 
industry, pharmaceutical written bill that does not drive down the cost 
of prescription drugs or cover most of America's seniors and is very 
harmful to women in this country, those tomorrow, and those who are in 
older generations.
  Mr. LINDER. Mr. Speaker, I, too, enjoyed that parade; and I 
particularly enjoyed the fact that they had not a particular thing to 
say about the bill. To say something about impact the bill and how it 
impacts women, I yield such time as she may consume to the gentlewoman 
from Connecticut (Mrs. Johnson), who wrote the bill.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, we have had a parade of my 
colleagues from the other side claim that this legislation is harmful 
to senior women. I wonder how they could have so lost touch with the 
lives of women in America and women in their districts. This bill 
represents the greatest leap forward in women's health since the 
passage of Medicare.
  I was polite to you, and I ask that you be polite to me.
  For the very first time, women, particularly low-income women, will 
have their prescriptions covered. Perhaps you did not read the bill. 
You know and I know that women live longer than men. The great majority 
of seniors are women. Perhaps you did not know that retired women are 
living on half the income of retired men, that the average income of 
retired men in America is $30,000 and the average income of retired 
women is $15,000 and of retired women over 85 is $10,000.
  Under this bill those low-income women will receive 100 percent of 
the costs of their drugs, of their premiums, of the deductible, and of 
the co-insurance up to maybe 2 to $5. They will have a right to charge 
that much co-insurance. That is an incredible boon to these women. They 
will have the security of knowing that every dollar of their 
prescription costs up to $2,000 will be covered if your income is under 
175 percent of poverty, and that is 44 percent of all seniors.
  Yes, this is a wonderful thing for women in America. Yes, this bill 
is a giant step forward for seniors in America. Yes, this is the 
greatest leap forward for women in health care since the founding of 
Medicare. And once you have read the bill, I will be happy to talk with 
you about details. But there can be no arguing with the fact that the 
first $2,000 of drug expense for people under 175 percent of poverty is 
completely covered and, by saving the State $40 billion, they will be 
able to go up that ladder of income.
  So let us try to talk about the facts tonight, let us have a little 
less theater, let us have a little more discussion about the details of 
the legislation, and let us try to do America proud as we talk about 
the need for prescription drugs in Medicare.
  Mr. THOMAS. Mr. Speaker, will the gentlewoman yield?
  Mrs. JOHNSON of Connecticut. I yield to the gentleman from 
California.
  Mr. THOMAS. As women enter their senior years, in terms of the 
problems they have with osteoporosis, do we include in this bill 
additional money to assist in mammography?
  Mrs. JOHNSON of Connecticut. We certainly do. We fix all the problems 
with reimbursements for mammography so they will be more accessible to 
the women of America. Furthermore, we provide access for something that 
is extremely important to women, more important to women than men, and 
that is access to disease management plans to manage chronic illness. 
It is women who are plagued with four, five, and six chronic illnesses.
  Mr. THOMAS. Mr. Speaker, will the gentlewoman yield?
  Mrs. JOHNSON of Connecticut. I yield to the gentleman from 
California.
  Mr. THOMAS. Is it not true that during their working lives men very 
often have physicals? In fact, it is oftentimes part of their 
professional occupation to get a physical periodically, and many times 
women who are not working do not get that physical?

[[Page H4175]]

  Mrs. JOHNSON of Connecticut. Absolutely.
  Mr. THOMAS. Is it not true in this bill that, for the first time, 
every senior who becomes Medicare eligible, that means every woman, 
gets a free physical?
  Mrs. JOHNSON of Connecticut. Every woman gets a free physical under 
this bill, and for the first time they have an option for a plan that 
provides entirely free preventative benefits across the board to men 
and women.
  So this is an enormous advancement for women because women are the 
ones who get the poorest health care throughout their lives, and they 
will have an option to a plan that has free preventive benefits across 
the board and, if they choose it, and they will all get a free baseline 
physical when they enter Medicare. Yes, a great advancement for senior 
women.
  Ms. SLAUGHTER. Mr. Speaker, I yield 1 minute to the gentleman from 
Massachusetts (Mr. McGovern).
  Mr. McGOVERN. Mr. Speaker, I rise in strong opposition to this sham 
bill and to this woefully inadequate bill offered by the majority.
  Every Member of this House knows that the number one issue facing 
senior citizens is the soaring cost of prescription drugs. Our seniors 
need relief and real relief now.
  My Republicans colleagues go on about how they support giving our 
seniors relief, and then they send this poor excuse for a benefit bill 
to the House floor. This guarantees seniors nothing, nothing. It is a 
bad bill. And to make matters worse, the gentlewoman from Connecticut 
(Mrs. Johnson) gets up and tells us how wonderful and strong her bill 
is. Yet she and the Republican leadership make it unamendable. No 
substitute. No amendments. No bipartisanship. Two hours total debate. 
That is it.
  How sad. How outrageous. If there ever should have been an open and 
fair process, it should have been today. There were even good 
Republican amendments that were offered before the Committee on Rules 
that were ruled out of order. But, no, you are afraid you might lose 
because deep in your hearts you know that your bill is nothing more 
than a political soundbite and you deserve to lose.
  Vote ``no'' on this rule and vote ``no'' on this bad bill.
  Mr. LINDER. Mr. Speaker, I yield 3 minutes to the gentlewoman from 
West Virginia (Mrs. Capito).
  Mrs. CAPITO. Mr. Speaker, I stand before you today to offer my 
remarks on the prescription drug plan.
  On May 1, 2002, four of my constituents boarded a bus, traveled from 
Martinsburg, West Virginia, to Washington, D.C., to offer their voice 
and their story on how the prescription drug dilemma has reshaped their 
lives. That day I heard each of their voices; and, unfortunately, it is 
a voice I hear and we all hear all too often.
  At each of the town meetings I have had the majority of the questions 
deal with the high cost of prescription drugs. After one particular 
town meeting a young lady approached me. She showed me a list of 
prescription drugs that her mother was taking and the cost of each drug 
listed besides it. Looking at the list my heart sank. These figures 
were staggering. Additionally, because of the high cost of her mother's 
medication, lack of Medicare coverage for her mother, this young woman 
who had a family of her own was paying for her mother's medication.
  Is this right, Mr. Speaker? No, it is not.
  Our seniors deserve the peace of mind of knowing that they can and 
will be able to afford their prescriptions. Anxiety over the 
affordability of prescribed medications should not spoil one's golden 
years. That is why I am standing here tonight.
  I am choosing to stand here and tell you that Medicare needs to offer 
prescription drug benefit. To be blunt, we need to offer it. We needed 
to offer it yesterday or the day before or the day before. This 
situation should be resolved.
  It is our duty as representatives to represent the people's voice, 
and their voice says now is the time. I urge all of my colleagues to 
stand up, pass this rule, pass the Medicare prescription drug 
legislation which is extremely beneficial to the senior women of 
America.
  Ms. SLAUGHTER. Mr. Speaker, I yield 3 minutes to the gentleman from 
New York (Mr. Rangel).
  Mr. RANGEL. Mr. Speaker, this rule does not allow Democrats an 
opportunity to say that we think we have a better idea. The majority 
found it very difficult to get enough votes to support the 
pharmaceutical industry, but it would just seem to me that it is not a 
rule against Democrats. It is not a rule even against the integrity of 
the House. It is a rule against the senior citizens who really deserve 
better treatment than they are getting.
  Mr. Speaker, I yield to the gentleman from Maryland (Mr. Hoyer).
  Mr. HOYER. Mr. Speaker, I thank the distinguished ranking member of 
the Committee on Ways and Means.
  There may be no more serious issue that we consider on the floor of 
this House this year. The gentlewoman from West Virginia (Mrs. Capito) 
that just spoke said why it was so important. She is right. This issue 
is critically important to the women that she mentioned, critically 
important to the individuals that the gentlewoman from Connecticut 
(Mrs. Johnson) mentioned, and I would say critically important to the 
citizens that every one of the women on this side of the aisle 
represent and came and said they were concerned about and, therefore, 
are not supporting this rule.
  The gentlewoman from Connecticut said she was polite to those people, 
and she was. But I suggest to the gentlewoman that this rule is not 
polite. This rule denigrates the importance and seriousness of this 
issue.
  When your side took over in 1995, Gerald Solomon, the then-chairman 
of the Committee on Rules, said this, ``The guiding principals will be 
openness and fairness. The Rules Committee will no longer rig the 
procedure to contrive a pre-determined outcome. From now on the Rules 
Committee will clear the stage for debate and let the House work its 
will.''
  You have, of course, retreated from that statement. You have not 
honored the seriousness of this issue.

                              {time}  2130

  The gentlewoman from Connecticut who the gentleman from California 
(Mr. Thomas) says wrote this bill will not have the opportunity to 
defend this bill against an alternative that can be fully debated as to 
whether or not the seniors to whom she refers will, in fact, be 
protected.
  The gentlewoman served with Bill Gradison. Bill Gradison for those 
who are relatively new to the House was a member of the Committee on 
Ways and Means and one of the senior members of the Committee on Ways 
and Means, and then Bill Gradison left here, and he went to head up the 
Insurance Industries Association in this country.
  Ms. SLAUGHTER. Mr. Speaker, I yield 1 minute to the gentleman from 
Maryland (Mr. Hoyer).
  Mr. HOYER. Mr. Speaker, he went to the insurance industry and what 
does Bill Gradison say, a Republican, not a Democrat, a member of the 
Committee on Ways and Means, retired, what does he say? A member 
representing the insurance agency, he says this bill will not work. 
That is what Bill Gradison says, and the shame on this democratic body 
is that an issue that all of us agree is so critically important will 
not be fully debated consistent with the principle that Mr. Solomon 
enunciated in 1995 when the reformers took over this House.
  How sad it is, how sad it is that we come here at this hour to debate 
one of America's most important issues, affecting millions and millions 
and millions of people. All of us, all of us have heard the lament of 
those individuals, be they female or male, who cannot pay their 
prescription drugs. It is our duty to reject this rule and to have a 
full and fair debate, consistent with the Solomon principles.
  Mr. LINDER. Mr. Speaker, I am pleased to yield 2 minutes to the 
gentlewoman from Virginia (Mrs. Jo Ann Davis).
  Mrs. JO ANN DAVIS of Virginia. Mr. Speaker, I rise to speak in 
support of the rule. For years I have been an avid supporter of 
prescription drug coverage for senior citizens. Why? Because I have a 
mom whose prescription drugs amount to over 50 percent of her Social 
Security check.
  Today, I rise to speak for all of those who have moms and dads on 
Medicare.

[[Page H4176]]

The minority does not have a serious bill. They have a $1 trillion 
election year gimmick that will bankrupt Medicare.
  This is a good and fair rule because it allows a vote on the only 
credible plan that has been carefully and thoughtfully designed to help 
seniors by lowering drug costs, guaranteeing coverage and providing 
choices.
  Under the Republican plan, every senior will be eligible for 
coverage. We guarantee this coverage. It cannot be taken away. The 
Democrat plan, however, phases out coverage. It is essentially an 
experiment. Mr. Speaker, seniors cannot afford an experiment. They need 
real, credible coverage that they can rely on.
  This bill will help our seniors. This is a good rule for a long-
awaited and much-needed legislation and we must pass it. I urge my 
colleagues to join me in voting ``yes'' on the rule and ``yes'' on 
final passage of the bill for my mom and everyone's mom and dad that is 
on Medicare.
  Ms. SLAUGHTER. Mr. Speaker, I yield 1 minute to the gentleman from 
New Jersey (Mr. Menendez).
  Mr. MENENDEZ. Mr. Speaker, I rise on behalf of my 83-year-old mother 
and millions like her across this country who work for decades, in her 
case, in the factories of New Jersey, now has Alzheimer's and spends 
over half of her Social Security check on prescription drugs and but 
for my sister and my assistance would not live with the dignity that 
she deserves. There is a difference between Republicans and Democrats 
on prescription drugs, and that is why Republicans will not even let us 
debate our proposal here on the floor of the House of Representatives.
  The denial of a vote on the Democratic proposal for a universal, 
affordable, guaranteed benefit under Medicare is a corruption of this 
institution by the Republican majority, by the way, for an industry 
that has given them millions in campaign contributions.
  There is a difference in who benefits. Democrats cover all seniors. 
My colleagues subsidize big insurance companies and cover less than a 
quarter of seniors' costs. There is a difference in what seniors will 
pay. Democrats guarantee a $25 monthly premium with low out-of-pocket 
expenses. My colleagues leave those decisions to the whims of 
corporations. Plenty of opportunity for more corporate greed.
  No senior in America should have to choose between paying their rent, 
putting food on the table, and having access to life-enhancing drugs.


                Announcement by the Speaker Pro Tempore

  The SPEAKER pro tempore (Mr. LaTourette). The Chair would ask the 
courtesy of all Members in not exceeding the time that has been yielded 
to them.
  Mr. LINDER. Mr. Speaker, I yield 2 minutes to the gentleman from Iowa 
(Mr. Latham).
  Mr. LATHAM. Mr. Speaker, I thank the gentleman from Georgia for 
yielding me the time, and I thank the Speaker for this time.
  This is a long time coming. This is so important for people like my 
mother who is 85 years old, living in a town of 168 people in 
Alexander, Iowa. This is not only a bill that is going to help her to 
be able to afford her prescription drugs and to enhance her length of 
life and quality of life; but just as importantly, in rural America, 
this bill is going to make sure that there is access to quality health 
care in rural America.
  There is a lot of work that has gone into this bill, and I would like 
to see any other proposal out there that has brought together so many 
people when we look at the American Hospital Association, the AMA, the 
physical therapists, the National Association of Home Care, the 
National Rural Health Care Association, all coming together in support 
of this very, very important legislation.
  Mr. Speaker, I have been very proud to serve on the Speaker's 
Prescription Drug Action Team, and I want to thank the Speaker and all 
the chairmen of the committees that have worked so hard on this bill 
and to the successful end which is really going to address the problems 
that we have.
  I also want to congratulate my three Republican colleagues from Iowa 
(Mr. Leach), (Mr. Nussle), and (Mr. Ganske) for working as a team to 
try and make sure that we did get relief in Iowa. We have the lowest 
reimbursement for our hospitals in the country by a wide margin. This 
bill is going to take a giant step toward keeping those rural hospitals 
open, to keep the kind of high-quality health care providers on the job 
and serving in Iowa. It is absolutely critical that we continue to have 
the physicians, the nurses, the home health care folks available for my 
mother.
  Mr. Speaker, this is a great evening, and I support the rule and the 
bill.
  Ms. SLAUGHTER. Mr. Speaker, I yield 2 minutes to the gentleman from 
New Jersey (Mr. Pallone).
  Mr. PALLONE. Mr. Speaker, some of the comments that are being made by 
my colleagues on the other side, both on the floor and in the Committee 
on Rules, have been very upsetting to me.
  I rise in opposition to the rule, but I heard the gentlewoman from 
Virginia just say that the rule was fair because it allows an up-or-
down vote on what is the only good bill dealing with prescription 
drugs. That is not what fairness is about. That is not what democracy 
is about.
  I asked this morning in the Committee on Rules that the Democratic 
substitute and three other amendments that would lead to price 
reductions and another amendment that would provide a guaranteed 
Medicare benefit be placed in order. All were denied. My colleague may 
not agree with me, but the gentlewoman from Virginia should not suggest 
that the only thing that should be considered is what they think is the 
right thing. That is not the way a democracy operates.
  The other thing that upset me was that I heard the gentlewoman from 
Connecticut say that we should just read the bill. Let me tell my 
colleague, I read the bill. We have not had a lot of time to read the 
Republican bill, but I read it. There is nothing in it. It is not a 
Medicare benefit. It does not guarantee any benefit. It does not tell 
us what the premium is going to be. It does not tell us what the 
deductible is going to be. It does not tell us anything about whether 
it is going to be available anywhere, and there is no price reduction.
  The gentlewoman from Connecticut mentioned the passage of Medicare, 
but she was very proud of the fact this morning in the Committee on 
Rules that this was not a Medicare bill and that it operated through 
private insurance and through market competition and was not part of 
Medicare because she said that Medicare oftentimes does not work now 
and we need to change it.
  Then the gentleman from Georgia actually said in response to the 
gentleman from Massachusetts (Mr. McGovern) when I spoke about how we 
wanted a Medicare guarantee and we wanted this to be under Medicare, 
the gentleman from Massachusetts (Mr. McGovern) said it is unfortunate 
that the gentleman from Georgia (Mr. Linder) made a reference to the 
Medicare prescription drug program as a Soviet-style model program, and 
the gentleman from Georgia (Mr. Linder) said, well, it is; and he said 
it several times.
  The problem is that the Republicans do not like Medicare. They do not 
want this to be a Medicare program because they never liked Medicare, 
and they want it to wither on the vine, and they do not want to provide 
any benefit for senior citizens in this country.
  Mr. LINDER. Mr. Speaker, I yield myself such time as I may consume. 
That was some of the gentleman's more interesting prose. I am sure 
there is a kernel of thought in there, but I did not detect it.
  Mr. Speaker, I yield 1 minute to the gentleman from California (Mr. 
Thomas), the chairman of the Committee on Ways and Means.
  Mr. THOMAS. Mr. Speaker, the parade on the other side of the aisle 
which repeated the mantra that it was a sham bill, cruel hoax, harmful 
to women and the disabled, in case anybody really thinks that is true, 
I am wondering why then when we look at the more than 90 organizations 
that support this bill, have names such as the Visiting Nurses 
Association, the Pennsylvania Women's Health Alliance, the National 
Spinal Cord Injury Association, the National Coalition for Women With 
Heart Disease, the National Alliance for the Mentally Ill of 
Pennsylvania, American Parkinson's Association of Vermont, the Epilepsy 
Foundation of Mississippi, having someone parade to the microphone and 
repeat some mantra, as though it was

[[Page H4177]]

some kind of a fixed statement that meant anything really does 
embarrass me, when if we look at the organizations and more that I just 
repeated who every day help the people that my colleagues say are not 
helped are for this bill. Someone is wrong, and it is not them.
  Ms. SLAUGHTER. Mr. Speaker, I yield myself such time as I may 
consume.
  The Democrats are standing with AARP, the National Committee to 
Preserve Social Security and Medicare, the Alliance for Retired 
Americans, National Council on the Aging, National Senior Citizens Law 
Center, Families USA, the National Partnership for Women and Families, 
the AFL and countless others who represent America's 40 million 
Medicare beneficiaries.
  Mr. Speaker, I yield 3 minutes to the gentleman from Michigan (Mr. 
Dingell).
  (Mr. DINGELL asked and was given permission to revise and extend his 
remarks.)
  Mr. DINGELL. Mr. Speaker, I thank the distinguished gentlewoman for 
yielding me the time.
  We have got a remarkable thing here before us, a closed rule. We have 
got a bill on which there were never any hearings, a bill that just 
drips defects, a bill that is opposed by almost everybody that knows 
anything about pharmaceuticals and about the needs of the senior 
citizens and a bill that is opposed by every single responsible major 
organization of senior citizens.
  We cannot offer amendments to it. They cannot be cut-and-bite 
amendments. There is no possibility of us offering a substitute to it. 
This is what my colleagues call democracy on that side of the aisle? 
This is the way we treat the concerns and the rights and the interests 
of our senior citizens? I wonder how many of them like what they are 
seeing tonight on television as they watch this body engage in debate 
which is at best fraudulent and which is at worst just plain 
outrageous.
  The hard fact of the matter is we cannot offer amendments on this 
side at all, but we can bring to attention the fact that this is going 
to significantly damage, if not in fact destroy, most of the plans that 
on behalf of industry and labor offer to retirees the right to have 
prescription pharmaceuticals as a part of the medical care program of 
the company which offers that particular benefit.
  That is an outrage. There is no way that we can address here what the 
amount is that is going to be charged for the program. In other words, 
in this legislation, there is nothing anywhere which tells how much the 
senior citizen is going to pay to whom for what. That is all left up to 
some kind of nebulous understanding between the Secretary and an 
insurance company. There is no correction for that particular problem.
  Is that bad? Of course. But there is worse. There is not a nickel's 
worth of subsidy for the health care of a senior citizen in this 
legislation. Do my colleagues know where the money goes in the 
legislation that is before us? To an insurance company. The insurance 
company can offer whatever benefits it wants or no benefits, but it is 
going to get a big fat subsidy.
  With companies like Arthur Andersen I am sure that we will have an 
accounting system which will make that look good, but the simple fact 
of the matter is the benefits that are going to come under this 
legislation are not going to come to citizens. They are going to go to 
a bunch of cold-hearted, steely-eyed insurance companies that are going 
to be interested in maximizing benefits. In fact, there is not one plan 
which will be offered by insurance companies that is not going to be 
heavily subsidized.
  Mr. Speaker, I rise in strong opposition to this abominable closed 
rule. On the most important issue to face this Congress, the Republican 
leadership has decided to prevent a single amendment to be offered, and 
in particular, a Democratic substitute.
  There is no secret why we Democrats are not being allowed to offer a 
substitute, even a substitute that requires no waivers of the rules. It 
is not because our substitute has no merit. It is because it has so 
much merit, it would pass.
  Let me explain why the rule needs to be defeated so that we can offer 
the Democratic substitute.
  Unlike the bill introduced by our Republican colleagues, our 
substitute can be simply explained, because it is built on a simple, 
known, and effective model--Medicare itself.
  Just like seniors pay a voluntary premium for Part B medical costs 
such as doctor visits, our bill provides for a voluntary Part D drug 
premium of $25 per month. For that, the Government will pay 80% of drug 
costs after a $100 deductible. And no senior will have to pay more than 
$2,000 in costs per year.
  These are real numbers, not estimates. The benefits and the $25 
monthly premium are specified on the first page of the substitute. 
Unfortunately, there are no such guarantees in the Republican bill.
  On top of that, we will be arming seniors with the most potent 
protection from soaring drug costs. Forty million seniors banded 
together under the buying power of Medicare, we can begin to use the 
necessary bargaining power to rein in high drug prices.
  This is not price controls; it is competition and bargaining. We saw 
that the Government was effective in negotiating a competitive price 
for the prescription drug Cipro during the anthrax outbreak. Why 
shouldn't we do the same for other life saving drugs for seniors?
  In contrast to our simple and effective prescription drug benefit, 
the Republican bill is a complex scheme that would make Rube Goldberg 
blush. In fact, it is not a drug benefit at all. It is a host of 
subsidies to private insurers in the hope that they will offer a drug-
only benefit to seniors. Will they? Time and again they have told us 
``no.''
  Why would the Republicans put forward such a model? Well, quite 
simply they have a larger agenda--they want to privatize all of 
Medicare, and this is just another step. That is the only reason why 
seniors are not even given a choice of getting the benefit through 
their traditional Medicare provider.

  Any why don't they endorse our plan? Our plan is simple; it is 
comprehensive; it is what seniors want. The Republicans have raised 
just one issue: they say it costs too much. Well, I can tell you that 
we can afford it. It is just a matter of priorities.
  Should that priority be making the estate tax repeal on the 
wealthiest people permanent, which will cost $750 billion in the decade 
that the permanent repeal is effective, or should it be enacting a 
critical health program that will help all of our seniors?
  Our prescription drug benefit has the strong support of organizations 
representing millions of seniors, such as the National Committee to 
Preserve Social Security and Medicare, the alliance for Retired 
Americans, the National Council on Aging, and AARP. They recognize our 
benefit is a good value for seniors.
  The substitute also includes provisions to shore up the Medicare fee-
for-service system such as increased payments to hospitals, doctors, 
and nursing homes. Senior citizens and individuals with disabilities 
depend on Medicare fee-for-service an ensuring its continued viability 
has always been a priority for Democrats.
  It is a good substitute, and I hope my colleagues will vote against 
the rule, so that it can be offered.

                              {time}  2145

  Mr. LINDER. Mr. Speaker, I yield 1 minute to the gentleman from 
Mississippi (Mr. Pickering).
  Mr. PICKERING. Mr. Speaker, I rise in proud support of the rule and 
the effort of this body. It is an historic opportunity for us.
  If we put the politics and the extreme language aside, these are the 
facts: $350 billion will go to our seniors for prescription drugs, to 
our rural hospitals, to our health community centers, to those who need 
it most.
  In my home State of Mississippi, 55 percent of all seniors live at 
the rate that will get the fixed income assistance, which means no 
deductible, no premium, only a copayment of $2 to $5 per prescription 
drug, an enormous benefit for the seniors who need it most. Fifty-five 
percent of seniors in Mississippi.
  If we look at those who have catastrophic occurrences in their life, 
when drug costs exceed $3,700, they will see no cost over that. Those 
most in need will be helped. It is responsible, it is reasonable, it is 
right. I urge the Members to follow and support the rule.
  Ms. SLAUGHTER. Mr. Speaker, I yield such time as he may consume to 
the gentleman from California (Mr. Honda).
  (Mr. HONDA asked and was given permission to revise and extend his 
remarks.)
  Mr. HONDA. Mr. Speaker, I rise to express my opposition of this 
prescription drug proposal.
  Mr. Speaker, the elderly and disabled have waited long enough for a 
prescription drug benefit in Medicare and for relief from the high cost 
of prescription drug prices. While the Republicans have been busy 
voting on permanent tax cuts and attending lavish fundraisers

[[Page H4178]]

by the pharmaceutical industry, seniors throughout the country have 
been waiting for Congress to take action. All seniors need relief from 
prescription drug prices, and they need it now.
  However, the Republican prescription drug bill completely fails the 
test of a real Medicare drug benefit. The Republican bill has no 
guaranteed minimum benefit, no guaranteed, affordable monthly premium, 
and no guarantee of fair drug prices. To add insult to injury, their 
bill leaves a huge coverage gap. Seniors who need more than $2,000 
worth of drugs must pay one hundred percent out-of-pocket, and keep 
paying premiums, until they reach the $3,700 out-of-pocket cap.
  Mr. Speaker, the Democrats have an alternative we had hoped to offer. 
Under the Democratic plan, seniors and individuals with disabilities 
will be able to keep making the choices that matter. Seniors will not 
be forced to join an HMO. They will not be forced to join a private 
insurance plan that will restrict their access to needed drugs, deny 
coverage for the medicine their doctors prescribe, or force them to 
change pharmacies. And unlike the Republican plan, our plan has no 
gap--beneficiaries will always have coverage.
  But the Republican Leadership is denying Democrats the opportunity to 
offer our alternative. They are denying our right to participate in a 
fair, democratic debate about prescription drugs. The time is now for a 
real, meaningful, and affordable Medicare prescription drug benefit. 
Unfortunately, it looks like this Republican-led House won't be 
providing one anytime soon.
  Ms. SLAUGHTER. Mr. Speaker, I yield 1 minute to the gentlewoman from 
California (Mrs. Capps).
  Mrs. CAPPS. Mr. Speaker, I thank my colleague for yielding me this 
time.
  Mr. Speaker, I acknowledge my sisters in Congress as we rise in 
opposition to this terrible rule.
  One of the proudest days of my life was when I was sworn into this 
body, the symbol of our democracy. But today I am sad for the House and 
for this country. The process the majority has used to produce their 
Medicare bill is completely contrary to the principles of our 
constitution. A bill was rammed through committee that will not give 
seniors an affordable, reliable, comprehensive benefit; seniors, most 
of whom are women.
  Now the majority is refusing to allow a free and fair debate on the 
issue. Why? They know their bill will not work. They know seniors will 
not get affordable drug coverage from insurance companies, and they 
know so many seniors will get no help with their medications, and they 
are afraid they would lose.
  I can accept losing in a fair fight, but I cannot accept this anti-
democratic attempt to muzzle fair debate. We should reject this rule, 
have a full debate on the needs of our seniors, and pass a real 
prescription drug benefit.
  Mr. LINDER. Mr. Speaker, I am pleased to yield 1 minute to the 
gentleman from Minnesota (Mr. Kennedy).
  (Mr. KENNEDY of Minnesota asked and was given permission to revise 
and extend his remarks.)
  Mr. KENNEDY of Minnesota. Mr. Speaker, this bill is important and 
overdue for our Nation's 13 million seniors. Our seniors deserve 
prescription drug coverage now. They do not deserve the Democrat's 
election-year gimmick.
  The average senior saves 44 percent on current drug costs under our 
plan. Mr. Speaker, our plan gives seniors immediate relief from the 
rising cost of prescription drugs by providing a discount of up to 25 
percent off the top of the overall drug cost.
  Just last week, Health and Human Services Secretary Tommy Thompson 
released a study showing our plan would save seniors more money than 
our friends on the other side of the aisle. In addition to the 
immediate discount and cost sharing, our plan includes catastrophic 
protection, 100 percent prescription drug coverage for low-income 
seniors, and more Medicare choices and savings.
  I support the passage of this bill and this rule, and I urge my 
colleagues to do the same.
  Ms. SLAUGHTER. Mr. Speaker, I yield 1 minute to the gentleman from 
Michigan (Mr. Bonior)
  Mr. BONIOR. Mr. Speaker, about 2 weeks ago, I got on a bus with some 
seniors from my State of Michigan, and we went over to Ontario, Canada, 
to buy some prescription drugs. They got these drugs at 60, 70, 80, 90, 
110 percent less than what they would have to pay in the United States, 
drugs like Lipitor and Celebrex.
  They deserve a secure retirement. A secure retirement means not 
having to choose between medication and rent, medication and food, 
medication and transportation. It also means not having to go to 
another country to buy medicines that they need. That is an outrage.
  We have the power in this institution to change that. We have had the 
power to change that for the last 8 years, and we have not done a damn 
thing about it, if my colleagues will pardon my language.
  The Republicans have turned a blind eye to the plight of our mothers 
and our fathers and our grandparents. They have been blinded by the 
money and the power of the pharmaceutical lobby, and the Republicans 
are putting up roadblocks to prescription drugs time after time after 
time.
  It is time for real reform, not a sham proposal. I ask my colleagues 
to open their eyes to the reality of what is happening in the country 
and give us some decent options to vote on.
  Mr. LINDER. Mr. Speaker, I yield myself such time as I may consume to 
remind my friend from Michigan that, about 10 years ago, they had the 
power to change it with overwhelming majorities in both bodies and the 
Presidency, and they chose not to do it then, too.
  Mr. Speaker, I yield 2 minutes to the gentleman from Texas (Mr. 
Barton).
  (Mr. BARTON of Texas asked and was given permission to revise and 
extend his remarks.)
  Mr. BARTON of Texas. Mr. Speaker, I rise in support of the rule, even 
though I had an amendment that I would have liked to have offered that 
was not made in order on prescription drug savings accounts.
  This is not the fairest rule. We could have made in order a 
Democratic alternative. But for a first start, I think it is a fair 
enough rule.
  This is a good plan that will be on the floor. It spends $350 billion 
over 10 years to provide a prescription drug benefit and some Medicare 
reforms for the providers. The drug benefit comes to a population where 
we have about 30 million senior citizens on Medicare, and 70 percent of 
those seniors have some prescription drug coverage under private 
medigap policies. Of those that do not have any prescription drug 
benefits, 50 percent of them have drug costs that are less than $1,000 
a year, and only about 700,000 have drug costs that are over $5,000 a 
year.
  Now, if you are one of those 700,000 or it is your mother or your 
father, your grandmother, your grandfather, your aunt or your uncle, 
that is a big problem. But to say that a prescription drug benefit that 
is going to provide $31 billion a year to provide coverage for 
prescription drugs is not at least a good start, I think is just flat 
hypocritical.
  Now, I think we can do more. I would like for us to do more. I would 
like to, at some point in time, make in order an option for those that 
want to use a prescription drug savings account to have that option; 
and, hopefully, later this year, we will get that.
  I would point out that if the plan that is before us were to become 
law and it is a bad plan, it is optional. There is nothing mandatory 
about this plan that is going to be on the floor.
  I would also point out that the provider benefits in the bill, which 
are over $4 billion a year, there is almost universal support for in 
the provider community.
  So this is a good start. I would hope we would vote for the rule and 
have the debate.
  Ms. SLAUGHTER. Mr. Speaker, may I inquire as to the time remaining on 
both sides?
  The SPEAKER pro tempore (Mr. LaTourette). The gentlewoman from New 
York (Ms. Slaughter) has 10 minutes remaining, and the gentleman from 
Georgia (Mr. Linder) has 11 minutes remaining.
  Ms. SLAUGHTER. Mr. Speaker, I yield 1 minute to the gentleman from 
Ohio (Mr. Brown).
  Mr. BROWN of Ohio. Mr. Speaker, I thank my friend from New York for 
yielding me this time.
  Last week, the Committee on Energy and Commerce was marking up the 
prescription drug bill. Last Wednesday, we stopped at 5 p.m. in the 
afternoon when we should have been working into the evening. Why? 
Because my friends on that side of the aisle went to a Republican fund-
raiser underwritten by the prescription drug companies.

[[Page H4179]]

  The Chair of that dinner was the CEO of a British drug company who 
donated $250,000 to the Republican Party. There were hundreds of 
thousands of other dollars donated by drug companies that night.
  The next day, Mr. Speaker, when we went back for the markup, every 
amendment that Democrats offered that the drug companies did not like, 
surprise, was voted down. An amendment that said seniors should get the 
same drug benefits that Members of Congress get was voted down on a 
party line vote because the drug company sat in the back of the room 
and said no.
  Every amendment we voted on that the drug companies did not like, to 
close the gap in all the out-of-pocket expenses that seniors had to 
pay, if the drug companies did not like it, they sat back in the back 
of the room and said no.
  Vote for the Democratic plan written for seniors.
  The SPEAKER pro tempore. The gentleman's time has expired.
  Mr. BROWN of Ohio. Vote ``no'' on the Republican plan written by the 
drug companies for the drug companies.
  The SPEAKER pro tempore. The gentleman's time has expired.
  Ms. SLAUGHTER. I was going to yield that gentleman another 30 
seconds.


                Announcement by the Speaker Pro Tempore

  The SPEAKER pro tempore. Members need to heed the gavel, and the 
Chair would respectfully ask that, when the gravel is pounding, the 
Members cease speaking so that the gentlewoman from New York (Ms. 
Slaughter) could yield additional time, which is her desire.
  Mr. LINDER. Mr. Speaker, I am pleased to yield 2 minutes to my 
friend, the gentleman from Florida (Mr. Weldon).
  Mr. WELDON of Florida. Mr. Speaker, as many of my colleagues in this 
body know, I practiced internal medicine for many years before coming 
to the House. Indeed, I still see patients about once a month at the 
veterans' clinic in my congressional district. I lived this problem on 
a daily basis. I practiced internal medicine. Mainly what I did was I 
wrote prescriptions mainly for senior citizens, and I dealt personally 
with the struggles that many of them face in paying for their drugs.
  My primary concern is getting a bill, and frankly I was very 
disappointed we did not get a bill 2 years ago, and I think the reason 
we did not get a bill is because some people thought they could 
capitalize on it in the campaign, and I have to honestly say this is 
deja vu all over again. We are starting out very, very poorly.
  I have heard that they have not had a chance. We had two committees 
mark up this bill. The Committee on Ways and Means spent 13 hours on 
it. They were in until 2 a.m. The Committee on Energy and Commerce went 
all night. We hear these claims that the pharmaceutical company is 
giving us all this money. Do I assume the Democratic party has never 
taken any pharmaceutical money?
  I will tell the Members what we need. We need a plan. We need some 
kind of plan, and this is step one. We have to go to conference with 
the Senate. Then we have to negotiate in conference, and many of you 
people who are over there demagogueing this issue are going to be in 
that conference committee. We are going to have plenty of opportunities 
to get a very, very good bill to help our seniors.
  But if we keep on with this attitude, I am going to tell my folks 
back home, forget it. It is going to be kicked off into the campaign 
again. People are going to hope they are going to get an advantage, and 
I do not think anybody is going to get an advantage, and the people who 
are going to suffer are the senior citizens.
  I want to say one other thing. We do not want a plan that stifles 
innovation. If you stifle innovation, I can tell you I used to write 
prescriptions for people and give them to them, new pills that kept 
them alive, and without those pills, they would have died.
  Ms. SLAUGHTER. Mr. Speaker, I yield 1 minute to the gentlewoman from 
Florida (Mrs. Thurman).
  Mrs. THURMAN. Mr. Speaker, I thank the gentlewoman for yielding me 
this time.
  Mr. Speaker, I want the people of the fifth district's voices to be 
heard tonight, too. First of all, I want to say that this debate 
tonight is not about the provider givebacks in this bill. This debate 
is about the most important issue facing the American people and the 
issue that every Member of this Congress and including the President 
ran on in the last election.
  And let us make it clear, today I went to the Committee on Rules 
because the people in the fifth district said to me, we want the cost 
of drugs down, we are tired of seeing on the TV people going to Canada 
to buy their medicines cheaper, or why is it that industrialized 
nations, our competitors, are buying their drugs at a lesser cost?
  Just to give you some examples, how about Zocor? In industrialized 
nations their average pricing is about $65. In the fifth district, it 
is $104. We need to bring these costs down.
  Mr. LINDER. Mr. Speaker, I am pleased to yield 2 minutes to the 
gentleman from Illinois (Mr. Shimkus).
  Mr. SHIMKUS. Mr. Speaker, I wish my friend, the gentleman from 
Maryland (Mr. Hoyer), was here because he played the Solomon card, and 
I have great respect for Jerry Solomon, and I say semper fi to Jerry, 
who is probably watching these proceedings and chuckling.
  Mr. Speaker, I support this rule. We labored hard for over 25 hours 
in the Committee on Energy and Commerce, and I know my friends on the 
Committee on Ways and Means worked deeply as hard. It is not a perfect 
bill. In fact, the bill coming to the floor stripped out my language on 
orphan drugs, help for Lou Gehrig's disease, Crohn's disease and 
Tourette's disease.
  But this bill has some positive aspects. First, it fits within the 
budget. This is critical because any amendment either on the floor 
would add to the bill which would strip it on a budget point of order 
or it would shortchange the prescription drug benefit or shortchange 
the hospital benefits.
  Illinois offers a pharmaceutical assistance program for dual 
eligibles. This bill will assume Federal responsibility for dual 
eligibles, saving Illinois $2 billion over 8 years.

                              {time}  2200

  Individuals who make 175 percent of poverty level will receive full 
cost-sharing assistance. This covers 34 percent of Illinois' Medicare 
population, 549,000 people. It increases payments to all hospitals in 
2003. It increases payments to community hospitals. It increases DSH 
payments, adds a 10 percent increase to rural home health care 
agencies, increases by 10 percent hospice payments.
  Mr. Speaker, it is a finely crafted bill that went through the 
committee process. It is not a perfect bill. It is a bill that we can 
pass on the floor tonight. I commend my colleagues and look forward to 
passing this bill.
  Ms. SLAUGHTER. Mr. Speaker, I yield 2 minutes to the gentlewoman from 
California (Ms. Pelosi), the Democratic whip.
  Ms. PELOSI. Mr. Speaker, I thank the gentlewoman for yielding me this 
time.
  Mr. Speaker, 37 years ago when Medicare first came into existence, 
there was a big fight over it. The Democrats wholeheartedly supported 
it. The Republicans opposed it. They still oppose Medicare.
  Over the years, they have made statements to that effect. Newt 
Gingrich when he was Speaker said that he would like to see Medicare, 
in his words, wither on the vine. And the Republican leader of the 
House, the gentleman from Texas (Mr. Armey) said that Medicare should 
be no part of a free world. In the debate in the Committee on Rules 
last night, the gentleman from Georgia (Mr. Linder) referred to it as a 
Soviet-style model, what the Democrats were proposing. A Soviet-style 
model.
  They did not support it then. They do not support it now. It is no 
wonder they have proposed this cruel hoax on America's seniors. To 
pretend they have a prescription drug benefit that is a guarantee is 
simply not true. They offer no guarantee, merely a suggestion.
  The Republican bill does not contain any defined premium or 
assurances that prescription drugs will be affordable. In the one State 
where such a program exists, the monthly premium is $85 per month. That 
is in Nevada.

[[Page H4180]]

  Less than one-fifth of the estimated cost of Medicare beneficiaries 
over the next 10 years will be covered in this bill. The Republican 
bill does not provide guaranteed access to the drugs seniors need or 
access to their local pharmacy.
  If we had been allowed to present a substitute tonight, which this 
rule prevents, the Democratic substitute would have provided a 
guaranteed, affordable prescription drug benefit for all seniors that 
will amount to an entitlement under Medicare. The gentleman from Texas 
(Mr. Barton) said before this is optional; it is not mandatory. He said 
that himself on the floor here.
  Mr. Speaker, imagine a situation where we could have prescription 
drug benefits for all of our seniors, the quality of life that it would 
produce, and the cost savings to our budget.
  Mr. LINDER. Mr. Speaker, I yield myself 30 seconds to point out a 
couple of things in the previous statement.
  Mr. Speaker, Mr. Gingrich did not ever say Medicare would wither on 
the vine. This was played out on CNN very clearly when they played the 
whole statement, not the botched statement the Democrats have been 
running. He said if we bring competition into the system, the Health 
Care Financing Administration would wither on the vine.
  Secondly, I will point out that the Democrats had a majority here for 
40 years. When I first came here, they had a huge majority in both 
bodies, and the President was a Democratic; and they did not even offer 
one. I think it is fair to say that the Republicans are making the 
effort.
  Mr. Speaker, I yield 1 minute to the gentlewoman from Pennsylvania 
(Ms. Hart).
  (Ms. HART asked and was given permission to revise and extend her 
remarks.)
  Ms. HART. Mr. Speaker, I rise in support of the rule and urge Members 
to also support the bill.
  The Centers for Medicaid and Medicare Services did a poll checking 
out this bill. They estimated that virtually all of the Medicare 
beneficiaries, that is at least 95 percent of them, would opt for this 
drug coverage. I doubt that 95 percent of Medicare recipients would be 
interested in their proposal, but this proposal provides seniors with 
coverage for prescription drugs that they cannot get today. That means 
the choice they currently make of leaving that prescription drug bag on 
the counter because they cannot afford it or paying for it and taking 
it home is no longer a choice they have to make. They pay for it 
because they have coverage, they take it home, and their health 
improves.
  All of the senior citizens that I have met with in my district have 
been asking me to please help them get the coverage for the 
prescription drugs they need to stay healthy and out of the hospital. 
That is all they ask. The women and the men. That is what we give them 
in our bill. I urge support.
  Ms. SLAUGHTER. Mr. Speaker, I yield 1 minute to the gentleman from 
New York (Mr. Nadler).
  Mr. NADLER. Mr. Speaker, what we have on the floor today is a 
pitiful, pathetic, puny, pretend plan; a pretend plan that pretends to 
offer seniors prescription drug care, prescription drugs; but what it 
really does is gives a lot of money to the insurance companies and says 
please, we hope you will do something for our seniors, maybe. That is 
all it is.
  They are too something, I will not say what because my words might be 
taken down, but they will not permit the Democratic plan, which is a 
straight plan for Medicare to pay for 80 percent of the cost of 
prescription drugs, to be offered on this floor because they do not 
have confidence that they could win the debate. They will not permit 
the two plans to be offered on this floor to be debated because they 
are afraid in the light of day if the American people see it, they 
would say, We want a plan. We want what they call the Soviet-style 
plan, which is what they characterize Medicare as for the last 40 
years.
  They did not want it then. They still do not want it. And they 
certainly do not want Medicare coverage for prescription drugs. They 
want to give more money to the insurance companies and say we hope they 
will provide it. Fat chance.
  Mr. LINDER. Mr. Speaker, I yield 1 minute to the gentleman from 
Kentucky (Mr. Fletcher).
  Mr. FLETCHER. Mr. Speaker, this evening we are addressing one of the 
most pressing health care issues in America. I am very disappointed 
that my colleagues on the other side of the aisle, when we marked up 
the budget, they absolutely set aside no amount of money, zippo. They 
did nothing to set aside any money for prescription drugs for seniors. 
There was no plan in order to provide the funding for the plan that 
they offered in the committee; and it was a $973 billion plan offered 
in the committee. There was no way of paying for it. This burden was 
going to be on our children and grandchildren, and the other side of 
the aisle offered no single way of paying for it.
  Mr. Speaker, they talked about taxes, but they did not offer the tax 
increase that would have been required. Are they taking it from Social 
Security? That is where it would have had to come from. Now they talk 
about controlling cost.
  We eliminated the best prices which eliminated the floor. 
Congressional Budget Office estimates this has the most cost-
controlling policy of any plan offered. That means we are going to 
provide the most competitive prices for drugs. I encourage Members to 
support the rule and the bill.
  Ms. SLAUGHTER. Mr. Speaker, I yield 2 minutes to the gentleman from 
Arkansas (Mr. Berry).
  Mr. BERRY. Mr. Speaker, I thank the gentlewoman for yielding me this 
time.
  Mr. Speaker, this rule is a fraud. This bill is a fraud. They have 
come to the floor and said that they are going to do something about 
prescription drugs for our seniors. Not a dime of this money goes to 
buy any medicine. It goes to the insurance companies.
  I wondered, as I listened to this debate this evening, if my 
colleagues on the other side of the aisle have bought into the 
philosophy of that old philosopher and spiritual leader, Brother Dave 
Gardner, who said, ``When you get a man down, kick him because it gives 
him incentive to rise above himself.''
  They have got our senior citizens down, and now they want to kick 
them. The Greatest Generation that lived through the Depression, fought 
World War II and built this Nation, and now we are going to just kick 
them one more time. And if we cannot kick them, we are going to trick 
them and try to make them think that we are going to buy them some 
prescription medicine. This bill does not buy them anything.
  Mr. Speaker, this rule should not pass and this bill should not pass 
because everyone who votes for it is going to have to live forever with 
the fact that they mistreated our senior citizens, the Greatest 
Generation one more time.
  Mr. LINDER. Mr. Speaker, I yield 2 minutes to the gentleman from 
California (Mr. Cunningham).
  Mr. CUNNINGHAM. Mr. Speaker, I would like to speak to my colleagues 
on the other side of the aisle. The gentlewoman from New York (Ms. 
Slaughter) and I have been friends for a long time. I have a mom. I 
have a grandmother that is 93 years old. I have a mother-in-law and two 
daughters. They just left topside.
  What we resent on this side, and they know the gamesmanship when they 
had the majority, but the inferences that Republicans do not care about 
our families is wrong. We do. I would give my life for my family. And I 
would not give a dime to drug companies if I thought it was going to 
hurt.
  Let me give an example. I had pneumonia a couple of years ago; and 
when I went to the doctor, the price of Augmentin was $110. My wife had 
prescription drug insurance through the school system where she is a 
teacher. That drug instead of $110 was $17. That is the free market 
private system, and we want more and more people to be included in 
that.
  Now, I understand if the other side of the aisle wants a government-
controlled health care plan like the former First Lady tried to do with 
health care. That is their prerogative, but we think that is wrong. We 
do care about our people. No child should have to apologize because 
they go to get a drug, and like the President sat right up here, 
President Clinton, and we take care of that. But to give the inference 
that Republicans do not care about our families is wrong because we do. 
We care very much.

[[Page H4181]]

  I would also say that the gentlewoman from California (Ms. Pelosi), 
who spoke previously, since 1988, every single year she voted to take 
100 percent of the money out of the Social Security trust fund, and 
here is the documentation.
  Ms. SLAUGHTER. Mr. Speaker, I yield 1 minute to the gentlewoman from 
Texas (Ms. Jackson-Lee).
  (Ms. JACKSON-LEE of Texas asked and was given permission to revise 
and extend her remarks.)
  Ms. JACKSON-LEE of Texas. Mr. Speaker, I am told that our physicians 
take a Hippocratic oath, and that oath says when someone is in need and 
trusts the physician, do no harm.
  I am sad to say that the insurance companies and the Republicans have 
gotten together, and they are doing great harm. The Republican 
insurance protection act: value, zero. Zero benefits. Zero to Mom, zero 
to Dad, zero benefits to the disabled. It is a shame. Realize that our 
sick seniors are on a roller coaster. Their premiums are not 
guaranteed, deductibles are high. She is not assured that she will be 
able to buy the drugs at the pharmacy she trusts, and she gets nothing 
for a big part of the year, even though she keeps paying premiums.
  Mr. Speaker, the Member from Florida said everybody takes money, the 
Democrats took money. But the Democrats did not take $31 million 5 days 
before we were supposed to come to the floor of the House and deny us a 
substitute in order for us to be able to debate this bill on behalf of 
the American people.
  Mr. LINDER. Mr. Speaker, I yield 1 minute to the gentleman from 
Georgia (Mr. Kingston).
  Mr. KINGSTON. Mr. Speaker, after looking at this issue from many 
different angles and for many different weeks, I am going to support 
this rule. There is a lot more left to do that I am going to be a part 
of, and I am proud to see that a number of our Members of our 
leadership have agreed to in terms of addressing and lowering the cost 
of prescription drugs. But as I listen to this rhetoric tonight, and so 
much of it is totally uncalled for, one has to believe the statement 
made in the New Republic in June that the Democrats want this issue on 
the table because it is an election year, they do not want the bill, 
they want the issue. I am listening to this, and I know there are a lot 
of Democrats who want the policy, but I cannot help but think tonight 
that the Democrats want the politics.

                              {time}  2215

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


                Announcement by the Speaker Pro Tempore

  The SPEAKER pro tempore (Mr. LaTourette). The Chair would again ask 
all Members to yield to the gavel.
  Ms. SLAUGHTER. Mr. Speaker, we had a plan. We had a fine plan. We 
just could not bring it out here before the American people.
  Mr. Speaker, I yield 1\1/2\ minutes to the gentlewoman from 
California (Ms. Eshoo).
  Ms. ESHOO. I thank the gentlewoman for yielding me this time.
  Mr. Speaker, I rise this evening in opposition to this rule. There is 
something very, very, very wrong in this House; and my Republican 
colleagues know it. You know it because you always speak of choice. You 
always speak about competition. You are always talking about new ideas. 
But you will not allow them to come to the floor of the House of 
Representatives.
  I represent 650,000 people. The gentleman that just came to the 
podium said, ``Where is your plan?'' It is right here. But you are 
afraid to debate it. Why do you not stand up, be men and women, and 
debate it? Do not be afraid of ideas. So we will protest.
  You know that the Democrats since the 1960s and before that have had 
a love affair with Medicare. You will never drive a wedge between us 
and Medicare. That is what we wanted to offer. We wanted to bring our 
plan to the floor of the House. Perhaps you have the votes to beat 
that, but the disgrace is that you waved the flag and then you waived 
the democratic rules.
  Shame on you. Shame on you for doing that. Go home and explain that 
to good Republicans, to good independents and to the Democrats in your 
district. They would never, ever accept that. That is why there is 
frustration and anger on this side. We can debate these things, but you 
are afraid to. You do not want to hear an idea, you do not want to hear 
about choice, and you do not want to hear about competition.
  Ms. SLAUGHTER. Mr. Speaker, I yield back the balance of my time.
  Mr. LINDER. Mr. Speaker, I yield myself the balance of my time.
  We have had an interesting debate here. We had a parade of female 
Democrats march down citing the mantra that this bill does nothing for 
senior women. In fact, not one of them spoke with any particularity to 
the bill. We had the gentlewoman from Connecticut (Mrs. Johnson) step 
up right after that and list time after time after time where this was 
of benefit for women across the country and most particularly low-
income women.
  Women have been abused by our social service programs from Social 
Security through Medicare. This is the first time that any party or any 
Congress has made an effort to fix that. This is a genuine improvement 
on this current circumstance.
  Facts do not cease to exist just because they are ignored.
  It was a fact that, some time ago, the Democrats controlled this body 
for 40 years and controlled the White House from time to time in the 
midst of that and never once put forth this important program.
  It was a fact that when I came here in 1993 they had overwhelming 
majorities and a President who was enthusiastic about taking over the 
health care system. But they did not ever put on the floor for a 
discussion or debate any prescription drug program for either side to 
consider.
  It is a fact that the Democrats had an opportunity to put forth a 
program that fit within the budget agreement that was passed by this 
House, a discipline that this body and this side of the House took 
seriously. We put forth a bill that fit within the discipline. They did 
not. This is our proposal. This is our rule. We urge support for it.
  Mr. Speaker, I yield back the balance of my time, and I move the 
previous question on the resolution.
  The previous question was ordered.
  The SPEAKER pro tempore. The question is on the resolution.
  The question was taken; and the Speaker pro tempore announced that 
the ayes appeared to have it.
  Ms. SLAUGHTER. Mr. Speaker, I object to the vote on the ground that a 
quorum is not present and make the point of order that a quorum is not 
present.
  The SPEAKER pro tempore. Evidently, a quorum is not present.
  The Sergeant at Arms will notify absent Members.
  The vote was taken by electronic device, and there were--yeas 218, 
nays 213, not voting 4, as follows:

                             [Roll No. 280]

                               YEAS--218

     Aderholt
     Akin
     Armey
     Bachus
     Baker
     Ballenger
     Barr
     Bartlett
     Barton
     Bass
     Bereuter
     Biggert
     Bilirakis
     Blunt
     Boehlert
     Boehner
     Bonilla
     Bono
     Boozman
     Brady (TX)
     Brown (SC)
     Bryant
     Burr
     Burton
     Buyer
     Callahan
     Calvert
     Camp
     Cannon
     Cantor
     Capito
     Castle
     Chabot
     Chambliss
     Coble
     Collins
     Combest
     Cooksey
     Cox
     Crane
     Crenshaw
     Cubin
     Culberson
     Cunningham
     Davis, Jo Ann
     Davis, Tom
     Deal
     DeLay
     DeMint
     Diaz-Balart
     Doolittle
     Dreier
     Duncan
     Dunn
     Ehlers
     Ehrlich
     Emerson
     English
     Everett
     Ferguson
     Flake
     Fletcher
     Foley
     Forbes
     Fossella
     Frelinghuysen
     Gallegly
     Ganske
     Gekas
     Gibbons
     Gilchrest
     Gillmor
     Gilman
     Goode
     Goodlatte
     Goss
     Graham
     Granger
     Graves
     Green (WI)
     Greenwood
     Grucci
     Hansen
     Hart
     Hastert
     Hastings (WA)
     Hayes
     Hayworth
     Hefley
     Herger
     Hilleary
     Hobson
     Hoekstra
     Horn
     Hostettler
     Houghton
     Hulshof
     Hunter
     Hyde
     Isakson
     Issa
     Jenkins
     Johnson (CT)
     Johnson (IL)
     Johnson, Sam
     Keller
     Kelly
     Kennedy (MN)
     Kerns
     King (NY)
     Kingston
     Kirk
     Knollenberg
     Kolbe
     LaHood
     Latham
     LaTourette
     Leach
     Lewis (CA)
     Lewis (KY)
     Linder
     LoBiondo
     Lucas (OK)
     Manzullo
     McCrery
     McHugh

[[Page H4182]]


     McInnis
     McKeon
     Mica
     Miller, Dan
     Miller, Gary
     Miller, Jeff
     Moran (KS)
     Myrick
     Nethercutt
     Ney
     Northup
     Norwood
     Nussle
     Osborne
     Ose
     Otter
     Oxley
     Paul
     Pence
     Peterson (PA)
     Petri
     Pickering
     Pitts
     Platts
     Pombo
     Portman
     Pryce (OH)
     Putnam
     Quinn
     Radanovich
     Ramstad
     Regula
     Rehberg
     Reynolds
     Riley
     Rogers (KY)
     Rogers (MI)
     Rohrabacher
     Ros-Lehtinen
     Royce
     Ryan (WI)
     Ryun (KS)
     Saxton
     Schaffer
     Schrock
     Sensenbrenner
     Sessions
     Shadegg
     Shaw
     Shays
     Sherwood
     Shimkus
     Shuster
     Simmons
     Simpson
     Skeen
     Smith (MI)
     Smith (NJ)
     Smith (TX)
     Souder
     Stearns
     Stump
     Sullivan
     Sununu
     Sweeney
     Tancredo
     Tauzin
     Taylor (NC)
     Terry
     Thomas
     Thornberry
     Thune
     Tiahrt
     Tiberi
     Toomey
     Upton
     Vitter
     Walden
     Walsh
     Wamp
     Watkins (OK)
     Watts (OK)
     Weldon (FL)
     Weldon (PA)
     Weller
     Whitfield
     Wicker
     Wilson (NM)
     Wilson (SC)
     Wolf
     Young (AK)
     Young (FL)

                               NAYS--213

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

                             NOT VOTING--4

     Clay
     Engel
     Roukema
     Traficant

                              {time}  2243

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

                              {time}  2245

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

                               H.R. 4954

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

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

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

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

              TITLE I--MEDICARE PRESCRIPTION DRUG BENEFIT

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

         ``Part D--Voluntary Prescription Drug Benefit Program

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

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

               Subtitle A--Medicare+Choice Revitalization

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

            Subtitle B--Medicare+Choice Competition Program

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

               TITLE III--RURAL HEALTH CARE IMPROVEMENTS

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

[[Page H4183]]

                TITLE IV--PROVISIONS RELATING TO PART A

                Subtitle A--Inpatient Hospital Services

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

             Subtitle B--Skilled Nursing Facility Services

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

                          Subtitle C--Hospice

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

                      Subtitle D--Other Provisions

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

                 TITLE V--PROVISIONS RELATING TO PART B

                    Subtitle A--Physicians' Services

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

                       Subtitle B--Other Services

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

             TITLE VI--PROVISIONS RELATING TO PARTS A AND B

                    Subtitle A--Home Health Services

Sec. 601. Elimination of 15 percent reduction in payment rates under 
              the prospective payment system.
Sec. 602. Establishment of reduced copayment for a home health service 
              episode of care for certain beneficiaries.
Sec. 603. Update in home health services.
Sec. 604. OASIS Task Force; suspension of certain OASIS data collection 
              requirements pending Task Force submittal of report.
Sec. 605. MedPAC study on medicare margins of home health agencies.

             Subtitle B--Direct Graduate Medical Education

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

                      Subtitle C--Other Provisions

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

              TITLE VII--MEDICARE BENEFITS ADMINISTRATION

Sec. 701. Establishment of Medicare Benefits Administration.

        TITLE VIII--REGULATORY REDUCTION AND CONTRACTING REFORM

                     Subtitle A--Regulatory Reform

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

                     Subtitle B--Contracting Reform

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

                   Subtitle C--Education and Outreach

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

                    Subtitle D--Appeals and Recovery

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

                  Subtitle E--Miscellaneous Provisions

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

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

                    Subtitle A--Medicaid Provisions

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

                    Subtitle B--Internet Pharmacies

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

            Subtitle C--Promotion of Electronic Prescription

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

                 Subtitle D--Treatment of Rare Diseases

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

             Subtitle E--Other Provisions Relating to Drugs

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

               ``Subpart 3--Pharmacist Workforce Programs

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

              TITLE X--HEALTH-CARE RELATED TAX PROVISIONS

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

              TITLE I--MEDICARE PRESCRIPTION DRUG BENEFIT

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

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

         ``Part D--Voluntary Prescription Drug Benefit Program

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

       ``(a) Provision of Qualified Prescription Drug Coverage 
     Through Enrollment in

[[Page H4184]]

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

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

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

[[Page H4185]]

     provides that similar elections under section 1851(e) take 
     effect under section 1851(f).
       ``(2) No election effective before 2005.--In no case shall 
     any election take effect before January 1, 2005.
       ``(3) Termination.--The Administrator shall provide for the 
     termination of an election in the case of--
       ``(A) termination of coverage under both part A and part B; 
     and
       ``(B) termination of elections described in section 
     1851(g)(3) (including failure to pay required premiums).

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

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

     Any amount determined under subparagraph (B) that is not a 
     multiple of $10 shall be rounded to the nearest multiple of 
     $10.
       ``(2) Limits on cost-sharing.--
       ``(A) In general.--The coverage has cost-sharing (for costs 
     above the annual deductible specified in paragraph (1) and up 
     to the initial coverage limit under paragraph (3)) as 
     follows:
       ``(i) First copayment range.--For costs above the annual 
     deductible specified in paragraph (1) and up to amount 
     specified in subparagraph (C), the cost-sharing--

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

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

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

       ``(B) Use of tiered copayments.--Nothing in this part shall 
     be construed as preventing a PDP sponsor from applying tiered 
     copayments, so long as such tiered copayments are consistent 
     with subparagraph (A).
       ``(C) Initial copayment threshold.--The amount specified in 
     this subparagraph--
       ``(i) for 2005, is equal to $1,000; or
       ``(ii) for a subsequent year, is equal to the amount 
     specified in this subparagraph for the previous year, 
     increased by the annual percentage increase described in 
     paragraph (5) for the year involved.

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

     Any amount determined under subparagraph (B) that is not a 
     multiple of $25 shall be rounded to the nearest multiple of 
     $25.
       ``(4) Catastrophic protection.--
       ``(A) In general.--Notwithstanding paragraph (3), the 
     coverage provides benefits with no cost-sharing after the 
     individual has incurred costs (as described in subparagraph 
     (C)) for covered outpatient drugs in a year equal to the 
     annual out-of-pocket threshold specified in subparagraph (B).
       ``(B) Annual out-of-pocket threshold.--For purposes of this 
     part, the `annual out-of-pocket threshold' specified in this 
     subparagraph--
       ``(i) for 2005, is equal to $4,500; or
       ``(ii) for a subsequent year, is equal to the amount 
     specified in this subparagraph for the previous year, 
     increased by the annual percentage increase described in 
     paragraph (5) for the year involved.

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

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

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

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

       ``(2) Catastrophic protection.--The coverage provides for 
     beneficiaries the catastrophic protection described in 
     subsection (b)(4).
       ``(d) Access to Negotiated Prices.--
       ``(1) In general.--Under qualified prescription drug 
     coverage offered by a PDP sponsor or a Medicare+Choice 
     organization, the sponsor or organization shall provide 
     beneficiaries with access to negotiated prices (including 
     applicable discounts) used for payment for covered outpatient 
     drugs, regardless of the fact that no benefits may be payable 
     under the coverage with respect to such drugs because of the 
     application of cost-sharing or an initial coverage limit 
     (described in subsection (b)(3)). Insofar as a State elects 
     to provide medical assistance under title XIX for a drug 
     based on the prices negotiated by a prescription drug plan 
     under this part, the requirements of section 1927 shall not 
     apply to such drugs.
       ``(2) Disclosure.--The PDP sponsor or Medicare+Choice 
     organization shall disclose to the Administrator (in a manner 
     specified by the Administrator) the extent to which discounts 
     or rebates made available to the sponsor or organization by a 
     manufacturer are passed through to enrollees through

[[Page H4186]]

     pharmacies and other dispensers or otherwise. The provisions 
     of section 1927(b)(3)(D) shall apply to information disclosed 
     to the Administrator under this paragraph in the same manner 
     as such provisions apply to information disclosed under such 
     section.
       ``(e) Actuarial Valuation; Determination of Annual 
     Percentage Increases.--
       ``(1) Processes.--For purposes of this section, the 
     Administrator shall establish processes and methods--
       ``(A) for determining the actuarial valuation of 
     prescription drug coverage, including--
       ``(i) an actuarial valuation of standard coverage and of 
     the reinsurance subsidy payments under section 1860H;
       ``(ii) the use of generally accepted actuarial principles 
     and methodologies; and
       ``(iii) applying the same methodology for determinations of 
     alternative coverage under subsection (c) as is used with 
     respect to determinations of standard coverage under 
     subsection (b); and
       ``(B) for determining annual percentage increases described 
     in subsection (b)(5).
       ``(2) Use of outside actuaries.--Under the processes under 
     paragraph (1)(A), PDP sponsors and Medicare+Choice 
     organizations may use actuarial opinions certified by 
     independent, qualified actuaries to establish actuarial 
     values.
       ``(f) Covered Outpatient Drugs Defined.--
       ``(1) In general.--Except as provided in this subsection, 
     for purposes of this part, the term `covered outpatient drug' 
     means--
       ``(A) a drug that may be dispensed only upon a prescription 
     and that is described in subparagraph (A)(i) or (A)(ii) of 
     section 1927(k)(2); or
       ``(B) a biological product described in clauses (i) through 
     (iii) of subparagraph (B) of such section or insulin 
     described in subparagraph (C) of such section,

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

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

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

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

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


[[Page H4187]]


     Nothing in this section shall be construed as impairing a PDP 
     sponsor from applying cost management tools (including 
     differential payments) under all methods of operation.
       ``(2) Medication therapy management program.--
       ``(A) In general.--A medication therapy management program 
     described in this paragraph is a program of drug therapy 
     management and medication administration that is designed to 
     assure, with respect to beneficiaries with chronic diseases 
     (such as diabetes, asthma, hypertension, and congestive heart 
     failure) or multiple prescriptions, that covered outpatient 
     drugs under the prescription drug plan are appropriately used 
     to achieve therapeutic goals and reduce the risk of adverse 
     events, including adverse drug interactions.
       ``(B) Elements.--Such program may include--
       ``(i) enhanced beneficiary understanding of such 
     appropriate use through beneficiary education, counseling, 
     and other appropriate means;
       ``(ii) increased beneficiary adherence with prescription 
     medication regimens through medication refill reminders, 
     special packaging, and other appropriate means; and
       ``(iii) detection of patterns of overuse and underuse of 
     prescription drugs.
       ``(C) Development of program in cooperation with licensed 
     pharmacists.--The program shall be developed in cooperation 
     with licensed pharmacists and physicians.
       ``(D) Considerations in pharmacy fees.--The PDP sponsor of 
     a prescription drug program shall take into account, in 
     establishing fees for pharmacists and others providing 
     services under the medication therapy management program, the 
     resources and time used in implementing the program.
       ``(3) Electronic prescription program.--
       ``(A) In general.--An electronic prescription drug program 
     described in this paragraph is a program that includes at 
     least the following components, consistent with national 
     standards established under subparagraph (B):
       ``(i) Electronic transmittal of prescriptions.--
     Prescriptions are only received electronically, except in 
     emergency cases and other exceptional circumstances 
     recognized by the Administrator.
       ``(ii) Provision of information to prescribing health care 
     professional.--The program provides, upon transmittal of a 
     prescription by a prescribing health care professional, for 
     transmittal by the pharmacist to the professional of 
     information that includes--

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

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

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

       ``(iii) Deadlines.--

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

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

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

       ``(a) General Requirements.--Each PDP sponsor of a 
     prescription drug plan shall meet the following requirements:
       ``(1) Licensure.--Subject to subsection (c), the sponsor is 
     organized and licensed under State law as a risk-bearing 
     entity eligible to offer health insurance or health benefits 
     coverage in each State in which it offers a prescription drug 
     plan.
       ``(2) Assumption of financial risk.--
       ``(A) In general.--Subject to subparagraph (B) and section 
     1860E(d)(2), the entity assumes full financial risk on a 
     prospective basis for qualified prescription drug coverage 
     that it offers under a prescription drug plan and that is not 
     covered under section 1860H.
       ``(B) Reinsurance permitted.--The entity may obtain 
     insurance or make other arrangements for the cost of coverage 
     provided to any enrolled member under this part.
       ``(3) Solvency for unlicensed sponsors.--In the case of a 
     sponsor that is not described in paragraph (1), the sponsor 
     shall meet solvency standards established by the 
     Administrator under subsection (d).
       ``(b) Contract Requirements.--
       ``(1) In general.--The Administrator shall not permit the 
     election under section 1860A of a prescription drug plan 
     offered by a PDP sponsor under this part, and the sponsor 
     shall not be eligible for payments under section 1860G or 
     1860H, unless the Administrator has entered into a contract 
     under this subsection with the sponsor with respect to the 
     offering of such plan. Such a contract with a sponsor may 
     cover more than one prescription drug plan. Such contract 
     shall provide that the sponsor agrees to comply with the 
     applicable requirements and standards of this part and the 
     terms and conditions of payment as provided for in this part.

[[Page H4188]]

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

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

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

     ``SEC. 1860F. SUBMISSION OF BIDS.

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

[[Page H4189]]

       ``(3) Review.--The Administrator shall review the 
     information filed under paragraph (2) for the purpose of 
     conducting negotiations under section 1860D(b)(2).
       ``(b) Uniform Bid.--
       ``(1) In general.--The bid for a prescription drug plan 
     under this section may not vary among individuals enrolled in 
     the plan in the same service area.
       ``(2) Construction.--Nothing in paragraph (1) shall be 
     construed as preventing the imposition of a late enrollment 
     penalty under section 1860A(c)(2)(B).
       ``(c) Collection.--
       ``(1) Use of electronic funds transfer mechanism or, at 
     beneficiary's option, withholding from social security 
     payment.--In accordance with regulations, a PDP sponsor may 
     encourage that enrollees under a plan make payment of the 
     premium established by the plan under this part through an 
     electronic funds transfer mechanism, such as automatic 
     charges of an account at a financial institution or a credit 
     or debit card account, or, at the option of an enrollee, 
     through withholding from benefit payments in the manner 
     provided under section 1840 with respect to monthly premiums 
     under section 1839. All such amounts shall be credited to the 
     Medicare Prescription Drug Trust Fund.
       ``(2) Offsetting.--Reductions in premiums for coverage 
     under parts A and B as a result of a selection of a 
     Medicare+Choice plan may be used to reduce the premium 
     otherwise imposed under paragraph (1).
       ``(3) Payment of plans.--PDP plans shall receive payment 
     based on bid amounts in the same manner as Medicare+Choice 
     organizations receive payment based on bid amounts under 
     section 1853(a)(1)(A)(ii) except that such payment shall be 
     made from the Medicare Prescription Drug Trust Fund.
       ``(d) Acceptance of Benchmark Amount as Full Premium for 
     Subsidized Low-Income Individuals if No Standard (or 
     Equivalent) Coverage in an Area.--
       ``(1) In general.--If there is no standard prescription 
     drug coverage (as defined in paragraph (2)) offered in an 
     area, in the case of an individual who is eligible for a 
     premium subsidy under section 1860G and resides in the area, 
     the PDP sponsor of any prescription drug plan offered in the 
     area (and any Medicare+Choice organization that offers 
     qualified prescription drug coverage in the area) shall 
     accept the benchmark bid amount (under section 1860G(b)(2)) 
     as payment in full for the premium charge for qualified 
     prescription drug coverage.
       ``(2) Standard prescription drug coverage defined.--For 
     purposes of this subsection, the term `standard prescription 
     drug coverage' means qualified prescription drug coverage 
     that is standard coverage or that has an actuarial value 
     equivalent to the actuarial value for standard coverage.

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

       ``(a) Income-Related Subsidies for Individuals With Income 
     Below 150 Percent of Federal Poverty Level.--
       ``(1) Full premium subsidy and reduction of cost-sharing 
     for individuals with income below 150 percent of federal 
     poverty level.--In the case of a subsidy eligible individual 
     (as defined in paragraph (4)) who is determined to have 
     income that does not exceed 150 percent of the Federal 
     poverty level, the individual is entitled under this 
     section--
       ``(A) to an income-related premium subsidy equal to 100 
     percent of the amount described in subsection (b)(1); and
       ``(B) subject to subsection (c), to the substitution for 
     the beneficiary cost-sharing described in paragraphs (1) and 
     (2) of section 1860B(b) (up to the initial coverage limit 
     specified in paragraph (3) of such section) of amounts that 
     do not exceed $2 for a multiple source or generic drug (as 
     described in section 1927(k)(7)(A)) and $5 for a non-
     preferred drug.
       ``(2) Sliding scale premium subsidy and reduction of cost-
     sharing for individuals with income above 150, but below 175 
     percent, of federal poverty level.--In the case of a subsidy 
     eligible individual who is determined to have income that 
     exceeds 150 percent, but does not exceed 175 percent, of the 
     Federal poverty level, the individual is entitled under this 
     section to--
       ``(A) an income-related premium subsidy determined on a 
     linear sliding scale ranging from 100 percent of the amount 
     described in subsection (b)(1) for individuals with incomes 
     at 150 percent of such level to 0 percent of such amount for 
     individuals with incomes at 175 percent of such level; and
       ``(B) subject to subsection (c), to the substitution for 
     the beneficiary cost-sharing described in paragraphs (1) and 
     (2) of section 1860B(b) (up to the initial coverage limit 
     specified in paragraph (3) of such section) of amounts that 
     do not exceed $2 for a multiple source or generic drug (as 
     described in section 1927(k)(7)(A)) and $5 for a non-
     preferred drug.
       ``(3) Construction.--Nothing in this section shall be 
     construed as preventing a PDP sponsor from reducing to 0 the 
     cost-sharing otherwise applicable to generic drugs.
       ``(4) Determination of eligibility.--
       ``(A) Subsidy eligible individual defined.--For purposes of 
     this section, subject to subparagraph (D), the term `subsidy 
     eligible individual' means an individual who--
       ``(i) is eligible to elect, and has elected, to obtain 
     qualified prescription drug coverage under this part;
       ``(ii) has income below 175 percent of the Federal poverty 
     line; and
       ``(iii) meets the resources requirement described in 
     section 1905(p)(1)(C).
       ``(B) Determinations.--The determination of whether an 
     individual residing in a State is a subsidy eligible 
     individual and the amount of such individual's income shall 
     be determined under the State medicaid plan for the State 
     under section 1935(a). In the case of a State that does not 
     operate such a medicaid plan (either under title XIX or under 
     a statewide waiver granted under section 1115), such 
     determination shall be made under arrangements made by the 
     Administrator.
       ``(C) Income determinations.--For purposes of applying this 
     section--
       ``(i) income shall be determined in the manner described in 
     section 1905(p)(1)(B); and
       ``(ii) the term `Federal poverty line' means the official 
     poverty line (as defined by the Office of Management and 
     Budget, and revised annually in accordance with section 
     673(2) of the Omnibus Budget Reconciliation Act of 1981) 
     applicable to a family of the size involved.
       ``(D) Treatment of territorial residents.--In the case of 
     an individual who is not a resident of the 50 States or the 
     District of Columbia, the individual is not eligible to be a 
     subsidy eligible individual but may be eligible for financial 
     assistance with prescription drug expenses under section 
     1935(e).
       ``(E) Treatment of conforming medigap policies.--For 
     purposes of this section, the term `qualified prescription 
     drug coverage' includes a medicare supplemental policy 
     described in section 1860H(b)(4).
       ``(5) Indexing dollar amounts.--
       ``(A) For 2006.--The dollar amounts applied under 
     paragraphs (1)(B) and (2)(B) for 2006 shall be the dollar 
     amounts specified in such paragraph increased by the annual 
     percentage increase described in section 1860B(b)(5) for 
     2006.
       ``(B) For subsequent years.--The dollar amounts applied 
     under paragraphs (1)(B) and (2)(B) for a year after 2006 
     shall be the amounts (under this paragraph) applied under 
     paragraph (1)(B) or (2)(B) for the preceding year increased 
     by the annual percentage increase described in section 
     1860B(b)(5) (relating to growth in medicare prescription drug 
     costs per beneficiary) for the year involved.
       ``(b) Premium Subsidy Amount.--
       ``(1) In general.--The premium subsidy amount described in 
     this subsection for an individual residing in an area is the 
     benchmark bid amount (as defined in paragraph (2)) for 
     qualified prescription drug coverage offered by the 
     prescription drug plan or the Medicare+Choice plan in which 
     the individual is enrolled.
       ``(2) Benchmark bid amount defined.--For purposes of this 
     subsection, the term `benchmark bid amount' means, with 
     respect to qualified prescription drug coverage offered 
     under--
       ``(A) a prescription drug plan that--
       ``(i) provides standard coverage (or alternative 
     prescription drug coverage the actuarial value is equivalent 
     to that of standard coverage), the bid amount for enrollment 
     under the plan under this part (determined without regard to 
     any subsidy under this section or any late enrollment penalty 
     under section 1860A(c)(2)(B)); or
       ``(ii) provides alternative prescription drug coverage the 
     actuarial value of which is greater than that of standard 
     coverage, the bid amount described in clause (i) multiplied 
     by the ratio of (I) the actuarial value of standard coverage, 
     to (II) the actuarial value of the alternative coverage; or
       ``(B) a Medicare+Choice plan, the portion of the bid amount 
     that is attributable to statutory drug benefits (described in 
     section 1853(a)(1)(A)(ii)(II)).
       ``(c) Rules in Applying Cost-Sharing Subsidies.--
       ``(1) In general.--In applying subsections (a)(1)(B) and 
     (a)(2)(B), nothing in this part shall be construed as 
     preventing a plan or provider from waiving or reducing the 
     amount of cost-sharing otherwise applicable.
       ``(2) Limitation on charges.--In the case of an individual 
     receiving cost-sharing subsidies under subsection (a)(1)(B) 
     or (a)(2)(B), the PDP sponsor may not charge more than $5 per 
     prescription.
       ``(3) Application of indexing rules.--The provisions of 
     subsection (a)(4) shall apply to the dollar amount specified 
     in paragraph (2) in the same manner as they apply to the 
     dollar amounts specified in subsections (a)(1)(B) and 
     (a)(2)(B).
       ``(d) Administration of Subsidy Program.--The Administrator 
     shall provide a process whereby, in the case of an individual 
     who is determined to be a subsidy eligible individual and who 
     is enrolled in prescription drug plan or is enrolled in a 
     Medicare+Choice plan under which qualified prescription drug 
     coverage is provided--
       ``(1) the Administrator provides for a notification of the 
     PDP sponsor or Medicare+Choice organization involved that the 
     individual is eligible for a subsidy and the amount of the 
     subsidy under subsection (a);
       ``(2) the sponsor or organization involved reduces the 
     premiums or cost-sharing otherwise imposed by the amount of 
     the applicable subsidy and submits to the Administrator 
     information on the amount of such reduction; and
       ``(3) the Administrator periodically and on a timely basis 
     reimburses the sponsor or organization for the amount of such 
     reductions.


[[Page H4190]]


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

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

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

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

[[Page H4191]]

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

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

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

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

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

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

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

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

     ``and may elect qualified prescription drug coverage in 
     accordance with section 1860A.''; and

[[Page H4192]]

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

     SEC. 103. MEDICAID AMENDMENTS.

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


  ``special provisions relating to medicare prescription drug benefit

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

     SEC. 104. MEDIGAP TRANSITION.

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

     in the case of an individual described in subparagraph (B) 
     who seeks to enroll under the

[[Page H4193]]

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

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

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


     ``medicare prescription drug discount card endorsement program

       ``Sec. 1807. (a) In General.--The Secretary (or the 
     Medicare Benefits Administrator pursuant to section 
     1808(c)(3)(C)) shall establish a program--
       ``(1) to endorse prescription drug discount card programs 
     that meet the requirements of this section; and
       ``(2) to make available to medicare beneficiaries 
     information regarding such endorsed programs.
       ``(b) Requirements for Endorsement.--The Secretary may not 
     endorse a prescription drug discount card program under this 
     section unless the program meets the following requirements:
       ``(1) Savings to medicare beneficiaries.--The program 
     passes on to medicare beneficiaries who enroll in the program 
     discounts on prescription drugs, including discounts 
     negotiated with manufacturers.
       ``(2) Prohibition on application only to mail order.--The 
     program applies to drugs that are available other than solely 
     through mail order.
       ``(3) Beneficiary services.--The program provides 
     pharmaceutical support services, such as education and 
     counseling, and services to prevent adverse drug 
     interactions.
       ``(4) Information.--The program makes available to medicare 
     beneficiaries through the Internet and otherwise information, 
     including information on enrollment fees, prices charged to 
     beneficiaries, and services offered under the program, that 
     the Secretary identifies as being necessary to provide for 
     informed choice by beneficiaries among endorsed programs.
       ``(5) Demonstrated experience.--The entity operating the 
     program has demonstrated experience and expertise in 
     operating such a program or a similar program.
       ``(6) Quality assurance.--The entity has in place adequate 
     procedures for assuring quality service under the program.
       ``(7) Additional beneficiary protections.--The program 
     meets such additional requirements as the Secretary 
     identifies to protect and promote the interest of medicare 
     beneficiaries, including requirements that ensure that 
     beneficiaries are not charged more than the lower of the 
     negotiated retail price or the usual and customary price.
       ``(c) Program Operation.--The Secretary shall operate the 
     program under this section consistent with the following:
       ``(1) Promotion of informed choice.--In order to promote 
     informed choice among endorsed prescription drug discount 
     card programs, the Secretary shall provide for the 
     dissemination of information which compares the costs and 
     benefits of such programs in a manner coordinated with the 
     dissemination of educational information on Medicare+Choice 
     plans under part C.
       ``(2) Oversight.--The Secretary shall provide appropriate 
     oversight to ensure compliance of endorsed programs with the 
     requirements of this section, including verification of the 
     discounts and services provided.
       ``(3) Use of medicare toll-free number.--The Secretary 
     shall provide through the 1-800-medicare toll free telephone 
     number for the receipt and response to inquiries and 
     complaints concerning the program and programs endorsed under 
     this section.
       ``(4) Disqualification for abusive practices.--The 
     Secretary shall revoke the endorsement of a program that the 
     Secretary determines no longer meets the requirements of this 
     section or that has engaged in false or misleading marketing 
     practices.
       ``(5) Enrollment practices.--A medicare beneficiary may not 
     be enrolled in more than one endorsed program at any time.
       ``(d) Transition.--The Secretary shall provide for an 
     appropriate transition and discontinuation of the program 
     under this section at the time prescription drug benefits 
     first become available under part D.
       ``(e) Authorization of Appropriations.--There are 
     authorized to be appropriated such sums as may be necessary 
     to carry out the program under this section.''.

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

               Subtitle A--Medicare+Choice Revitalization

     SEC. 201. MEDICARE+CHOICE IMPROVEMENTS.

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

[[Page H4194]]

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

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

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

     SEC. 203. AVOIDING DUPLICATIVE STATE REGULATION.

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

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

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

     SEC. 205. MEDICARE MSAS.

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

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

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

     such reasonable cost reimbursement contract may be extended 
     and renewed to cover such area (so long as it is not included 
     in the service area of any Medicare+Choice plan).''.
       (2) Study.--The Medicare Benefits Administrator shall 
     conduct a study of an appropriate transition for plans 
     offered under reasonable cost contracts under section 1876 of 
     the Social Security Act on and after January 1, 2005. Such a 
     transition may take into account whether there are one or 
     more coordinated care Medicare+Choice plans being offered in 
     the areas involved. Not later than February 1, 2004, the 
     Administrator shall submit to Congress a report on such study 
     and shall include recommendations regarding any changes in 
     the amendment made by

[[Page H4195]]

     paragraph (1) as the Administrator determines to be 
     appropriate.
       (b) Extension of Social Health Maintenance Organization 
     (SHMO) Demonstration Project.--
       (1) In general.--Section 4018(b)(1) of the Omnibus Budget 
     Reconciliation Act of 1987 is amended by striking ``the date 
     that is 30 months after the date that the Secretary submits 
     to Congress the report described in section 4014(c) of the 
     Balanced Budget Act of 1997'' and inserting ``December 31, 
     2004''.
       (2) SHMOs offering medicare+choice plans.--Nothing in such 
     section 4018 shall be construed as preventing a social health 
     maintenance organization from offering a Medicare+Choice plan 
     under part C of title XVIII of the Social Security Act.

            Subtitle B--Medicare+Choice Competition Program

     SEC. 211. MEDICARE+CHOICE COMPETITION PROGRAM.

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


                     ``submission of bid amounts'';

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

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

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

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

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

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

       ``(iii) Demographic adjustment, including adjustment for 
     health status.--The Administrator shall adjust the payment 
     amount under clause (i), the unadjusted non-drug monthly bid 
     amount under clause (ii)(I), and the fee-for-service area-
     specific non-drug benchmark amount under clause (ii)(II) for 
     such risk factors as age, disability status, gender, 
     institutional status, and such other factors as the 
     Administrator determines to be appropriate, including 
     adjustment for health status under paragraph (3), so as to 
     ensure actuarial equivalence. The Administrator may add to, 
     modify, or substitute for such adjustment factors if such 
     changes will improve the determination of actuarial 
     equivalence.
       ``(iv) Reference to subsidy payment for statutory drug 
     benefits.--In the case in which an enrollee is enrolled under 
     part D, the Medicare+Choice organization also is entitled to 
     a subsidy payment amount under section 1860H.''.
       (d) Conforming Amendments.--

[[Page H4196]]

       (1) Protection against beneficiary selection.--Section 
     1852(b)(1)(A) (42 U.S.C. 1395w-22(b)(1)(A)) is amended by 
     adding at the end the following: ``The Administrator shall 
     not approve a plan of an organization if the Administrator 
     determines that the benefits are designed to substantially 
     discourage enrollment by certain Medicare+Choice eligible 
     individuals with the organization.''.
       (2) Conforming amendment to premium terminology.--
     Subparagraphs (A) and (B) of section 1854(b)(2) (42 U.S.C. 
     1395w-24(b)(2)) are amended to read as follows:
       ``(A) Medicare+Choice monthly basic beneficiary premium.--
     The term `Medicare+Choice monthly basic beneficiary premium' 
     means, with respect to a Medicare+Choice plan--
       ``(i) described in section 1853(a)(1)(A)(ii)(I) (relating 
     to plans providing rebates), zero; or
       ``(ii) described in section 1853(a)(1)(A)(ii)(II), the 
     amount (if any) by which the unadjusted non-drug monthly bid 
     amount exceeds the fee-for-service area-specific non-drug 
     benchmark amount.
       ``(B) Medicare+Choice monthly supplemental beneficiary 
     premium.--The term `Medicare+Choice monthly supplemental 
     beneficiary premium' means, with respect to a Medicare+Choice 
     plan, the portion of the aggregate monthly bid amount 
     submitted under clause (i) of subsection (a)(6)(A) for the 
     year that is attributable under such section to the provision 
     of nonstatutory benefits.''.
       (3) Requirement for uniform bid amounts.--Section 1854(c) 
     (42 U.S.C. 1395w-24(c)) is amended to read as follows:
       ``(c) Uniform Bid Amounts.--The Medicare+Choice monthly bid 
     amount submitted under subsection (a)(6) of a Medicare+Choice 
     organization under this part may not vary among individuals 
     enrolled in the plan.''.
       (4) Permitting beneficiary rebates.--
       (A) Section 1851(h)(4)(A) (42 U.S.C. 1395w-21(h)(4)(A)) is 
     amended by inserting ``except as provided under section 
     1854(b)(1)(C)'' after ``or otherwise''.
       (B) Section 1854(d) (42 U.S.C. 1395w-24(d)) is amended by 
     inserting ``, except as provided under subsection 
     (b)(1)(C),'' after ``and may not provide''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to payments and premiums for months beginning 
     with January 2005.

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

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

     The Administrator has the discretion to decide whether or not 
     to designate as a competitive-demonstration area an area that 
     qualifies for such designation.
       ``(B) Qualifications for designation.--For purposes of this 
     title, a Medicare+Choice area (which is a metropolitan 
     statistical area or other area with a substantial number of 
     Medicare+Choice enrollees) may not be designated as a 
     `competitive-demonstration area' for a 2-year period 
     beginning with a year unless the Administrator determines, by 
     such date before the beginning of the year as the 
     Administrator determines appropriate, that--
       ``(i) there will be offered during the open enrollment 
     period under this part before the beginning of the year at 
     least 2 Medicare+Choice plans (in addition to the fee-for-
     service program under parts A and B), each offered by a 
     different Medicare+Choice organization; and
       ``(ii) during March of the previous year at least 50 
     percent of the number of Medicare+Choice eligible individuals 
     who reside in the area were enrolled in a Medicare+Choice 
     plan.
       ``(2) Choice non-drug benchmark amount.--For purposes of 
     this part, the term `choice non-drug benchmark amount' means, 
     with respect to a Medicare+Choice payment area for a month in 
     a year, the sum of the 2 components described in paragraph 
     (3) for the area and year. The Administrator shall compute 
     such benchmark amount for each competitive-demonstration area 
     before the beginning of each annual, coordinated election 
     period under section 1851(e)(3)(B) for each year (beginning 
     with 2005) in which it is designated as such an area.
       ``(3) 2 components.--For purposes of paragraph (2), the 2 
     components described in this paragraph for an area and a year 
     are the following:
       ``(A) Fee-for-service component weighted by national fee-
     for-service market share.--The product of the following:
       ``(i) National fee-for-service market share.--The national 
     fee-for-service market share percentage (determined under 
     paragraph (5)) for the year.
       ``(ii) Fee-for-service area-specific non-drug bid.--The 
     fee-for-service area-specific non-drug bid (as defined in 
     paragraph (6)) for the area and year.
       ``(B) M+C component weighted by national medicare+choice 
     market share.--The product of the following:
       ``(i) National medicare+choice market share.--1 minus the 
     national fee-for-service market share percentage for the 
     year.
       ``(ii) Weighted average of plan bids in area.--The weighted 
     average of the plan bids for the area and year (as determined 
     under paragraph (4)(A)).
       ``(4) Determination of weighted average bids for an area.--
       ``(A) In general.--For purposes of paragraph (3)(B)(ii), 
     the weighted average of plan bids for an area and a year is 
     the sum of the following products for Medicare+Choice plans 
     described in subparagraph (C) in the area and year:
       ``(i) Proportion of each plan's enrollees in the area.--The 
     number of individuals described in subparagraph (B), divided 
     by the total number of such individuals for all 
     Medicare+Choice plans described in subparagraph (C) for that 
     area and year.
       ``(ii) Monthly non-drug bid amount.--The unadjusted non-
     drug monthly bid amount.
       ``(B) Counting of individuals.--The Administrator shall 
     count, for each Medicare+Choice plan described in 
     subparagraph (C) for an area and year, the number of 
     individuals who reside in the area and who were enrolled 
     under such plan under this part during March of the previous 
     year.
       ``(C) Exclusion of plans not offered in previous year.--For 
     an area and year, the Medicare+Choice plans described in this 
     subparagraph are plans that are offered in the area and year 
     and were offered in the area in March of the previous year.
       ``(5) Computation of national fee-for-service market share 
     percentage.--The Administrator shall determine, for a year, 
     the proportion (in this subsection referred to as the 
     `national fee-for-service market share percentage') of 
     Medicare+Choice eligible individuals who during March of the 
     previous year were not enrolled in a Medicare+Choice plan.
       ``(6) Fee-for-service area-specific non-drug bid.--For 
     purposes of this part, the term `fee-for-service area-
     specific non-drug bid' means, for an area and year, the 
     amount described in section 1853(j)(1) for the area and year, 
     except that any reference to a percent of less than 100 
     percent shall be deemed a reference to 100 percent.''.
       (b) Application of Choice Non-Drug Benchmark in 
     Competitive-Demonstration Areas.--
       (1) In general.--Section 1854 is amended--
       (A) in subsection (b)(1)(C)(i), as added by section 
     211(b)(1)(A), by striking ``(i) Requirement.--If'' and 
     inserting ``(i) Requirement for non-competitive-demonstration 
     areas.--In the case of a Medicare+Choice payment area that is 
     not a competitive-demonstration area designated under section 
     1853(k)(1), if'';
       (B) in subsection (b)(1)(C), as so added, by inserting 
     after clause (i) the following new clause:
       ``(ii) Requirement for competitive-demonstration areas.--In 
     the case of a Medicare+Choice payment area that is designated 
     as a competitive-demonstration area under section 1853(k)(1), 
     if there are average per capita monthly savings described in 
     paragraph (4) for a Medicare+Choice plan and year, the 
     Medicare+Choice plan shall provide to the enrollee a monthly 
     rebate equal to 75 percent of such savings.'';
       (C) by adding at the end of subsection (b), as amended by 
     section 211(b)(1), the following new paragraph:
       ``(4) Computation of average per capita monthly savings for 
     competitive-demonstration areas.--For purposes of paragraph 
     (1)(C)(ii), the average per capita monthly savings referred 
     to in such paragraph for a Medicare+Choice plan and year 
     shall be computed in the same manner as the average per 
     capita monthly savings is computed under paragraph (3) except 
     that the reference to the fee-for-service area-specific non-
     drug benchmark in paragraph (3)(B)(i) (or to the benchmark 
     amount as adjusted under paragraph (3)(C)(i)) is deemed to be 
     a reference to the choice non-drug benchmark amount (or such 
     amount as adjusted in the manner described in paragraph 
     (3)(B)(i)).''; and
       (D) in subsection (d), as amended by section 211(d)(4), by 
     inserting ``and subsection (b)(1)(D)'' after ``subsection 
     (b)(1)(C),''.
       (2) Conforming amendments.--
       (A) Payment of plans.--Section 1853(a)(1)(A)(ii), as 
     amended by section 211(c)(1), is amended--
       (i) in subclause (I), by inserting ``(or, in the case of a 
     competitive-demonstration area, the choice non-drug benchmark 
     amount)'' after ``benchmark amount''; and
       (ii) in subclauses (I) and (II), by inserting ``(or, in the 
     case of a competitive-demonstration area, described in 
     section 1854(b)(4))'' after ``section 1854(b)(1)(C)''.
       (B) Definition of monthly basic premium.--Section 
     1854(b)(2)(A)(ii), as amended by section 211(d)(2), is 
     amended by inserting ``(or, in the case of a competitive-
     demonstration area, the choice non-drug benchmark amount)'' 
     after ``benchmark amount''.
       (c) Premium Adjustment.--Section 1839 (42 U.S.C. 1395r) is 
     amended by adding at the end the following new subsection:

[[Page H4197]]

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

     SEC. 213. CONFORMING AMENDMENTS.

       (a) Conforming Amendments Relating to Bids.--
       (1) Section 1854 (42 U.S.C. 1395w-24) is amended--
       (A) in the heading by inserting ``and bid amounts'' after 
     ``premiums'';
       (B) in the heading of subsection (a), by inserting ``and 
     Bid Amounts'' after ``Premiums''; and
       (C) in subsection (a)(5)(A), by inserting ``paragraphs (2), 
     (3), and (4) of'' after ``filed under''.
       (b) Additional Conforming Amendments.--
       (1) Annual determination and announcement of certain 
     factors.--Section 1853(b) (42 U.S.C. 1395w-23(b)) is 
     amended--
       (A) in paragraph (1), by striking ``the calendar year 
     concerned'' and all that follows and inserting the following: 
     ``the calendar year concerned with respect to each 
     Medicare+Choice payment area, the following:
       ``(A) Pre-competition information.--For years before 2005, 
     the following:
       ``(i) Medicare+choice capitation rates.--The annual 
     Medicare+Choice capitation rate for each Medicare+Choice 
     payment area for the year.
       ``(ii) Adjustment factors.--The risk and other factors to 
     be used in adjusting such rates under subsection (a)(1)(A) 
     for payments for months in that year.
       ``(B) Competition information.--For years beginning with 
     2005, the following:
       ``(i) Benchmarks.--The fee-for-service area-specific non-
     drug benchmark under section 1853(j) and, if applicable, the 
     choice non-drug benchmark under section 1853(k)(2), for the 
     year involved and, if applicable, the national fee-for-
     service market share percentage.
       ``(ii) Adjustment factors.--The adjustment factors applied 
     under section 1853(a)(1)(A)(iii) (relating to demographic 
     adjustment), section 1853(a)(1)(B) (relating to adjustment 
     for end-stage renal disease), and section 1853(a)(3) 
     (relating to health status adjustment).
       ``(iii) Projected fee-for-service bid.--In the case of a 
     competitive area, the projected fee-for-service area-specific 
     non-drug bid (as determined under subsection (k)(6)) for the 
     area.
       ``(iv) Individuals.--The number of individuals counted 
     under subsection (k)(4)(B) and enrolled in each 
     Medicare+Choice plan in the area.''; and
       (B) in paragraph (3), by striking ``in sufficient detail'' 
     and all that follows up to the period at the end.
       (2) Repeal of provisions relating to adjusted community 
     rate (acr).--
       (A) In general.--Subsections (e) and (f) of section 1854 
     (42 U.S.C. 1395w-24) are repealed.
       (B) Conforming amendment.--Section 1839(a)(2) (42 U.S.C. 
     1395r(a)(2)) is amended by striking ``, and to reflect'' and 
     all that follows and inserting a period.
       (3) Prospective implementation of national coverage 
     determinations.--Section 1852(a)(5) (42 U.S.C. 1395w-
     22(a)(5)) is amended to read as follows:
       ``(5) Prospective implementation of national coverage 
     determinations.--The Secretary shall only implement a 
     national coverage determination that will result in a 
     significant change in the costs to a Medicare+Choice 
     organization in a prospective manner that applies to 
     announcements made under section 1853(b) after the date of 
     the implementation of the determination.''.
       (4) Permitting geographic adjustment to consolidate 
     multiple medicare+choice payment areas in a state into a 
     single statewide medicare+choice payment area.--Section 
     1853(d)(3) (42 U.S.C. 1395w-23(e)(3)) is amended--
       (A) by amending clause (i) of subparagraph (A) to read as 
     follows:
       ``(i) to a single statewide Medicare+Choice payment 
     area,''; and
       (B) by amending subparagraph (B) to read as follows:
       ``(B) Budget neutrality adjustment.--In the case of a State 
     requesting an adjustment under this paragraph, the Medicare 
     Benefits Administrator shall initially (and annually 
     thereafter) adjust the payment rates otherwise established 
     under this section for Medicare+Choice payment areas in the 
     State in a manner so that the aggregate of the payments under 
     this section in the State shall not exceed the aggregate 
     payments that would have been made under this section for 
     Medicare+Choice payment areas in the State in the absence of 
     the adjustment under this paragraph.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to payments and premiums for periods beginning on 
     or after January 1, 2005.

               TITLE III--RURAL HEALTH CARE IMPROVEMENTS

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

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

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

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

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

       Section 1886(d)(3)(A)(iv) (42 U.S.C. 1395ww(d)(3)(A)(iv)) 
     is amended--
       (1) by striking ``(iv) For discharges'' and inserting 
     ``(iv)(I) Subject to the succeeding provisions of this 
     clause, for discharges''; and
       (2) by adding at the end the following new subclauses:

[[Page H4198]]

       ``(II) For discharges occurring during fiscal year 2003, 
     the average standardized amount for hospitals located other 
     than in a large urban area shall be increased by \1/2\ of the 
     difference between the average standardized amount determined 
     under subclause (I) for hospitals located in large urban 
     areas for such fiscal year and such amount determined 
     (without regard to this subclause) for other hospitals for 
     such fiscal year.
       ``(III) For discharges occurring in a fiscal year beginning 
     with fiscal year 2004, the Secretary shall compute an average 
     standardized amount for hospitals located in any area within 
     the United States and within each region equal to the average 
     standardized amount computed for the previous fiscal year 
     under this subparagraph for hospitals located in a large 
     urban area (or, beginning with fiscal year 2005, for 
     hospitals located in any area) increased by the applicable 
     percentage increase under subsection (b)(3)(B)(i).''.

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

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

     SEC. 305. IMPROVEMENTS TO CRITICAL ACCESS HOSPITAL PROGRAM.

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

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

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

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

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

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

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

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

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

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

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

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

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

[[Page H4199]]

                TITLE IV--PROVISIONS RELATING TO PART A

                Subtitle A--Inpatient Hospital Services

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

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

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

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

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

       (a) Improving Timeliness of Data Collection.--Section 
     1886(d)(5)(K) (42 U.S.C. 1395ww(d)(5)(K)) is amended by 
     adding at the end the following new clause:
       ``(vii) Under the mechanism under this subparagraph, the 
     Secretary shall provide for the addition of new diagnosis and 
     procedure codes in April 1 of each year, but the addition of 
     such codes shall not require the Secretary to adjust the 
     payment (or diagnosis-related group classification) under 
     this subsection until the fiscal year that begins after such 
     date.''.
       (b) Eligibility Standard.--
       (1) Minimum period for recognition of new technologies.--
     Section 1886(d)(5)(K)(vi) (42 U.S.C. 1395ww(d)(5)(K)(vi)) is 
     amended--
       (A) by inserting ``(I)'' after ``(vi)''; and
       (B) by adding at the end the following new subclause:
       ``(II) Under such criteria, a service or technology shall 
     not be denied treatment as a new service or technology on the 
     basis of the period of time in which the service or 
     technology has been in use if such period ends before the end 
     of the 2-to-3-year period that begins on the effective date 
     of implementation of a code under ICD-9-CM (or a successor 
     coding methodology) that enables the identification of a 
     significant sample of specific discharges in which the 
     service or technology has been used.''.
       (2) Adjustment of threshold.--Section 1886(d)(5)(K)(ii)(I) 
     (42 U.S.C. 1395ww(d)(5)(K)(ii)(I)) is amended by inserting 
     ``(applying a threshold specified by the Secretary that is 
     the lesser of 50 percent of the national average standardized 
     amount for operating costs of inpatient hospital services for 
     all hospitals and all diagnosis-related groups or one 
     standard deviation for the diagnosis-related group 
     involved)'' after ``is inadequate''.
       (3) Criterion for substantial improvement.--Section 
     1886(d)(5)(K)(vi) (42 U.S.C. 1395ww(d)(5)(K)(vi)), as amended 
     by paragraph (1), is further amended by adding at the end the 
     following subclause:
       ``(III) The Secretary shall by regulation provide for 
     further clarification of the criteria applied to determine 
     whether a new service or technology represents an advance in 
     medical technology that substantially improves the diagnosis 
     or treatment of beneficiaries. Under such criteria, in 
     determining whether a new service or technology represents an 
     advance in medical technology that substantially improves the 
     diagnosis or treatment of beneficiaries, the Secretary shall 
     deem a service or technology as meeting such requirement if 
     the service or technology is a drug or biological that is 
     designated under section 506 or 526 of the Federal Food, 
     Drug, and Cosmetic Act, approved under section 314.510 or 
     601.41 of title 21, Code of Federal Regulations, or 
     designated for priority review when the marketing application 
     for such drug or biological was filed or is a medical device 
     for which an exemption has been granted under section 520(m) 
     of such Act, for which priority review has been provided 
     under section 515(d)(5) of such Act, or is a substantially 
     equivalent device for which an expedited review is provided 
     under section 513(f) of such Act.''.
       (4) Process for public input.--Section 1886(d)(5)(K) (42 
     U.S.C. 1395ww(d)(5)(K)), as amended by paragraph (1), is 
     amended--
       (A) in clause (i), by adding at the end the following: 
     ``Such mechanism shall be modified to meet the requirements 
     of clause (viii).''; and
       (B) by adding at the end the following new clause:
       ``(viii) The mechanism established pursuant to clause (i) 
     shall be adjusted to provide, before publication of a 
     proposed rule, for public input regarding whether a new 
     service or technology not described in the second sentence of 
     clause (vi)(III) represents an advance in medical technology 
     that substantially improves the diagnosis or treatment of 
     beneficiaries as follows:
       ``(I) The Secretary shall make public and periodically 
     update a list of all the services and technologies for which 
     an application for additional payment under this subparagraph 
     is pending.
       ``(II) The Secretary shall accept comments, 
     recommendations, and data from the public regarding whether 
     the service or technology represents a substantial 
     improvement.
       ``(III) The Secretary shall provide for a meeting at which 
     organizations representing hospitals, physicians, medicare 
     beneficiaries, manufacturers, and any other interested party 
     may present comments, recommendations, and data to the 
     clinical staff of the Centers for Medicare & Medicaid 
     Services before publication of a notice of proposed 
     rulemaking regarding whether service or technology represents 
     a substantial improvement.''.
       (c) Preference for Use of DRG Adjustment.--Section 
     1886(d)(5)(K) (42 U.S.C. 1395ww(d)(5)(K)) is further amended 
     by adding at the end the following new clause:
       ``(ix) Before establishing any add-on payment under this 
     subparagraph with respect to a new technology, the Secretary 
     shall seek to identify one or more diagnosis-related groups 
     associated with such technology, based on similar clinical or 
     anatomical characteristics and the cost of the technology. 
     Within such groups the Secretary shall assign an eligible new 
     technology into a diagnosis-related group where the average 
     costs of care most closely approximate the costs of care of 
     using the new technology. In such case, no add-on payment 
     under this subparagraph shall be made with respect to such 
     new technology and this clause shall not affect the 
     application of paragraph (4)(C)(iii).''.
       (d) Improvement in Payment for New Technology.--Section 
     1886(d)(5)(K)(ii)(III) (42 U.S.C. 1395ww(d)(5)(K)(ii)(III)) 
     is amended by inserting after ``the estimated average cost of 
     such service or technology'' the following: ``(based on the 
     marginal rate applied to costs under subparagraph (A))''.
       (e) Effective Date.--
       (1) In general.--The Secretary shall implement the 
     amendments made by this section so that they apply to 
     classification for fiscal years beginning with fiscal year 
     2004.
       (2) Reconsiderations of applications for fiscal year 2003 
     that are denied.--In the case of an application for a 
     classification of a medical service or technology as a new 
     medical service or technology under section 1886(d)(5)(K) of 
     the Social Security Act (42 U.S.C. 1395ww(d)(5)(K)) that was 
     filed for fiscal year 2003 and that is denied--
       (A) the Secretary shall automatically reconsider the 
     application as an application for fiscal year 2004 under the 
     amendments made by this section; and
       (B) the maximum time period otherwise permitted for such 
     classification of the service or technology shall be extended 
     by 12 months.

     SEC. 404. PHASE-IN OF FEDERAL RATE FOR HOSPITALS IN PUERTO 
                   RICO.

       Section 1886(d)(9) (42 U.S.C. 1395ww(d)(9)) is amended--
       (1) in subparagraph (A)--
       (A) in clause (i), by striking ``for discharges beginning 
     on or after October 1, 1997, 50 percent (and for discharges 
     between October 1, 1987, and September 30, 1997, 75 
     percent)'' and inserting ``the applicable Puerto Rico 
     percentage (specified in subparagraph (E))''; and
       (B) in clause (ii), by striking ``for discharges beginning 
     in a fiscal year beginning on or after October 1, 1997, 50 
     percent (and for discharges between October 1, 1987, and 
     September 30, 1997, 25 percent)'' and inserting ``the 
     applicable Federal percentage (specified in subparagraph 
     (E))''; and
       (2) by adding at the end the following new subparagraph:
       ``(E) For purposes of subparagraph (A), for discharges 
     occurring--
       ``(i) between October 1, 1987, and September 30, 1997, the 
     applicable Puerto Rico percentage is 75 percent and the 
     applicable Federal percentage is 25 percent;
       ``(ii) on or after October 1, 1997, and before October 1, 
     2003, the applicable Puerto Rico percentage is 50 percent and 
     the applicable Federal percentage is 50 percent;
       ``(iii) during fiscal year 2004, the applicable Puerto Rico 
     percentage is 45 percent and the applicable Federal 
     percentage is 55 percent;
       ``(iv) during fiscal year 2005, the applicable Puerto Rico 
     percentage is 40 percent and the applicable Federal 
     percentage is 60 percent;
       ``(v) during fiscal year 2006, the applicable Puerto Rico 
     percentage is 35 percent and the applicable Federal 
     percentage is 65 percent;
       ``(vi) during fiscal year 2007, the applicable Puerto Rico 
     percentage is 30 percent and the applicable Federal 
     percentage is 70 percent; and
       ``(vii) on or after October 1, 2007, the applicable Puerto 
     Rico percentage is 25 percent and the applicable Federal 
     percentage is 75 percent.''.

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

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

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

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

[[Page H4200]]

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

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

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

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

             Subtitle B--Skilled Nursing Facility Services

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

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

                          Subtitle C--Hospice

     SEC. 421. COVERAGE OF HOSPICE CONSULTATION SERVICES.

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

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

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

     SEC. 423. RURAL HOSPICE DEMONSTRATION PROJECT.

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

                      Subtitle D--Other Provisions

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

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

                 TITLE V--PROVISIONS RELATING TO PART B

                    Subtitle A--Physicians' Services

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

       (a) Update for 2003 through 2005.--
       (1) In general.--Section 1848(d) (42 U.S.C. 1395w-4(d)) is 
     amended by adding at the end the following new paragraphs:
       ``(5) Update for 2003.--The update to the single conversion 
     factor established in paragraph (1)(C) for 2003 is 2 percent.

[[Page H4201]]

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

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

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

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

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

                       Subtitle B--Other Services

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

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


        ``competitive acquisition of certain items and services

       ``Sec. 1847. (a) Establishment of Competitive Acquisition 
     Programs.--
       ``(1) Implementation of programs.--
       ``(A) In general.--The Secretary shall establish and 
     implement programs under which competitive acquisition areas 
     are established throughout the United States for contract 
     award purposes for the furnishing under this part of 
     competitively priced items and services (described in 
     paragraph (2)) for which payment is made under this part. 
     Such areas may differ for different items and services.
       ``(B) Phased-in implementation.--The programs shall be 
     phased-in among competitive acquisition areas over a period 
     of not longer than 3 years in a manner so that the 
     competition under the programs occurs in--
       ``(i) at least \1/3\ of such areas in 2004; and
       ``(ii) at least \2/3\ of such areas in 2005.
       ``(C) Waiver of certain provisions.--In carrying out the 
     programs, the Secretary may waive such provisions of the 
     Federal Acquisition Regulation as are necessary for the 
     efficient implementation of this section, other than 
     provisions relating to confidentiality of information and 
     such other provisions as the Secretary determines 
     appropriate.
       ``(2) Items and services described.--The items and services 
     referred to in paragraph (1) are the following:
       ``(A) Durable medical equipment and inhalation drugs used 
     in connection with durable medical equipment.--Covered items 
     (as defined in section 1834(a)(13)) for which payment is 
     otherwise made under section 1834(a), other than items used 
     in infusion, and inhalation drugs used in conjunction with 
     durable medical equipment.
       ``(B) Off-the-shelf orthotics.--Orthotics (described in 
     section 1861(s)(9)) for which payment is otherwise made under 
     section 1834(h) which require minimal self-adjustment for 
     appropriate use and does not require expertise in trimming, 
     bending, molding, assembling, or customizing to fit to the 
     patient.
       ``(3) Exemption authority.--In carrying out the programs 
     under this section, the Secretary may exempt--
       ``(A) areas that are not competitive due to low population 
     density; and
       ``(B) items and services for which the application of 
     competitive acquisition is not likely to result in 
     significant savings.
       ``(b) Program Requirements.--
       ``(1) In general.--The Secretary shall conduct a 
     competition among entities supplying items and services 
     described in subsection (a)(2) for each competitive 
     acquisition area in which the program is implemented under 
     subsection (a) with respect to such items and services.
       ``(2) Conditions for awarding contract.--
       ``(A) In general.--The Secretary may not award a contract 
     to any entity under the competition conducted in an 
     competitive acquisition area pursuant to paragraph (1) to 
     furnish such items or services unless the Secretary finds all 
     of the following:
       ``(i) The entity meets quality and financial standards 
     specified by the Secretary or developed by accreditation 
     entities or organizations recognized by the Secretary.
       ``(ii) The total amounts to be paid under the contract 
     (including costs associated with the administration of the 
     contract) are expected to be less than the total amounts that 
     would otherwise be paid.
       ``(iii) Beneficiary access to a choice of multiple 
     suppliers in the area is maintained.
       ``(iv) Beneficiary liability is limited to the applicable 
     percentage of contract award price.
       ``(B) Quality standards.--The quality standards specified 
     under subparagraph (A)(i) shall not be less than the quality 
     standards that would otherwise apply if this section did not 
     apply and shall include consumer services standards. The 
     Secretary shall consult with an expert outside advisory panel 
     composed of an appropriate selection of representatives of 
     physicians, practitioners, and suppliers to review (and 
     advise the Secretary concerning) such quality standards.
       ``(3) Contents of contract.--
       ``(A) In general.--A contract entered into with an entity 
     under the competition conducted pursuant to paragraph (1) is 
     subject to terms and conditions that the Secretary may 
     specify.
       ``(B) Term of contracts.--The Secretary shall rebid 
     contracts under this section not less often than once every 3 
     years.
       ``(4) Limit on number of contractors.--
       ``(A) In general.--The Secretary may limit the number of 
     contractors in a competitive acquisition area to the number 
     needed to meet projected demand for items and services 
     covered under the contracts. In awarding contracts, the 
     Secretary shall take into account the ability bidding 
     entities to furnish items or services in sufficient 
     quantities to meet the anticipated needs of beneficiaries for 
     such items or services in the geographic area covered under 
     the contract on a timely basis.
       ``(B) Multiple winners.--The Secretary shall award 
     contracts to more than one entity submitting a bid in each 
     area for an item or service.
       ``(5) Participating contractors.--Payment shall not be made 
     for items and services described in subsection (a)(2) 
     furnished by a contractor and for which competition is 
     conducted under this section unless--
       ``(A) the contractor has submitted a bid for such items and 
     services under this section; and
       ``(B) the Secretary has awarded a contract to the 
     contractor for such items and services under this section.
       ``(6) Authority to contract for education, outreach and 
     complaint services.--

[[Page H4202]]

     The Secretary may enter into a contract with an appropriate 
     entity to address complaints from beneficiaries who receive 
     items and services from an entity with a contract under this 
     section and to conduct appropriate education of and outreach 
     to such beneficiaries with respect to the program.
       ``(c) Annual Reports.--The Secretary shall submit to 
     Congress an annual management report on the programs under 
     this section. Each such report shall include information on 
     savings, reductions in cost-sharing, access to items and 
     services, and beneficiary satisfaction.
       ``(d) Demonstration Project for Clinical Laboratory 
     Services.--
       ``(1) In general.--The Secretary shall conduct a 
     demonstration project on the application of competitive 
     acquisition under this section to clinical diagnostic 
     laboratory tests--
       ``(A) for which payment is otherwise made under section 
     1833(h) or 1834(d)(1) (relating to colorectal cancer 
     screening tests); and
       ``(B) which are furnished without a face-to-face encounter 
     between the individual and the hospital or physician ordering 
     the tests.
       ``(2) Terms and conditions.--Such project shall be under 
     the same conditions as are applicable to items and services 
     described in subsection (a)(2).
       ``(3) Report.--The Secretary shall submit to Congress--
       ``(A) an initial report on the project not later than 
     December 31, 2004; and
       ``(B) such progress and final reports on the project after 
     such date as the Secretary determines appropriate.''.
       (b) Continuation of Certain Demonstration Projects.--
     Notwithstanding the amendment made by subsection (a), with 
     respect to demonstration projects implemented by the 
     Secretary under section 1847 of the Social Security Act (42 
     U.S.C. 1395w-3) (relating to the establishment of competitive 
     acquisition areas) that was in effect on the day before the 
     date of the enactment of this Act, each such demonstration 
     project may continue under the same terms and conditions 
     applicable under that section as in effect on that date.
       (c) Report on Differences in Payment for Laboratory 
     Services.--Not later than 18 months after the date of the 
     enactment of this Act, the Comptroller General of the United 
     States shall submit to Congress a report that analyzes 
     differences in reimbursement between public and private 
     payors for clinical diagnostic laboratory services.

     SEC. 512. PAYMENT FOR AMBULANCE SERVICES.

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

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

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

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

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

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

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

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

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

               ``Initial Preventive Physical Examination

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

[[Page H4203]]

       (2) in paragraph (7), by striking ``or (H)'' and inserting 
     ``(H), or (J)''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to services furnished on or after January 1, 
     2004, but only for individuals whose coverage period begins 
     on or after such date.

     SEC. 516. RENAL DIALYSIS SERVICES.

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

             TITLE VI--PROVISIONS RELATING TO PARTS A AND B

                    Subtitle A--Home Health Services

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

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

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

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

     SEC. 603. UPDATE IN HOME HEALTH SERVICES.

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

       ``(II) 2003'';

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

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

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

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

       (a) Establishment.--The Secretary of Health and Human 
     Services shall establish and appoint a task force (to be 
     known as the ``OASIS Task Force'') to examine the data 
     collection and reporting requirements under OASIS. For 
     purposes of this section, the term ``OASIS'' means the 
     Outcome and Assessment Information Set required by reason of 
     section 4602(e) of Balanced Budget Act of 1997 (42 U.S.C. 
     1395fff note).
       (b) Composition.--The OASIS Task Force shall be composed of 
     the following:
       (1) Staff of the Centers for Medicare & Medicaid Services 
     with expertise in post-acute care.
       (2) Representatives of home health agencies.
       (3) Health care professionals and research and health care 
     quality experts outside the Federal Government with expertise 
     in post-acute care.

[[Page H4204]]

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

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

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

             Subtitle B--Direct Graduate Medical Education

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

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

     SEC. 612. REDISTRIBUTION OF UNUSED RESIDENT POSITIONS.

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

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

       ``(ii) Redistribution.--

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

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

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

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

                      Subtitle C--Other Provisions

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

       (a) Examination of Budget Consequences.--Section 1805(b) 
     (42 U.S.C. 1395b-6(b)) is amended by adding at the end the 
     following new paragraph:
       ``(8) Examination of budget consequences.--Before making 
     any recommendations, the Commission shall examine the budget 
     consequences of such recommendations, directly or through 
     consultation with appropriate expert entities.''.
       (b) Consideration of Efficient Provision of Services.--
     Section 1805(b)(2)(B)(i) (42 U.S.C. 1395b-6(b)(2)(B)(i)) is 
     amended by inserting ``the efficient provision of'' after 
     ``expenditures for''.
       (c) Additional Reports.--
       (1) Data needs and sources.--The Medicare Payment Advisory 
     Commission shall conduct a study, and submit a report to 
     Congress by not later than June 1, 2003, on the need for 
     current data, and sources of current

[[Page H4205]]

     data available, to determine the solvency and financial 
     circumstances of hospitals and other medicare providers of 
     services.
       (2) Use of tax-related returns.--Using return information 
     provided under Form 990 of the Internal Revenue Service, the 
     Commission shall submit to Congress, by not later than June 
     1, 2003, a report on the following:
       (A) Investments and capital financing of hospitals 
     participating under the medicare program and related 
     foundations.
       (B) Access to capital financing for private and for not-
     for-profit hospitals.

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

       (a) In General.--The Secretary of Health and Human Services 
     shall conduct a demonstration project under this section (in 
     this section referred to as the ``project'') to demonstrate 
     the impact on costs and health outcomes of applying disease 
     management to certain medicare beneficiaries with diagnosed 
     diabetes. In no case may the number of participants in the 
     project exceed 30,000 at any time.
       (b) Voluntary Participation.--
       (1) Eligibility.--Medicare beneficiaries are eligible to 
     participate in the project only if--
       (a) they are Hispanic, as determined by the Secretary;
       (A) they meet specific medical criteria demonstrating the 
     appropriate diagnosis and the advanced nature of their 
     disease;
       (B) their physicians approve of participation in the 
     project; and
       (C) they are not enrolled in a Medicare+Choice plan.
       (2) Benefits.--A medicare beneficiary who is enrolled in 
     the project shall be eligible--
       (A) for disease management services related to their 
     diabetes; and
       (B) for payment for all costs for prescription drugs 
     without regard to whether or not they relate to the diabetes, 
     except that the project may provide for modest cost-sharing 
     with respect to prescription drug coverage.
       (c) Contracts With Disease Management Organizations.--
       (1) In general.--The Secretary of Health and Human Services 
     shall carry out the project through contracts with up to 
     three disease management organizations. The Secretary shall 
     not enter into such a contract with an organization unless 
     the organization demonstrates that it can produce improved 
     health outcomes and reduce aggregate medicare expenditures 
     consistent with paragraph (2).
       (2) Contract provisions.--Under such contracts--
       (A) such an organization shall be required to provide for 
     prescription drug coverage described in subsection (b)(2)(B);
       (B) such an organization shall be paid a fee negotiated and 
     established by the Secretary in a manner so that (taking into 
     account savings in expenditures under parts A and B of the 
     medicare program under title XVIII of the Social Security 
     Act) there will be no net increase, and to the extent 
     practicable, there will be a net reduction in expenditures 
     under the medicare program as a result of the project; and
       (C) such an organization shall guarantee, through an 
     appropriate arrangement with a reinsurance company or 
     otherwise, the prohibition on net increases in expenditures 
     described in subparagraph (B).
       (3) Payments.--Payments to such organizations shall be made 
     in appropriate proportion from the Trust Funds established 
     under title XVIII of the Social Security Act.
       (4) Working group.--The Secretary shall establish within 
     the Department of Health and Human Services a working group 
     consisting of employees of the Department to carry out the 
     following:
       (A) To oversee the project.
       (B) To establish policy and criteria for medicare disease 
     management programs within the Department, including the 
     establishment of policy and criteria for such programs.
       (C) To identify targeted medical conditions and targeted 
     individuals.
       (D) To select areas in which such programs are carried out.
       (E) To monitor health outcomes under such programs.
       (F) To measure the effectiveness of such programs in 
     meeting any budget neutrality requirements.
       (G) Otherwise to serve as a central focal point within the 
     Department for dissemination of information on medicare 
     disease management programs.
       (d) Application of Medigap Protections to Demonstration 
     Project Enrollees.--(1) Subject to paragraph (2), the 
     provisions of section 1882(s)(3) (other than clauses (i) 
     through (iv) of subparagraph (B)) and 1882(s)(4) of the 
     Social Security Act shall apply to enrollment (and 
     termination of enrollment) in the demonstration project under 
     this section, in the same manner as they apply to enrollment 
     (and termination of enrollment) with a Medicare+Choice 
     organization in a Medicare+Choice plan.
       (2) In applying paragraph (1)--
       (A) any reference in clause (v) or (vi) of section 
     1882(s)(3)(B) of such Act to 12 months is deemed a reference 
     to the period of the demonstration project; and
       (B) the notification required under section 1882(s)(3)(D) 
     of such Act shall be provided in a manner specified by the 
     Secretary of Health and Human Services.
       (e) Duration.--The project shall last for not longer than 3 
     years.
       (f) Waiver.--The Secretary of Health and Human Services 
     shall waive such provisions of title XVIII of the Social 
     Security Act as may be necessary to provide for payment for 
     services under the project in accordance with subsection 
     (c)(3).
       (g) Report.--The Secretary of Health and Human Services 
     shall submit to Congress an interim report on the project not 
     later than 2 years after the date it is first implemented and 
     a final report on the project not later than 6 months after 
     the date of its completion. Such reports shall include 
     information on the impact of the project on costs and health 
     outcomes and recommendations on the cost-effectiveness of 
     extending or expanding the project.
       (h) GAO Study on Disease Management Programs.--The 
     Comptroller General of the United States shall conduct a 
     study that compares disease management programs under title 
     XVIII of the Social Security Act with such programs conducted 
     in the private sector, including the prevalence of such 
     programs and programs for case management. The study shall 
     identify the cost-effectiveness of such programs and any 
     savings achieved by such programs. The Comptroller General 
     shall submit a report on such study to Congress by not later 
     than 18 months after the date of the enactment of this Act.

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

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

[[Page H4206]]

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

              TITLE VII--MEDICARE BENEFITS ADMINISTRATION

     SEC. 701. ESTABLISHMENT OF MEDICARE BENEFITS ADMINISTRATION.

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


                   ``medicare benefits administration

       ``Sec. 1808. (a) Establishment.--There is established 
     within the Department of Health and Human Services an agency 
     to be known as the Medicare Benefits Administration.
       ``(b) Administrator; Deputy Administrator; Chief Actuary.--
       ``(1) Administrator.--
       ``(A) In general.--The Medicare Benefits Administration 
     shall be headed by an administrator to be known as the 
     `Medicare Benefits Administrator' (in this section referred 
     to as the `Administrator') who shall be appointed by the 
     President, by and with the advice and consent of the Senate. 
     The Administrator shall be in direct line of authority to the 
     Secretary.
       ``(B) Compensation.--The Administrator shall be paid at the 
     rate of basic pay payable for level III of the Executive 
     Schedule under section 5314 of title 5, United States Code.
       ``(C) Term of office.--The Administrator shall be appointed 
     for a term of 5 years. In any case in which a successor does 
     not take office at the end of an Administrator's term of 
     office, that Administrator may continue in office until the 
     entry upon office of such a successor. An Administrator 
     appointed to a term of office after the commencement of such 
     term may serve under such appointment only for the remainder 
     of such term.
       ``(D) General authority.--The Administrator shall be 
     responsible for the exercise of all powers and the discharge 
     of all duties of the Administration, and shall have authority 
     and control over all personnel and activities thereof.
       ``(E) Rulemaking authority.--The Administrator may 
     prescribe such rules and regulations as the Administrator 
     determines necessary or appropriate to carry out the 
     functions of the Administration. The regulations prescribed 
     by the Administrator shall be subject to the rulemaking 
     procedures established under section 553 of title 5, United 
     States Code.
       ``(F) Authority to establish organizational units.--The 
     Administrator may establish, alter, consolidate, or 
     discontinue such organizational units or components within 
     the Administration as the Administrator considers necessary 
     or appropriate, except as specified in this section.
       ``(G) Authority to delegate.--The Administrator may assign 
     duties, and delegate, or authorize successive redelegations 
     of, authority to act and to render decisions, to such 
     officers and employees of the Administration as the 
     Administrator may find necessary. Within the limitations of 
     such delegations, redelegations, or assignments, all official 
     acts and decisions of such officers and employees shall have 
     the same force and effect as though performed or rendered by 
     the Administrator.
       ``(2) Deputy administrator.--
       ``(A) In general.--There shall be a Deputy Administrator of 
     the Medicare Benefits Administration who shall be appointed 
     by the President, by and with the advice and consent of the 
     Senate.
       ``(B) Compensation.--The Deputy Administrator shall be paid 
     at the rate of basic pay payable for level IV of the 
     Executive Schedule under section 5315 of title 5, United 
     States Code.
       ``(C) Term of office.--The Deputy Administrator shall be 
     appointed for a term of 5 years. In any case in which a 
     successor does not take office at the end of a Deputy 
     Administrator's term of office, such Deputy Administrator may 
     continue in office until the entry upon office of such a 
     successor. A Deputy Administrator appointed to a term of 
     office after the commencement of such term may serve under 
     such appointment only for the remainder of such term.
       ``(D) Duties.--The Deputy Administrator shall perform such 
     duties and exercise such powers as the Administrator shall 
     from time to time assign or delegate. The Deputy 
     Administrator shall be Acting Administrator of the 
     Administration during the absence or disability of the 
     Administrator and, unless the President designates another 
     officer of the Government as Acting Administrator, in the 
     event of a vacancy in the office of the Administrator.
       ``(3) Chief actuary.--
       ``(A) In general.--There is established in the 
     Administration the position of Chief Actuary. The Chief 
     Actuary shall be appointed by, and in direct line of 
     authority to, the Administrator of such Administration. The 
     Chief Actuary shall be appointed from among individuals who 
     have demonstrated, by their education and experience, 
     superior expertise in the actuarial sciences. The Chief 
     Actuary may be removed only for cause.
       ``(B) Compensation.--The Chief Actuary shall be compensated 
     at the highest rate of basic pay for the Senior Executive 
     Service under section 5382(b) of title 5, United States Code.
       ``(C) Duties.--The Chief Actuary shall exercise such duties 
     as are appropriate for the office of the Chief Actuary and in 
     accordance with professional standards of actuarial 
     independence.
       ``(4) Secretarial coordination of program administration.--
     The Secretary shall ensure appropriate coordination between 
     the Administrator and the Administrator of the Centers for 
     Medicare & Medicaid Services in carrying out the programs 
     under this title.
       ``(c) Duties; Administrative Provisions.--
       ``(1) Duties.--
       ``(A) General duties.--The Administrator shall carry out 
     parts C and D, including--
       ``(i) negotiating, entering into, and enforcing, contracts 
     with plans for the offering of Medicare+Choice plans under 
     part C, including the offering of qualified prescription drug 
     coverage under such plans; and
       ``(ii) negotiating, entering into, and enforcing, contracts 
     with PDP sponsors for the offering of prescription drug plans 
     under part D.
       ``(B) Other duties.--The Administrator shall carry out any 
     duty provided for under part C or part D, including 
     demonstration projects carried out in part or in whole under 
     such parts, the programs of all-inclusive care for the 
     elderly (PACE program) under section 1894, the social health 
     maintenance organization (SHMO) demonstration projects 
     (referred to in section 4104(c) of the Balanced Budget Act of 
     1997), and through a Medicare+Choice project that 
     demonstrates the application of capitation payment rates for 
     frail elderly medicare beneficiaries through the use of a 
     interdisciplinary team and through the provision of primary 
     care services to such beneficiaries by means of such a team 
     at the nursing facility involved).
       ``(C) Prescription drug card.--The Administrator shall 
     carry out section 1807 (relating to the medicare prescription 
     drug discount card endorsement program).
       ``(D) Noninterference.--In carrying out its duties with 
     respect to the provision of qualified prescription drug 
     coverage to beneficiaries under this title, the Administrator 
     may not--
       ``(i) require a particular formulary or institute a price 
     structure for the reimbursement of covered outpatient drugs;
       ``(ii) interfere in any way with negotiations between PDP 
     sponsors and Medicare+Choice organizations and drug 
     manufacturers, wholesalers, or other suppliers of covered 
     outpatient drugs; and
       ``(iii) otherwise interfere with the competitive nature of 
     providing such coverage through such sponsors and 
     organizations.
       ``(E) Annual reports.--Not later March 31 of each year, the 
     Administrator shall submit to Congress and the President a 
     report on the administration of parts C and D during the 
     previous fiscal year.
       ``(2) Staff.--
       ``(A) In general.--The Administrator, with the approval of 
     the Secretary, may employ, without regard to chapter 31 of 
     title 5, United States Code, other than sections 3110 and 
     3112, such officers and employees as are necessary to 
     administer the activities to be carried out through the 
     Medicare Benefits Administration. The Administrator shall 
     employ staff with appropriate and necessary expertise in 
     negotiating contracts in the private sector.
       ``(B) Flexibility with respect to compensation.--
       ``(i) In general.--The staff of the Medicare Benefits 
     Administration shall, subject to clause (ii), be paid without 
     regard to the provisions of chapter 51 (other than section 
     5101) and chapter 53 (other than section 5301) of such title 
     (relating to classification and schedule pay rates).
       ``(ii) Maximum rate.--In no case may the rate of 
     compensation determined under clause (i) exceed the rate of 
     basic pay payable for level IV of the Executive Schedule 
     under section 5315 of title 5, United States Code.
       ``(C) Limitation on full-time equivalent staffing for 
     current cms functions being transferred.--The Administrator 
     may not employ under this paragraph a number of full-time 
     equivalent employees, to carry out functions that were 
     previously conducted by the Centers for Medicare & Medicaid 
     Services and that are conducted by the Administrator by 
     reason of this section, that exceeds the number of such full-
     time equivalent employees authorized to be employed by the 
     Centers for Medicare & Medicaid Services to

[[Page H4207]]

     conduct such functions as of the date of the enactment of 
     this Act.
       ``(3) Redelegation of certain functions of the centers for 
     medicare & medicaid services.--
       ``(A) In general.--The Secretary, the Administrator, and 
     the Administrator of the Centers for Medicare & Medicaid 
     Services shall establish an appropriate transition of 
     responsibility in order to redelegate the administration of 
     part C from the Secretary and the Administrator of the 
     Centers for Medicare & Medicaid Services to the Administrator 
     as is appropriate to carry out the purposes of this section.
       ``(B) Transfer of data and information.--The Secretary 
     shall ensure that the Administrator of the Centers for 
     Medicare & Medicaid Services transfers to the Administrator 
     of the Medicare Benefits Administration such information and 
     data in the possession of the Administrator of the Centers 
     for Medicare & Medicaid Services as the Administrator of the 
     Medicare Benefits Administration requires to carry out the 
     duties described in paragraph (1).
       ``(C) Construction.--Insofar as a responsibility of the 
     Secretary or the Administrator of the Centers for Medicare & 
     Medicaid Services is redelegated to the Administrator under 
     this section, any reference to the Secretary or the 
     Administrator of the Centers for Medicare & Medicaid Services 
     in this title or title XI with respect to such responsibility 
     is deemed to be a reference to the Administrator.
       ``(d) Office of Beneficiary Assistance.--
       ``(1) Establishment.--The Secretary shall establish within 
     the Medicare Benefits Administration an Office of Beneficiary 
     Assistance to coordinate functions relating to outreach and 
     education of medicare beneficiaries under this title, 
     including the functions described in paragraph (2). The 
     Office shall be separate operating division within the 
     Administration.
       ``(2) Dissemination of information on benefits and appeals 
     rights.--
       ``(A) Dissemination of benefits information.--The Office of 
     Beneficiary Assistance shall disseminate, directly or through 
     contract, to medicare beneficiaries, by mail, by posting on 
     the Internet site of the Medicare Benefits Administration and 
     through a toll-free telephone number, information with 
     respect to the following:
       ``(i) Benefits, and limitations on payment (including cost-
     sharing, stop-loss provisions, and formulary restrictions) 
     under parts C and D.
       ``(ii) Benefits, and limitations on payment under parts A 
     and B, including information on medicare supplemental 
     policies under section 1882.

     Such information shall be presented in a manner so that 
     medicare beneficiaries may compare benefits under parts A, B, 
     D, and medicare supplemental policies with benefits under 
     Medicare+Choice plans under part C.
       ``(B) Dissemination of appeals rights information.--The 
     Office of Beneficiary Assistance shall disseminate to 
     medicare beneficiaries in the manner provided under 
     subparagraph (A) a description of procedural rights 
     (including grievance and appeals procedures) of beneficiaries 
     under the original medicare fee-for-service program under 
     parts A and B, the Medicare+Choice program under part C, and 
     the Voluntary Prescription Drug Benefit Program under part D.
       ``(e) Medicare Policy Advisory Board.--
       ``(1) Establishment.--There is established within the 
     Medicare Benefits Administration the Medicare Policy Advisory 
     Board (in this section referred to the `Board'). The Board 
     shall advise, consult with, and make recommendations to the 
     Administrator of the Medicare Benefits Administration with 
     respect to the administration of parts C and D, including the 
     review of payment policies under such parts.
       ``(2) Reports.--
       ``(A) In general.--With respect to matters of the 
     administration of parts C and D, the Board shall submit to 
     Congress and to the Administrator of the Medicare Benefits 
     Administration such reports as the Board determines 
     appropriate. Each such report may contain such 
     recommendations as the Board determines appropriate for 
     legislative or administrative changes to improve the 
     administration of such parts, including the topics described 
     in subparagraph (B). Each such report shall be published in 
     the Federal Register.
       ``(B) Topics described.--Reports required under 
     subparagraph (A) may include the following topics:
       ``(i) Fostering competition.--Recommendations or proposals 
     to increase competition under parts C and D for services 
     furnished to medicare beneficiaries.
       ``(ii) Education and enrollment.--Recommendations for the 
     improvement to efforts to provide medicare beneficiaries 
     information and education on the program under this title, 
     and specifically parts C and D, and the program for 
     enrollment under the title.
       ``(iii) Implementation of risk-adjustment.--Evaluation of 
     the implementation under section 1853(a)(3)(C) of the risk 
     adjustment methodology to payment rates under that section to 
     Medicare+Choice organizations offering Medicare+Choice plans 
     that accounts for variations in per capita costs based on 
     health status and other demographic factors.
       ``(iv) Disease management programs.--Recommendations on the 
     incorporation of disease management programs under parts C 
     and D.
       ``(v) Rural access.--Recommendations to improve competition 
     and access to plans under parts C and D in rural areas.
       ``(C) Maintaining independence of board.--The Board shall 
     directly submit to Congress reports required under 
     subparagraph (A). No officer or agency of the United States 
     may require the Board to submit to any officer or agency of 
     the United States for approval, comments, or review, prior to 
     the submission to Congress of such reports.
       ``(3) Duty of administrator of medicare benefits 
     administration.--With respect to any report submitted by the 
     Board under paragraph (2)(A), not later than 90 days after 
     the report is submitted, the Administrator of the Medicare 
     Benefits Administration shall submit to Congress and the 
     President an analysis of recommendations made by the Board in 
     such report. Each such analysis shall be published in the 
     Federal Register.
       ``(4) Membership.--
       ``(A) Appointment.--Subject to the succeeding provisions of 
     this paragraph, the Board shall consist of seven members to 
     be appointed as follows:
       ``(i) Three members shall be appointed by the President.
       ``(ii) Two members shall be appointed by the Speaker of the 
     House of Representatives, with the advice of the chairmen and 
     the ranking minority members of the Committees on Ways and 
     Means and on Energy and Commerce of the House of 
     Representatives.
       ``(iii) Two members shall be appointed by the President pro 
     tempore of the Senate with the advice of the chairman and the 
     ranking minority member of the Senate Committee on Finance.
       ``(B) Qualifications.--The members shall be chosen on the 
     basis of their integrity, impartiality, and good judgment, 
     and shall be individuals who are, by reason of their 
     education and experience in health care benefits management, 
     exceptionally qualified to perform the duties of members of 
     the Board.
       ``(C) Prohibition on inclusion of federal employees.--No 
     officer or employee of the United States may serve as a 
     member of the Board.
       ``(5) Compensation.--Members of the Board shall receive, 
     for each day (including travel time) they are engaged in the 
     performance of the functions of the board, compensation at 
     rates not to exceed the daily equivalent to the annual rate 
     in effect for level IV of the Executive Schedule under 
     section 5315 of title 5, United States Code.
       ``(6) Terms of office.--
       ``(A) In general.--The term of office of members of the 
     Board shall be 3 years.
       ``(B) Terms of initial appointees.--As designated by the 
     President at the time of appointment, of the members first 
     appointed--
       ``(i) one shall be appointed for a term of 1 year;
       ``(ii) three shall be appointed for terms of 2 years; and
       ``(iii) three shall be appointed for terms of 3 years.
       ``(C) Reappointments.--Any person appointed as a member of 
     the Board may not serve for more than 8 years.
       ``(D) Vacancy.--Any member appointed to fill a vacancy 
     occurring before the expiration of the term for which the 
     member's predecessor was appointed shall be appointed only 
     for the remainder of that term. A member may serve after the 
     expiration of that member's term until a successor has taken 
     office. A vacancy in the Board shall be filled in the manner 
     in which the original appointment was made.
       ``(7) Chair.--The Chair of the Board shall be elected by 
     the members. The term of office of the Chair shall be 3 
     years.
       ``(8) Meetings.--The Board shall meet at the call of the 
     Chair, but in no event less than three times during each 
     fiscal year.
       ``(9) Director and staff.--
       ``(A) Appointment of director.--The Board shall have a 
     Director who shall be appointed by the Chair.
       ``(B) In general.--With the approval of the Board, the 
     Director may appoint, without regard to chapter 31 of title 
     5, United States Code, such additional personnel as the 
     Director considers appropriate.
       ``(C) Flexibility with respect to compensation.--
       ``(i) In general.--The Director and staff of the Board 
     shall, subject to clause (ii), be paid without regard to the 
     provisions of chapter 51 and chapter 53 of such title 
     (relating to classification and schedule pay rates).
       ``(ii) Maximum rate.--In no case may the rate of 
     compensation determined under clause (i) exceed the rate of 
     basic pay payable for level IV of the Executive Schedule 
     under section 5315 of title 5, United States Code.
       ``(D) Assistance from the administrator of the medicare 
     benefits administration.--The Administrator of the Medicare 
     Benefits Administration shall make available to the Board 
     such information and other assistance as it may require to 
     carry out its functions.
       ``(10) Contract authority.--The Board may contract with and 
     compensate government and private agencies or persons to 
     carry out its duties under this subsection, without regard to 
     section 3709 of the Revised Statutes (41 U.S.C. 5).
       ``(f) Funding.--There is authorized to be appropriated, in 
     appropriate part from the Federal Hospital Insurance Trust 
     Fund and from the Federal Supplementary Medical Insurance 
     Trust Fund (including the Medicare Prescription Drug 
     Account), such sums as are necessary to carry out this 
     section.''.
       (b) Effective Date.--

[[Page H4208]]

       (1) In general.--The amendment made by subsection (a) shall 
     take effect on the date of the enactment of this Act.
       (2) Timing of initial appointments.--The Administrator and 
     Deputy Administrator of the Medicare Benefits Administration 
     may not be appointed before March 1, 2003.
       (3) Duties with respect to eligibility determinations and 
     enrollment.--The Administrator of the Medicare Benefits 
     Administration shall carry out enrollment under title XVIII 
     of the Social Security Act, make eligibility determinations 
     under such title, and carry out part C of such title for 
     years beginning or after January 1, 2005.
       (4) Transition.--Before the date the Administrator of the 
     Medicare Benefits Administration is appointed and assumes 
     responsibilities under this section and section 1807 of the 
     Social Security Act, the Secretary of Health and Human 
     Services shall provide for the conduct of any 
     responsibilities of such Administrator that are otherwise 
     provided under law.
       (c) Miscellaneous Administrative Provisions.--
       (1) Administrator as member of the board of trustees of the 
     medicare trust funds.--Section 1817(b) and section 1841(b) 
     (42 U.S.C. 1395i(b), 1395t(b)) are each amended by striking 
     ``and the Secretary of Health and Human Services, all ex 
     officio,'' and inserting ``the Secretary of Health and Human 
     Services, and the Administrator of the Medicare Benefits 
     Administration, all ex officio,''.
       (2) Increase in grade to executive level iii for the 
     administrator of the centers for medicare & medicaid 
     services; level for medicare benefits administrator.--
       (A) In general.--Section 5314 of title 5, United States 
     Code, by adding at the end the following:
       ``Administrator of the Centers for Medicare & Medicaid 
     Services .
       ``Administrator of the Medicare Benefits Administration.''.
       (B) Conforming amendment.--Section 5315 of such title is 
     amended by striking ``Administrator of the Health Care 
     Financing Administration.''.
       (C) Effective date.--The amendments made by this paragraph 
     take effect on January 1, 2003.

        TITLE VIII--REGULATORY REDUCTION AND CONTRACTING REFORM

                     Subtitle A--Regulatory Reform

     SEC. 801. CONSTRUCTION; DEFINITION OF SUPPLIER.

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

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

                               ``Supplier

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

     SEC. 802. ISSUANCE OF REGULATIONS.

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

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

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

[[Page H4209]]

     comply with statutory requirements or that the application of 
     such 30-day period is contrary to the public interest. If the 
     Secretary provides for an earlier effective date pursuant to 
     this clause, the Secretary shall include in the issuance or 
     publication of the substantive change a finding described in 
     the first sentence, and a brief statement of the reasons for 
     such finding.
       ``(C) No action shall be taken against a provider of 
     services or supplier with respect to noncompliance with such 
     a substantive change for items and services furnished before 
     the effective date of such a change.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to compliance actions undertaken on or after the 
     date of the enactment of this Act.
       (c) Reliance on Guidance.--
       (1) In general.--Section 1871(e), as added by subsection 
     (a), is further amended by adding at the end the following 
     new paragraph:
       ``(2)(A) If--
       ``(i) a provider of services or supplier follows the 
     written guidance (which may be transmitted electronically) 
     provided by the Secretary or by a medicare contractor (as 
     defined in section 1889(g)) acting within the scope of the 
     contractor's contract authority, with respect to the 
     furnishing of items or services and submission of a claim for 
     benefits for such items or services with respect to such 
     provider or supplier;
       ``(ii) the Secretary determines that the provider of 
     services or supplier has accurately presented the 
     circumstances relating to such items, services, and claim to 
     the contractor in writing; and
       ``(iii) the guidance was in error;
     the provider of services or supplier shall not be subject to 
     any sanction (including any penalty or requirement for 
     repayment of any amount) if the provider of services or 
     supplier reasonably relied on such guidance.
       ``(B) Subparagraph (A) shall not be construed as preventing 
     the recoupment or repayment (without any additional penalty) 
     relating to an overpayment insofar as the overpayment was 
     solely the result of a clerical or technical operational 
     error.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on the date of the enactment of this Act 
     but shall not apply to any sanction for which notice was 
     provided on or before the date of the enactment of this Act.

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

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

                     Subtitle B--Contracting Reform

     SEC. 811. INCREASED FLEXIBILITY IN MEDICARE ADMINISTRATION.

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


          ``contracts with medicare administrative contractors

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

[[Page H4210]]

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


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

       (2) Subsection (a) is amended to read as follows:
       ``(a) The administration of this part shall be conducted 
     through contracts with medicare administrative contractors 
     under section 1874A.''.
       (3) Subsection (b) is repealed.
       (4) Subsection (c) is amended--
       (A) by striking paragraph (1); and
       (B) in each of paragraphs (2)(A) and (3)(A), by striking 
     ``agreement under this section'' and inserting ``contract 
     under section 1874A that provides for making payments under 
     this part''.
       (5) Subsections (d) through (i) are repealed.
       (6) Subsections (j) and (k) are each amended--
       (A) by striking ``An agreement with an agency or 
     organization under this section'' and inserting ``A contract 
     with a medicare administrative contractor under section 1874A 
     with respect to the administration of this part''; and
       (B) by striking ``such agency or organization'' and 
     inserting ``such medicare administrative contractor'' each 
     place it appears.
       (7) Subsection (l) is repealed.
       (c) Conforming Amendments to Section 1842 (Relating to 
     Carriers).--Section 1842 (42 U.S.C. 1395u) is amended as 
     follows:
       (1) The heading is amended to read as follows:


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

       (2) Subsection (a) is amended to read as follows:
       ``(a) The administration of this part shall be conducted 
     through contracts with medicare administrative contractors 
     under section 1874A.''.
       (3) Subsection (b) is amended--
       (A) by striking paragraph (1);
       (B) in paragraph (2)--
       (i) by striking subparagraphs (A) and (B);
       (ii) in subparagraph (C), by striking ``carriers'' and 
     inserting ``medicare administrative contractors''; and
       (iii) by striking subparagraphs (D) and (E);
       (C) in paragraph (3)--
       (i) in the matter before subparagraph (A), by striking 
     ``Each such contract shall provide that the carrier'' and 
     inserting ``The Secretary'';
       (ii) by striking ``will'' the first place it appears in 
     each of subparagraphs (A), (B), (F), (G), (H), and (L) and 
     inserting ``shall'';
       (iii) in subparagraph (B), in the matter before clause (i), 
     by striking ``to the policyholders and subscribers of the 
     carrier'' and

[[Page H4211]]

     inserting ``to the policyholders and subscribers of the 
     medicare administrative contractor'';
       (iv) by striking subparagraphs (C), (D), and (E);
       (v) in subparagraph (H)--

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

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

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

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

[[Page H4212]]

       (1) In general.--The provisions of section 1874A(e)(2) of 
     the Social Security Act (other than subparagraph (B)), as 
     added by subsection (a), shall apply to each fiscal 
     intermediary under section 1816 of the Social Security Act 
     (42 U.S.C. 1395h) and each carrier under section 1842 of such 
     Act (42 U.S.C. 1395u) in the same manner as they apply to 
     medicare administrative contractors under such provisions.
       (2) Deadline for initial evaluation.--In the case of such a 
     fiscal intermediary or carrier with an agreement or contract 
     under such respective section in effect as of the date of the 
     enactment of this Act, the first evaluation under section 
     1874A(e)(2)(A) of the Social Security Act (as added by 
     subsection (a)), pursuant to paragraph (1), shall be 
     completed (and a report on the evaluation submitted to the 
     Secretary) by not later than 1 year after such date.

                   Subtitle C--Education and Outreach

     SEC. 821. PROVIDER EDUCATION AND TECHNICAL ASSISTANCE.

       (a) Coordination of Education Funding.--
       (1) In general.--The Social Security Act is amended by 
     inserting after section 1888 the following new section:


             ``provider education and technical assistance

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

     that relate to providers of services and suppliers under the 
     programs under this title (and title XI insofar as it relates 
     to such programs).''.

[[Page H4213]]

       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on October 1, 2003.
       (f) Additional Provider Education Provisions.--
       (1) In general.--Section 1889, as added by subsection (a) 
     and as amended by subsections (d) and (e), is further amended 
     by adding at the end the following new subsections:
       ``(e) Encouragement of Participation in Education Program 
     Activities.--A medicare contractor may not use a record of 
     attendance at (or failure to attend) educational activities 
     or other information gathered during an educational program 
     conducted under this section or otherwise by the Secretary to 
     select or track providers of services or suppliers for the 
     purpose of conducting any type of audit or prepayment review.
       ``(f) Construction.--Nothing in this section or section 
     1893(g) shall be construed as providing for disclosure by a 
     medicare contractor of information that would compromise 
     pending law enforcement activities or reveal findings of law 
     enforcement-related audits.
       ``(g) Definitions.--For purposes of this section, the term 
     `medicare contractor' includes the following:
       ``(1) A medicare administrative contractor with a contract 
     under section 1874A, including a fiscal intermediary with a 
     contract under section 1816 and a carrier with a contract 
     under section 1842.
       ``(2) An eligible entity with a contract under section 
     1893.
     Such term does not include, with respect to activities of a 
     specific provider of services or supplier an entity that has 
     no authority under this title or title IX with respect to 
     such activities and such provider of services or supplier.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall take effect on the date of the enactment of this Act.

     SEC. 822. SMALL PROVIDER TECHNICAL ASSISTANCE DEMONSTRATION 
                   PROGRAM.

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

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

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


                    ``medicare beneficiary ombudsman

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

[[Page H4214]]

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

     SEC. 824. BENEFICIARY OUTREACH DEMONSTRATION PROGRAM.

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

                    Subtitle D--Appeals and Recovery

     SEC. 831. TRANSFER OF RESPONSIBILITY FOR MEDICARE APPEALS.

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

     SEC. 832. PROCESS FOR EXPEDITED ACCESS TO REVIEW.

       (a) Expedited Access to Judicial Review.--Section 1869(b) 
     (42 U.S.C. 1395ff(b)) as amended by BIPA, is amended--
       (1) in paragraph (1)(A), by inserting ``, subject to 
     paragraph (2),'' before ``to judicial review of the 
     Secretary's final decision'';
       (2) in paragraph (1)(F)--
       (A) by striking clause (ii);
       (B) by striking ``proceeding'' and all that follows through 
     ``determination'' and inserting ``determinations and 
     reconsiderations''; and
       (C) by redesignating subclauses (I) and (II) as clauses (i) 
     and (ii) and by moving the indentation of such subclauses 
     (and the matter that follows) 2 ems to the left; and
       (3) by adding at the end the following new paragraph:
       ``(2) Expedited access to judicial review.--
       ``(A) In general.--The Secretary shall establish a process 
     under which a provider of services or supplier that furnishes 
     an item or service or an individual entitled to benefits 
     under part A or enrolled under part B, or both, who has filed 
     an appeal under paragraph (1) may obtain access to judicial 
     review when a review panel (described in subparagraph (D)), 
     on its own motion or at the request of the appellant, 
     determines that no entity in the administrative appeals 
     process has the authority to decide the question of law or 
     regulation relevant to the matters in controversy and that 
     there is no material issue of fact in dispute. The appellant 
     may

[[Page H4215]]

     make such request only once with respect to a question of law 
     or regulation in a case of an appeal.
       ``(B) Prompt determinations.--If, after or coincident with 
     appropriately filing a request for an administrative hearing, 
     the appellant requests a determination by the appropriate 
     review panel that no review panel has the authority to decide 
     the question of law or regulations relevant to the matters in 
     controversy and that there is no material issue of fact in 
     dispute and if such request is accompanied by the documents 
     and materials as the appropriate review panel shall require 
     for purposes of making such determination, such review panel 
     shall make a determination on the request in writing within 
     60 days after the date such review panel receives the request 
     and such accompanying documents and materials. Such a 
     determination by such review panel shall be considered a 
     final decision and not subject to review by the Secretary.
       ``(C) Access to judicial review.--
       ``(i) In general.--If the appropriate review panel--

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

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

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

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

     SEC. 833. REVISIONS TO MEDICARE APPEALS PROCESS.

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

[[Page H4216]]

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

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

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

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

     SEC. 834. PREPAYMENT REVIEW.

       (a) In General.--Section 1874A, as added by section 
     811(a)(1) and as amended by sections 812(b), 821(b)(1), and 
     831(c)(1), is further amended by adding at the end the 
     following new subsection:
       ``(h) Conduct of Prepayment Review.--
       ``(1) Conduct of random prepayment review.--
       ``(A) In general.--A medicare administrative contractor may 
     conduct random prepayment review only to develop a 
     contractor-wide or program-wide claims payment error rates or 
     under such additional circumstances as may be provided under 
     regulations, developed in consultation with providers of 
     services and suppliers.
       ``(B) Use of standard protocols when conducting prepayment 
     reviews.--When a medicare administrative contractor conducts 
     a random prepayment review, the contractor may conduct such 
     review only in accordance with a standard protocol for random 
     prepayment audits developed by the Secretary.
       ``(C) Construction.--Nothing in this paragraph shall be 
     construed as preventing the denial of payments for claims 
     actually reviewed under a random prepayment review.
       ``(D) Random prepayment review.--For purposes of this 
     subsection, the term `random prepayment review' means a 
     demand for the production of records or documentation absent 
     cause with respect to a claim.
       ``(2) Limitations on non-random prepayment review.--
       ``(A) Limitations on initiation of non-random prepayment 
     review.--A medicare administrative contractor may not 
     initiate non-random prepayment review of a provider of 
     services or supplier based on the initial identification by 
     that provider of services or supplier of an improper billing 
     practice unless there is a likelihood of sustained or high 
     level of payment error (as defined in subsection (i)(3)(A)).
       ``(B) Termination of non-random prepayment review.--The 
     Secretary shall issue regulations relating to the 
     termination, including termination dates, of non-random 
     prepayment review. Such regulations may vary such a 
     termination date based upon the differences in the 
     circumstances triggering prepayment review.''.
       (b) Effective Date.--
       (1) In general.--Except as provided in this subsection, the 
     amendment made by subsection (a) shall take effect 1 year 
     after the date of the enactment of this Act.
       (2) Deadline for promulgation of certain regulations.--The 
     Secretary shall first issue regulations under section 
     1874A(h) of the Social Security Act, as added by subsection 
     (a), by not later than 1 year after the date of the enactment 
     of this Act.
       (3) Application of standard protocols for random prepayment 
     review.--Section 1874A(h)(1)(B) of the Social Security Act, 
     as added by subsection (a), shall apply to random prepayment 
     reviews conducted on or after such date (not later than 1 
     year after the date of the enactment of this Act) as the 
     Secretary shall specify.
       (c) Application to Fiscal Intermediaries and Carriers.--The 
     provisions of section 1874A(h) of the Social Security Act, as 
     added by subsection (a), shall apply to each fiscal 
     intermediary under section 1816 of the Social Security Act 
     (42 U.S.C. 1395h) and each carrier under section 1842 of such 
     Act (42 U.S.C. 1395u) in the same manner as they apply to 
     medicare administrative contractors under such provisions.

     SEC. 835. RECOVERY OF OVERPAYMENTS.

       (a) In General.--Section 1893 (42 U.S.C. 1395ddd) is 
     amended by adding at the end the following new subsection:
       ``(f) Recovery of Overpayments.--
       ``(1) Use of repayment plans.--
       ``(A) In general.--If the repayment, within 30 days by a 
     provider of services or supplier, of an overpayment under 
     this title would constitute a hardship (as defined in 
     subparagraph (B)), subject to subparagraph (C), upon request 
     of the provider of services or supplier the Secretary shall 
     enter into a plan with the provider of services or supplier 
     for the repayment (through offset or otherwise) of

[[Page H4217]]

     such overpayment over a period of at least 6 months but not 
     longer than 3 years (or not longer than 5 years in the case 
     of extreme hardship, as determined by the Secretary). 
     Interest shall accrue on the balance through the period of 
     repayment. Such plan shall meet terms and conditions 
     determined to be appropriate by the Secretary.
       ``(B) Hardship.--
       ``(i) In general.--For purposes of subparagraph (A), the 
     repayment of an overpayment (or overpayments) within 30 days 
     is deemed to constitute a hardship if--

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

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

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

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

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

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

[[Page H4218]]

       (7) Payment audits.--Section 1893A(f)(7) of the Social 
     Security Act, as added by subsection (a), shall apply to 
     audits initiated after the date of the enactment of this Act.
       (8) Standard for abnormal billing patterns.--Not later than 
     1 year after the date of the enactment of this Act, the 
     Secretary shall first establish a standard methodology for 
     selection of sample claims for abnormal billing patterns 
     under section 1893(f)(8) of the Social Security Act, as added 
     by subsection (a).

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

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

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

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

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

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

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

       ``(ii) Deadline for redeterminations.--The contractor shall 
     complete and provide notice of such redetermination within 
     the same time period as the time period applicable to the 
     contractor providing notice of redeterminations relating to a 
     claim for benefits under subsection (a)(3)(C)(ii).
       ``(6) Limitation on further review.--
       ``(A) In general.--Contractor determinations described in 
     paragraph (4)(A)(ii) or (4)(A)(iii) (and redeterminations 
     made under paragraph (5)(B)), relating to pre-service claims 
     are not subject to further administrative appeal or judicial 
     review under this section or otherwise.
       ``(B) Decision not to seek prior determination or negative 
     determination does not impact right to obtain services, seek 
     reimbursement, or appeal rights.--Nothing in this subsection 
     shall be construed as affecting the right of an individual 
     who--
       ``(i) decides not to seek a prior determination under this 
     subsection with respect to items or services; or
       ``(ii) seeks such a determination and has received a 
     determination described in paragraph (4)(A)(ii)),
     from receiving (and submitting a claim for) such items 
     services and from obtaining administrative or judicial review 
     respecting such claim under the other applicable provisions 
     of this section. Failure to seek a prior determination under 
     this subsection with respect to items and services shall not 
     be taken into account in such administrative or judicial 
     review.
       ``(C) No prior determination after receipt of services.--
     Once an individual is provided items and services, there 
     shall be no prior determination under this subsection with 
     respect to such items or services.''.
       (b) Effective Date; Transition.--
       (1) Effective date.--The Secretary shall establish the 
     prior determination process

[[Page H4219]]

     under the amendment made by subsection (a) in such a manner 
     as to provide for the acceptance of requests for 
     determinations under such process filed not later than 18 
     months after the date of the enactment of this Act.
       (2) Transition.--During the period in which the amendment 
     made by subsection (a) has become effective but contracts are 
     not provided under section 1874A of the Social Security Act 
     with medicare administrative contractors, any reference in 
     section 1869(g) of such Act (as added by such amendment) to 
     such a contractor is deemed a reference to a fiscal 
     intermediary or carrier with an agreement under section 1816, 
     or contract under section 1842, respectively, of such Act.
       (3) Limitation on application to sgr.--For purposes of 
     applying section 1848(f)(2)(D) of the Social Security Act (42 
     U.S.C. 1395w-4(f)(2)(D)), the amendment made by subsection 
     (a) shall not be considered to be a change in law or 
     regulation.
       (c) Provisions Relating to Advance Beneficiary Notices; 
     Report on Prior Determination Process.--
       (1) Data collection.--The Secretary shall establish a 
     process for the collection of information on the instances in 
     which an advance beneficiary notice (as defined in paragraph 
     (4)) has been provided and on instances in which a 
     beneficiary indicates on such a notice that the beneficiary 
     does not intend to seek to have the item or service that is 
     the subject of the notice furnished.
       (2) Outreach and education.--The Secretary shall establish 
     a program of outreach and education for beneficiaries and 
     providers of services and other persons on the appropriate 
     use of advance beneficiary notices and coverage policies 
     under the medicare program.
       (3) GAO report report on use of advance beneficiary 
     notices.--Not later than 18 months after the date on which 
     section 1869(g) of the Social Security Act (as added by 
     subsection (a)) takes effect, the Comptroller General of the 
     United States shall submit to Congress a report on the use of 
     advance beneficiary notices under title XVIII of such Act. 
     Such report shall include information concerning the 
     providers of services and other persons that have provided 
     such notices and the response of beneficiaries to such 
     notices.
       (4) GAO report on use of prior determination process.--Not 
     later than 18 months after the date on which section 1869(g) 
     of the Social Security Act (as added by subsection (a)) takes 
     effect, the Comptroller General of the United States shall 
     submit to Congress a report on the use of the prior 
     determination process under such section. Such report shall 
     include--
       (A) information concerning the types of procedures for 
     which a prior determination has been sought, determinations 
     made under the process, and changes in receipt of services 
     resulting from the application of such process; and
       (B) an evaluation of whether the process was useful for 
     physicians (and other suppliers) and beneficiaries, whether 
     it was timely, and whether the amount of information required 
     was burdensome to physicians and beneficiaries.
       (5) Advance beneficiary notice defined.--In this 
     subsection, the term ``advance beneficiary notice'' means a 
     written notice provided under section 1879(a) of the Social 
     Security Act (42 U.S.C. 1395pp(a)) to an individual entitled 
     to benefits under part A or B of title XVIII of such Act 
     before items or services are furnished under such part in 
     cases where a provider of services or other person that would 
     furnish the item or service believes that payment will not be 
     made for some or all of such items or services under such 
     title.

                  Subtitle E--Miscellaneous Provisions

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

       (a) In General.--The Secretary may not implement any new 
     documentation guidelines for evaluation and management 
     physician services under the title XVIII of the Social 
     Security Act on or after the date of the enactment of this 
     Act unless the Secretary--
       (1) has developed the guidelines in collaboration with 
     practicing physicians (including both generalists and 
     specialists) and provided for an assessment of the proposed 
     guidelines by the physician community;
       (2) has established a plan that contains specific goals, 
     including a schedule, for improving the use of such 
     guidelines;
       (3) has conducted appropriate and representative pilot 
     projects under subsection (b) to test modifications to the 
     evaluation and management documentation guidelines;
       (4) finds that the objectives described in subsection (c) 
     will be met in the implementation of such guidelines; and
       (5) has established, and is implementing, a program to 
     educate physicians on the use of such guidelines and that 
     includes appropriate outreach.
     The Secretary shall make changes to the manner in which 
     existing evaluation and management documentation guidelines 
     are implemented to reduce paperwork burdens on physicians.
       (b) Pilot Projects to Test Evaluation and Management 
     Documentation Guidelines.--
       (1) In general.--The Secretary shall conduct under this 
     subsection appropriate and representative pilot projects to 
     test new evaluation and management documentation guidelines 
     referred to in subsection (a).
       (2) Length and consultation.--Each pilot project under this 
     subsection shall--
       (A) be voluntary;
       (B) be of sufficient length as determined by the Secretary 
     to allow for preparatory physician and medicare contractor 
     education, analysis, and use and assessment of potential 
     evaluation and management guidelines; and
       (C) be conducted, in development and throughout the 
     planning and operational stages of the project, in 
     consultation with practicing physicians (including both 
     generalists and specialists).
       (3) Range of pilot projects.--Of the pilot projects 
     conducted under this subsection--
       (A) at least one shall focus on a peer review method by 
     physicians (not employed by a medicare contractor) which 
     evaluates medical record information for claims submitted by 
     physicians identified as statistical outliers relative to 
     definitions published in the Current Procedures Terminology 
     (CPT) code book of the American Medical Association;
       (B) at least one shall focus on an alternative method to 
     detailed guidelines based on physician documentation of face 
     to face encounter time with a patient;
       (C) at least one shall be conducted for services furnished 
     in a rural area and at least one for services furnished 
     outside such an area; and
       (D) at least one shall be conducted in a setting where 
     physicians bill under physicians' services in teaching 
     settings and at least one shall be conducted in a setting 
     other than a teaching setting.
       (4) Banning of targeting of pilot project participants.--
     Data collected under this subsection shall not be used as the 
     basis for overpayment demands or post-payment audits. Such 
     limitation applies only to claims filed as part of the pilot 
     project and lasts only for the duration of the pilot project 
     and only as long as the provider is a participant in the 
     pilot project.
       (5) Study of impact.--Each pilot project shall examine the 
     effect of the new evaluation and management documentation 
     guidelines on--
       (A) different types of physician practices, including those 
     with fewer than 10 full-time-equivalent employees (including 
     physicians); and
       (B) the costs of physician compliance, including education, 
     implementation, auditing, and monitoring.
       (6) Periodic reports.--The Secretary shall submit to 
     Congress periodic reports on the pilot projects under this 
     subsection.
       (c) Objectives for Evaluation and Management Guidelines.--
     The objectives for modified evaluation and management 
     documentation guidelines developed by the Secretary shall be 
     to--
       (1) identify clinically relevant documentation needed to 
     code accurately and assess coding levels accurately;
       (2) decrease the level of non-clinically pertinent and 
     burdensome documentation time and content in the physician's 
     medical record;
       (3) increase accuracy by reviewers; and
       (4) educate both physicians and reviewers.
       (d) Study of Simpler, Alternative Systems of Documentation 
     for Physician Claims.--
       (1) Study.--The Secretary shall carry out a study of the 
     matters described in paragraph (2).
       (2) Matters described.--The matters referred to in 
     paragraph (1) are--
       (A) the development of a simpler, alternative system of 
     requirements for documentation accompanying claims for 
     evaluation and management physician services for which 
     payment is made under title XVIII of the Social Security Act; 
     and
       (B) consideration of systems other than current coding and 
     documentation requirements for payment for such physician 
     services.
       (3) Consultation with practicing physicians.--In designing 
     and carrying out the study under paragraph (1), the Secretary 
     shall consult with practicing physicians, including 
     physicians who are part of group practices and including both 
     generalists and specialists.
       (4) Application of hipaa uniform coding requirements.--In 
     developing an alternative system under paragraph (2), the 
     Secretary shall consider requirements of administrative 
     simplification under part C of title XI of the Social 
     Security Act.
       (5) Report to congress.--(A) Not later than October 1, 
     2004, the Secretary shall submit to Congress a report on the 
     results of the study conducted under paragraph (1).
       (B) The Medicare Payment Advisory Commission shall conduct 
     an analysis of the results of the study included in the 
     report under subparagraph (A) and shall submit a report on 
     such analysis to Congress.
       (e) Study on Appropriate Coding of Certain Extended Office 
     Visits.--The Secretary shall conduct a study of the 
     appropriateness of coding in cases of extended office visits 
     in which there is no diagnosis made. Not later than October 
     1, 2004, the Secretary shall submit a report to Congress on 
     such study and shall include recommendations on how to code 
     appropriately for such visits in a manner that takes into 
     account the amount of time the physician spent with the 
     patient.
       (f) Definitions.--In this section--
       (1) the term ``rural area'' has the meaning given that term 
     in section 1886(d)(2)(D) of the Social Security Act, 42 
     U.S.C. 1395ww(d)(2)(D); and

[[Page H4220]]

       (2) the term ``teaching settings'' are those settings 
     described in section 415.150 of title 42, Code of Federal 
     Regulations.

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

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

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

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

     SEC. 844. EMTALA IMPROVEMENTS.

       (a) Payment for EMTALA-Mandated Screening and Stabilization 
     Services.--
       (1) In general.--Section 1862 (42 U.S.C. 1395y) is amended 
     by inserting after subsection (c) the following new 
     subsection:
       ``(d) For purposes of subsection (a)(1)(A), in the case of 
     any item or service that is required to be provided pursuant 
     to section 1867 to an individual who is entitled to benefits 
     under this title, determinations as to whether the item or 
     service is reasonable and necessary shall be made on the 
     basis of the information available to the treating physician 
     or practitioner (including the patient's presenting symptoms 
     or complaint)

[[Page H4221]]

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

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

       (a) Establishment.--The Secretary shall establish a 
     Technical Advisory Group (in this section referred to as the 
     ``Advisory Group'') to review issues related to the Emergency 
     Medical Treatment and Active Labor Act (EMTALA) and its 
     implementation. In this section, the term ``EMTALA'' refers 
     to the provisions of section 1867 of the Social Security Act 
     (42 U.S.C. 1395dd).
       (b) Membership.--The Advisory Group shall be composed of 19 
     members, including the Administrator of the Centers for 
     Medicare & Medicaid Services and the Inspector General of the 
     Department of Health and Human Services and of which--
       (1) 4 shall be representatives of hospitals, including at 
     least one public hospital, that have experience with the 
     application of EMTALA and at least 2 of which have not been 
     cited for EMTALA violations;
       (2) 7 shall be practicing physicians drawn from the fields 
     of emergency medicine, cardiology or cardiothoracic surgery, 
     orthopedic surgery, neurosurgery, obstetrics-gynecology, and 
     psychiatry, with not more than one physician from any 
     particular field;
       (3) 2 shall represent patients;
       (4) 2 shall be staff involved in EMTALA investigations from 
     different regional offices of the Centers for Medicare & 
     Medicaid Services; and
       (5) 1 shall be from a State survey office involved in 
     EMTALA investigations and 1 shall be from a peer review 
     organization, both of whom shall be from areas other than the 
     regions represented under paragraph (4).
     In selecting members described in paragraphs (1) through (3), 
     the Secretary shall consider qualified individuals nominated 
     by organizations representing providers and patients.
       (c) General Responsibilities.--The Advisory Group--
       (1) shall review EMTALA regulations;
       (2) may provide advice and recommendations to the Secretary 
     with respect to those regulations and their application to 
     hospitals and physicians;
       (3) shall solicit comments and recommendations from 
     hospitals, physicians, and the public regarding the 
     implementation of such regulations; and
       (4) may disseminate information on the application of such 
     regulations to hospitals, physicians, and the public.
       (d) Administrative Matters.--
       (1) Chairperson.--The members of the Advisory Group shall 
     elect a member to serve as chairperson of the Advisory Group 
     for the life of the Advisory Group.
       (2) Meetings.--The Advisory Group shall first meet at the 
     direction of the Secretary. The Advisory Group shall then 
     meet twice per year and at such other times as the Advisory 
     Group may provide.
       (e) Termination.--The Advisory Group shall terminate 30 
     months after the date of its first meeting.
       (f) Waiver of Administrative Limitation.--The Secretary 
     shall establish the Advisory Group notwithstanding any 
     limitation that may apply to the number of advisory 
     committees that may be established (within the Department of 
     Health and Human Services or otherwise).

     SEC. 846. AUTHORIZING USE OF ARRANGEMENTS WITH OTHER HOSPICE 
                   PROGRAMS TO PROVIDE CORE HOSPICE SERVICES IN 
                   CERTAIN CIRCUMSTANCES.

       (a) In General.--Section 1861(dd)(5) (42 U.S.C. 
     1395x(dd)(5)) is amended by adding at the end the following 
     new subparagraph:
       ``(D) In extraordinary, exigent, or other non-routine 
     circumstances, such as unanticipated periods of high patient 
     loads, staffing shortages due to illness or other events, or 
     temporary travel of a patient outside a hospice program's 
     service area, a hospice program may enter into arrangements 
     with another hospice program for the provision by that other 
     program of services described in paragraph (2)(A)(ii)(I). The 
     provisions of paragraph (2)(A)(ii)(II) shall apply with 
     respect to the services provided under such arrangements.''.
       (b) Conforming Payment Provision.--Section 1814(i) (42 
     U.S.C. 1395f(i)) is amended by adding at the end the 
     following new paragraph:
       ``(4) In the case of hospice care provided by a hospice 
     program under arrangements under section 1861(dd)(5)(D) made 
     by another hospice program, the hospice program that made the 
     arrangements shall bill and be paid for the hospice care.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to hospice care provided on or after the date of 
     the enactment of this Act.

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

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

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

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

[[Page H4222]]

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

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

     SEC. 850. TREATMENT OF CERTAIN DENTAL CLAIMS.

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

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

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

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

                    Subtitle A--Medicaid Provisions

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

       (a) Establishment.--There is established a commission to be 
     known as the National Bipartisan Commission on the Future of 
     Medicaid (in this section referred to as the ``Commission'').
       (b) Duties of the Commission.--The Commission shall--
       (1) review and analyze the long-term financial condition of 
     the medicaid program under title XIX of the Social Security 
     Act (42 U.S.C. 1396 et seq.);
       (2) identify the factors that are causing, and the 
     consequences of, increases in costs under the medicaid 
     program, including--
       (A) the impact of these cost increases upon State budgets, 
     funding for other State programs, and levels of State taxes 
     necessary to fund growing expenditures under the medicaid 
     program;
       (B) the financial obligations of the Federal government 
     arising from the Federal matching requirement for 
     expenditures under the medicaid program; and
       (C) the size and scope of the current program and how the 
     program has evolved over time;
       (3) analyze potential policies that will ensure both the 
     financial integrity of the medicaid program and the provision 
     of appropriate benefits under such program;
       (4) make recommendations for establishing incentives and 
     structures to promote enhanced efficiencies and ways of 
     encouraging innovative State policies under the medicaid 
     program;
       (5) make recommendations for establishing the appropriate 
     balance between benefits covered, payments to providers, 
     State and Federal contributions and, where appropriate, 
     recipient cost-sharing obligations;
       (6) make recommendations on the impact of promoting 
     increased utilization of competitive, private enterprise 
     models to contain program cost growth, through enhanced 
     utilization of private plans, pharmacy benefit managers, and 
     other methods currently being used to contain private sector 
     health-care costs;
       (7) make recommendations on the financing of prescription 
     drug benefits currently covered under medicaid programs, 
     including analysis of the current Federal manufacturer rebate 
     program, its impact upon both private market prices as well 
     as those paid by other government purchasers, recent State 
     efforts to negotiate additional supplemental manufacturer 
     rebates and the ability of pharmacy benefit managers to lower 
     drug costs;
       (8) review and analyze such other matters relating to the 
     medicaid program as the Commission deems appropriate; and
       (9) analyze the impact of impending demographic changes 
     upon medicaid benefits, including long term care services, 
     and make recommendations for how best to appropriately divide 
     State and Federal responsibilities for funding these 
     benefits.
       (c) Membership.--
       (1) Number and appointment.--The Commission shall be 
     composed of 17 members, of whom--
       (A) four shall be appointed by the President;
       (B) six shall be appointed by the Majority Leader of the 
     Senate, in consultation with the Minority Leader of the 
     Senate, of whom not more than 4 shall be of the same 
     political party;
       (C) six shall be appointed by the Speaker of the House of 
     Representatives, in consultation with the Minority Leader of 
     the House of Representatives, of whom not more than 4 shall 
     be of the same political party; and
       (D) one, who shall serve as Chairman of the Commission, 
     appointed jointly by the President, Majority Leader of the 
     Senate, and the Speaker of the House of Representatives.
       (2) Deadline for appointment.--Members of the Commission 
     shall be appointed by not later than December 1, 2002.
       (3) Terms of appointment.--The term of any appointment 
     under paragraph (1) to the Commission shall be for the life 
     of the Commission.
       (4) Meetings.--The Commission shall meet at the call of its 
     Chairman or a majority of its members.
       (5) Quorum.--A quorum shall consist of 8 members of the 
     Commission, except that 4 members may conduct a hearing under 
     subsection (e).
       (6) Vacancies.--A vacancy on the Commission shall be filled 
     in the same manner in which the original appointment was made 
     not later than 30 days after the Commission is given notice 
     of the vacancy and shall not affect the power of the 
     remaining members to execute the duties of the Commission.
       (7) Compensation.--Members of the Commission shall receive 
     no additional pay, allowances, or benefits by reason of their 
     service on the Commission.
       (8) Expenses.--Each member of the Commission shall receive 
     travel expenses and per diem in lieu of subsistence in 
     accordance with sections 5702 and 5703 of title 5, United 
     States Code.
       (d) Staff and Support Services.--
       (1) Executive director.--
       (A) Appointment.--The Chairman shall appoint an executive 
     director of the Commission.
       (B) Compensation.--The executive director shall be paid the 
     rate of basic pay for level V of the Executive Schedule.
       (2) Staff.--With the approval of the Commission, the 
     executive director may appoint such personnel as the 
     executive director considers appropriate.
       (3) Applicability of civil service laws.--The staff of the 
     Commission shall be appointed without regard to the 
     provisions of title 5, United States Code, governing 
     appointments in the competitive service, and shall be paid 
     without regard to the provisions of chapter 51 and subchapter 
     III of chapter 53 of such title (relating to classification 
     and General Schedule pay rates).
       (4) Experts and consultants.--With the approval of the 
     Commission, the executive director may procure temporary and 
     intermittent services under section 3109(b) of title 5, 
     United States Code.
       (5) Physical facilities.--The Administrator of the General 
     Services Administration shall locate suitable office space 
     for the operation of the Commission. The facilities shall 
     serve as the headquarters of the Commission and shall include 
     all necessary equipment and incidentals required for the 
     proper functioning of the Commission.
       (e) Powers of Commission.--
       (1) Hearings and other activities.--For the purpose of 
     carrying out its duties, the Commission may hold such 
     hearings and undertake such other activities as the 
     Commission determines to be necessary to carry out its 
     duties.
       (2) Studies by gao.--Upon the request of the Commission, 
     the Comptroller General shall conduct such studies or 
     investigations as the Commission determines to be necessary 
     to carry out its duties.
       (3) Cost estimates by congressional budget office and 
     office of the chief actuary of hcfa.--
       (A) The Director of the Congressional Budget Office or the 
     Chief Actuary of the Centers for Medicare & Medicaid 
     Services, or both, shall provide to the Commission, upon the 
     request of the Commission, such cost estimates as the 
     Commission determines to be necessary to carry out its 
     duties.
       (B) The Commission shall reimburse the Director of the 
     Congressional Budget Office for expenses relating to the 
     employment in the office of the Director of such additional 
     staff as may be necessary for the Director to comply with 
     requests by the Commission under subparagraph (A).
       (4) Detail of federal employees.--Upon the request of the 
     Commission, the head of any Federal agency is authorized to 
     detail, without reimbursement, any of the personnel of such 
     agency to the Commission to assist the Commission in carrying 
     out its duties. Any such detail shall not interrupt or 
     otherwise affect the civil service status or privileges of 
     the Federal employee.
       (5) Technical assistance.--Upon the request of the 
     Commission, the head of a Federal agency shall provide such 
     technical assistance to the Commission as the Commission 
     determines to be necessary to carry out its duties.
       (6) Use of mails.--The Commission may use the United States 
     mails in the same manner and under the same conditions as 
     Federal agencies and shall, for purposes of the frank, be 
     considered a commission of Congress as described in section 
     3215 of title 39, United States Code.

[[Page H4223]]

       (7) Obtaining information.--The Commission may secure 
     directly from any Federal agency information necessary to 
     enable it to carry out its duties, if the information may be 
     disclosed under section 552 of title 5, United States Code. 
     Upon request of the Chairman of the Commission, the head of 
     such agency shall furnish such information to the Commission.
       (8) Administrative support services.--Upon the request of 
     the Commission, the Administrator of General Services shall 
     provide to the Commission on a reimbursable basis such 
     administrative support services as the Commission may 
     request.
       (9) Printing.--For purposes of costs relating to printing 
     and binding, including the cost of personnel detailed from 
     the Government Printing Office, the Commission shall be 
     deemed to be a committee of the Congress.
       (f) Report.--Not later than March 1, 2004, the Commission 
     shall submit a report to the President and Congress which 
     shall contain a detailed statement of only those 
     recommendations, findings, and conclusions of the Commission.
       (g) Termination.--The Commission shall terminate 30 days 
     after the date of submission of the report required in 
     subsection (f).
       (h) Authorization of Appropriations.--There are authorized 
     to be appropriated $1,500,000 to carry out this section.

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

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

                    Subtitle B--Internet Pharmacies

     SEC. 911. FINDINGS.

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

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

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

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

       ``(a) Definitions.--For purposes of this section:
       ``(1) Consumer.--The term `consumer' means a person (other 
     than an entity licensed or otherwise authorized under Federal 
     or State law as a pharmacy or to dispense or distribute 
     prescription drugs) that purchases or seeks to purchase 
     prescription drugs through the Internet.
       ``(2) Home page.--The term `home page' means the entry 
     point or main web page for an Internet site.
       ``(3) Internet.--The term `Internet' means collectively the 
     myriad of computer and telecommunications facilities, 
     including equipment and operating software, which comprise 
     the interconnected worldwide network of networks that employ 
     the Transmission Control Protocol/Internet Protocol, or any 
     predecessor or successor protocols to such protocol, to 
     communicate information of all kinds by wire or radio, 
     including electronic mail.
       ``(4) Interstate internet seller.--
       ``(A) In general.--The term `interstate Internet seller' 
     means a person whether in the United States or abroad, that 
     engages in, offers to engage in, or causes the delivery or 
     sale of a prescription drug through the Internet and has such 
     drug delivered directly to the consumer via the Postal 
     Service, or any private or commercial interstate carrier to a 
     consumer in the United States who is residing in a State 
     other than the State in which the seller's place of business 
     is located. This definition excludes a person who only 
     delivers a prescription drug to a consumer, such as an 
     interstate carrier service.
       ``(B) Exemption.--With respect to the consumer involved, 
     the term `interstate Internet seller' does not include a 
     person described in subparagraph (A) whose place of business 
     is located within 75 miles of the consumer.
       ``(5) Link.--The term `link' means either a textual or 
     graphical marker on a web page that, when clicked on, takes 
     the consumer to another part of the Internet, such as to 
     another web page or a different area on the same web page, or 
     from an electronic message to a web page.
       ``(6) Pharmacy.--The term `pharmacy' means any place 
     licensed or otherwise authorized as a pharmacy under State 
     law.
       ``(7) Prescriber.--The term `prescriber' means an 
     individual, licensed or otherwise authorized under applicable 
     Federal and State law to issue prescriptions for prescription 
     drugs.
       ``(8) Prescription drug.--The term `prescription drug' 
     means a drug under section 503(b)(1).
       ``(9) Valid prescription.--The term `valid prescription' 
     means a prescription that meets the requirements of section 
     503(b)(1) and other applicable Federal and State law.
       ``(10) Web site; site.--The terms `web site' and `site' 
     mean a specific location on the Internet that is determined 
     by Internet protocol numbers or by a domain name.
       ``(b) Requirements for Interstate Internet Sellers.--
       ``(1) In general.--Each interstate Internet seller shall 
     comply with the requirements of this subsection with respect 
     to the sale of, or the offer to sell, prescription drugs 
     through the Internet and shall at all times display on its 
     web site information in accordance with paragraph (2).
       ``(2) Web site disclosure information.--An interstate 
     Internet seller shall post in a visible and clear manner (as 
     determined by regulation) on the home page of its web site, 
     or on a page directly linked to such home page--
       ``(A) the street address of the interstate Internet 
     seller's place of business, and the telephone number of such 
     place of business;
       ``(B) each State in which the interstate Internet seller is 
     licensed or otherwise authorized as a pharmacy, or if the 
     interstate Internet seller is not licensed or otherwise 
     authorized by a State as a pharmacy, each State in which the 
     interstate Internet seller is licensed or otherwise 
     authorized to dispense prescription drugs, and the type of 
     State license or authorization;
       ``(C) in the case of an interstate Internet seller that 
     makes referrals to or solicits on behalf of a prescriber, the 
     name of each prescriber, the street address of each such 
     prescriber's place of business, the telephone number of such 
     place of business, each State in which each such prescriber 
     is licensed or otherwise authorized to prescribe prescription 
     drugs, and the type of such license or authorization; and
       ``(D) a statement that the interstate Internet seller will 
     dispense prescription drugs only upon a valid prescription.
       ``(3) Date of posting.--Information required to be posted 
     under paragraph (2) shall be posted by an interstate Internet 
     seller--
       ``(A) not later than 90 days after the effective date of 
     this section if the web site of such seller is in operation 
     as of such date; or
       ``(B) on the date of the first day of operation of such 
     seller's web site if such site goes into operation after such 
     date.
       ``(4) Qualifying statements.--An interstate Internet seller 
     shall not indicate in any manner that posting disclosure 
     information on its web site signifies that the Federal 
     Government has made any determination on the legitimacy of 
     the interstate Internet seller or its business.
       ``(5) Disclosure to state licensing boards.--An interstate 
     Internet seller licensed or otherwise authorized to dispense 
     prescription drugs in accordance with applicable State law 
     shall notify each State entity that granted such licensure or 
     authorization that it is an interstate Internet seller, the 
     name of its business, the Internet address of its business, 
     the street address of its place of business, and the 
     telephone number of such place of business.
       ``(6) Regulations.--The Secretary is authorized to 
     promulgate such regulations as are necessary to carry out the 
     provisions of this subsection. In issuing such regulations, 
     the Secretary--
       ``(A) shall take into consideration disclosure formats used 
     by existing interstate Internet seller certification 
     programs; and
       ``(B) shall in defining the term `place of business' 
     include provisions providing that such place is a single 
     location at which employees of the business perform job 
     functions, and not a post office box or similar locale.''.
       (b) Prohibited Acts.--Section 301 of the Federal Food, 
     Drug, and Cosmetic Act (21 U.S.C. 331) is amended by adding 
     at the end the following:
       ``(bb) The failure to post information required under 
     section 503B(b)(2) or for knowingly making a materially false 
     statement when posting such information as required under 
     such section or violating section 503B(b)(4).''.

     SEC. 913. PUBLIC EDUCATION.

       The Secretary of Health and Human Services shall engage in 
     activities to educate the public about the dangers of 
     purchasing prescription drugs from unlawful Internet

[[Page H4224]]

     sources. The Secretary should educate the public about 
     effective public and private sector consumer protection 
     efforts, as appropriate, with input from the public and 
     private sectors, as appropriate.

     SEC. 914. STUDY REGARDING COORDINATION OF REGULATORY 
                   ACTIVITIES.

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

     SEC. 915. EFFECTIVE DATE.

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

            Subtitle C--Promotion of Electronic Prescription

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

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

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

       ``(a) In General.--The Secretary is authorized to make 
     grants for the purpose of assisting health care providers who 
     prescribe drugs and biologicals in implementing electronic 
     prescription programs described in section 1860C(d)(3) of the 
     Social Security Act.
       ``(b) Application.--No grant may be made under this section 
     except pursuant to a grant application that is submitted in a 
     time, manner, and form approved by the Secretary.
       ``(c) Authorization of Appropriations.--There are 
     authorized to be appropriated for fiscal year 2004, such sums 
     as may be appropriate to carry out this section.''.

                 Subtitle D--Treatment of Rare Diseases

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

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


                       ``office of rare diseases

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

     SEC. 932. RARE DISEASE REGIONAL CENTERS OF EXCELLENCE.

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


             ``rare disease regional centers of excellence

       ``Sec. 404G. (a) Cooperative Agreements and Grants.--
       ``(1) In general.--The Director of the Office of Rare 
     Diseases (in this section referred to as the `Director'), in 
     collaboration with the directors of the other relevant 
     institutes and centers of the National Institutes of Health, 
     may enter into cooperative agreements with and make grants to 
     public or private nonprofit entities to pay all or part of 
     the cost of planning, establishing, or strengthening, and 
     providing basic operating support for regional centers of 
     excellence for clinical research into, training in, and 
     demonstration of diagnostic, prevention, control, and 
     treatment methods for rare diseases.
       ``(2) Policies.--A cooperative agreement or grant under 
     paragraph (1) shall be entered into in accordance with 
     policies established by the Director of NIH.
       ``(b) Coordination With Other Institutes.--The Director 
     shall coordinate the activities under this section with 
     similar activities conducted by other national research 
     institutes, centers and agencies of the National Institutes 
     of Health and by the Food and Drug Administration to the 
     extent that such institutes, centers and agencies have 
     responsibilities that are related to rare diseases.
       ``(c) Uses for Federal Payments Under Cooperative 
     Agreements or Grants.--Federal payments made under a 
     cooperative agreement or grant under subsection (a) may be 
     used for--
       ``(1) staffing, administrative, and other basic operating 
     costs, including such patient care costs as are required for 
     research;
       ``(2) clinical training, including training for allied 
     health professionals, continuing education for health 
     professionals and allied health professions personnel, and 
     information programs for the public with respect to rare 
     diseases; and
       ``(3) clinical research and demonstration programs.
       ``(d) Period of Support; Additional Periods.--Support of a 
     center under subsection (a) may be for a period of not to 
     exceed 5 years. Such period may be extended by the Director 
     for additional periods of not more than 5 years if the 
     operations of such center have been reviewed by an 
     appropriate technical and scientific peer review group 
     established by the Director and if such group has recommended 
     to the Director that such period should be extended.
       ``(e) Authorization of Appropriations.--For the purpose of 
     carrying out this section, there are authorized to be 
     appropriated such sums as already have been appropriated for 
     fiscal year 2002, and $20,000,000 for each of the fiscal 
     years 2003 through 2006.''.

             Subtitle E--Other Provisions Relating to Drugs

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

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

[[Page H4225]]

     care for family members with diseases or disorders.
       (c) Report.--Not later than two years after the date of the 
     enactment of this Act, the Comptroller General of the United 
     States shall submit to the Congress a report providing the 
     findings of the study under subsection (a).

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

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

               ``Subpart 3--Pharmacist Workforce Programs

     ``SEC. 771. PUBLIC SERVICE ANNOUNCEMENTS.

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

     ``SEC. 772. DEMONSTRATION PROJECT.

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

     ``SEC. 773. INFORMATION TECHNOLOGY.

       ``(a) Grants and Contracts.--The Secretary may make awards 
     of grants or contracts to qualifying schools of pharmacy for 
     the purpose of assisting such schools in acquiring and 
     installing computer-based systems to provide pharmaceutical 
     education. Education provided through such systems may be 
     graduate education, professional education, or continuing 
     education. The computer-based systems may be designed to 
     provide on-site education, or education at remote sites 
     (commonly referred to as distance learning), or both.
       ``(b) Qualifying School of Pharmacy.--For purposes of this 
     section, the term `qualifying school of pharmacy' means a 
     school of pharmacy (as defined in section 799B) that requires 
     students to serve in a clinical rotation in which pharmacist 
     services are part of the curriculum.

     ``SEC. 774. AUTHORIZATION OF APPROPRIATIONS.

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

              TITLE X--HEALTH-CARE RELATED TAX PROVISIONS

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

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

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

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

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

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

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

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

[[Page H4226]]

       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to expenses incurred after the date of the 
     enactment of this Act.

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

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

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

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

              TITLE I--MEDICARE PRESCRIPTION DRUG BENEFIT

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

         ``Part D--Voluntary Prescription Drug Benefit Program

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

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

               Subtitle A--Medicare+Choice Revitalization

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

            Subtitle B--Medicare+Choice Competition Program

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

               TITLE III--RURAL HEALTH CARE IMPROVEMENTS

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

                TITLE IV--PROVISIONS RELATING TO PART A

                Subtitle A--Inpatient Hospital Services

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

             Subtitle B--Skilled Nursing Facility Services

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

                          Subtitle C--Hospice

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

                      Subtitle D--Other Provisions

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

                 TITLE V--PROVISIONS RELATING TO PART B

                    Subtitle A--Physicians' Services

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

                       Subtitle B--Other Services

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

             TITLE VI--PROVISIONS RELATING TO PARTS A AND B

                    Subtitle A--Home Health Services

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

             Subtitle B--Direct Graduate Medical Education

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

[[Page H4227]]

                      Subtitle C--Other Provisions

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

              TITLE VII--MEDICARE BENEFITS ADMINISTRATION

Sec. 701. Establishment of Medicare Benefits Administration.

        TITLE VIII--REGULATORY REDUCTION AND CONTRACTING REFORM

                     Subtitle A--Regulatory Reform

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

                     Subtitle B--Contracting Reform

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

                   Subtitle C--Education and Outreach

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

                    Subtitle D--Appeals and Recovery

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

                  Subtitle E--Miscellaneous Provisions

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

                     TITLE IX--MEDICAID PROVISIONS

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

              TITLE I--MEDICARE PRESCRIPTION DRUG BENEFIT

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

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

         ``Part D--Voluntary Prescription Drug Benefit Program

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

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

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

     In applying the last sentence of section 1851(e)(4) (relating 
     to discontinuance of a Medicare+Choice election during the 
     first year of eligibility) under this subparagraph, in the 
     case of an election described in such section in which the 
     individual had elected or is provided qualified prescription 
     drug coverage at the time of such first enrollment, the 
     individual shall be permitted to enroll in a prescription 
     drug plan under this part at the time of the election of 
     coverage under the original fee-for-service plan.
       ``(B) Initial election periods.--
       ``(i) Individuals currently covered.--In the case of an 
     individual who is entitled to benefits under part A or 
     enrolled under part B as of November 1, 2004, there shall be 
     an initial election period of 6 months beginning on that 
     date.
       ``(ii) Individual covered in future.--In the case of an 
     individual who is first entitled to benefits under part A or 
     enrolled under part B after such date, there shall be an 
     initial election period which is the same as the initial 
     enrollment period under section 1837(d).
       ``(C) Additional special election periods.--The 
     Administrator shall establish special election periods--
       ``(i) in cases of individuals who have and involuntarily 
     lose prescription drug coverage described in subsection 
     (c)(2)(C);
       ``(ii) in cases described in section 1837(h) (relating to 
     errors in enrollment), in the same manner as such section 
     applies to part B;
       ``(iii) in the case of an individual who meets such 
     exceptional conditions (including conditions provided under 
     section 1851(e)(4)(D)) as the Administrator may provide; and
       ``(iv) in cases of individuals (as determined by the 
     Administrator) who become eligible for prescription drug 
     assistance under title XIX under section 1935(d).
       ``(3) Information on plans.--Information described in 
     section 1860C(b)(1) on prescription drug plans shall be made 
     available during open enrollment periods.
       ``(c) Guaranteed Issue; Community Rating; and 
     Nondiscrimination.--
       ``(1) Guaranteed issue.--
       ``(A) In general.--An eligible individual who is eligible 
     to elect qualified prescription drug coverage under a 
     prescription drug plan or Medicare+Choice plan at a time 
     during which elections are accepted under this part with 
     respect to the plan shall not be denied enrollment based on 
     any health status-related factor (described in section 
     2702(a)(1) of the Public Health Service Act) or any other 
     factor.
       ``(B) Medicare+choice limitations permitted.--The 
     provisions of paragraphs (2) and (3) (other than subparagraph 
     (C)(i), relating to default enrollment) of section 1851(g) 
     (relating to priority and limitation on termination of 
     election) shall apply to PDP sponsors under this subsection.
       ``(2) Community-rated premium.--
       ``(A) In general.--In the case of an individual who 
     maintains (as determined under subparagraph (C)) continuous 
     prescription drug coverage since the date the individual 
     first qualifies to elect prescription drug coverage under 
     this part, a PDP sponsor or Medicare+Choice organization 
     offering a prescription drug plan or Medicare+Choice plan 
     that provides qualified prescription drug coverage and in 
     which the individual is enrolled may not deny, limit, or 
     condition the coverage or provision of covered prescription 
     drug benefits or vary or increase the premium under the plan 
     based on any health status-related factor described in 
     section 2702(a)(1) of the Public Health Service Act or any 
     other factor.
       ``(B) Late enrollment penalty.--In the case of an 
     individual who does not maintain such continuous prescription 
     drug coverage (as described in subparagraph (C)), a PDP 
     sponsor or Medicare+Choice organization may (notwithstanding 
     any provision in this title) adjust the premium otherwise 
     applicable or impose a pre-existing condition exclusion with 
     respect to qualified prescription drug coverage in a manner 
     that reflects additional actuarial risk involved. Such a risk 
     shall be established through an appropriate actuarial opinion 
     of the type described in subparagraphs (A) through (C) of 
     section 2103(c)(4).

[[Page H4228]]

       ``(C) Continuous prescription drug coverage.--An individual 
     is considered for purposes of this part to be maintaining 
     continuous prescription drug coverage on and after the date 
     the individual first qualifies to elect prescription drug 
     coverage under this part if the individual establishes that 
     as of such date the individual is covered under any of the 
     following prescription drug coverage and before the date that 
     is the last day of the 63-day period that begins on the date 
     of termination of the particular prescription drug coverage 
     involved (regardless of whether the individual subsequently 
     obtains any of the following prescription drug coverage):
       ``(i) Coverage under prescription drug plan or 
     medicare+choice plan.--Qualified prescription drug coverage 
     under a prescription drug plan or under a Medicare+Choice 
     plan.
       ``(ii) Medicaid prescription drug coverage.--Prescription 
     drug coverage under a medicaid plan under title XIX, 
     including through the Program of All-inclusive Care for the 
     Elderly (PACE) under section 1934, through a social health 
     maintenance organization (referred to in section 4104(c) of 
     the Balanced Budget Act of 1997), or through a 
     Medicare+Choice project that demonstrates the application of 
     capitation payment rates for frail elderly medicare 
     beneficiaries through the use of a interdisciplinary team and 
     through the provision of primary care services to such 
     beneficiaries by means of such a team at the nursing facility 
     involved.
       ``(iii) Prescription drug coverage under group health 
     plan.--Any outpatient prescription drug coverage under a 
     group health plan, including a health benefits plan under the 
     Federal Employees Health Benefit Plan under chapter 89 of 
     title 5, United States Code, and a qualified retiree 
     prescription drug plan as defined in section 1860H(f)(1), but 
     only if (subject to subparagraph (E)(ii)) the coverage 
     provides benefits at least equivalent to the benefits under a 
     qualified prescription drug plan.
       ``(iv) Prescription drug coverage under certain medigap 
     policies.--Coverage under a medicare supplemental policy 
     under section 1882 that provides benefits for prescription 
     drugs (whether or not such coverage conforms to the standards 
     for packages of benefits under section 1882(p)(1)), but only 
     if the policy was in effect on January 1, 2005, and if 
     (subject to subparagraph (E)(ii)) the coverage provides 
     benefits at least equivalent to the benefits under a 
     qualified prescription drug plan.
       ``(v) State pharmaceutical assistance program.--Coverage of 
     prescription drugs under a State pharmaceutical assistance 
     program, but only if (subject to subparagraph (E)(ii)) the 
     coverage provides benefits at least equivalent to the 
     benefits under a qualified prescription drug plan.
       ``(vi) Veterans' coverage of prescription drugs.--Coverage 
     of prescription drugs for veterans under chapter 17 of title 
     38, United States Code, but only if (subject to subparagraph 
     (E)(ii)) the coverage provides benefits at least equivalent 
     to the benefits under a qualified prescription drug plan.
       ``(D) Certification.--For purposes of carrying out this 
     paragraph, the certifications of the type described in 
     sections 2701(e) of the Public Health Service Act and in 
     section 9801(e) of the Internal Revenue Code shall also 
     include a statement for the period of coverage of whether the 
     individual involved had prescription drug coverage described 
     in subparagraph (C).
       ``(E) Disclosure.--
       ``(i) In general.--Each entity that offers coverage of the 
     type described in clause (iii), (iv), (v), or (vi) of 
     subparagraph (C) shall provide for disclosure, consistent 
     with standards established by the Administrator, of whether 
     such coverage provides benefits at least equivalent to the 
     benefits under a qualified prescription drug plan.
       ``(ii) Waiver of limitations.--An individual may apply to 
     the Administrator to waive the requirement that coverage of 
     such type provide benefits at least equivalent to the 
     benefits under a qualified prescription drug plan, if the 
     individual establishes that the individual was not adequately 
     informed that such coverage did not provide such level of 
     benefits.
       ``(F) Construction.--Nothing in this section shall be 
     construed as preventing the disenrollment of an individual 
     from a prescription drug plan or a Medicare+Choice plan based 
     on the termination of an election described in section 
     1851(g)(3), including for non-payment of premiums or for 
     other reasons specified in subsection (d)(3), which takes 
     into account a grace period described in section 
     1851(g)(3)(B)(i).
       ``(3) Nondiscrimination.--A PDP sponsor offering a 
     prescription drug plan shall not establish a service area in 
     a manner that would discriminate based on health or economic 
     status of potential enrollees.
       ``(d) Effective Date of Elections.--
       ``(1) In general.--Except as provided in this section, the 
     Administrator shall provide that elections under subsection 
     (b) take effect at the same time as the Administrator 
     provides that similar elections under section 1851(e) take 
     effect under section 1851(f).
       ``(2) No election effective before 2005.--In no case shall 
     any election take effect before January 1, 2005.
       ``(3) Termination.--The Administrator shall provide for the 
     termination of an election in the case of--
       ``(A) termination of coverage under both part A and part B; 
     and
       ``(B) termination of elections described in section 
     1851(g)(3) (including failure to pay required premiums).

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

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

     Any amount determined under subparagraph (B) that is not a 
     multiple of $10 shall be rounded to the nearest multiple of 
     $10.
       ``(2) Limits on cost-sharing.--
       ``(A) In general.--The coverage has cost-sharing (for costs 
     above the annual deductible specified in paragraph (1) and up 
     to the initial coverage limit under paragraph (3)) as 
     follows:
       ``(i) First copayment range.--For costs above the annual 
     deductible specified in paragraph (1) and up to amount 
     specified in subparagraph (C), the cost-sharing--

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

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

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

       ``(B) Use of tiered copayments.--Nothing in this part shall 
     be construed as preventing a PDP sponsor from applying tiered 
     copayments, so long as such tiered copayments are consistent 
     with subparagraph (A).
       ``(C) Initial copayment threshold.--The amount specified in 
     this subparagraph--
       ``(i) for 2005, is equal to $1,000; or
       ``(ii) for a subsequent year, is equal to the amount 
     specified in this subparagraph for the previous year, 
     increased by the annual percentage increase described in 
     paragraph (5) for the year involved.

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

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

[[Page H4229]]

       ``(i) for 2005, is equal to $3,700; or
       ``(ii) for a subsequent year, is equal to the amount 
     specified in this subparagraph for the previous year, 
     increased by the annual percentage increase described in 
     paragraph (5) for the year involved.

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

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

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

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

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

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

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

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

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

     Such information shall also be made available on request to 
     prospective enrollees during annual open enrollment periods.
       ``(2) Disclosure upon request of general coverage, 
     utilization, and grievance information.--Upon request of an 
     individual

[[Page H4230]]

     eligible to enroll under a prescription drug plan, the PDP 
     sponsor shall provide the information described in section 
     1852(c)(2) (other than subparagraph (D)) to such individual.
       ``(3) Response to beneficiary questions.--Each PDP sponsor 
     offering a prescription drug plan shall have a mechanism for 
     providing specific information to enrollees upon request. The 
     sponsor shall make available on a timely basis, through an 
     Internet website and in writing upon request, information on 
     specific changes in its formulary.
       ``(4) Claims information.--Each PDP sponsor offering a 
     prescription drug plan must furnish to enrolled individuals 
     in a form easily understandable to such individuals an 
     explanation of benefits (in accordance with section 1806(a) 
     or in a comparable manner) and a notice of the benefits in 
     relation to initial coverage limit and annual out-of-pocket 
     threshold for the current year, whenever prescription drug 
     benefits are provided under this part (except that such 
     notice need not be provided more often than monthly).
       ``(c) Access to Covered Benefits.--
       ``(1) Assuring pharmacy access.--
       ``(A) In general.--The PDP sponsor of the prescription drug 
     plan shall secure the participation in its network of a 
     sufficient number of pharmacies that dispense (other than by 
     mail order) drugs directly to patients to ensure convenient 
     access (as determined by the Administrator and including 
     adequate emergency access) for enrolled beneficiaries, in 
     accordance with standards established under section 1860D(e) 
     that ensure such convenient access.
       ``(B) Use of point-of-service system.--A PDP sponsor shall 
     establish an optional point-of-service method of operation 
     under which--
       ``(i) the plan provides access to any or all pharmacies 
     that are not participating pharmacies in its network; and
       ``(ii) the plan may charge beneficiaries through 
     adjustments in premiums and copayments any additional costs 
     associated with the point-of-service option.

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

     Nothing in this section shall be construed as impairing a PDP 
     sponsor from applying cost management tools (including 
     differential payments) under all methods of operation.
       ``(2) Medication therapy management program.--
       ``(A) In general.--A medication therapy management program 
     described in this paragraph is a program of drug therapy 
     management and medication administration that is designed to 
     assure, with respect to beneficiaries with chronic diseases 
     (such as diabetes, asthma, hypertension, and congestive heart 
     failure) or multiple prescriptions, that covered outpatient 
     drugs under the prescription drug plan are appropriately used 
     to achieve therapeutic goals and reduce the risk of adverse 
     events, including adverse drug interactions.
       ``(B) Elements.--Such program may include--
       ``(i) enhanced beneficiary understanding of such 
     appropriate use through beneficiary education, counseling, 
     and other appropriate means;
       ``(ii) increased beneficiary adherence with prescription 
     medication regimens through medication refill reminders, 
     special packaging, and other appropriate means; and
       ``(iii) detection of patterns of overuse and underuse of 
     prescription drugs.
       ``(C) Development of program in cooperation with licensed 
     pharmacists.--The program shall be developed in cooperation 
     with licensed and practicing pharmacists and physicians.
       ``(D) Considerations in pharmacy fees.--The PDP sponsor of 
     a prescription drug program shall take into account, in 
     establishing fees for pharmacists and others providing 
     services under the medication therapy management program, the 
     resources and time used in implementing the program.
       ``(3) Electronic prescription program.--
       ``(A) In general.--An electronic prescription drug program 
     described in this paragraph is a program that includes at 
     least the following components, consistent with national 
     standards established under subparagraph (B):
       ``(i) Electronic transmittal of prescriptions.--
     Prescriptions are only received electronically, except in 
     emergency cases and other exceptional circumstances 
     recognized by the Administrator.
       ``(ii) Provision of information to prescribing health care 
     professional.--The program provides, upon transmittal of a 
     prescription by a prescribing health care professional, for 
     transmittal by the pharmacist to the professional of 
     information that includes--

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

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

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

       ``(iii) Deadlines.--

       ``(I) The Administrator shall constitute the task force 
     under clause (ii) by not later than April 1, 2003.
       ``(II) Such task force shall submit recommendations to 
     Administrator by not later than January 1, 2004.

[[Page H4231]]

       ``(III) The Administrator shall develop and promulgate the 
     national standards referred to in clause (ii) by not later 
     than January 1, 2005.

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

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

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

[[Page H4232]]

     for PDP sponsors and plans consistent with, and to carry out, 
     this part. The Administrator shall publish such regulations 
     by October 1, 2003.
       ``(f) Relation to State Laws.--
       ``(1) In general.--The standards established under this 
     part shall supersede any State law or regulation (other than 
     State licensing laws or State laws relating to plan solvency, 
     except as provided in subsection (d)) with respect to 
     prescription drug plans which are offered by PDP sponsors 
     under this part.
       ``(2) Prohibition of state imposition of premium taxes.--No 
     State may impose a premium tax or similar tax with respect to 
     premiums paid to PDP sponsors for prescription drug plans 
     under this part, or with respect to any payments made to such 
     a sponsor by the Administrator under this part.

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

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

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

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

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

       ``(a) Income-Related Subsidies for Individuals With Income 
     Below 175 Percent of Federal Poverty Level.--
       ``(1) Full premium subsidy and reduction of cost-sharing 
     for individuals with income below 150 percent of federal 
     poverty level.--In the case of a subsidy eligible individual 
     (as defined in paragraph (4)) who is determined to have 
     income that does not exceed 150 percent of the Federal 
     poverty level, the individual is entitled under this 
     section--
       ``(A) to an income-related premium subsidy equal to 100 
     percent of the amount described in subsection (b)(1); and
       ``(B) subject to subsection (c), to the substitution for 
     the beneficiary cost-sharing described in paragraphs (1) and 
     (2) of section 1860B(b) (up to the initial coverage limit 
     specified in paragraph (3) of such section) of amounts that 
     do not exceed $2 for a multiple source or generic drug (as 
     described in section 1927(k)(7)(A)) and $5 for a non-
     preferred drug.
       ``(2) Sliding scale premium subsidy and reduction of cost-
     sharing for individuals with income above 150, but below 175 
     percent, of federal poverty level.--In the case of a subsidy 
     eligible individual who is determined to have income that 
     exceeds 150

[[Page H4233]]

     percent, but does not exceed 175 percent, of the Federal 
     poverty level, the individual is entitled under this section 
     to--
       ``(A) an income-related premium subsidy determined on a 
     linear sliding scale ranging from 100 percent of the amount 
     described in subsection (b)(1) for individuals with incomes 
     at 150 percent of such level to 0 percent of such amount for 
     individuals with incomes at 175 percent of such level; and
       ``(B) subject to subsection (c), to the substitution for 
     the beneficiary cost-sharing described in paragraphs (1) and 
     (2) of section 1860B(b) (up to the initial coverage limit 
     specified in paragraph (3) of such section) of amounts that 
     do not exceed $2 for a multiple source or generic drug (as 
     described in section 1927(k)(7)(A)) and $5 for a non-
     preferred drug.
       ``(3) Construction.--Nothing in this section shall be 
     construed as preventing a PDP sponsor from reducing to 0 the 
     cost-sharing otherwise applicable to generic drugs.
       ``(4) Determination of eligibility.--
       ``(A) Subsidy eligible individual defined.--For purposes of 
     this section, subject to subparagraph (D), the term `subsidy 
     eligible individual' means an individual who--
       ``(i) is eligible to elect, and has elected, to obtain 
     qualified prescription drug coverage under this part;
       ``(ii) has income below 175 percent of the Federal poverty 
     line; and
       ``(iii) meets the resources requirement described in 
     section 1905(p)(1)(C).
       ``(B) Determinations.--The determination of whether an 
     individual residing in a State is a subsidy eligible 
     individual and the amount of such individual's income shall 
     be determined under the State medicaid plan for the State 
     under section 1935(a) or by the Social Security 
     Administration. In the case of a State that does not operate 
     such a medicaid plan (either under title XIX or under a 
     statewide waiver granted under section 1115), such 
     determination shall be made under arrangements made by the 
     Administrator. There are authorized to be appropriated to the 
     Social Security Administration such sums as may be necessary 
     for the determination of eligibility under this subparagraph.
       ``(C) Income determinations.--For purposes of applying this 
     section--
       ``(i) income shall be determined in the manner described in 
     section 1905(p)(1)(B); and
       ``(ii) the term `Federal poverty line' means the official 
     poverty line (as defined by the Office of Management and 
     Budget, and revised annually in accordance with section 
     673(2) of the Omnibus Budget Reconciliation Act of 1981) 
     applicable to a family of the size involved.
       ``(D) Treatment of territorial residents.--In the case of 
     an individual who is not a resident of the 50 States or the 
     District of Columbia, the individual is not eligible to be a 
     subsidy eligible individual but may be eligible for financial 
     assistance with prescription drug expenses under section 
     1935(e).
       ``(E) Treatment of conforming medigap policies.--For 
     purposes of this section, the term `qualified prescription 
     drug coverage' includes a medicare supplemental policy 
     described in section 1860H(b)(4).
       ``(5) Indexing dollar amounts.--
       ``(A) For 2006.--The dollar amounts applied under 
     paragraphs (1)(B) and (2)(B) for 2006 shall be the dollar 
     amounts specified in such paragraph increased by the annual 
     percentage increase described in section 1860B(b)(5) for 
     2006.
       ``(B) For subsequent years.--The dollar amounts applied 
     under paragraphs (1)(B) and (2)(B) for a year after 2006 
     shall be the amounts (under this paragraph) applied under 
     paragraph (1)(B) or (2)(B) for the preceding year increased 
     by the annual percentage increase described in section 
     1860B(b)(5) (relating to growth in medicare prescription drug 
     costs per beneficiary) for the year involved.
       ``(b) Premium Subsidy Amount.--
       ``(1) In general.--The premium subsidy amount described in 
     this subsection for an individual residing in an area is the 
     benchmark bid amount (as defined in paragraph (2)) for 
     qualified prescription drug coverage offered by the 
     prescription drug plan or the Medicare+Choice plan in which 
     the individual is enrolled.
       ``(2) Benchmark bid amount defined.--For purposes of this 
     subsection, the term `benchmark bid amount' means, with 
     respect to qualified prescription drug coverage offered 
     under--
       ``(A) a prescription drug plan that--
       ``(i) provides standard coverage (or alternative 
     prescription drug coverage the actuarial value is equivalent 
     to that of standard coverage), the bid amount for enrollment 
     under the plan under this part (determined without regard to 
     any subsidy under this section or any late enrollment penalty 
     under section 1860A(c)(2)(B)); or
       ``(ii) provides alternative prescription drug coverage the 
     actuarial value of which is greater than that of standard 
     coverage, the bid amount described in clause (i) multiplied 
     by the ratio of (I) the actuarial value of standard coverage, 
     to (II) the actuarial value of the alternative coverage; or
       ``(B) a Medicare+Choice plan, the portion of the bid amount 
     that is attributable to statutory drug benefits (described in 
     section 1853(a)(1)(A)(ii)(II)).
       ``(c) Rules in Applying Cost-Sharing Subsidies.--
       ``(1) In general.--In applying subsections (a)(1)(B) and 
     (a)(2)(B), nothing in this part shall be construed as 
     preventing a plan or provider from waiving or reducing the 
     amount of cost-sharing otherwise applicable.
       ``(2) Limitation on charges.--In the case of an individual 
     receiving cost-sharing subsidies under subsection (a)(1)(B) 
     or (a)(2)(B), the PDP sponsor may not charge more than $5 per 
     prescription.
       ``(3) Application of indexing rules.--The provisions of 
     subsection (a)(4) shall apply to the dollar amount specified 
     in paragraph (2) in the same manner as they apply to the 
     dollar amounts specified in subsections (a)(1)(B) and 
     (a)(2)(B).
       ``(d) Administration of Subsidy Program.--The Administrator 
     shall provide a process whereby, in the case of an individual 
     who is determined to be a subsidy eligible individual and who 
     is enrolled in prescription drug plan or is enrolled in a 
     Medicare+Choice plan under which qualified prescription drug 
     coverage is provided--
       ``(1) the Administrator provides for a notification of the 
     PDP sponsor or Medicare+Choice organization involved that the 
     individual is eligible for a subsidy and the amount of the 
     subsidy under subsection (a);
       ``(2) the sponsor or organization involved reduces the 
     premiums or cost-sharing otherwise imposed by the amount of 
     the applicable subsidy and submits to the Administrator 
     information on the amount of such reduction; and
       ``(3) the Administrator periodically and on a timely basis 
     reimburses the sponsor or organization for the amount of such 
     reductions.

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

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

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

     This section constitutes budget authority in advance of 
     appropriations Acts and represents the obligation of the 
     Administrator to provide for the payment of amounts provided 
     under this section.
       ``(b) Qualifying Entity Defined.--For purposes of this 
     section, the term `qualifying entity' means any of the 
     following that has entered into an agreement with the 
     Administrator to provide the Administrator with such 
     information as may be required to carry out this section:
       ``(1) A PDP sponsor offering a prescription drug plan under 
     this part.
       ``(2) A Medicare+Choice organization that provides 
     qualified prescription drug coverage under a Medicare+Choice 
     plan under part C.
       ``(3) The sponsor of a qualified retiree prescription drug 
     plan (as defined in subsection (f)).
       ``(c) Reinsurance Payment Amount.--
       ``(1) In general.--Subject to subsection (d)(1)(B) and 
     paragraph (4), the reinsurance payment amount under this 
     subsection for a qualifying covered individual (as defined in 
     subsection (g)(1)) for a coverage year (as defined in 
     subsection (g)(2)) is equal to the sum of the following:

[[Page H4234]]

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

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

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

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

       ``(a) Definitions.--For purposes of this part:
       ``(1) Covered outpatient drugs.--The term `covered 
     outpatient drugs' is defined in section 1860B(f).
       ``(2) Initial coverage limit.--The term `initial coverage 
     limit' means such limit as established under section 
     1860B(b)(3), or, in the case of coverage that is not standard 
     coverage, the comparable limit (if any) established under the 
     coverage.
       ``(3) Medicare prescription drug trust fund.--The term 
     `Medicare Prescription Drug Trust Fund' means the Trust Fund 
     created under section 1860I(a).

[[Page H4235]]

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

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

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

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

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

     SEC. 103. MEDICAID AMENDMENTS.

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


  ``special provisions relating to medicare prescription drug benefit

       ``Sec. 1935. (a) Requirement for Making Eligibility 
     Determinations for Low-Income Subsidies.--As a condition of 
     its State plan under this title under section 1902(a)(66) and 
     receipt of any Federal financial assistance under section 
     1903(a), a State shall--
       ``(1) make determinations of eligibility for premium and 
     cost-sharing subsidies under (and in accordance with) section 
     1860G;
       ``(2) inform the Administrator of the Medicare Benefits 
     Administration of such determinations in cases in which such 
     eligibility is established; and
       ``(3) otherwise provide such Administrator with such 
     information as may be required to carry out part D of title 
     XVIII (including section 1860G).
       ``(b) Payments for Additional Administrative Costs.--
       ``(1) In general.--The amounts expended by a State in 
     carrying out subsection (a) are, subject to paragraph (2), 
     expenditures reimbursable under the appropriate paragraph of 
     section 1903(a); except that, notwithstanding any other 
     provision of such section, the applicable Federal matching 
     rates with respect to such expenditures under such section 
     shall be increased as follows (but in no case shall the rate 
     as so increased exceed 100 percent):
       ``(A) For expenditures attributable to costs incurred 
     during 2005, the otherwise applicable Federal matching rate 
     shall be increased by 10 percent of the percentage otherwise 
     payable (but for this subsection) by the State.
       ``(B)(i) For expenditures attributable to costs incurred 
     during 2006 and each subsequent year through 2013, the 
     otherwise applicable Federal matching rate shall be increased 
     by the applicable percent (as defined in clause (ii)) of the 
     percentage otherwise payable (but for this subsection) by the 
     State.
       ``(ii) For purposes of clause (i), the `applicable percent' 
     for--
       ``(I) 2006 is 20 percent; or
       ``(II) a subsequent year is the applicable percent under 
     this clause for the previous year increased by 10 percentage 
     points.
       ``(C) For expenditures attributable to costs incurred after 
     2013, the otherwise applicable Federal matching rate shall be 
     increased to 100 percent.
       ``(2) Coordination.--The State shall provide the 
     Administrator with such information as may be necessary to 
     properly allocate administrative expenditures described in 
     paragraph (1) that may otherwise be made for similar 
     eligibility determinations.''.
       (b) Phased-In Federal Assumption of Medicaid Responsibility 
     for Premium and Cost-Sharing Subsidies for Dually Eligible 
     Individuals.--
       (1) In general.--Section 1903(a)(1) (42 U.S.C. 1396b(a)(1)) 
     is amended by inserting

[[Page H4236]]

     before the semicolon the following: ``, reduced by the amount 
     computed under section 1935(c)(1) for the State and the 
     quarter''.
       (2) Amount described.--Section 1935, as inserted by 
     subsection (a)(2), is amended by adding at the end the 
     following new subsection:
       ``(c) Federal Assumption of Medicaid Prescription Drug 
     Costs for Dually-Eligible Beneficiaries.--
       ``(1) In general.--For purposes of section 1903(a)(1), for 
     a State that is one of the 50 States or the District of 
     Columbia for a calendar quarter in a year (beginning with 
     2005) the amount computed under this subsection is equal to 
     the product of the following:
       ``(A) Medicare subsidies.--The total amount of payments 
     made in the quarter under section 1860G (relating to premium 
     and cost-sharing prescription drug subsidies for low-income 
     medicare beneficiaries) that are attributable to individuals 
     who are residents of the State and are entitled to benefits 
     with respect to prescribed drugs under the State plan under 
     this title (including such a plan operating under a waiver 
     under section 1115).
       ``(B) State matching rate.--A proportion computed by 
     subtracting from 100 percent the Federal medical assistance 
     percentage (as defined in section 1905(b)) applicable to the 
     State and the quarter.
       ``(C) Phase-out proportion.--The phase-out proportion (as 
     defined in paragraph (2)) for the quarter.
       ``(2) Phase-out proportion.--For purposes of paragraph 
     (1)(C), the `phase-out proportion' for a calendar quarter 
     in--
       ``(A) 2005 is 90 percent;
       ``(B) a subsequent year before 2014, is the phase-out 
     proportion for calendar quarters in the previous year 
     decreased by 10 percentage points; or
       ``(C) a year after 2013 is 0 percent.''.
       (c) Medicaid Providing Wrap-Around Benefits.--Section 1935, 
     as so inserted and amended, is further amended by adding at 
     the end the following new subsection:
       ``(d) Additional Provisions.--
       ``(1) Medicaid as secondary payor.--In the case of an 
     individual who is entitled to qualified prescription drug 
     coverage under a prescription drug plan under part D of title 
     XVIII (or under a Medicare+Choice plan under part C of such 
     title) and medical assistance for prescribed drugs under this 
     title, medical assistance shall continue to be provided under 
     this title for prescribed drugs to the extent payment is not 
     made under the prescription drug plan or the Medicare+Choice 
     plan selected by the individual.
       ``(2) Condition.--A State may require, as a condition for 
     the receipt of medical assistance under this title with 
     respect to prescription drug benefits for an individual 
     eligible to obtain qualified prescription drug coverage 
     described in paragraph (1), that the individual elect 
     qualified prescription drug coverage under section 1860A.''.
       (d) Treatment of Territories.--
       (1) In general.--Section 1935, as so inserted and amended, 
     is further amended--
       (A) in subsection (a) in the matter preceding paragraph 
     (1), by inserting ``subject to subsection (e)'' after 
     ``section 1903(a)'';
       (B) in subsection (c)(1), by inserting ``subject to 
     subsection (e)'' after ``1903(a)(1)''; and
       (C) by adding at the end the following new subsection:
       ``(e) Treatment of Territories.--
       ``(1) In general.--In the case of a State, other than the 
     50 States and the District of Columbia--
       ``(A) the previous provisions of this section shall not 
     apply to residents of such State; and
       ``(B) if the State establishes a plan described in 
     paragraph (2) (for providing medical assistance with respect 
     to the provision of prescription drugs to medicare 
     beneficiaries), the amount otherwise determined under section 
     1108(f) (as increased under section 1108(g)) for the State 
     shall be increased by the amount specified in paragraph (3).
       ``(2) Plan.--The plan described in this paragraph is a plan 
     that--
       ``(A) provides medical assistance with respect to the 
     provision of covered outpatient drugs (as defined in section 
     1860B(f)) to low-income medicare beneficiaries; and
       ``(B) assures that additional amounts received by the State 
     that are attributable to the operation of this subsection are 
     used only for such assistance.
       ``(3) Increased amount.--
       ``(A) In general.--The amount specified in this paragraph 
     for a State for a year is equal to the product of--
       ``(i) the aggregate amount specified in subparagraph (B); 
     and
       ``(ii) the amount specified in section 1108(g)(1) for that 
     State, divided by the sum of the amounts specified in such 
     section for all such States.
       ``(B) Aggregate amount.--The aggregate amount specified in 
     this subparagraph for--
       ``(i) 2005, is equal to $20,000,000; or
       ``(ii) a subsequent year, is equal to the aggregate amount 
     specified in this subparagraph for the previous year 
     increased by annual percentage increase specified in section 
     1860B(b)(5) for the year involved.
       ``(4) Report.--The Administrator shall submit to Congress a 
     report on the application of this subsection and may include 
     in the report such recommendations as the Administrator deems 
     appropriate.''.
       (2) Conforming amendment.--Section 1108(f) (42 U.S.C. 
     1308(f)) is amended by inserting ``and section 
     1935(e)(1)(B)'' after ``Subject to subsection (g)''.
       (e) Amendment to Best Price.--Section 1927(c)(1)(C)(i) (42 
     U.S.C. 1396r-8(c)(1)(C)(i)) is amended--
       (1) by striking ``and'' at the end of subclause (III);
       (2) by striking the period at the end of subclause (IV) and 
     inserting ``; and''; and
       (3) by adding at the end the following new subclause:

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

     SEC. 104. MEDIGAP TRANSITION.

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

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

[[Page H4237]]

     through the offering of other coverage under this 
     subsection.''.

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

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


     ``medicare prescription drug discount card endorsement program

       ``Sec. 1807. (a) In General.--The Secretary (or the 
     Medicare Benefits Administrator pursuant to section 
     1808(c)(3)(C)) shall establish a program--
       ``(1) to endorse prescription drug discount card programs 
     that meet the requirements of this section; and
       ``(2) to make available to medicare beneficiaries 
     information regarding such endorsed programs.
       ``(b) Requirements for Endorsement.--The Secretary may not 
     endorse a prescription drug discount card program under this 
     section unless the program meets the following requirements:
       ``(1) Savings to medicare beneficiaries.--The program 
     passes on to medicare beneficiaries who enroll in the program 
     discounts on prescription drugs, including discounts 
     negotiated with manufacturers.
       ``(2) Prohibition on application only to mail order.--The 
     program applies to drugs that are available other than solely 
     through mail order.
       ``(3) Beneficiary services.--The program provides 
     pharmaceutical support services, such as education and 
     counseling, and services to prevent adverse drug 
     interactions.
       ``(4) Information.--The program makes available to medicare 
     beneficiaries through the Internet and otherwise information, 
     including information on enrollment fees, prices charged to 
     beneficiaries, and services offered under the program, that 
     the Secretary identifies as being necessary to provide for 
     informed choice by beneficiaries among endorsed programs.
       ``(5) Demonstrated experience.--The entity operating the 
     program has demonstrated experience and expertise in 
     operating such a program or a similar program.
       ``(6) Quality assurance.--The entity has in place adequate 
     procedures for assuring quality service under the program.
       ``(7) Operation of assistance program.--The entity meets 
     such requirements relating to solvency, compliance with 
     financial reporting requirements, audit compliance, and 
     contractual guarantees as the Secretary finds necessary for 
     the participation of the sponsor in the low-income assistance 
     program under section 1807A.
       ``(8) Enrollment fees.--The program may charge an annual 
     enrollment fee, but the amount of such annual fee may not 
     exceed $25.
       ``(9) Additional beneficiary protections.--The program 
     meets such additional requirements as the Secretary 
     identifies to protect and promote the interest of medicare 
     beneficiaries, including requirements that ensure that 
     beneficiaries are not charged more than the lower of the 
     negotiated retail price or the usual and customary price.

     The prices negotiated by a prescription drug discount card 
     program endorsed under this section shall (notwithstanding 
     any other provision of law) not be taken into account for the 
     purposes of establishing the best price under section 
     1927(c)(1)(C).
       ``(c) Program Operation.--The Secretary shall operate the 
     program under this section consistent with the following:
       ``(1) Promotion of informed choice.--In order to promote 
     informed choice among endorsed prescription drug discount 
     card programs, the Secretary shall provide for the 
     dissemination of information which compares the prices and 
     services of such programs in a manner coordinated with the 
     dissemination of educational information on Medicare+Choice 
     plans under part C.
       ``(2) Oversight.--The Secretary shall provide appropriate 
     oversight to ensure compliance of endorsed programs with the 
     requirements of this section, including verification of the 
     discounts and services provided.
       ``(3) Use of medicare toll-free number.--The Secretary 
     shall provide through the 1-800-medicare toll free telephone 
     number for the receipt and response to inquiries and 
     complaints concerning the program and programs endorsed under 
     this section.
       ``(4) Sanctions for abusive practices.--The Secretary may 
     implement intermediate sanctions or may revoke the 
     endorsement of a program in the case of a program that the 
     Secretary determines no longer meets the requirements of this 
     section or that has engaged in false or misleading marketing 
     practices.
       ``(5) Enrollment practices.--A medicare beneficiary may not 
     be enrolled in more than one endorsed program at any time. A 
     medicare beneficiary may change the endorsed program in which 
     the beneficiary is enrolled, but may not make such change 
     until the beneficiary has been enrolled in a program for a 
     minimum period of time specified by the Secretary.
       ``(d) Transition.--The Secretary shall provide for an 
     appropriate transition and discontinuation of the program 
     under this section at the time prescription drug benefits 
     first become available under part D.
       ``(e) Endorsement Condition.--The Secretary shall require, 
     as condition of endorsement under of a prescription drug 
     discount card program under this section that the program 
     implement policies and procedures to safeguard the use and 
     disclosure of program beneficiaries' individually 
     identifiable health information in a manner consistent with 
     the Federal regulations (concerning the privacy of 
     individually identifiable health information) promulgated 
     under section 264(c) of the Health Insurance Portability and 
     Accountability Act of 1996.
       ``(f) Authorization of Appropriations.--There are 
     authorized to be appropriated such sums as may be necessary 
     to carry out the program under this section and section 
     1807A.


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

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

[[Page H4238]]

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

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

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

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

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

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

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

               Subtitle A--Medicare+Choice Revitalization

     SEC. 201. MEDICARE+CHOICE IMPROVEMENTS.

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

[[Page H4239]]

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

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

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

     SEC. 203. AVOIDING DUPLICATIVE STATE REGULATION.

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

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

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

     SEC. 205. MEDICARE MSAS.

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

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

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

[[Page H4240]]

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

            Subtitle B--Medicare+Choice Competition Program

     SEC. 211. MEDICARE+CHOICE COMPETITION PROGRAM.

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

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

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

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

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

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

       ``(iii) Demographic adjustment, including adjustment for 
     health status.--The Administrator shall adjust the payment 
     amount under clause (i), the unadjusted non-drug monthly bid 
     amount under clause (ii)(I), and the fee-for-service area-
     specific non-drug benchmark amount under clause (ii)(II) for 
     such risk factors as age, disability status, gender, 
     institutional status, and such

[[Page H4241]]

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

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

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

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

[[Page H4242]]

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

     SEC. 213. CONFORMING AMENDMENTS.

       (a) Conforming Amendments Relating to Bids.--
       (1) Section 1854 (42 U.S.C. 1395w-24) is amended--
       (A) in the heading of subsection (a), by inserting ``and 
     Bid Amounts'' after ``Premiums''; and
       (B) in subsection (a)(5)(A), by inserting ``paragraphs (2), 
     (3), and (4) of'' after ``filed under''.
       (b) Additional Conforming Amendments.--
       (1) Annual determination and announcement of certain 
     factors.--Section 1853(b) (42 U.S.C. 1395w-23(b)) is 
     amended--
       (A) in paragraph (1), by striking ``the respective calendar 
     year'' and all that follows and inserting the following: 
     ``the calendar year concerned with respect to each 
     Medicare+Choice payment area, the following:
       ``(A) Pre-competition information.--For years before 2005, 
     the following:
       ``(i) Medicare+choice capitation rates.--The annual 
     Medicare+Choice capitation rate for each Medicare+Choice 
     payment area for the year.
       ``(ii) Adjustment factors.--The risk and other factors to 
     be used in adjusting such rates under subsection (a)(1)(A) 
     for payments for months in that year.
       ``(B) Competition information.--For years beginning with 
     2005, the following:
       ``(i) Benchmarks.--The fee-for-service area-specific non-
     drug benchmark under section 1853(j) and, if applicable, the 
     choice non-drug benchmark under section 1853(k)(2), for the 
     year involved and, if applicable, the national fee-for-
     service market share percentage.
       ``(ii) Adjustment factors.--The adjustment factors applied 
     under section 1853(a)(1)(A)(iii) (relating to demographic 
     adjustment), section 1853(a)(1)(B) (relating to adjustment 
     for end-stage renal disease), and section 1853(a)(3) 
     (relating to health status adjustment).
       ``(iii) Projected fee-for-service bid.--In the case of a 
     competitive area, the projected fee-for-service area-specific 
     non-drug bid (as determined under subsection (k)(6)) for the 
     area.
       ``(iv) Individuals.--The number of individuals counted 
     under subsection (k)(4)(B) and enrolled in each 
     Medicare+Choice plan in the area.''; and
       (B) in paragraph (3), by striking ``in sufficient detail'' 
     and all that follows up to the period at the end.
       (2) Repeal of provisions relating to adjusted community 
     rate (acr).--
       (A) In general.--Subsections (e) and (f) of section 1854 
     (42 U.S.C. 1395w-24) are repealed.
       (B) Conforming amendment.--Section 1839(a)(2) (42 U.S.C. 
     1395r(a)(2)) is amended by striking ``, and to reflect'' and 
     all that follows and inserting a period.
       (3) Prospective implementation of national coverage 
     determinations.--Section 1852(a)(5) (42 U.S.C. 1395w-
     22(a)(5)) is amended to read as follows:
       ``(5) Prospective implementation of national coverage 
     determinations.--The Secretary shall only implement a 
     national coverage determination that will result in a 
     significant change in the costs to a Medicare+Choice 
     organization in a prospective manner that applies to 
     announcements made under section 1853(b) after the date of 
     the implementation of the determination.''.
       (4) Permitting geographic adjustment to consolidate 
     multiple medicare+choice payment areas in a state into a 
     single statewide medicare+choice payment area.--Section 
     1853(d)(3) (42 U.S.C. 1395w-23(e)(3)) is amended--
       (A) by amending clause (i) of subparagraph (A) to read as 
     follows:
       ``(i) to a single statewide Medicare+Choice payment 
     area,''; and
       (B) by amending subparagraph (B) to read as follows:
       ``(B) Budget neutrality adjustment.--In the case of a State 
     requesting an adjustment under this paragraph, the Medicare 
     Benefits Administrator shall initially (and annually 
     thereafter) adjust the payment rates otherwise established 
     under this section for Medicare+Choice payment areas in the 
     State in a manner so that the aggregate of the payments under 
     this section in the State shall not exceed the aggregate 
     payments that would have been made under this section for 
     Medicare+Choice payment areas in the State in the absence of 
     the adjustment under this paragraph.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to payments and premiums for periods beginning on 
     or after January 1, 2005.

               TITLE III--RURAL HEALTH CARE IMPROVEMENTS

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

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

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

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

[[Page H4243]]

       (b) Effective Date.--The amendments made by this section 
     shall apply with respect to discharges occurring on or after 
     October 1, 2002.

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

       Section 1886(d)(3)(A)(iv) (42 U.S.C. 1395ww(d)(3)(A)(iv)) 
     is amended--
       (1) by striking ``(iv) For discharges'' and inserting 
     ``(iv)(I) Subject to the succeeding provisions of this 
     clause, for discharges''; and
       (2) by adding at the end the following new subclauses:
       ``(II) For discharges occurring during fiscal year 2003, 
     the average standardized amount for hospitals located other 
     than in a large urban area shall be increased by \1/2\ of the 
     difference between the average standardized amount determined 
     under subclause (I) for hospitals located in large urban 
     areas for such fiscal year and such amount determined 
     (without regard to this subclause) for other hospitals for 
     such fiscal year.
       ``(III) For discharges occurring in a fiscal year beginning 
     with fiscal year 2004, the Secretary shall compute an average 
     standardized amount for hospitals located in any area within 
     the United States and within each region equal to the average 
     standardized amount computed for the previous fiscal year 
     under this subparagraph for hospitals located in a large 
     urban area (or, beginning with fiscal year 2005, for 
     hospitals located in any area) increased by the applicable 
     percentage increase under subsection (b)(3)(B)(i).''.

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

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

     SEC. 305. IMPROVEMENTS TO CRITICAL ACCESS HOSPITAL PROGRAM.

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

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

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

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

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

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

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

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

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

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

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

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

[[Page H4244]]

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

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

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

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

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

                TITLE IV--PROVISIONS RELATING TO PART A

                Subtitle A--Inpatient Hospital Services

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

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

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

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

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

       (a) Improving Timeliness of Data Collection.--Section 
     1886(d)(5)(K) (42 U.S.C. 1395ww(d)(5)(K)) is amended by 
     adding at the end the following new clause:
       ``(vii) Under the mechanism under this subparagraph, the 
     Secretary shall provide for the addition of new diagnosis and 
     procedure codes in April 1 of each year, but the addition of 
     such codes shall not require the Secretary to adjust the 
     payment (or diagnosis-related group classification) under 
     this subsection until the fiscal year that begins after such 
     date.''.
       (b) Eligibility Standard.--
       (1) Minimum period for recognition of new technologies.--
     Section 1886(d)(5)(K)(vi) (42 U.S.C. 1395ww(d)(5)(K)(vi)) is 
     amended--
       (A) by inserting ``(I)'' after ``(vi)''; and
       (B) by adding at the end the following new subclause:
       ``(II) Under such criteria, a service or technology shall 
     not be denied treatment as a new service or technology on the 
     basis of the period of time in which the service or 
     technology has been in use if such period ends before the end 
     of the 2-to-3-year period that begins on the effective date 
     of implementation of a code under ICD-9-CM (or a successor 
     coding methodology) that enables the identification of a 
     significant sample of specific discharges in which the 
     service or technology has been used.''.
       (2) Adjustment of threshold.--Section 1886(d)(5)(K)(ii)(I) 
     (42 U.S.C. 1395ww(d)(5)(K)(ii)(I)) is amended by inserting 
     ``(applying a threshold specified by the Secretary that is 
     the lesser of 50 percent of the national average standardized 
     amount for operating costs of inpatient hospital services for 
     all hospitals and all diagnosis-related groups or one 
     standard deviation for the diagnosis-related group 
     involved)'' after ``is inadequate''.
       (3) Criterion for substantial improvement.--Section 
     1886(d)(5)(K)(vi) (42 U.S.C. 1395ww(d)(5)(K)(vi)), as amended 
     by paragraph (1), is further amended by adding at the end the 
     following subclause:
       ``(III) The Secretary shall by regulation provide for 
     further clarification of the criteria applied to determine 
     whether a new service or technology represents an advance in 
     medical technology that substantially improves the diagnosis 
     or treatment of beneficiaries. Under such criteria, in 
     determining whether a new service or technology represents an 
     advance in medical technology that substantially improves the 
     diagnosis or treatment of beneficiaries, the Secretary shall 
     deem a service or technology as meeting such requirement if 
     the service or technology is a drug or biological that is 
     designated under section 506 or 526 of the Federal Food, 
     Drug, and Cosmetic Act, approved under section 314.510 or 
     601.41 of title 21, Code of Federal Regulations, or 
     designated for priority review when the marketing application 
     for such drug or biological was filed or is a medical device 
     for which an exemption has been granted under section 520(m) 
     of such Act, or for which priority review has been provided 
     under section 515(d)(5) of such Act.''.
       (4) Process for public input.--Section 1886(d)(5)(K) (42 
     U.S.C. 1395ww(d)(5)(K)), as amended by paragraph (1), is 
     amended--
       (A) in clause (i), by adding at the end the following: 
     ``Such mechanism shall be modified to meet the requirements 
     of clause (viii).''; and
       (B) by adding at the end the following new clause:
       ``(viii) The mechanism established pursuant to clause (i) 
     shall be adjusted to provide, before publication of a 
     proposed rule, for public input regarding whether a new 
     service or technology not described in the second sentence of 
     clause (vi)(III) represents an advance in medical technology 
     that substantially improves the diagnosis or treatment of 
     beneficiaries as follows:
       ``(I) The Secretary shall make public and periodically 
     update a list of all the services and technologies for which 
     an application for additional payment under this subparagraph 
     is pending.
       ``(II) The Secretary shall accept comments, 
     recommendations, and data from the public regarding whether 
     the service or technology represents a substantial 
     improvement.
       ``(III) The Secretary shall provide for a meeting at which 
     organizations representing hospitals, physicians, medicare 
     beneficiaries, manufacturers, and any other interested party 
     may present comments, recommendations, and data to the 
     clinical staff of the Centers for Medicare & Medicaid 
     Services before publication of a notice of proposed 
     rulemaking regarding whether service or technology represents 
     a substantial improvement.''.
       (c) Preference for Use of DRG Adjustment.--Section 
     1886(d)(5)(K) (42 U.S.C. 1395ww(d)(5)(K)) is further amended 
     by adding at the end the following new clause:
       ``(ix) Before establishing any add-on payment under this 
     subparagraph with respect

[[Page H4245]]

     to a new technology, the Secretary shall seek to identify one 
     or more diagnosis-related groups associated with such 
     technology, based on similar clinical or anatomical 
     characteristics and the cost of the technology. Within such 
     groups the Secretary shall assign an eligible new technology 
     into a diagnosis-related group where the average costs of 
     care most closely approximate the costs of care of using the 
     new technology. In such case, no add-on payment under this 
     subparagraph shall be made with respect to such new 
     technology and this clause shall not affect the application 
     of paragraph (4)(C)(iii).''.
       (d) Improvement in Payment for New Technology.--Section 
     1886(d)(5)(K)(ii)(III) (42 U.S.C. 1395ww(d)(5)(K)(ii)(III)) 
     is amended by inserting after ``the estimated average cost of 
     such service or technology'' the following: ``(based on the 
     marginal rate applied to costs under subparagraph (A))''.
       (e) Effective Date.--
       (1) In general.--The Secretary shall implement the 
     amendments made by this section so that they apply to 
     classification for fiscal years beginning with fiscal year 
     2004.
       (2) Reconsiderations of applications for fiscal year 2003 
     that are denied.--In the case of an application for a 
     classification of a medical service or technology as a new 
     medical service or technology under section 1886(d)(5)(K) of 
     the Social Security Act (42 U.S.C. 1395ww(d)(5)(K)) that was 
     filed for fiscal year 2003 and that is denied--
       (A) the Secretary shall automatically reconsider the 
     application as an application for fiscal year 2004 under the 
     amendments made by this section; and
       (B) the maximum time period otherwise permitted for such 
     classification of the service or technology shall be extended 
     by 12 months.

     SEC. 404. PHASE-IN OF FEDERAL RATE FOR HOSPITALS IN PUERTO 
                   RICO.

       Section 1886(d)(9) (42 U.S.C. 1395ww(d)(9)) is amended--
       (1) in subparagraph (A)--
       (A) in clause (i), by striking ``for discharges beginning 
     on or after October 1, 1997, 50 percent (and for discharges 
     between October 1, 1987, and September 30, 1997, 75 
     percent)'' and inserting ``the applicable Puerto Rico 
     percentage (specified in subparagraph (E))''; and
       (B) in clause (ii), by striking ``for discharges beginning 
     in a fiscal year beginning on or after October 1, 1997, 50 
     percent (and for discharges between October 1, 1987, and 
     September 30, 1997, 25 percent)'' and inserting ``the 
     applicable Federal percentage (specified in subparagraph 
     (E))''; and
       (2) by adding at the end the following new subparagraph:
       ``(E) For purposes of subparagraph (A), for discharges 
     occurring--
       ``(i) between October 1, 1987, and September 30, 1997, the 
     applicable Puerto Rico percentage is 75 percent and the 
     applicable Federal percentage is 25 percent;
       ``(ii) on or after October 1, 1997, and before October 1, 
     2003, the applicable Puerto Rico percentage is 50 percent and 
     the applicable Federal percentage is 50 percent;
       ``(iii) during fiscal year 2004, the applicable Puerto Rico 
     percentage is 45 percent and the applicable Federal 
     percentage is 55 percent;
       ``(iv) during fiscal year 2005, the applicable Puerto Rico 
     percentage is 40 percent and the applicable Federal 
     percentage is 60 percent;
       ``(v) during fiscal year 2006, the applicable Puerto Rico 
     percentage is 35 percent and the applicable Federal 
     percentage is 65 percent;
       ``(vi) during fiscal year 2007, the applicable Puerto Rico 
     percentage is 30 percent and the applicable Federal 
     percentage is 70 percent; and
       ``(vii) on or after October 1, 2007, the applicable Puerto 
     Rico percentage is 25 percent and the applicable Federal 
     percentage is 75 percent.''.

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

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

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

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

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

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

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

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

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

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

             Subtitle B--Skilled Nursing Facility Services

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

       (a) Temporary Increase in Nursing Component of PPS Federal 
     Rate.--Section 312(a) of BIPA is amended by adding at the end 
     the following new sentence: ``The Secretary of Health and 
     Human Services shall increase by 12, 10, and 8 percent the 
     nursing component of the case-mix adjusted Federal 
     prospective payment rate specified in Tables 3 and 4 of the 
     final rule published in the Federal Register by the Health 
     Care Financing Administration on July 31, 2000 (65 Fed. Reg. 
     46770) and as subsequently updated under section 
     1888(e)(4)(E)(ii) of the Social Security Act (42 U.S.C. 
     1395yy(e)(4)(E)(ii)), effective for services furnished during 
     fiscal years 2003, 2004, and 2005, respectively.''.
       (b) Adjustment to RUGs for AIDS Residents.--
       (1) In general.--Paragraph (12) of section 1888(e) (42 
     U.S.C. 1395yy(e)) is amended to read as follows:
       ``(12) Adjustment for residents with aids.--
       ``(A) In general.--Subject to subparagraph (B), in the case 
     of a resident of a skilled nursing facility who is afflicted 
     with acquired immune deficiency syndrome (AIDS), the per diem 
     amount of payment otherwise applicable shall be increased by 
     128 percent to reflect increased costs associated with such 
     residents.
       ``(B) Sunset.--Subparagraph (A) shall not apply on and 
     after such date as the Secretary certifies that there is an 
     appropriate adjustment in the case mix under paragraph 
     (4)(G)(i) to compensate for the increased costs associated 
     with residents described in such subparagraph.''.
       (2) Effective date.--The amendment made by paragraph (1) 
     shall apply to services furnished on or after October 1, 
     2003.

                          Subtitle C--Hospice

     SEC. 421. COVERA