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107th Congress                                            Rept. 107-542
                        HOUSE OF REPRESENTATIVES
 2d Session                                                      Part 1

======================================================================



 
 MEDICARE MODERNIZATION AND PRESCRIPTION DRUG ACT OF 2002 (TITLE VII: 
                   MEDICARE BENEFITS ADMINISTRATION)

                                _______
                                

                 June 26, 2002.--Ordered to be printed

                                _______
                                

 Mr. Tauzin, from the Committee on Energy and Commerce, submitted the 
                               following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 4988]

    The Committee on Energy and Commerce, to whom was referred 
the bill (H.R. 4988) to amend title XVIII of the Social 
Security Act to establish the Medicare Benefits Administration 
within the Department of Health and Human Services, and for 
other purposes, having considered the same, report favorably 
thereon without amendment and recommend that the bill do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     2
Background and Need for Legislation..............................     2
Hearings.........................................................     3
Committee Consideration..........................................     3
Committee Votes..................................................     3
Committee Oversight Findings.....................................     5
Statement of General Performance Goals and Objectives............     5
New Budget Authority, Entitlement Authority, and Tax Expenditures     5
Committee Cost Estimate..........................................     5
Congressional Budget Office Estimate.............................     5
Federal Mandates Statement.......................................     5
Advisory Committee Statement.....................................     5
Constitutional Authority Statement...............................     5
Applicability to Legislative Branch..............................     6
Section-by-Section Analysis of the Legislation...................     6
Changes in Existing Law Made by the Bill, as Reported............     7
Dissenting Views.................................................    17

                          Purpose and Summary

    The purpose of H.R. 4988 is to create the Medicare Benefits 
Administration (MBA) to allow the prescription drug benefit and 
Medicare+Choice program to be administered by an independent 
agency with the appropriate expertise to manage benefits 
delivered through competing private sector organizations. The 
MBA will set and enforce new standards for prescription drug 
plans, disseminate benefit information to beneficiaries, and 
handle grievances. The new agency will be headed by an 
Administrator, appointed for a 5-year term by the president, 
who will negotiate and enforce contracts with prescription drug 
plan sponsors under part D and Medicare+Choice plans under part 
C. The Secretary and the Administrator of the Centers for 
Medicare & Medicaid will establish a transition of 
responsibility for the administration of part C to the MBA. A 
Medicare Policy Advisory Board will be established to advise, 
consult with and make recommendations to the Administrator as 
well as submit reports to Congress on part C and D issues as 
they deem appropriate.
    H.R. 4988 also creates a pharmacy grant program to be 
administered by the MBA. The grant program will facilitate the 
development of services that will reduce adverse drug reactions 
and medical errors.

                  Background and Need for Legislation

    Historically, the Health Care Financing Administration, now 
the Centers for Medicare and Medicaid, has been a fee-for-
service oriented agency with limited experience in managing 
benefits that rely on private sector competition. Creating the 
MBA allows for new employees with relevant experience to 
oversee both Medicare+Choice and the prescription drug benefit. 
The prescription drug card is also unlike other CMS programs in 
that it will require a significant degree of coordination with 
the private sector to implement successfully. Staff will have 
the technical background and the relevant work experience to 
develop and promulgate rules, educate beneficiaries about their 
rights and benefit options under parts C and D, and establish 
standards to ensure actuarial equivalence among qualified 
prescription drug plans.
    The pharmacy grant program will address the needs of 
pharmacies, particularly those in rural and under-served areas, 
in complying with new requirements set forth in the 
prescription drug benefit for electronic prescribing and 
developing medication therapy management programs.
    It is the intent of the committee that these grants will 
help enhance patient safety and improve medication compliance 
for beneficiaries participating in the new Medicare outpatient 
prescription drug benefit. Studies have shown that up front 
investment in disease management including medication therapies 
can reduce overall medical costs for some diseases by as much 
as 30 to 50 percent. The Committee also notes that a pharmacy 
or a network of common ownership or common affiliation of 
pharmacies should meet certain credentialing standards 
established by the Secretary of the Department of Health and 
Human Services. The committee intends that the Secretary will 
work with private entities regarding these standards.

                                Hearings

    The Committee on Energy and Commerce has not held hearings 
on the legislation.

                        Committee Consideration

    On Friday, June 21, 2002, the Full Committee met in open 
markup session and favorably ordered reported a Committee Print 
on Medicare Benefits Administration by a roll call vote of 27 
yeas and 15 nays, amended, a quorum being present. Chairman 
Tauzin then introduced H.R. 4988 to reflect the Committee's 
action.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. The 
following is the recorded vote taken on the motion by Mr. 
Tauzin to order H.R. 4988 reported to the House including the 
names of those members voting for and against.


                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee has not held oversight 
or legislative hearings on this legislation.

         Statement of General Performance Goals and Objectives

    The goal of H.R. 4988 is to establish a new agency with the 
specific responsibility to administer parts C and D of the 
Medicare program.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee finds that H.R. 
4988, to amend title XVIII of the Social Security Act to 
establish the Medicare BenefitsAdministration within the 
Department of Health and Human Services, and for other purposes, would 
result in no new or increased budget authority, entitlement authority, 
or tax expenditures or revenues.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974, which is 
included in the report to accompany H.R. 4984.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the cost estimate provided by the 
Congressional Budget Office pursuant to section 402 of the 
Congressional Budget Act of 1974 is included in the report to 
accompany H.R. 4984.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act. The estimate is included in the report to accompany H.R. 
4984.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional authority for this legislation is provided in 
Article I, section 8, clause 3, which grants Congress the power 
to regulate commerce with foreign nations, among the several 
States, and with the Indian tribes.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             Section-by-Section Analysis of the Legislation


Sec. 701. Establishment of Medicare Benefits Administration

    Section 701 establishes a new agency, the Medicare Benefits 
Administration (MBA), within the Department of Health and Human 
Services. The Administrator of this agency will be appointed 
for a term of 5 years by the President, with Senate 
confirmation, and will report directly to the Secretary. The 
Administrator will have the authority to develop and implement 
new rules and regulations pertaining to the Administration and 
delegate responsibilities to officers and employees of the 
Administration. A Deputy Administrator will also be appointed 
by the President, with Senate confirmation, for a term of 5 
years. The position of Chief Actuary will also be established. 
The Chief Actuary will be appointed by and report directly to 
the Administrator. The Secretary will be responsible for 
coordination between the Administrator for the MBA and the 
Administrator for the Centers for Medicare & Medicaid Services 
(CMS) in carrying out the Part C and Part D programs.
    This section states that the Administrator will negotiate, 
enter into, and enforce contracts with PDP sponsors under Part 
D and Medicare+Choice plans under Part C, including those 
offering qualified prescription drug coverage. In carrying out 
duties related to the prescription drug benefit, the 
Administrator will not be allowed to require a particular 
formulary or pricing structure for the reimbursement of drugs 
or interfere with the competitive nature of the PDPs and their 
sponsors. The Administrator will also carry out demonstration 
projects under Parts C and D, implement the prescription drug 
discount card program, and submit annual reports to Congress 
and the President. With the approval of the Secretary, the MBA 
will employ officers and employees that are necessary to 
administer Parts C and D. For functions of CMS that are 
transferred to MBA, new staff will be employed at numbers not 
toexceed the number of full time employees that previously 
handled those functions at CMS. The Secretary and the CMS and MBA 
Administrator will determine an appropriate transition of 
responsibility for Part C, which will include the transfer of relevant 
data and information.
    This office will coordinate functions relating to outreach 
and education of Medicare beneficiaries. It will disseminate 
benefit information to beneficiaries via the Internet, mail, 
and phone, and disseminate information on appeals rights to 
beneficiaries.
    This section creates an advisory board to advise, consult 
with, and make recommendations to the Administrator of the MBA 
regarding the administration of Parts C and D. The Board will 
submit to Congress and the Administrator reports on Parts C and 
D issues they deem appropriate. Each report will include 
legislative or administrative changes to improve the 
administration of the benefits under Parts C and D. Topics may 
include fostering competition, education and enrollment, 
implementation of risk-adjustment, disease management programs, 
and rural access. The Board will be independent and will not be 
required to seek comment or approval of reports from an officer 
or agency prior to submission to Congress. The Board will 
consist of 7 members: 3 appointed by the President, 2 appointed 
by the Speaker of the House with advice from the chairmen and 
minority ranking members of the Committees on Ways and Means 
and on Energy and Commerce, and 2 appointed by the President 
pro tempore of the Senate taking advice from the chairman and 
ranking minority member of the Senate Finance Committee. The 
members will be chosen based on their integrity, impartiality, 
and good judgment and will have education or experience related 
to health care benefits management. No federal employee will 
serve on the Board. In general, appointees will serve for a 
term of 3 years; however, the initial appointees will serve 
from 1 to 3 years. The Chair of the Board will be elected by 
the members and will also serve for 3 years. The Board will 
also have a Director appointed by the Chair. The Board will 
meet at least three times each year.
    The funding necessary to carry out this section will be 
appropriated in part from the Hospital Insurance Trust Fund and 
from the Supplementary Medical Insurance Trust Fund.
    This section states that the Administrator will serve as a 
member of the Board of Trustees of the Medicare Trust Funds, 
and that the Administrator and Deputy will not be appointed 
until March 1, 2003. Until the appointment of an Administrator, 
the Secretary will handle the responsibilities of the position.

Section. 702. Pharmacy Grant Program

    Section 702 requires the MBA Administrator to establish a 
pharmacy grant program that will provide funding for 
independent pharmacies to comply with electronic prescribing 
requirements, prospectively review drug utilization, and 
develop innovative medication therapy management programs. The 
administrator will give priority to small pharmacies in rural 
or underserved areas. Appropriations for the grant program as 
authorized in the amount of $150,000,000 starting in 2004 and 
ending in 2007.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

                          SOCIAL SECURITY ACT

           *       *       *       *       *       *       *



        TITLE XVIII--HEALTH INSURANCE FOR THE AGED AND DISABLED

           *       *       *       *       *       *       *



                    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 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.

           *       *       *       *       *       *       *


    Part A--Hospital Insurance Benefits for the Aged and Disabled

           *       *       *       *       *       *       *


                 FEDERAL HOSPITAL INSURANCE TRUST FUND

  Sec. 1817. (a) * * *
  (b) With respect to the Trust Fund, there is hereby created a 
body to be known as the Board of Trustees of the Trust Fund 
(hereinafter in this section referred to as the ``Board of 
Trustees'') composed of the Commissioner of Social Security, 
the Secretary of the Treasury, the Secretary of Labor, [and the 
Secretary of Health and Human Services, all ex officio,] the 
Secretary of Health and Human Services, and the Administrator 
of the Medicare Benefits Administration, all ex officio, and of 
two members of the public (both of whom may not be from the 
same political party), who shall be nominated by the President 
for a term of four years and subject to confirmation by the 
Senate. A member of the Board of Trustees serving as a member 
of the public and nominated and confirmed to fill a vacancy 
occurring during a term shall be nominated and confirmed only 
for the remainder of such term. An individual nominated and 
confirmed as a member of the public may serve in such position 
after the expiration of such member's term until the earlier of 
the time at which the member's successor takes office or the 
time at which a report of the Board is first issued under 
paragraph (2) after the expiration of the member's term. The 
Secretary of the Treasury shall be the Managing Trustee of the 
Board of Trustees (hereinafter in this section referred to as 
the ``Managing Trustee''). The Administrator of the Health Care 
Financing Administration shall serve as the Secretary of the 
Board of Trustees. The Board of Trustees shall meet not less 
frequently than once each calendar year. It shall be the duty 
of the Board of Trustees to--
          (1)  * * *

           *       *       *       *       *       *       *


   Part B--Supplementary Medical Insurance Benefits for the Aged and 
                               Disabled

           *       *       *       *       *       *       *


           FEDERAL SUPPLEMENTARY MEDICAL INSURANCE TRUST FUND

  Sec. 1841. (a) * * *
  (b) With respect to the Trust Fund, there is hereby created a 
body to be known as the Board of Trustees of the Trust Fund 
(hereinafter in this section referred to as the ``Board of 
Trustees'') composed of the Commissioner of Social Security, 
Secretary of the Treasury, the Secretary of Labor, [and the 
Secretary of Health and Human Services, all ex officio,] the 
Secretary of Health and Human Services, and the Administrator 
of the Medicare Benefits Administration, all ex officio, and of 
two members of the public (both of whom may not be from the 
same political party), who shall be nominated by the President 
for a term of four years and subject to confirmation by the 
Senate. A member of the Board of Trustees serving as a member 
of the public and nominated and confirmed to fill a vacancy 
occurring during a term shall be nominated and confirmed only 
for the remainder of such term. An individual nominated and 
confirmed as a member of the public may serve in such position 
after the expiration of such member's term until the earlier of 
the time at which the member's successor takes office or the 
time at which a report of the Board is first issued under 
paragraph (2) after the expiration of the member's term. The 
Secretary of the Treasury shall be the Managing Trustee of the 
Board of Trustees (hereinafter in this section referred to as 
the ``Managing Trustee''). The Administrator of the Health Care 
Financing Administration shall serve as the Secretary of the 
Board of Trustees. The Board of Trustees shall meet not less 
frequently than once each calendar year. It shall be the duty 
of the Board of Trustees to--
          (1)  * * *

           *       *       *       *       *       *       *

                              ----------                              


                      TITLE 5, UNITED STATES CODE

           *       *       *       *       *       *       *


                         PART III--EMPLOYEES

           *       *       *       *       *       *       *


                     Subpart D--Pay and Allowances

           *       *       *       *       *       *       *


                   CHAPTER 53--PAY RATES AND SYSTEMS

           *       *       *       *       *       *       *


              SUBCHAPTER II--EXECUTIVE SCHEDULE PAY RATES

           *       *       *       *       *       *       *


Sec. 5314. Positions at level III

  Level III of the Executive Schedule applies to the following 
positions, for which the annual rate of basic pay shall be the 
rate determined with respect to such level under chapter 11 of 
title 2, as adjusted by section 5318 of this title:
          Solicitor General of the United States.
          Under Secretary of Commerce, Under Secretary of 
        Commerce for Economic Affairs, Under Secretary of 
        Commerce for Export Administration and Under Secretary 
        of Commerce for Travel and Tourism.

           *       *       *       *       *       *       *

          Administrator of the Centers for Medicare & Medicaid 
        Services .
          Administrator of the Medicare Benefits 
        Administration.

Sec. 5315. Positions at level IV

  Level IV of the Executive Schedule applies to the following 
positions, for which the annual rate of basic pay shall be the 
rate determined with respect to such level under chapter 11 of 
title 2, as adjusted by section 5318 of this title:
          Deputy Administrator of General Services.

           *       *       *       *       *       *       *

          [Administrator of the Health Care Financing 
        Administration.]

           *       *       *       *       *       *       *


                            DISSENTING VIEWS

    H.R. 4988 creates a separate ``Medicare Benefits 
Administration'' to oversee the Medicare+Choice program and the 
new Part D prescription drug benefit. This entirely duplicative 
entity would administer the pieces of the Medicare program that 
are run by private, risk-bearing insurance companies and 
managed care plans. The only conceivable purpose of creating 
such an Administrator would be to prepare for phase-out of the 
traditional Medicare fee- for-service program, administered by 
the Center for Medicare and Medicaid Services, and a transfer 
of the Medicare program to the private sector.
    While the Medicare program has always relied on private 
sector providers, there is a difference between the current 
structure and the one envisioned under the Committee bill. 
Since Medicare was enacted, private sector entities have 
delivered benefits to seniors and processed the program's 
claims. The Medicare program itself, however, has always 
assumed the ultimate responsibility--and the ultimate financial 
risk--of caring for our Nation's seniors. The private sector 
entities overseen by the Medicare Benefits Administration would 
not only deliver and manage the program's benefits and process 
the program's claims, but would assume financial risk as well.
    The Medicare program was originally created because the 
private sector did not offer affordable and reliable health 
insurance to the elderly and disabled. We see little evidence 
that the elderly and disabled have become more attractive 
populations to insure, and we have serious doubts about the 
wisdom of the approach established in H.R. 4988. We do not 
object to private insurance companies or managed care 
organizations participating in Medicare, but we fear that if 
these companies assume the financial risk of providing care, 
the health and well-being of seniors and the disabled will no 
longer be the first priority of the Medicare program.

                                   John D. Dingell.
                                   Sherrod Brown.
                                   Henry A. Waxman.
                                   Rick Boucher.
                                   Edolphus Towns.
                                   Gene Green.
                                   Frank Pallone, Jr.
                                   Michael F. Doyle.
                                   Karen McCarthy.
                                   Tom Barrett.
                                   Chris John.
                                   Bobby L. Rush.
                                   Ted Strickland.
                                   Anna G. Eshoo.
                                   Lois Capps.
                                   Peter Deutsch.
                                   Eliot L. Engel.
                                   Tom Sawyer.
                                   Diana DeGette.
                                   Bart Gordon.